<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1995
REGISTRATION NO. 33-57391
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ANACOMP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
INDIANA 35-1144230
(State or other jurisdiction of incorporation or (I.R.S. employer identification number)
organization)
</TABLE>
11550 NORTH MERIDIAN STREET
P.O. BOX 40888
INDIANAPOLIS, INDIANA 46240
(317) 844-9666
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
GEORGE C. GASKIN, ESQ.
CORPORATE COUNSEL
ANACOMP, INC.
ONE BUCKHEAD PLAZA
SUITE 1700
ATLANTA, GEORGIA 30305
(404) 262-2667
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
<TABLE>
<S> <C>
MICHAEL C. RYAN, ESQ. JOHN W. WHITE, ESQ.
CADWALADER, WICKERSHAM & TAFT CRAVATH, SWAINE & MOORE
100 MAIDEN LANE 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10038 NEW YORK, NEW YORK 10019
(212) 504-6000 (212) 474-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /
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 said Section 8(a),
may determine.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED MARCH 27, 1995
PROSPECTUS
$225,000,000
ANACOMP, INC.
% SENIOR SECURED NOTES DUE 2002
The % Senior Secured Notes due 2002 (the "Notes") are being offered (the
"Offering") by Anacomp, Inc. ("Anacomp" or the "Company"). The Notes will mature
on , 2002. Interest on the Notes is payable semi-annually on each
and , commencing , 1995. The Offering is
part of a refinancing by the Company consisting of the Offering, the concurrent
establishment of a revolving credit facility in an aggregate principal amount of
$50 million (the "Revolving Credit Facility") and the application of certain of
the net proceeds of the Offering to retire $203.4 million of the Company's
indebtedness (the "Refinancing"). The closings of the Offering and the Revolving
Credit Facility are conditioned upon one another and upon the receipt of certain
consents from holders of the Company's 15% Senior Subordinated Notes due 2000.
See "The Refinancing" and "Use of Proceeds".
The Notes will be senior obligations of the Company secured by substantially all
the assets of the Company (collectively, the "Collateral"), which will consist
of (i) tangible assets with a book value substantially less than the aggregate
principal amount of the Notes, (ii) intangible assets (principally goodwill) and
(iii) accounts receivable, inventory and the proceeds thereof (collectively, the
"Working Capital Collateral"). The lien on behalf of the Notes on the Working
Capital Collateral will be second in priority and junior to the lien of the
lenders under the Revolving Credit Facility on the Working Capital Collateral.
The Notes will rank pari passu (on an equal basis) in right of payment with all
existing and future senior obligations of the Company, including the Revolving
Credit Facility. As of December 31, 1994, after giving effect to the
Refinancing, the Company would have had approximately $1.8 million of senior
indebtedness outstanding (excluding the Notes) and $50 million available for
borrowing under the Revolving Credit Facility.
The Company will be required to redeem $37.5 million aggregate principal amount
of the Notes on each of December , 2000, and December , 2001, in each case
at par, plus accrued interest. The Notes will be redeemable at the option of the
Company, in whole or in part, on or after , 2000, at % of the
principal amount thereof, plus accrued interest. After , 2001, the
Notes are redeemable at par. Upon a Change of Control (as defined herein), each
holder of the Notes will have the right to require the Company to repurchase
such holder's Notes at 101% of the principal amount thereof, plus accrued
interest. In addition, the Company will be required in certain circumstances to
make an offer to purchase Notes at a purchase price equal to par, plus accrued
interest, from the proceeds of certain sales of assets.
The Company does not intend to list the Notes on any securities exchange. No
assurance can be given that any market for the Notes will develop, or, if such a
market develops, as to the liquidity of such market.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNT COMPANY(1)(2)
PUBLIC(1)
<S> <C> <C> <C>
Per Note........................... % % %
Total.............................. $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from , 1995, to the date of
delivery.
(2) Before deducting expenses payable by the Company, estimated to be $ .
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of Notes will be made at the office of Salomon Brothers Inc, Seven
World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1995.
SALOMON BROTHERS INC SMITH BARNEY INC.
The date of this Prospectus is , 1995.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR CALIFORNIA RESIDENTS
WITH RESPECT TO SALES OF THE NOTES BEING OFFERED HEREBY TO CALIFORNIA
RESIDENTS AS OF THE DATE OF THIS PROSPECTUS, SUCH NOTES MAY BE SOLD ONLY TO: (1)
"ACCREDITED INVESTORS" WITHIN THE MEANING OF REGULATION D UNDER THE SECURITIES
ACT OF 1933, (2) BANKS, SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES,
INSURANCE COMPANIES, INVESTMENT COMPANIES REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, PENSION AND PROFIT-SHARING TRUSTS, CORPORATIONS OR OTHER
ENTITIES WHICH, TOGETHER WITH THE CORPORATION'S OR OTHER ENTITY'S AFFILIATES,
HAVE A NET WORTH ON A CONSOLIDATED BASIS ACCORDING TO THEIR MOST RECENT
REGULARLY PREPARED FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED, BUT NOT
NECESSARILY AUDITED, BY OUTSIDE ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND
SUBSIDIARIES OF THE FOREGOING OR (3) ANY PERSON (OTHER THAN A PERSON FORMED FOR
THE SOLE PURPOSE OF PURCHASING THE NOTES BEING OFFERED HEREBY) WHO PURCHASES AT
LEAST $1,000,000 AGGREGATE AMOUNT OF THE NOTES OFFERED HEREBY OR (4) ANY PERSON
WHO (A) HAS AN INCOME OF $65,000 AND A NET WORTH OF $250,000 OR (B) HAS A NET
WORTH OF $500,000 (IN EACH CASE, EXCLUDING HOME, HOME FURNISHINGS AND PERSONAL
AUTOMOBILES).
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (collectively with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Notes offered
hereby. In accordance with the rules and regulations of the Commission, this
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement, and reference is
hereby made to the Registration Statement and related exhibits filed as a part
thereof and otherwise incorporated therein for further information with respect
to the Company and the Notes offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of each document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. Copies of
the Registration Statement and the exhibits thereto may be inspected without
charge at the offices of the Commission or obtained at prescribed rates from the
Public Reference Section of the Commission at the addresses set forth below.
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
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, Room 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,
the Company's common stock is listed on the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and the Midwest Stock Exchange, 440 South
LaSalle Street, Chicago, Illinois 60605, where reports, proxy statements and
other information concerning the Company can also be inspected.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, except for Item 6 "Selected Financial Data", Item 7
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to Item 14 "Exhibits, Financial Statement
Schedules, and Reports on Form 8-K", sections (a)(1) "Financial Statements" and
(a)(2) "Financial Statement Schedules" therein, and the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1994, as amended by Form
10-Q/A, Amendment No. 1 filed on March 27, 1995, each filed by Anacomp with the
Commission pursuant to the Exchange Act (File No. 1-8328), are hereby
incorporated in this Prospectus by reference and made a part hereof. All
documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the Offering of the Notes made hereby shall be deemed to be incorporated
herein by reference and shall be a part hereof from the date of the filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
is deemed to be incorporated by reference herein, 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.
The Company will provide, without charge to each person to whom a copy of
this Prospectus is delivered, including any beneficial owner, upon written or
oral request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to Corporate Communications,
Anacomp, Inc., 11550 North Meridian Street, P.O. Box 40888, Indianapolis,
Indiana 46240, telephone number (317) 844-9666.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including notes thereto) appearing elsewhere or incorporated by
reference in this Prospectus. Unless the context otherwise requires, "Anacomp"
or the "Company" means Anacomp, Inc. and its subsidiaries. The Company's fiscal
year ends September 30.
THE COMPANY
Anacomp is the world's leading full-service provider of micrographics
systems, services and supplies with over 15,000 customers in more than 65
countries. Micrographics is the conversion of information stored in digital form
or on paper to microfilm or microfiche. The Company has the world's largest
installed base of micrographics recorders (approximately 58% of those in use),
which enables Anacomp to generate a significant portion of its revenue by
providing related maintenance services and consumable supplies. In addition, the
Company provides micrographics outsourcing services through its 50 data service
centers. Together, Anacomp's service-related businesses have generated more than
65% of its annual revenues in each of the last three fiscal years. The Company
also is a leading manufacturer and distributor of a wide range of magnetics
storage products. Anacomp's customers include a majority of the Fortune 500,
leading financial institutions and government agencies, such as AT&T Corp., The
Boeing Company, Citicorp, Deutsche Bank AG, Electronic Data Systems Corp., the
U.S. Army and the U.S. Social Security Administration. In the fiscal year ended
September 30, 1994, Anacomp's revenues were approximately $593 million and
earnings before interest, taxes, depreciation and amortization ("EBITDA") was
approximately $114 million.
The volume of data being generated and processed by businesses and
governments is growing rapidly, primarily as a result of the increasing power
and prevalence of computers. In 1994, more than 90% of this data was stored on
paper, which is the most costly and inefficient way to store information. Faced
with the growing volume of information, private and public enterprises are
increasingly relying on a wide range of technologies to facilitate the storage
and retrieval of data. These technologies include DASD (direct access storage
device), optical disk, magnetic tape and micrographics. Given their
complementary functions, organizations typically employ several data storage and
management technologies simultaneously. Demand for a particular technology is
driven by several important attributes, including cost, speed of retrieval,
ongoing feasibility of retrieval technology, longevity and data integrity. The
optimal mix of these attributes changes according to the frequency of
information usage and the urgency of its retrieval. For example, large
commercial banks, with millions of monthly customer bank statements, receive
frequent inquiries during the initial weeks after the statements are generated.
At this stage, a high-cost but fast-access technology such as DASD is typically
used. However, as the frequency and urgency of customer requests decreases over
time, the data may be migrated to a low-cost but relatively slower retrieval
technology such as micrographics.
Micrographics is the least expensive of all data storage and management
technologies, costing approximately $0.08-$0.15 per megabyte in 1994, compared
to $3.50-$7.00 per megabyte for DASD, $1.50-$3.50 per megabyte for optical disk
and $0.30-$1.00 per megabyte for magnetic tape. In addition to this cost
advantage, micrographics is the most stable storage medium as it is human
readable and, accordingly, does not require sophisticated electronic retrieval
devices that are subject to rapid technological change. Information stored on
microfilm or microfiche is estimated to remain usable for over 100 years, making
micrographics the preferred method of storing information for extended periods
of time. Micrographics also has the highest degree of integrity because data
cannot be altered once recorded onto microfilm or microfiche.
4
<PAGE> 6
The Company seeks to expand the value of micrographics and target new
digital storage markets by implementing the following strategies:
- Enhance Leadership in Micrographics. Anacomp is expanding its
leadership position in micrographics by (i) continuing to drive
the pace of technological innovations through the introduction
of new micrographics features and products, (ii) offering
upgraded capabilities and services through the Company's data
service centers and (iii) acquiring companies or assets that are
available at attractive prices as a result of industry
consolidation, with an emphasis on acquisitions of data service
centers.
- Pursue Strategic Alliances. Anacomp is developing new
micrographics, digital and consumable products through alliances
with leading technology companies such as International Business
Machines Corporation, Xerox Corporation, FileNet Corporation and
Eastman Kodak Company. The Company is pursuing strategic
alliances in order to gain access to new technologies and reduce
development time and expenses. Anacomp's technological
leadership in micrographics, worldwide distribution network and
base of over 15,000 customers should continue to make Anacomp an
attractive strategic alliance partner.
- Seek International Growth. Anacomp intends to pursue
international opportunities by targeting new markets in certain
Asian and Latin American countries that have relied almost
exclusively on paper storage and have no or minimal previous
exposure to micrographics. For example, in fiscal 1994, the
Company placed its first three micrographics systems in China,
with that country's two largest banks.
- Continue Cost Reductions. The Company continues to streamline
its operations in an effort to reduce costs. These initiatives
include consolidating manufacturing operations and supply
relationships, outsourcing manufacturing functions and
centralizing administration, customer service and order entry.
The Company estimates that these measures will generate $6 to $8
million in annual savings at current volume levels.
THE REFINANCING
The Offering is part of a refinancing by Anacomp (the "Refinancing") that
also consists of (i) the concurrent establishment of the Revolving Credit
Facility in an aggregate principal amount of $50 million; and (ii) the
application of certain of the net proceeds from the Offering to retire
approximately $203.4 million of the Company's indebtedness. In connection with
the Refinancing, the Company has received consents (the "Consents") from holders
of its 15% Senior Subordinated Notes due 2000 (the "15% Subordinated Notes") in
order to modify or eliminate certain provisions of the indenture relating to the
15% Subordinated Notes (the "Subordinated Indenture") necessary to permit, among
other things, the Refinancing and is making a tender offer to purchase up to $50
million fully accreted value of the 15% Subordinated Notes (the "Tender Offer").
See "The Refinancing" and "Use of Proceeds".
The closings of the Offering and the Revolving Credit Facility will be
conditioned upon each other and upon the receipt of the required Consents from
holders of the 15% Subordinated Notes.
The Refinancing will (i) eliminate an aggregate of $153 million in
scheduled principal payments in fiscal years 1995 through 1998, thereby
providing Anacomp with additional cash for product development and enhancement
and for acquisitions; (ii) simplify Anacomp's capital structure by consolidating
long-term indebtedness; and (iii) provide Anacomp with the flexibility to
refinance the remaining 15% Subordinated Notes if the Company elects, subject to
market conditions, to redeem such 15% Subordinated Notes after they become
redeemable in November 1995. As of December 31, 1994, after giving effect to the
Refinancing, the Company would have had approximately $192 million of
subordinated indebtedness outstanding.
5
<PAGE> 7
THE OFFERING
Securities................. $225 million aggregate principal amount of %
Senior Secured Notes due 2002.
Maturity Date.............. , 2002.
Interest Payment Dates..... and , commencing
, 1995.
Mandatory Redemption....... The Company will be required to redeem $37.5
million aggregate principal amount of Notes on each
of December , 2000, and December , 2001, in
each case at a redemption price equal to 100% of
the principal amount thereof, plus accrued and
unpaid interest. See "Description of the
Notes -- Mandatory Redemption".
Optional Redemption........ The Notes will be redeemable at the option of the
Company, in whole or in part, on or after
, 2000, at % of the principal
amount thereof, declining to 100% of the principal
amount thereof on or after , 2001,
plus, in each case, accrued and unpaid interest.
See "Description of the Notes -- Optional
Redemption".
Ranking.................... The Notes will be senior secured obligations of the
Company and will rank pari passu with all other
existing and future senior obligations of the
Company, including the Revolving Credit Facility,
and senior to all existing and future subordinated
or junior indebtedness of the Company.
Security................... The Collateral securing the Notes will consist of
substantially all the assets of the Company.
Although the Collateral will include the Working
Capital Collateral, the lien on behalf of the Notes
on the Working Capital Collateral will be second in
priority and junior to the lien of the lenders
under the Revolving Credit Facility on the Working
Capital Collateral. The Collateral will include
after-acquired assets of the Company to the extent
that such assets are acquired by the Company
without financing secured by a lien on such assets.
See "Risk Factors -- Potential Inadequacy of
Security" and "Description of the
Notes -- Collateral".
Change of Control.......... Upon a Change of Control, the Company will be
required to make an offer to purchase the Notes
then outstanding at a purchase price equal to 101%
of the principal amount thereof, plus accrued and
unpaid interest. See "Description of the
Notes -- Change of Control".
Asset Sale Proceeds........ The Company will be required in certain
circumstances to make offers to purchase Notes at a
purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest, with the
net cash proceeds of certain sales or other
dispositions of assets by the Company or certain of
its subsidiaries. See "Description of the
Notes -- Certain Covenants -- Limitation on Sales
of Assets and Restricted Subsidiary Stock".
Principal Covenants........ The Indenture (as defined herein) relating to the
Notes will contain covenants limiting, among other
things, (i) the incurrence of additional
indebtedness by the Company and certain of its
subsidiaries, (ii) the payment of dividends on, and
the redemption of, capital stock of the Company and
certain of its subsidiaries, (iii) the redemption
of
6
<PAGE> 8
certain subordinated obligations of the Company and
certain of its subsidiaries and the making of
certain investments by the Company and certain of
its subsidiaries, (iv) the sale by the Company and
certain of its subsidiaries of assets and certain
subsidiary stock, (v) transactions between the
Company and its affiliates, (vi) liens on the
Collateral securing the Notes, (vii) sale/leaseback
transactions by the Company and certain of its
subsidiaries and (viii) consolidations and mergers
and transfers of all or substantially all the
Company's and certain of its subsidiaries' assets.
However, all these limitations and prohibitions are
subject to a number of important qualifications and
exceptions. See "Description of the Notes --
Certain Covenants" and "-- Consolidation, Merger
and Sale of Assets".
Use of Proceeds............ The net proceeds of the Offering will be used to
repay approximately $203.4 million of the Company's
existing indebtedness, as well as for general
corporate purposes. See "Use of Proceeds".
RISK FACTORS
A number of factors could adversely affect the Company's ability to make
payments on the Notes, including the following business risks: Adverse Effect of
Growth of Digital Technologies, Recent Declines in Revenues, Quarterly Earnings
Fluctuations, Availability of Polyester and Certain Other Supplies, New Products
and International; and the following transaction risks: Substantial Leverage,
Ability to Repay Notes and Other Debt, Potential Inadequacy of Security,
Conflicts Between the Indenture and the Subordinated Indenture, Covenant
Compliance and Lack of Public Market.
7
<PAGE> 9
SUMMARY CONSOLIDATED OPERATING AND FINANCIAL DATA
The following table summarizes selected consolidated historical operating
and financial data of the Company for the five fiscal years ended September 30,
1994, and as of September 30, 1994, which were derived, except as otherwise
noted, from the consolidated financial statements of the Company audited by
Arthur Andersen LLP. The table also summarizes selected unaudited consolidated
historical operating and financial data for the three-month periods ended
December 31, 1994 and 1993 and as of December 31, 1994, derived from unaudited
interim condensed consolidated financial statements of the Company, as restated,
which, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the unaudited interim periods. The following table also includes certain
unaudited pro forma financial data that reflect adjustments necessary to give
effect to the Offering and the Revolving Credit Facility (assuming no borrowings
thereunder) and the use of the net proceeds from the Offering as described under
"Use of Proceeds". The pro forma financial data do not purport to represent the
Company's results of operations or financial condition had the Refinancing been
effective for the periods indicated and do not purport to project the Company's
results of operations and financial condition for any future period. This table
should be read in conjunction with, and is qualified in its entirety by
reference to, "Selected Consolidated Operating and Financial Data",
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Company's historical consolidated financial statements and
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
------------------- ------------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................. $151,812 $136,949 $592,599 $590,208 $628,940 $635,361 $652,238
Cost of sales............ 109,723 95,612 420,483 404,752 428,308 423,956 431,047
Selling, general and
administrative
expenses............... 24,196 21,757 92,539 96,822 100,330 105,861 108,589
Operating income......... 17,893 19,580 79,577 88,634 100,302 105,544 112,602
Interest expense......... 17,949(a) 17,086 67,174 68,960 71,947 79,655 84,483
Net income............... 281 9,401(b) 14,955(b) 18,591 26,921 29,205 9,576
Ratio of earnings to
fixed charges(c)....... 1.03x 1.16x 1.21x 1.27x 1.41x 1.36x 1.16x
OTHER FINANCIAL DATA:
EBITDA(d)................ $ 26,469 $ 27,544 $114,192 $121,640 $134,871 $137,095 $148,854
Capital expenditures..... 3,236 3,039 18,868 20,726 18,755 13,916 22,182
Pro forma cash interest
expense(e)............. 15,862 -- 62,105 -- -- -- --
Ratio of EBITDA to
pro forma cash interest
expense(e)............. 1.67x -- 1.84x -- -- -- --
Ratio of pro forma total
debt to EBITDA(e)...... -- -- 3.67x -- -- -- --
Ratio of pro forma
earnings to pro forma
fixed charges(c)....... 1.07x -- 1.20x -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
-------------------------
PRO FORMA(F) ACTUAL
------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash........................................................................ $ 7,000 $ 5,337
Property, plant, and equipment -- net....................................... 57,750 57,750
Intangible assets(g)........................................................ 276,969 276,969
Total assets................................................................ 644,984 636,363
Total debt.................................................................. 418,557 395,807
Redeemable preferred stock.................................................. 24,502 24,502
Stockholders' equity........................................................ 40,430 48,907
</TABLE>
8
<PAGE> 10
(a) Includes $1,400 of accelerated amortization of debt fees as a result of
accelerated debt paydowns.
(b) The Company adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes, in the first quarter of fiscal year 1994. The adoption
resulted in a one-time increase to net income of $8,000 reflecting the
cumulative effect on prior years of this accounting change.
(c) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense on indebtedness, amortization of deferred debt
issuance costs, accretion of the original issue discount and the portion of
rental expense under operating leases that has been deemed by the Company to
be representative of an interest factor, all on a pre-tax basis. The ratio
of pro forma earnings to pro forma fixed charges is similarly computed,
giving effect, however, to the applicable pro forma adjustments described in
footnote (e).
(d) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. Management believes that EBITDA, as presented, provides an
indicator of the Company's ability to service or incur indebtedness. EBITDA
should not be considered as an alternative to net income (as determined in
accordance with GAAP) as a measure of the Company's operating results or to
cash flows (as determined in accordance with GAAP) as a measure of the
Company's liquidity.
(e) The pro forma data give effect to the Refinancing (assuming no borrowings
under the Revolving Credit Facility) and the application of the estimated
net proceeds therefrom as if the Refinancing had occurred at the beginning
of the periods presented. Pro forma cash interest expense represents total
interest expense, including interest expense for the Notes and other
indebtedness as if the Notes were outstanding at the beginning of the period
presented, less amortization of deferred issue costs, accretion of the
original issue discount and accretion of interest on accrued lease reserves.
(f) The pro forma data give effect to the Refinancing (assuming no borrowings
under the Revolving Credit Facility) and the application of the estimated
net proceeds therefrom as if the Refinancing had occurred at December 31,
1994, including after-tax charges of approximately $3,881 relating to the
non-cash write-off of unamortized debt issuance costs and unamortized debt
discount of the debt instruments retired and approximately $4,596 relating
to the make-whole payments required upon the redemption of the 12.25% Series
B Senior Notes due 1997, a 3.5% Tender Offer premium above fully accreted
value and a 2% consent fee associated with the Company's 15% Subordinated
Notes. The pro forma data also reflect the capitalization of $12,250 of the
costs and fees incurred in connection with the Refinancing, estimated to be
$13,250. See "Use of Proceeds".
(g) Intangible assets represent primarily the excess of purchase price over net
assets of businesses acquired (goodwill). Goodwill is amortized on the
straight-line method over 15 to 40 years.
9
<PAGE> 11
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective purchasers of the Notes should carefully consider the matters set
forth below before making an investment decision.
BUSINESS RISKS
Adverse Effect of Growth of Digital Technologies
Revenues for Anacomp's micrographic services and products have been
adversely affected for each of the past four fiscal years (see "-- Recent
Declines in Revenues") and could in the future be substantially adversely
affected by, among other things, the increasing use of digital technology.
Micrographics represented 82% of the Company's fiscal 1994 revenues and is
expected to remain the Company's primary source of revenues for the foreseeable
future. The effect of digital and other technologies on the demand for
micrographics depends, in part, on the extent of technological advances and cost
decreases in such technologies. The recent trend of technological advances and
attendant price declines in digital systems and products is expected to
continue. As a result, in certain instances, potential micrographics customers
have deferred, and may continue to defer, investments in micrographics systems
(including the Company's XFP 2000 system) and the utilization of micrographics
data service centers while evaluating the abilities of digital and other
technologies.
The continuing development of local area computer networks and similar
systems based on digital technologies has resulted and will continue to result
in at least some Anacomp customers changing their use of micrographics from data
storage and retrieval to primarily data storage. The Company believes this is at
least part of the reason for the declines in the past two fiscal years in sales
of the Company's duplicate film, readers and reader/printers. Anacomp's service
centers also are producing fewer duplicate microfiche per original for
customers, reflecting this use of micrographics primarily for storage. The
rapidly changing data storage and management industry also has resulted in
intense price competition in certain of the Company's markets, particularly
micrographics services. Anacomp's operating margins have decreased to 11.8% in
the first quarter of fiscal 1995 from 13.4% in fiscal 1994, 15% in 1993 and
15.9% in 1992.
Recent Declines in Revenues
As a result of the rapidly changing nature of the data storage and
management industry, the Company has experienced declining or flat revenues in
each of the last four fiscal years. Excluding contributions from acquisitions
made by Anacomp during 1994, revenues for fiscal 1994 decreased $29.1 million
from 1993 and revenues decreased $1.1 million for the first quarter of fiscal
1995 when compared to the same period for the previous year. Fiscal 1993
revenues decreased $42.6 million compared to the prior year, and revenues in
fiscal 1992 decreased $11.7 million from 1991, excluding, in each case,
acquisitions made by Anacomp during such fiscal year. For further discussion by
product line of recent trends in revenues and operating margins, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition".
Anacomp has used acquisitions in the past to try to offset declining
revenues and increase market share. If Anacomp continues to experience declining
revenues, it may depend, in part, on acquisitions to try to offset such
declines, and there can be no assurance that the Company will be able to effect
any such further acquisitions. For example, revenues for the Company's
micrographics services business increased 5% in fiscal 1994 from 1993 largely
because of the acquisition of 16 data service centers or related customer bases.
Revenues for micrographics services declined 2% in fiscal 1993 from 1992, a
period during which only four data service centers were acquired. Acquisitions
generally have been of companies in markets in which Anacomp already competes.
The Company's substantial leverage limits the amount of cash flow available for
investment. The Indenture for the Notes and the terms of the Company's other
indebtedness will restrict the Company's ability to make acquisitions. See
"-- Substantial Leverage".
10
<PAGE> 12
Quarterly Earnings Fluctuations
Sales of the Company's COM (Computer Output to Microfilm) systems,
including its XFP 2000 systems, vary significantly from quarter to quarter
depending on various factors, including the level and timing of orders and
shipments, customer requirements, the mix of product features selected and
pricing changes, some of which are not within the control of the Company.
Additionally, as is the case with many technology companies, a significant
portion of the Company's sales of its COM systems typically occurs in the last
few weeks of a quarter. As a result, Anacomp's COM systems revenues may shift
from one quarter to the next, having a significant effect on reported results,
and quarterly revenues and reported results cannot be accurately estimated even
a few weeks prior to the end of a quarter. See note 16 to the Company's audited
consolidated financial statements appearing elsewhere herein.
Availability of Polyester and Certain Other Supplies
Polyester is the basic raw material for the Company's film and magnetics
products. There is currently a worldwide shortage of polyester, and the price of
magnetics-based polyester is expected to increase 5% to 10% over the next two
years. Large increases in the price of polyester are likely to affect the
Company's operating margins adversely as the maturity of the Company's magnetics
markets makes it difficult to effect price increases. Increased polyester prices
also could result in the loss of certain customers. Anacomp and its principal
polyester vendor, SKC Limited and SKC America, Inc. (collectively, "SKC"), from
time to time negotiate polyester price increases relating to magnetics products,
and there can be no assurance as to the outcome of any such negotiations. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources".
Certain third parties are the sole suppliers of some of the Company's raw
materials and products. Any disruption in the supply relationship between the
Company and such suppliers could result in delays or reductions in product
shipment or increases in product costs that adversely affect the Company's
operating results in any given period. In the event of any such disruption,
there can be no assurance that the Company could develop alternative sources at
acceptable prices and within reasonable times. For a further description of the
Company's raw material needs and supply relationships, see "Business -- Raw
Materials and Suppliers".
New Products
The Company is attempting to introduce new data storage and management
products and services incorporating digital technologies. These products and
services are all recent introductions and, accordingly, have limited or no
revenues to date. The markets for such new products and services are very
competitive, and there can be no assurances that Anacomp's products and services
will achieve market acceptance. The Company has no experience in the
manufacture, sale or marketing of these new products and services. The Company
currently is in the process of reeducating and refocusing its sales force to
sell its new products and services, as well as its more traditional COM products
and services, and there can be no assurance that this will be successfully
achieved. The Company's substantial leverage also may hinder the development and
deployment of new technologies. See "-- Substantial Leverage".
International
The Company's financial results are dependent in part on its international
operations, which represented 29% of revenues for fiscal 1994. Anacomp expects
that its international operations will continue to be a significant portion of
the Company's business as the Company seeks to expand its international
presence. Certain risks are inherent in international operations, including
exposure to currency fluctuations. From time to time in the past, the Company's
financial results have been affected both favorably and unfavorably by
fluctuations in currency exchange rates. In fiscal 1993, a relatively stronger
U.S. dollar as compared with fiscal 1992 reduced revenues and operating income
of the Company's foreign subsidiaries by $8.7 million and $1.4 million,
respectively, as the foreign currency results were translated into U.S. dollars.
The impact of foreign currency fluctuations in fiscal 1994 was not significant.
Future unfavorable fluctuations in currency exchange rates also may have an
adverse impact on the Company's revenues and operating results. Anacomp does not
currently enter into hedging arrangements, although it may do so in the future.
11
<PAGE> 13
TRANSACTION RISKS
Substantial Leverage
The Company is highly leveraged and substantially all its assets are or
will be mortgaged or subject to security interests. For the fiscal year ended
September 30, 1994, the Company's earnings before interest, taxes, depreciation
and amortization ("EBITDA") was $114.2 million. For the same period, the
Company's pro forma cash interest expense, as adjusted to give effect to the
issuance of the Notes, the creation of the Revolving Credit Facility (assuming
no borrowings thereunder) and the use of net proceeds from the Notes, would have
been $62.1 million. On the same pro forma basis, as of December 31, 1994, the
Company's total long-term indebtedness would have been $418.6 million.
Concurrently with the issuance of the Notes, the Company will be entering
into the Revolving Credit Facility in an aggregate principal amount of $50
million. See "The Refinancing". After the Refinancing, the Company's other
indebtedness will consist (as of December 31, 1994) of $174.9 million fully
accreted value of its 15% Subordinated Notes (assuming $50 million of 15%
Subordinated Notes are purchased by the Company pursuant to the Tender Offer),
$21 million of 13 7/8% Convertible Subordinated Debentures due January 15, 2002
and $1.8 million of capital leases and other indebtedness. In addition, the
Company has $25 million outstanding under its SKC Trade Payable due 2001.
Subject to the terms of the Notes and the Company's other indebtedness, the
Company may incur additional indebtedness from time to time, in connection with
acquisitions or otherwise.
The degree to which the Company is leveraged, together with the covenants
imposed by the Company's indebtedness, including the Notes, could have adverse
consequences to holders of the Notes, including the following: (i) substantial
cash flow from the Company's operations will be required for the payment of
principal and interest on its indebtedness and will not be available for other
purposes; (ii) the Company's ability to obtain additional financing in the
future, whether for acquisitions, capital expenditures, refinancings or
otherwise, may be impaired; (iii) the Company may be more leveraged than certain
of its competitors, which may place it at a competitive disadvantage; (iv) the
Company's loan and other debt agreements (including the Indenture) will impose
significant financial and operating restrictions; and (v) the Company's high
degree of leverage may make it more vulnerable to changes in economic conditions
and may limit its ability to withstand competitive pressures and technological
developments, consummate acquisitions and capitalize on significant business
opportunities.
Ability to Repay Notes and Other Debt
The Company will require substantial cash flow to meet its interest payment
obligations with respect to the Notes, the Revolving Credit Facility (to the
extent drawn upon), the 15% Subordinated Notes and all other current and future
borrowings. The Company's cash flow is dependent on the Company's future
performance and is subject to financial, economic and other factors, some of
which are beyond its control. If the Company is unable to generate sufficient
cash flow from operations or otherwise to satisfy its interest obligations on
the Notes and other indebtedness, it may be required to refinance all or a
portion of such obligations or to sell assets. For a discussion of the Company's
liquidity and capital resources, see "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Liquidity and Capital
Resources".
The Company expects that any payment of the principal of any of the Notes,
the 15% Subordinated Notes (which become redeemable at Anacomp's option
beginning in November 1995 and which have mandatory sinking fund obligations of
$22 million in November 1998 (assuming $50 million fully accreted value of 15%
Subordinated Notes are purchased by the Company pursuant to the Tender Offer)
and $72 million in November 1999) or any other borrowings, whether upon
maturity, acceleration, redemption, under a sinking fund obligation or other
repurchase obligation, such as a change of control, may have to be refinanced in
whole or in part or financed by the sale of assets or similar transactions. The
Indenture and other debt instruments of Anacomp contain restrictions on the
Company's ability to incur additional indebtedness and to sell assets and,
notwithstanding such restrictions, the Company may not be able to effect a
refinancing or sell assets on acceptable terms when needed.
12
<PAGE> 14
Potential Inadequacy of Security
The proceeds of any sale of the Collateral following an event of default
under the Indenture may not be sufficient to repay the Notes in full. The Notes
will be secured with a lien on the Collateral, which will consist of
substantially all the Company's assets. The Collateral will include
after-acquired assets of the Company to the extent that such assets are acquired
by the Company without financing secured by such assets. The Indenture for the
Notes permits the Collateral to be subject to Permitted Liens (as defined
herein).
Although the Collateral consists of substantially all the assets of the
Company, most of Anacomp's assets consist of goodwill and other intangibles.
Excluding Working Capital Collateral, the tangible assets comprising the
Collateral, which, as of December 31, 1994, had a book value of approximately
$67.5 million, will consist primarily of processing equipment, manufacturing
equipment and tooling, spare parts, long-term receivables and office furniture.
The only real property owned by Anacomp that will be part of the Collateral is
the Graham, Texas site on which the Company's primary magnetics manufacturing
facility is located. A portion of the Graham property is subject to a
non-subordinated lease with substantially below market value rents. The
Collateral will not include facility leases under which Anacomp operates data
service centers and maintains certain other operations. The common stock and
assets (other than accounts receivable, inventory and the proceeds thereof) of
the U.S. Restricted Subsidiaries (as defined herein) of the Company are part of
the Collateral. However, the U.S. Restricted Subsidiaries are non-operating
companies and have no significant assets. The Collateral also includes, subject
to certain restrictions of foreign law, 65% of the common stock of the Company's
Foreign Restricted Subsidiaries (as defined herein) that are owned directly by
the Company or a U.S. Restricted Subsidiary. Although certain of the Foreign
Restricted Subsidiaries are operating companies, they have few assets, other
than accounts receivables and inventory, which may be pledged to secure foreign
currency revolving credit facilities. No assets of the Foreign Restricted
Subsidiaries are part of the Collateral. There is no public market for the
common stock of either the U.S. Restricted Subsidiaries or the Foreign
Restricted Subsidiaries.
Although the Collateral will include Working Capital Collateral, the lien
on behalf of the Notes on the Working Capital Collateral will be second in
priority and junior to the lien of the lenders under the Revolving Credit
Facility on the Working Capital Collateral. The holders of the Notes will have
no rights to, among other things, control the disposition of the Working Capital
Collateral until the obligations of the Company under the Revolving Credit
Facility (to the extent such obligations are permitted to be incurred under the
Indenture, together with all interest, fee and expenses owed under the Revolving
Credit Facility) have been fully satisfied. The agent for the lenders under the
Revolving Credit Facility (the "Revolver Agent") will be permitted to release
the lien of the Indenture on the Working Capital Collateral in connection with
sales or dispositions thereof so long as the lien on behalf of the Revolving
Credit Facility is similarly released and the proceeds thereof are applied as
required under the Intercreditor Agreement and to waive any rights of the
Trustee so long as the corresponding rights of the Revolver Agent have been
similarly waived. See "Description of the Notes -- Collateral -- Working Capital
Collateral". The first priority and senior lien in favor of the lenders under
the Revolving Credit Facility will extend to any refinancing of the Revolving
Credit Facility or any replacement of the Revolving Credit Facility that occurs
within six months of the satisfaction in full of the Company's obligations under
the Revolving Credit Facility. In addition, SKC has a security interest in up to
$10 million of products purchased by Anacomp pursuant to the supply agreement
between the Company and SKC. See "Description of Other Obligations -- SKC Trade
Payable due 2001".
If a bankruptcy proceeding were to be commenced by or against the Company
and the bankruptcy court were to conclude that the Notes were inadequately
secured, the holders of the Notes would have only an unsecured deficiency claim
to the extent of such inadequacy and would not be entitled to post-petition
interest. Any deficiency claim (whether or not in a bankruptcy proceeding
involving the Company) of the holders of the Notes would rank pari passu with
any deficiency claims of the lenders of the Revolving Credit Facility and all
other general unsecured creditors. In addition, the ability of the holders of
the Notes to effect a sale of the Collateral may be subject to certain
bankruptcy limitations in
13
<PAGE> 15
the event of a bankruptcy proceeding involving the Company. See "Description of
the Notes -- Certain Bankruptcy Limitations" and "-- Collateral".
Conflicts Between the Indenture and the Subordinated Indenture
The Indenture for the Company's 15% Subordinated Notes (the "Subordinated
Indenture") requires the Company to offer to repurchase the 15% Subordinated
Notes upon the failure to comply with certain covenants including: (i) minimum
consolidated net worth maintenance; (ii) changes of control; (iii) sales of
assets or subsidiary stock; and (iv) incurrence of indebtedness (collectively,
the "Mandatory Repurchase Offers"). In the event that the Company is required to
make certain Mandatory Repurchase Offers, the Subordinated Indenture requires
that the Company first obtain the consent of the holders of the Notes and the
lenders under the Revolving Credit Facility or prepay in full both the Notes and
the Revolving Credit Facility. In addition, the Company will be prohibited under
the Indenture for the Notes from making any payment pursuant to any Mandatory
Repurchase Offer unless the Company can satisfy the conditions for making a
Restricted Payment (as defined herein) in the amount of such payment. As of
December 31, 1994, on a pro forma basis giving effect to the Refinancing,
Anacomp would not have satisfied certain of the conditions for making Restricted
Payments. The Notes are not redeemable by Anacomp until , 2000.
Failure to make any Mandatory Repurchase Offer or payment pursuant thereto,
including as a result of the failure to satisfy the consent or prepayment
condition described above, could result in an acceleration of the maturity of
the 15% Subordinated Notes, thereby triggering an event of default under the
Indenture for the Notes. Conversely, if the Company makes a payment pursuant to
a Mandatory Repurchase Offer without satisfying the conditions for making a
Restricted Payment under the Indenture, the maturity of the Notes may be
accelerated, thereby triggering cross-acceleration under the Subordinated
Indenture. Any such default or acceleration also could result in the
acceleration of other debt of the Company under agreements that contain
cross-default or cross-acceleration provisions.
The Consents which were solicited from the holders of the 15% Subordinated
Notes in order to permit, among other things, the Refinancing, do not eliminate
the covenants described above requiring Anacomp to make Mandatory Repurchase
Offers. See "Description of Other Obligations -- 15% Subordinated Notes due
2000 -- Mandatory Repurchase Offers".
Covenant Compliance
The terms and conditions of the Indenture relating to the Notes and the
instruments applicable to the Company's other indebtedness impose restrictions
that limit, among other things, Anacomp's ability to: (i) incur additional
indebtedness (including indebtedness incurred by means of guarantees); (ii)
create liens on assets; (iii) sell assets; (iv) engage in mergers or
consolidations; (v) make acquisitions and investments; (vi) engage in certain
transactions with affiliates; (vii) make dividends, investments and certain
other payments; and (viii) engage in sale/leaseback transactions. The
Subordinated Indenture for the 15% Subordinated Notes contains various covenants
more restrictive on the operations and actions of Anacomp, and certain events of
default that are more likely to be declared, than the covenants and events of
default contained in the Indenture for the Notes. The agreement for the
Revolving Credit Facility and the Subordinated Indenture also will impose
various financial maintenance covenants on the Company. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources" and "Description of Other
Obligations -- Revolving Credit Facility" and "-- 15% Subordinated Notes due
2000".
The ability of the Company to comply with such covenants will be dependent
on the future financial performance of the Company which will be subject to
prevailing economic conditions and other factors, including factors beyond the
control of the Company. A failure to comply with any of these covenants could
result in a default or event of default under the relevant debt agreements
(including the Indenture), permitting lenders to accelerate the maturity of the
indebtedness under such agreements, to foreclose upon the collateral securing
such indebtedness and to terminate their commitments (if any) with respect
14
<PAGE> 16
to additional funding obligations under such agreements. Any such default, event
of default, acceleration or failure to comply also could result in the
acceleration of other debt of the Company under agreements that may contain
cross-default or cross-acceleration provisions. Under any of these
circumstances, there can be no assurance that the Company would have sufficient
funds or other resources to satisfy all such obligations on a timely basis.
Lack of Public Market
There is no existing market for the Notes, and there can be no assurance
that any market for the Notes will develop or, if any such market does develop,
as to the liquidity of any such market. If such a market were to develop, the
Notes could trade at prices that may be higher or lower than the initial
offering price thereof depending on many factors, including prevailing interest
rates, the Company's operating results and the markets for similar securities.
Each of Salomon Brothers Inc and Smith Barney Inc. has advised the Company that
it currently intends to make a market in the Notes; however, neither is
obligated to do so and any market making may be discontinued at any time without
notice. The Company does not intend to apply for listing of the Notes on any
securities exchange or for quotation of the Notes through the Nasdaq National
Market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the non-investment grade
debt market will not continue to be subject to such disruptions.
15
<PAGE> 17
THE REFINANCING
The Offering is part of the Refinancing that also consists of (i) the
concurrent establishment of the Revolving Credit Facility in an aggregate
principal amount of $50 million; and (ii) the application of certain of the net
proceeds from the Offering to retire approximately $203.4 million of the
Company's indebtedness. See "Use of Proceeds". The closings of the Offering and
the Revolving Credit Facility are conditioned upon each other and upon the
receipt of the required Consents from holders of the 15% Subordinated Notes as
described below.
The Refinancing will (i) eliminate an aggregate of $153 million in
scheduled principal payments in fiscal years 1995 through 1998, thereby
providing Anacomp with additional cash for product development and enhancement
and for acquisitions; (ii) simplify Anacomp's capital structure by consolidating
long-term indebtedness; and (iii) provide Anacomp with the flexibility to
refinance the remaining 15% Subordinated Notes if the Company elects, subject to
market conditions, to redeem such 15% Subordinated Notes after they become
redeemable in November 1995.
REVOLVING CREDIT FACILITY
As part of the Refinancing, the Company will be entering into the Revolving
Credit Facility in an aggregate principal amount of $50 million. The Revolving
Credit Facility will have a term of three years, will be secured by a first
priority and senior lien on the Working Capital Collateral and will have such
other customary terms and provisions as are negotiated between the Company and
the lenders under the Revolving Credit Facility. For a discussion of certain of
these terms and provisions, see "Description of Other Obligations -- Revolving
Credit Facility".
CONSENT SOLICITATION AND TENDER OFFER
In connection with the Refinancing, the Company solicited Consents (the
"Consent Solicitation") from holders of its 15% Subordinated Notes in order to
modify certain provisions of the Subordinated Indenture necessary to permit,
among other things, the Refinancing. As required by the Subordinated Indenture,
the Company received Consents from holders of at least 66 2/3% of the
outstanding principal amount of the 15% Subordinated Notes. In connection with
the Consent Solicitation, the Company will pay a fee equal to $20 for each
$1,000 fully accreted value of 15% Subordinated Notes for which a Consent has
been accepted by the Company. On March 13, 1995, the Consent Solicitation
expired and the Company and the trustee for the 15% Subordinated Notes executed
an amendment and restatement of the Subordinated Indenture that gives effect to
the amendments that are the subject of the Consents. The application of such
amendment and restatement of the Subordinated Indenture will be conditioned upon
the closing of the Refinancing.
In connection with the Consent Solicitation, on February 28, 1995, the
Company commenced an offer to purchase up to $50 million fully accreted value of
the 15% Subordinated Notes at a price of $1,035 per each $1,000 fully accreted
value plus accrued interest (the "Tender Offer"). The Tender Offer expires on
March 28, 1995, unless extended by the Company pursuant to the terms of the
Tender Offer (the "Tender Expiration Date"). The Company intends to extend the
Tender Offer so that the Tender Expiration Date occurs on or about the same date
the Refinancing is consummated. A portion of the net proceeds from the Offering
will be used to pay any tendering holders. In the event an amount less than $50
million fully accreted value of the 15% Subordinated Notes is tendered pursuant
to the Tender Offer, the Company will purchase any such 15% Subordinated Notes
tendered and will apply the difference between $50 million and such lesser
amount to retire additional indebtedness, which may be subordinated, and other
obligations of the Company or for general corporate purposes. Anacomp's
obligation to pay the fee for the Consents described above and purchase any
tendered 15% Subordinated Notes is conditioned upon the closing of the
Refinancing. See "Description of Other Obligations -- 15% Subordinated Notes due
2000".
16
<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
(after deduction of the underwriting discount and expenses payable by the
Company) are estimated to be $211.8 million. The net proceeds will be used to
retire approximately $203.4 million of Anacomp's indebtedness and to pay
expenses related thereto. The remainder of the net proceeds from the Offering,
approximately $1.7 million, will be retained by the Company for general
corporate purposes.
The following table sets forth the estimated sources and uses of the funds
to be raised in the Offering, as if the Offering had occurred on December 31,
1994 (in millions of dollars):
<TABLE>
<S> <C>
Sources:
% Senior Secured Notes due 2002..................................... $ 225.0
==========
Uses:
Revolving Loan due 1995(a)............................................ $ 32.0
Multicurrency Revolving Loan due 1995(b).............................. 29.8
Term Loans due 1996(c)................................................ 17.6
12.25% Series B Senior Notes due 1997(d).............................. 64.9
15% Senior Subordinated Notes due 2000(e)............................. 51.8
9% Convertible Subordinated Debentures due January 15, 1996........... 10.5
Graham Note payable at 10% due July 15, 1997.......................... 3.5
Refinancing Fees and Expenses......................................... 13.2
General Corporate Purposes............................................ 1.7
-------------
Total......................................................... $ 225.0
==========
</TABLE>
---------------
<TABLE>
<S> <C>
(a) The Revolving Loan bears interest at 2.75% over the one, two, three or six-month reserve adjusted London
Interbank Offer Rate ("LIBOR"), selected at the Company's option (8.88% at December 31, 1994).
(b) The Multicurrency Revolving Loan bears interest at 2.75% over the one, two, three or six-month LIBOR, selected
at the Company's option (8.84% at December 31, 1994).
(c) The Term Loans due 1996 bear interest at 2.75% over the three-month LIBOR (8.38% at December 31, 1994).
(d) Includes make-whole payment of approximately $4.9 million relating to the prepayment of the 12.25% Series B
Senior Notes due 1997.
(e) Assumes the Company purchases $50 million fully accreted value of the 15% Subordinated Notes pursuant to the
Tender Offer at 103.5% of the fully accreted value thereof. In the event an amount less than $50 million fully
accreted value of the 15% Subordinated Notes are tendered pursuant to the Tender Offer, the Company will
purchase any such 15% Subordinated Notes tendered and will apply the difference between $50 million and such
lesser amount to retire additional indebtedness, which may be subordinated, and other obligations of the
Company or for general corporate purposes.
</TABLE>
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the Company's consolidated capitalization as
of December 31, 1994 on a historical basis and as adjusted to give effect to the
Offering, the Revolving Credit Facility (assuming no borrowings are outstanding
thereunder) and the use of certain of the net proceeds from the Offering as
described under "Use of Proceeds". This table should be read in conjunction with
the Company's historical consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
--------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Cash................................................................ $ 5,337 $ 7,000
========= ==========
Senior Debt:
Revolving Loan.................................................... $ 32,000 $ --
Multicurrency Revolving Loan...................................... 29,752 --
Term Loans........................................................ 17,647 --
Series B Senior Notes............................................. 60,000 --
Senior Secured Notes offered hereby............................... -- 225,000
Capitalized Leases and Other...................................... 1,796 1,796
Subordinated Debt:
15% Subordinated Notes............................................ 219,608 170,785(a)
13 7/8% Convertible Subordinated Debentures....................... 20,976 20,976
Graham Note....................................................... 3,549 --
9% Convertible Subordinated Debentures............................ 10,479 --
---------- -----------
Total Debt................................................ 395,807 418,557
Redeemable Preferred Stock.......................................... 24,502 24,502
Stockholders' equity................................................ 48,907 40,430
---------- -----------
Total Capitalization.................................... $ 469,216 $ 483,489
========= ==========
</TABLE>
---------------
(a) Assumes $50 million fully accreted value of 15% Subordinated Notes are
purchased by the Company pursuant to the Tender Offer.
18
<PAGE> 20
SELECTED CONSOLIDATED OPERATING AND FINANCIAL DATA
The following table sets forth the selected consolidated historical
operating and financial data of the Company for the five fiscal years ended
September 30, 1994 and as of September 30 for the five fiscal years ended
September 30, 1994, which were derived, except as otherwise noted, from the
consolidated financial statements of the Company audited by Arthur Andersen LLP.
The table also sets forth selected unaudited consolidated historical operating
and financial data for the three-month periods ended December 31, 1994 and 1993
and as of December 31, 1994, derived from the unaudited interim condensed
consolidated financial statements of the Company, as restated, which, in the
opinion of management of the Company, include all adjustments consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the unaudited interim periods. The following table also includes certain
unaudited pro forma financial data that reflect adjustments necessary to give
effect to the Offering and the Revolving Credit Facility (assuming no borrowings
thereunder) and the use of the net proceeds from the Offering as described under
"Use of Proceeds". The pro forma financial data do not purport to represent the
Company's results of operations or financial condition had the Refinancing been
effective for the periods indicated and do not purport to project the Company's
results of operations and financial condition for any future period. This table
should be read in conjunction with, and is qualified in its entirety by
reference to, "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the Company's historical consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
----------------------- ----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
------------ -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.......................... $151,812 $136,949 $592,599 $590,208 $628,940 $635,361 $652,238
Cost of sales..................... 109,723 95,612 420,483 404,752 428,308 423,956 431,047
Selling, general and
administrative expenses......... 24,196 21,757 92,539 96,822 100,330 105,861 108,589
Operating income.................. 17,893 19,580 79,577 88,634 100,302 105,544 112,602
Interest expense.................. 17,949(a) 17,086 67,174 68,960 71,947 79,655 84,483
Income from operations before
extraordinary credit and
cumulative effect of accounting
change.......................... 281 1,401 6,955 11,691 18,221 18,105 3,442
Net income........................ 281 9,401(b) 14,955(b) 18,591 26,921 29,205 9,576
Per share income (loss) from
operations (net of preferred
stock dividends and discount
accretion)...................... (.01) .02 .10 .22 .38 .38 .04
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994 AS OF SEPTEMBER 30,
----------------------- ----------------------------------------------------
PRO FORMA(C) ACTUAL 1994 1993 1992 1991 1990
------------ -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash ............................. $ 7,000 $ 5,337 $ 19,871 $ 24,922 $ 29,881 $ 19,811 $ 11,577
Property, plant and
equipment -- net................ 57,750 57,750 66,769 66,399 67,872 70,609 79,414
Intangible assets(d).............. 276,969 276,969 279,607 296,426 310,333 318,575 335,084
Total assets...................... 644,984 636,363 658,639 643,548 681,561 686,062 717,513
Total debt........................ 418,557 395,807 411,847 439,093 477,303 514,749 539,707
Redeemable preferred stock........ 24,502 24,502 24,478 24,383 24,287 24,191 24,095
Stockholder's equity.............. 40,430 48,907 49,756 13,799 8,290 (25,017) (58,580)
</TABLE>
---------------
<TABLE>
<S> <C>
(a) Includes $1,400 of accelerated amortization of debt fees as a result of accelerated debt paydowns.
(b) The Company adopted Financial Accounting Standards No. 109, Accounting for Income Taxes, in the first quarter of fiscal
year 1994. The adoption resulted in a one-time increase to net income of $8,000 reflecting the cumulative effect on prior
years of this accounting change.
(c) The pro forma data give effect to the Refinancing (assuming no borrowings under the Revolving Credit Facility) and the
application of the estimated net proceeds therefrom as if the Refinancing had occurred at December 31, 1994, including
after-tax charges of approximately $3,881 relating to the non-cash write-off of unamortized debt issuance costs and
unamortized debt discount of the debt instruments retired and approximately $4,596 relating to the make-whole payments
required upon the redemption of the 12.25% Series B Senior Notes due 1997, a 3.5% Tender Offer premium above fully
accreted value and a 2% consent fee associated with the Company's 15% Subordinated Notes. The pro forma data also reflect
the capitalization of $12,250 of the costs and fees incurred in connection with the Refinancing, estimated to be $13,250.
See "Use of Proceeds".
(d) Intangible assets represent primarily the excess of purchase price over net assets of businesses acquired (goodwill).
Goodwill is amortized on the straight-line method over 15 to 40 years.
</TABLE>
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS -- GENERAL
First Three Months Fiscal 1995
Total revenues for the three months ended December 31, 1994 increased $14.9
million over the same period of the prior year. The increase was the result of
contributions from two acquisitions made in fiscal 1994: approximately $13.2
million from the acquisition of Graham Magnetics, Inc. ("Graham"), a
manufacturer of magnetics products, in May 1994, and $2.7 million from the
acquisition of the COM services customer base of 14 data service centers from
National Business Systems, Inc. ("NBS"), in January 1994.
Selling, general and administrative expenses were 16% of revenue in both
periods.
Operating margins (for which operating income is defined as income from
operations before interest, other income, income taxes and cumulative effect of
accounting change) were 11.8% in the first quarter of fiscal 1995, compared to
14.3% in the first quarter of fiscal 1994. This decrease was primarily due to
the relatively greater proportion of magnetic sales in the current period as a
result of the Graham acquisition and reduced micrographics services margins, as
reductions in selling prices exceeded reductions in production costs. Operating
income declined in the first quarter of fiscal 1995 as compared to the first
quarter of fiscal 1994 as a result of the decrease in operating margins.
Fiscal Years 1994, 1993 and 1992
Anacomp's fiscal 1994 revenues totalled $592.6 million compared to $590.2
million in fiscal 1993. The Graham acquisition contributed $22.4 million to 1994
revenues and NBS contributed $9.1 million to 1994 revenues. Excluding the
contributions from these two acquisitions, fiscal 1994 revenues decreased $29.1
million from fiscal 1993 principally due to decreased sales of COM systems,
duplicate film and retrieval devices.
Revenues in 1993 decreased $38.7 million compared to the prior year. The
continued maturing of certain of Anacomp's magnetics products caused
approximately one-half of the decline, with another quarter attributable to
unfavorable currency fluctuations compared to the prior year. The balance was
generally attributable to the continued weakness in the European economies.
Revenues in 1992 decreased $6.4 million from fiscal 1991's $635.4 million.
Micrographics services, maintenance services, COM systems and magnetics products
experienced revenue increases ranging from 2% to 13% in 1992. Micrographics
supplies revenues, however, decreased 8%, primarily reflecting a decline in film
and chemistry sales, most of which occurred in the indirect channels.
Selling, general and administrative costs in 1994 decreased $4.3 million,
due in part to the receipt of insurance proceeds related to Environmental
Protection Agency liabilities. Selling, general and administrative costs in 1993
decreased $3.5 million, primarily as a result of favorable settlements of
certain facility lease obligations.
Operating margins (for which operating income is defined as income from
operations before interest, other income, income taxes, extraordinary credit and
cumulative effect of accounting change) declined to 13.4% in 1994 from 15% in
1993. Accordingly, operating income decreased $9.1 million in 1994. The decrease
was largely attributable to a change in product mix as the relatively less
profitable magnetics products represented a greater portion of total sales.
Operating income decreased $11.7 million from 1992 to 1993, generally in
proportion to the decline in revenues. Operating margins were 15.9% in 1992.
Operating income decreased $5.2 million in 1992, due in part to the $6.4
million reduction in revenue. In addition, Anacomp completed two major factory
consolidations during the third and fourth quarters of 1992 in which its
manufacturing operations in Hartford, Wisconsin, and its ten separate
20
<PAGE> 22
manufacturing facilities around San Diego county were relocated to a single site
in Poway, California (outside San Diego). One-time costs associated with this
consolidation totalled more than $3.2 million and are reflected in operating
income for 1992.
RESULTS OF OPERATIONS -- PRODUCTS AND SERVICES
Micrographics Supplies and Equipment
Micrographics supplies and equipment revenues, which accounted for 30% of
the Company's revenues in the first quarter of fiscal 1995, decreased 2% in that
quarter compared to the first quarter of fiscal 1994. Original film sales
decreased 2% while duplicate film sales increased 8%. The duplicate film
increase is due primarily to the reacquisition of First Image Management Company
("First Image") as a duplicate film customer and the addition of Eastman Kodak
Company's ("Kodak") European duplicate film business. Retrieval products sales
were level compared to the same period in fiscal 1994. Micrographics supplies
and equipment operating margins were up slightly.
Micrographics supplies and equipment revenues decreased 8% in 1994,
principally due to reduced demand for duplicate film, readers and
reader/printers. Although the Company expects to effect price increases in the
second half of fiscal 1995 to at least partially offset this reduced demand for
duplicate film, the market may not accept any such price increases. As the
Company's supplies and equipment business partly depends on sales of the
Company's COM systems to generate repeat business, revenues from this business
unit will be gradually affected by the declines in COM systems sales discussed
below.
During the fourth quarter of fiscal 1993, Anacomp introduced the DS 300.
The DS 300 contributed $1 million in revenue in fiscal 1994 and $103,000 in the
first quarter of fiscal 1995, which was less than expected. However, Anacomp
expects increases in the remainder of fiscal 1995, as a result of product
improvements and better identification of the user markets.
Micrographics supplies and equipment revenues decreased from $237.3 million
in 1992 to $223.1 million in 1993, a 6% decline. However, approximately 2% of
this decline was attributable to currency fluctuations, and another 3% was
attributable to the loss in mid-1992 of First Image as a duplicate film
customer. Micrographics supplies revenues declined 8.5% in 1992. Anacomp
believes that the decrease in 1992 resulted principally from the generally weak
worldwide economic conditions.
Micrographics supplies and equipment operating profits decreased in fiscal
1994 in proportion to the decline in revenue. In 1993, micrographics supplies
operating margins were down 2% to 3%, due in part to currency fluctuations
affecting both revenues and costs as well as pricing competition in certain
product lines. Micrographics supplies and equipment operating profits decreased
in fiscal 1992 in proportion to the decline in revenues, excluding approximately
$2 million of costs associated with the factory relocation.
Micrographics Services
Micrographics services revenues, which accounted for 21% of Anacomp's
revenues in the first quarter of fiscal 1995, increased 5% in that quarter
compared to the first quarter of fiscal 1994 on an 18% increase in volume, 13%
of which is attributable to the acquisition of the COM services customer base of
14 data service centers from NBS. COM service revenues were adversely affected
by a decline in average selling prices. Operating margins decreased 3% as the
reduction in selling prices exceeded reductions in production costs.
Micrographics services revenues increased 5% in 1994, decreased 2% in 1993
and increased 6% in 1992, on volume increases of 10%, 13% and 14% in 1994, 1993
and 1992, respectively. The increase in fiscal 1994 volume was the result of the
NBS acquisition. Decreasing prices adversely affected Anacomp's micrographics
services business in 1994. The revenues decline in 1993 was due to the absence
of certain government contracts that expired in 1992 and were not replaced as
well as reduced prices. The growth of volume resulted both from an increase in
new customers as well as an increase in
21
<PAGE> 23
services to existing customers. Operating margins as a percent of revenue in
1994 decreased 2% as reductions in average selling prices exceeded reductions in
production costs. In 1993 and 1992, reductions in operating costs kept margins
steady despite keen price competition.
Maintenance Services
Maintenance services revenues, which accounted for 15% of the Company's
revenues in the first quarter of fiscal 1995, are derived principally from COM
recorders and duplicators. Such revenues decreased 6% in the first quarter of
fiscal 1995 when compared to the first quarter of fiscal 1994 in part due to
reduced pricing to a major customer. Operating margins improved slightly.
Maintenance revenues increased $3.1 million in 1994, decreased $4.8 million
in 1993 and increased $1.7 million in 1992. The improvement in 1994 is largely
the result of the addition of a national data service center company to
Anacomp's customer base. Approximately one-half of the decline in 1993 was
caused by currency fluctuations. The remaining decline was caused in part by the
improved capacity and efficiency of the XFP 2000, which allows customers to
produce more volume on fewer machines. The Company's maintenance revenues are
adversely affected by the replacement of older COM systems with XFP 2000 systems
because fewer XFP 2000 systems are required to process the same volume as older
COM systems. Operating margins modestly decreased in 1994 after remaining level
in 1993 and 1992.
COM Systems
COM systems revenues, which accounted for 11% of the Company's revenues in
the first quarter of fiscal 1995, increased $1.3 million with the sale or
operating lease of 47 XFP 2000 systems to third party users in that quarter,
compared to 43 systems in the first quarter of fiscal 1994. Also included in COM
systems revenues for the first quarter of fiscal 1995 is $3.5 million of sales
of equipment for use in Anacomp data centers under sale and leaseback
arrangements compared to $750,000 in the same period of the prior year.
Operating margins were essentially unchanged compared to the first quarter of
fiscal 1994, excluding the effect of the sale and leaseback revenues for which
all profits are deferred and recognized over the leaseback period.
COM systems revenues decreased 22% in 1994 because of the decline in sales
and operating leases of XFP 2000 COM systems to third parties from 274 systems
in 1993 to 165 systems in 1994. This decline was partly the result of reduced
original equipment manufacturer ("OEM") shipments (25 systems in 1994 versus 67
in 1993). Although the Company believes that the introduction of the Xerox
Corporation ("Xerox") and International Business Machines Corporation ("IBM")
data stream features ("XCF" and "AFP", respectively) for the XFP 2000 system
will help to offset the declining sales, there can be no assurance that such
features will improve the marketability of the XFP 2000 system.
COM systems revenues increased slightly in 1993 after consideration of
currency effects. COM systems revenues increased 7% in 1992 as a result of an
84% increase in sales and operating leases of XFP 2000 COM systems from 115 in
1991 to 211 in 1992.
Operating margins improved in 1994 despite reduced revenues as a result of
higher average selling prices. Operating margins in 1993 improved significantly
both as a result of higher XFP 2000 volumes and the benefits from the facility
consolidation that took place in 1992. Operating margins in 1992 were
essentially unchanged from the prior year, excluding costs associated with the
San Diego facility consolidation. During the fourth quarter of fiscal 1992,
Anacomp consolidated its San Diego-based manufacturing, engineering, maintenance
and product marketing operations into a newly constructed facility in Poway,
California, just outside San Diego. The move consolidated 10 different sites
around San Diego county and involved approximately 1,000 employees. Anacomp
spent approximately $1.2 million in the fourth quarter of fiscal 1992 in
connection with the consolidation.
22
<PAGE> 24
Magnetics
Magnetics revenues, which accounted for 23% of the Company's revenues in
the first quarter of fiscal 1995, increased $2.6 million, or 14%, in that
quarter compared to the first quarter of fiscal 1994, in addition to the $13.2
million contribution from the acquisition of Graham. The increase was due in
part to increased sales of "cookies", which are the magnetic media used in
manufacturing flexible diskettes. Magnetics operating margins improved 4% in the
first quarter compared to the same period of the prior year, due in part to
operating efficiencies resulting from the Graham acquisition.
Anacomp's acquisition of Graham in May 1994 was the primary reason for a
36% increase in magnetics revenues over 1993. Graham manufactures certain
magnetics products at its facility in Graham, Texas. Anacomp has shifted all its
U.S. production of those products from its Omaha, Nebraska plant to the Graham
facility. The costs associated with this relocation were not significant. The
consolidation allows Anacomp to dedicate its Omaha magnetics media coating line
exclusively to the production of cookies, thereby substantially improving the
quality of its cookies. The consolidation also results in improved manufacturing
efficiencies and overall head count reduction.
Magnetics revenues decreased $16.5 million in 1993. Almost half of the
decrease was due to the completion of a one-time OEM arrangement, which
contributed $9.7 million in revenues in 1992 and only $1.1 million in 1993. In
addition, Anacomp experienced decreased demand for 3480 and TK 50/52 cartridges
as well as open reel tape, as these products continued to mature. Anacomp
introduced the high-compression 3490E cartridge in mid-1993, which contributed
over $8 million of revenues in 1994.
The revenues added in 1994 from the Graham acquisition resulted in
increased operating profits. The reduced revenues in 1993 resulted in a
significant reduction in operating profits. In 1992, operating profits declined
despite increased revenues, due principally to increased pricing pressures.
RESULTS OF OPERATIONS -- OTHER
Interest
Interest expense and fee amortization in the first quarter of fiscal 1995
included $1.4 million of accelerated amortization of debt fees as a result of
accelerated debt paydowns that occurred in such quarter. In addition to
scheduled debt paydowns of $13.1 million, $20.5 million of Term Loan and Series
A Notes were repaid during the first quarter of fiscal 1995.
The reduction in interest expense in 1994 resulted from lower debt levels,
partly offset by the increase in short-term interest rates. Interest expense in
1993 and 1992 declined as a result of debt repayments as well as reduced
interest rates.
Income Taxes
Income taxes as a percentage of income from operations were 53% in each of
the first quarters of fiscal 1995 and 1994. Income taxes as a percentage of
income from operations were 55% in 1994, 43% in 1993 and 44% in 1992. In 1994
and 1993, income tax expense was reduced $1.2 million and $3.7 million,
respectively, as a result of the favorable settlement and disposition of
previously established tax reserves. In 1992, the effective tax rate was reduced
by the receipt of $1.2 million in state tax refunds and by the inclusion in
income of certain foreign exchange gains, which were not subject to tax. The
effective tax rate is higher than the U.S. statutory rate because of
amortization of goodwill which is not deductible for tax purposes and generally
higher foreign tax rates. See note 10 to Anacomp's audited consolidated
financial statements included elsewhere herein.
The Company adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes, in the first quarter of fiscal year 1994. The adoption resulted in
a one-time increase to income of $8 million reflecting the cumulative effect on
prior years of this accounting change. In addition, the Company has recorded a
deferred tax asset of $95 million representing the U.S. federal and state tax
savings from net operating loss carryforwards ("NOLs") and tax credits. The
Company also has recorded a valuation
23
<PAGE> 25
allowance of $60 million, reducing the deferred tax asset to $35 million. In
determining the valuation allowance, the Company assumed pre-tax income at
present levels and considered the impact of the reversal of temporary
differences and the periods in which NOL carryforward benefits expire. See note
10 to Anacomp's consolidated financial statements included elsewhere herein for
a further discussion of the effect of this adoption on the Company's financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically experienced positive cash flow from operations
and anticipates that positive cash flow will continue in the future. In
addition, the Revolving Credit Facility will provide the Company with further
liquidity. Under its current senior loan documents, the Company is required to
make principal payments in an aggregate amount of $153 million in fiscal years
1995 through 1998. As a result of the Refinancing, all such scheduled principal
payments will effectively be deferred. Anacomp will not be required to make any
scheduled principal payments on the Notes prior to December , 2000, when
the Company is required to make the first of two $37.5 million scheduled
mandatory redemption payments. See "Description of the Notes -- Mandatory
Redemption". Accordingly, Anacomp believes it has sufficient liquidity to fund
operations and planned capital expenditures in fiscal 1995. The Company intends
to reinvest any net cash provided by operating activities in its business,
including in product development and enhancements, as well as to use any such
net cash to pursue strategic acquisitions. The 15% Subordinated Notes are
redeemable beginning November 1995, and Anacomp will consider redeeming them
through a refinancing, subject to market conditions.
The Company's Amended and Restated Master Agreement (the "Master
Agreement") governing the Term Loans, the Revolving Credit Loan, the
Multicurrency Loan and Series B Senior Notes contains certain restrictive
covenants related to net worth, interest coverage, cash flow, fixed charges,
debt incurrence, capital expenditures and current ratio. If the Company violates
any of these covenants, the Company has a 30-day period in which to remedy such
violation before an event of default occurs which would permit the lenders under
the Master Agreement to accelerate their debt. The terms of the Company's other
debt agreements contain cross-default or cross-acceleration provisions which
would permit, upon acceleration under the Master Agreement, the acceleration of
such other debt. Subsequent to September 30, 1994, after obtaining an amendment
to the interest coverage ratio covenant for September 30, 1994 and all
measurement periods thereafter, the Company was in compliance with all the
covenants of the Master Agreement. The Company believes that it will be in
compliance with the interest coverage ratio covenant during fiscal 1995. Based
upon information currently available, the Company is uncertain as to whether it
will be able to satisfy the net worth covenant and the funded indebtedness to
total capitalization covenant under the Master Agreement as of September 30,
1995. The adverse consequences of violating these covenants is discussed above.
Upon completion of the Refinancing, the Master Agreement will no longer be in
effect and all indebtedness thereunder will be repaid.
If the Refinancing is not completed, the Company intends to generate
additional liquidity through alternative debt offerings, equity offerings or
conversion of certain existing assets to cash. The Company believes that such
sources, along with operating cash flow, will adequately fund operations, debt
service and planned capital expenditures over the twelve-month period ending
December 31, 1995.
Management does not believe that the effects of inflation will have a
material impact on the Company. Moreover, management is currently unaware of
changes in the price of materials, other than polyester, or other operating
costs or in the selling price of Anacomp's products and services that will
materially affect the Company. Due to a worldwide shortage of polyester, the
price of polyester used by the Company in the manufacture of its magnetics
products is expected to increase 5% to 10% over the next two years. This
increase will partially be offset by increased selling prices. Although
increased polyester prices could result in the loss of certain customers or
reduced operating margins, the Company does not expect such increases to have a
material impact on the Company.
24
<PAGE> 26
First Three Months Fiscal 1995
During the first quarter of fiscal 1995, Anacomp repaid $33.7 million of
Term Loans, Series A Senior Notes and Series B Senior Notes with proceeds from
sale and leaseback transactions of data service center equipment ($13 million),
drawdowns on the Revolving Credit Loan ($18.1 million) and available cash
reserves ($2.6 million).
Anacomp's working capital at December 31, 1994, excluding the current
portion of long-term debt which is intended to be refinanced, amounted to $42.2
million compared to $51 million at September 30, 1994. Net cash used in
operating activities increased to $8.7 million for the first quarter of fiscal
1995 compared to $1.3 million in the first quarter of fiscal 1994, as increased
sales in the current year resulted in relatively higher levels of accounts
receivable. Net cash provided by investing activities increased to $10.7 million
in the first quarter, compared to $1.4 million in the comparable prior period,
primarily as a result of the sale and leaseback of data service center
equipment. Net cash used in financing activities increased as a result of the
debt paydowns described above.
Fiscal Year 1994
In 1994, Anacomp continued to invest in retooling its data service centers,
to make important acquisitions such as Graham and NBS and to make significant
investments in software including the XCF and AFP features. At the same time,
short and long-term debt was reduced by $27.2 million. These expenditures were
funded primarily from operating cash flow. In addition, common stock was issued
in each of the major acquisitions, inventory turnover rates were improved and
certain data service center equipment was sold under sale and leaseback
arrangements that generated approximately $12 million during the year.
Net cash provided by operating activities was $52.7 million for fiscal 1994
compared to $45.9 million for the prior year. Net cash used in investing
activities increased $21.1 million primarily because of the Graham and NBS
business acquisitions and the decline in proceeds from sales of assets. Net cash
used in financing activities decreased $13 million primarily due to reduced debt
fees and long-term debt payments.
25
<PAGE> 27
THE DATA STORAGE AND MANAGEMENT INDUSTRY
OVERVIEW
The volume of data being generated and processed by businesses and
governments is growing rapidly, primarily as a result of the increasing power
and prevalence of computers. In 1994, more than 90% of this data was stored on
paper, which is the most costly and inefficient way to store information. Faced
with the growing volume of information, private and public enterprises are
increasingly relying on a wide range of technologies to facilitate the storage
and management of data. These technologies include DASD, optical disk, magnetic
tape and micrographics (Computer Output Microfilm), as shown in the following
chart:
DATA STORAGE AND MANAGEMENT TECHNOLOGIES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
COMPUTER OUTPUT
DASD OPTICAL DISK MAGNETIC TAPE MICROFILM
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Description Direct access stor- Peripheral storage Peripheral storage Tape-like reels of
age devices com- devices written and technology film and 4" X 6"
prised of magnetic read by laser light consisting of tape sheets of film that
disk drives directly technology. Data are drives, robotics and store information in
connected to host stored on permanent cartridges; data are scaled down page
computers. and re-writable sequentially read layout format.
disks. from and written to
the media.
----------------------------------------------------------------------------------------------------------
Example Application Airline reservation Storage of bank Nightly backup and Storage/archiving
systems statements 30-90 temporary storage of of bank statements
days old data stored on DASD over six months old
or optical devices
----------------------------------------------------------------------------------------------------------
Speed of Retrieval <1 second 5-10 seconds 10-30 seconds >30 seconds
----------------------------------------------------------------------------------------------------------
Fully Loaded $3.50 - $7.00 $1.50 - $3.50 $0.30 - $1.00 $0.08 - $0.15
Cost per Megabyte
----------------------------------------------------------------------------------------------------------
</TABLE>
Given their complementary functions, organizations typically employ several
storage and management technologies simultaneously. Demand for a particular
technology is driven by several important attributes, including cost, speed of
retrieval, ongoing feasibility of retrieval technology, longevity and data
integrity. The optimal mix of these attributes changes according to the
frequency of information usage and the urgency of its retrieval. At the early
stage of a document's life, a high-cost but fast-access technology such as DASD
is typically used. In later stages, the data may be migrated to a low-cost but
relatively slower retrieval technology such as micrographics.
MICROGRAPHICS
Micrographics is the conversion of information stored in digital form or on
paper to microfilm or microfiche. Computer Output Microfilm (COM) converts
textual and graphical digital information at high speed directly from a computer
or magnetic tape to microfilm or microfiche. COM was initially developed as an
information management system that would reduce the cost and increase the speed
of computer output by "printing" computer-generated data on microfilm or
microfiche, instead of paper. Compared to paper, COM has a number of benefits.
COM recorders can print reports substantially faster than typical impact
printers, and multiple copies can be made easily and economically on high-speed
duplicators. In addition, a COM recorder can print a 1,000 page report on a
single 4" by 6" microfiche. With the advent of indexing, retrieval of
information is easier and faster with COM than with paper storage.
A COM recorder receives data directly from a computer or magnetic tape,
interprets and converts the data from digital to analog format and performs
certain functions such as film manipulation, output formatting, titling and
index extraction. The data are then converted into images and transferred
directly onto film, and the finished microfilm or microfiche, as well as
duplicates, are produced. Retrieval of images on microfilm or microfiche is
accomplished by the use of low-cost readers or reader/printers. In addition,
micrographic images may be returned to a digital format for computer use.
26
<PAGE> 28
The comparative advantages of micrographics are:
- Cost. Micrographics is the least expensive of all storage and
retrieval technologies, costing approximately $0.08 - $0.15 per
megabyte in 1994, compared to $3.50 - $7.00 per megabyte for DASD,
$1.50 - $3.50 per megabyte for optical disk and $0.30 - $1.00 per
megabyte for magnetic tape.
- Ongoing Feasibility of Retrieval Technology. Micrographics is the
most stable storage medium as it is human readable and, accordingly,
does not require sophisticated electronic retrieval devices that are
subject to rapid technological change.
- Longevity. Information stored on microfilm or microfiche is estimated
to remain usable for over 100 years, making micrographics the
preferred method of storing information for extended periods of time.
- Integrity of Data Image. Microfilm and microfiche are reproduced in
an analog, not digital, format. Once recorded on a micrographics
medium, information cannot be altered and is not susceptible to
computer or digital errors. This ensures that the image retrieved
exactly resembles the image stored.
Storage of the monthly account statements generated by commercial banks
illustrates the benefits of micrographics. Bank statements generally require
frequent and urgent retrieval only during the first few months after they have
been prepared (when customer inquiries are highest). During this period, a high-
cost but fast-retrieval technology such as DASD generally is used. Thereafter,
as the frequency and urgency of customer requests decrease, banks may migrate
bank statement data to several lower-cost but slower retrieval technologies such
as optical disk or magnetic tape. Still further decreases in the frequency of
customer requests make data migration to micrographics the most cost-effective
and reliable long-term data storage option. In certain cases, organizations may
output data directly to COM given the relative lack of retrieval urgency
throughout such data's life cycle. For example, the same banks may output
internal personnel records directly to micrographics.
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BUSINESS
STRATEGY
Anacomp seeks to expand the value of micrographics and target new digital
storage markets by implementing the following strategies.
ENHANCE LEADERSHIP IN MICROGRAPHICS
Anacomp is the world's leading full-service provider of micrographics
systems, services and supplies. In order to capitalize further on the Company's
leading position in the micrographics industry, Anacomp seeks to expand the
value of micrographics by:
- Continuing to Drive the Pace of Technological Innovation. Anacomp has
been the leader in providing technological improvements in
micrographics. In 1990, the Company introduced the XFP 2000 COM
system, the fourth generation of COM systems which continues to be the
most significant COM industry advancement during the last decade. The
Company has developed, in conjunction with Xerox, the XCF technology
which enables the XFP 2000 to process and image Xerox high-speed,
high-volume data streams, including those containing fonts, forms,
logos, signatures and other images, onto microfilm or microfiche. A
similar alliance with IBM's Pennant division is developing AFP which,
when available, will enable the XFP 2000 to process and image IBM's
AFP formatted data streams used by IBM high-speed, high-volume laser
printers. Anacomp believes that both developments will extend the
market potential of the XFP 2000 and increase the effectiveness of
micrographics. As part of its continuing effort to develop integrated
data storage solutions that broaden various COM applications, the
Company recently introduced a new workstation, the DS 300, that
enables users to digitize and transmit micrographics images and data
to an electronic network.
- Maximizing Value of Data Service Centers. Anacomp upgraded its data
service center COM capabilities through the recently completed
installation of the Company's XFP 2000 COM systems in all 50 Anacomp
data service centers. The Company will upgrade its data center
services further by introducing the XCF enhancement feature. The
Company also will offer in its data centers the AFP enhancement
feature when it becomes available in mid-1995. Competitors of the
Company have begun to purchase Anacomp XFP 2000 systems in order to
upgrade their capabilities to match those now available at Anacomp's
centers. Anacomp believes that it can increase the value of its data
service centers by offering the following recently introduced
services: (i) recording computer generated data and information onto
CD-Rs, a digital storage medium; and (ii) scanning paper or microfilm
for recording onto CD-Rs.
- Capitalizing on Industry Consolidation. The micrographics industry is
undergoing consolidation, and the Company anticipates making
acquisitions of companies or assets that are available at attractive
prices as a result of these consolidations. In fiscal 1994, the
Company acquired the customer base of 14 data service centers from
NBS, further enhancing Anacomp's COM services market share.
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PURSUE STRATEGIC ALLIANCES
Anacomp is developing new micrographics, digital and consumable products
through alliances with leading technology companies such as IBM, Xerox, FileNet
Corporation ("FileNet") and Kodak. Examples of product developments from these
relationships include the XCF and AFP enhancement features for XFP 2000 systems
developed with Xerox and IBM, respectively. In addition, the Company also
markets VELLOS under an OEM arrangement with FileNet and has developed XSTAR
through an alliance with IBM and RSD America Inc. The Company is pursuing
strategic alliances in order to gain access to technologies and reduce
development time and expenses. Anacomp's micrographics technological leadership,
worldwide distribution network and base of over 15,000 customers should continue
to make Anacomp an attractive strategic alliance partner. See
"Business -- Products and Services -- New Products and Markets" for a
description of the VELLOS and XSTAR products.
SEEK INTERNATIONAL GROWTH
The Company currently markets its COM products and maintenance services in
more than 65 countries, with international operations accounting for 29% of
Anacomp's fiscal 1994 revenue. Anacomp is targeting new international markets in
certain Latin American and Asian countries, such as China, with no or minimal
previous exposure to COM. In fiscal 1993, the Company formed a separate
Americas/Asia division to spearhead various strategic efforts, including (i) the
Company's alliance with Kodak, begun in fiscal 1994, whereby Kodak became the
Company's exclusive distributor in Asia (except Japan) and Australia, and which
has already resulted in the successful placement of XFPs at two of the largest
banks in China, and (ii) the current development of software that will for the
first time make native-language COM systems available for sale in China, Korea
and Taiwan. For financial information concerning the Company's international
operations, see note 15 to the audited consolidated financial statements.
CONTINUE COST REDUCTIONS
The Company continues to streamline its operations in an effort to reduce
costs in recognition of recent declines in revenues. These initiatives include
consolidating manufacturing operations and supply relationships, outsourcing
manufacturing functions and centralizing administration, customer service and
order entry. The Company estimates that these measures will generate $6 to $8
million in annual savings at current volume levels.
PRODUCTS AND SERVICES
Anacomp is the world's leading full-service provider of micrographics
systems, services and supplies with customers in more than 65 countries. Anacomp
has the world's largest installed base of COM systems (58% of the machines in
use), and micrographics accounted for 82% of Anacomp's revenues in fiscal 1994.
Micrographics is the conversion of information stored in digital form or on
paper to microfilm or microfiche. COM converts digital and graphical information
at high speed directly to microfilm or microfiche.
The table below sets forth Anacomp's revenues by product and service line
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
--------------------------------- ----------------------------------------------------
1994 1993 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Micrographics:
Supplies and Equipment.... $ 45,712 30% $ 46,755 34% $204,589 35% $223,120 38% $237,287 38%
Services.................. 32,413 21 30,927 23 131,654 22 125,226 21 127,853 20
Maintenance............... 22,103 15 23,456 17 89,912 15 86,777 15 91,604 15
COM Systems............... 16,609 11 15,280 11 59,149 10 75,900 13 76,845 12
Magnetics................... 34,514 23 18,693 14 98,817 17 72,703 12 89,217 14
Other....................... 461 -- 1,838 1 8,478 1 6,482 1 6,134 1
-------- --- -------- --- -------- --- -------- --- -------- ---
$151,812 100% $136,949 100% $592,599 100% $590,208 100% $628,940 100%
========= ==== ========= ==== ========= ==== ========= ==== ========= ====
</TABLE>
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Anacomp provides (i) micrographics processing services to customers on an
outsourcing basis through its 50 data service centers nationwide; (ii)
micrographics systems for users who perform their own data conversion; (iii)
consumable supplies and equipment for micrographics systems; and (iv)
maintenance services for micrographics equipment. Anacomp also is a leading
manufacturer and distributor of a wide range of magnetics storage products.
MICROGRAPHICS SERVICES
General
The Company operates 50 data service centers located in the United States.
Anacomp's data service centers, which generally operate 24 hours per day every
day of the year, receive on a daily basis thousands of magnetic tapes or direct
computer transmissions from more than 8,000 customers. The data service centers
then convert the information on these tapes to 16mm microfilm or to microfiche,
which is a 4" X 6" microfilm card capable of storing up to 1,000 pages of
computer output. Anacomp has recently begun to offer CD-R services to its
customers. As with COM, Anacomp receives data on computer tape or via direct
transmission and records the data onto CD-Rs. For most CD-R customers, Anacomp
simultaneously records their data onto microfilm or microfiche.
Anacomp has been successful in acquiring data service centers located in
attractive markets and, in most cases, has consolidated these operations with
its existing network. Such acquisitions result in incremental volumes being
serviced by Anacomp's existing data service centers, thereby improving operating
margins. Anacomp has acquired 24 data service centers or their customer bases
during the past three fiscal years and anticipates continuing to make such
acquisitions.
The Company recently upgraded the capabilities of its data service centers
by installing XFP 2000 systems in each of its 50 centers. In addition, the
Company plans on offering the XCF enhancement feature (which became available in
December 1994) and the AFP enhancement feature (which should become available in
mid-1995). The Company's XFP 2000 and the related XCF and AFP capabilities
enable the Company's data service centers to offer customers applications
previously unavailable, thereby expanding the market for COM services.
In October 1994, Anacomp established the Image Conversion Services division
("ICS"). Through ICS, Anacomp operates 11 image conversion centers where
original source paper documents are scanned and recorded onto either microfilm
or microfiche or CD-Rs. The Company plans to expand further into image
conversion by making these services available in additional locations.
Customers and Distribution
Anacomp's micrographics services customers include a majority of the
Fortune 500 companies, banks, insurance companies, financial service companies,
retailers, healthcare providers and government agencies, such as Automatic Data
Processing, Inc. ("ADP"), Citicorp, Electronic Data Systems Corp. ("EDS"),
General Electric Capital Corporation, The Home Depot, Inc. and IBM (none of
which accounted for more than 5% of Anacomp's micrographic services revenues in
fiscal year 1994). The typical service contract is exclusive, lasts one year
with a one-year automatic renewal period and provides for usage-based monthly
fees, subject to increase on 30 days' notice. Approximately 75% of Anacomp's
micrographics services customers are subject to contracts and more than 95% of
such contracts are renewed annually.
For the typical Anacomp data service center customer, an Anacomp
salesperson identifies potential COM applications through a survey performed
on-site or by observing paper reports at a data processing location. For
example, a company may need to transfer a computerized record of all accounts
payable activity to microfiche for active records management and archival
storage. The Anacomp salesperson obtains information regarding any specialized
requirements, such as indexing, rapid turnaround and distribution, and relays
this information to Anacomp's software programmers. The Anacomp data service
center then creates a sample output for the customer. Once the sample output is
approved by the
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customer, Anacomp establishes a regular schedule for gathering the customer's
digital tapes for processing or establishes a direct transmission link. Upon
receipt of customer computer data, the data service center creates, processes,
duplicates, packages and distributes the microfilm or microfiche to the
customer. Turnaround time ranges from two to 36 hours depending on customer
needs.
In the Company's ICS division, sales personnel work closely with Anacomp's
COM sales force to identify COM customers who are potential users of ICS.
Additionally, the ICS sales force prospects for new business from non-Anacomp
COM customers. ICS has over 600 customers, including Aetna Life Insurance and
Annuity Company ("Aetna"), Pillsbury Corporation, The Chase Manhattan Bank N.A.
and the Commonwealth of Massachusetts.
Competitors
Data service center industry competition is primarily limited to service
centers within a 50-mile radius of a customer because of the emphasis on rapid
turnaround. Anacomp and First Image (which has 66 data service centers) are the
two largest national data service center organizations with approximately 25%
and 38% of the market, respectively. The remainder of the market is served by
numerous small data service centers.
The market in which ICS operates is highly fragmented with no one
competitor, including Anacomp, having more than a 10% market share. Anacomp
competes primarily with numerous small regional providers.
COM SYSTEMS
General
Anacomp is the world's leading manufacturer and distributor of COM systems,
offering a complete line of COM recorders, processors, duplicators and related
software. Anacomp's installed base of COM systems, approximately 58% of those in
use worldwide, is more than twice as large as its nearest competitor, and
related sales of COM services and supplies to the installed base provide the
Company with a recurring revenue stream that constitutes a significant portion
of its annual revenues. The Company's COM recorders offer a complete line of
features, including wet or dry process technology, roll or cut fiche, medium to
high speed, stand-alone or integrated film processors and duplicators, PC-based
operator control interface and electronic forms generation.
Anacomp's XFP 2000, introduced in 1990 as the fourth generation of COM
recorder technology, continues to be the most significant technological
advancement in the COM industry during the last decade. The XFP 2000 is faster
and more reliable than previous COM recorders and, through its laser technology,
provides the capability to generate precise reproductions of any image. When
coupled with Anacomp's proprietary XCF and AFP software, the XFP 2000 can
duplicate the output of high-speed, high-volume laser printers of various
manufacturers. This capability, which is not available in older generation COM
recorders, allows for the first time images such as fonts, forms, logos,
signatures, photographs and other images to be output to microfilm or
microfiche.
The Company has recently completed the development of XCF in conjunction
with Xerox. This software feature enables the XFP 2000 to process the same data
stream used by Xerox high-speed, high-volume laser printers. In connection with
XCF, Anacomp must make royalty payments to Xerox. The Company recently prepaid
to Xerox $1.3 million for 100 software licenses. XCF became available in
December 1994, and the Company has shipped four of them as of December 31, 1994.
A similar alliance with IBM's Pennant division is producing software that
will enable Anacomp's XFP 2000 to process and image AFP formatted data streams
used by IBM high-speed mainframe laser printers. AFP is expected to be available
in mid-1995. Anacomp has paid Pennant certain fees for the development of AFP
and must make royalty payments over the next six years. The worldwide installed
base of IBM, Xerox and IBM-compatible Siemans AG high-speed, high-volume laser
printers is estimated to be 25,000.
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The Company has sold or placed on operating leases a total of 855 XFP 2000
systems to third parties since its introduction in 1990 (43 in fiscal 1990, 115
in 1991, 211 in 1992, 274 in 1993, 165 in 1994 and 47 in the first quarter of
1995). Anacomp has sold 149 XFP 2000 systems to Kodak since 1990 under an OEM
supply agreement (12 in fiscal 1990, 13 in 1991, 32 in 1992, 67 in 1993 and 25
in 1994). To the extent Kodak purchases fewer than a total of 300 XFP 2000
systems by October 1997, it will be obligated pursuant to the OEM agreement to
pay a penalty. The Company is uncertain how many XFP 2000 systems Kodak will
purchase.
As part of the Company's plan to enhance its position in the COM market
place, Anacomp has installed 163 XFP 2000 systems in its 50 data service
centers. Anacomp's XCF and AFP enhancement features, when installed in Anacomp
data service centers, will further differentiate the Company's micrographics
service capabilities. Competitors of the Company have begun to purchase Anacomp
XFPs in order to upgrade their capabilities to match those now available at
Anacomp's data service centers. In fiscal 1994, Anacomp sold 39 XFP 2000 systems
to non-Anacomp service centers. There are currently more than 1,900 older
generation systems in service centers worldwide, representing a significant
potential market for XFP sales.
As compared to the United States and Europe, COM is substantially
underutilized in certain Latin American and Asian countries, particularly China.
In fiscal 1993, the Company formed a separate Americas/Asia division to take
advantage of growing opportunities in Latin America and Asia. The Company is
currently developing software for the XFP 2000 that will permit data to be
recorded utilizing kanji characters. As a result of this software,
native-language COM systems will be available for sale for the first time in
China, Korea and Taiwan. The Company believes that this software will be
available in the second half of calendar 1995.
Customers and Distribution
Principal customers for the Company's COM systems include information
intensive organizations such as banks, insurance companies, financial service
companies, retailers, healthcare providers, manufacturers and government
agencies and, as described above, non-Anacomp COM data service centers. Recent
purchasers of the XFP 2000 include Aetna, American Airlines, Inc., AT&T Corp.,
Chemical Banking Corporation, CIGNA Corporation, Cincinnati Bell Inc., EDS, GTE
Corporation, NYNEX Corporation, PepsiCo, Inc., the State of Washington, The
Travelers Inc. and Westinghouse Electric Corporation. While the vast majority of
COM systems are sold outright, the Company does offer customers three or
five-year lease options.
Of the Company's installed base, 77% constitutes older generation
technology. The Company believes that represents a significant opportunity for
replacement sales of XFP 2000 systems, particularly in light of the XCF and AFP
software features.
International sales accounted for 35% of the Company's fiscal 1994 COM
system revenues. In foreign markets, Anacomp sells COM systems through wholly
owned operating subsidiaries and, in countries in which Anacomp does not have a
subsidiary, through dealers and agents. In 1994, Kodak became the Company's
exclusive distributor in Asia (other than Japan) and Australia. Utilizing
Kodak's local sales network, the Company increased its sales in Asia, including
a total of three XFP 2000 systems sales to the two largest banks in China.
Competitors
The Company's primary competitors in the sale of COM systems are
Agfa-Gevaert AG ("Agfa") and Micrographic Technology Corporation ("MTC").
Anacomp manufactures, on a private label basis, the COM systems sold by Kodak
through an OEM agreement. In some instances, Anacomp and Kodak compete directly
for the same COM system sales. Competition is based principally on product
features, as well as on such factors as product quality, service and price.
Anacomp sells approximately 70% of all new COM system sales worldwide (inclusive
of OEM unit sales). Anacomp's large installed base is an important competitive
advantage in the sale of new COM systems because changing from one
manufacturer's COM system to another is difficult as a result of software
conversion and operator training costs.
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MICROGRAPHICS SUPPLIES AND EQUIPMENT
General
Anacomp sells the most comprehensive line of micrographics supplies in the
world, offering original silver halide film, duplicate film, chemicals for
microfilm processing, paper and toners for reader/printers, micrographics lamps
and bulbs and other consumables. A majority of the supplies sold consists of
silver halide film, which is used to produce original masters of computer
information (such as a bank statement) on microfilm or microfiche, and duplicate
microfilm, which is used to create one or more additional copies of such master
(e.g., copies of a bank statement at several local branches). Anacomp is the
exclusive supplier of proprietary wet and dry original halide film used in its
XFP series of COM systems and of the proprietary dry original halide film for
its X Series, an earlier generation of Anacomp COM systems. Most original
microfilm for Anacomp's COM systems is specifically manufactured for Anacomp by
Kodak in a proprietary package. For original film sales to other COM systems and
to the source document marketplace, Anacomp has national distribution and vendor
agreements with Agfa, Kodak and Fuji.
In addition to offering supplies, Anacomp designs, manufactures and markets
a complete line of microfilm/microfiche readers and reader/printers. Readers,
which sell for approximately $100 to $400 per unit, are relatively simple,
low-cost devices used to view microfilm or microfiche. Reader/printers, which
allow users to print a paper copy of the microfilm or microfiche being viewed,
sell for approximately $1,250 to $6,300 per unit.
In April 1993, the Company announced the introduction of the DS 300, a
low-cost, full function workstation that scans, digitizes and electronically
converts micrographic images on demand. The images can then be viewed, edited or
enhanced on a PC screen and output to a laser printer or fax machine or
distributed over a WAN or LAN to other PC imaging users. By so doing, the DS
300, the only scanning system that features a Windows-based open architecture,
bridges on-line and off-line technologies and facilitates such applications as
customer service, billing and statement research.
Customers and Distribution
Anacomp sells its consumable supplies directly to more than 90% of its
worldwide installed base. In addition, the Company's indirect sales operation
sells supplies to dealers and distributors throughout the United States.
Original microfilm sales of Anacomp include film sold specifically for
Anacomp's COM systems (85% of original microfilm sales), for other
manufacturers' COM systems (4% of original microfilm sales) and for the source
document marketplace (11% of original microfilm sales). Beginning in October
1994, Anacomp became the exclusive provider of duplicate film to First Image,
Anacomp's primary competitor in the data service center business and one of the
world's largest consumers of duplicate microfilm.
The Company sells readers and reader/printers to its COM systems and data
service center customers and is an OEM supplier to Kodak and Bell & Howell
Company. Anacomp also sells readers and reader/printers through distributors and
to customers of competing data service centers both directly and through such
competing data service centers.
International sales in fiscal 1994 accounted for 32% of the Company's total
micrographics supplies and equipment revenues. In foreign markets, Anacomp
offers supplies through wholly owned operating subsidiaries and, in countries in
which Anacomp does not have a subsidiary, through a network of dealers and
distributors.
Competitors
For non-OEM sales of the XFP 2000, Anacomp is the exclusive supplier for
original microfilm because of the proprietary nature of the film. Anacomp
competes in sales of non-proprietary original microfilm with other
manufacturers, including Agfa, Fuji Photo Film Co., Ltd. ("Fuji"), Kodak and
Minnesota Mining & Manufacturing Company ("3M"). Anacomp's worldwide market
share for this product is approximately 55%.
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Anacomp believes it is the world's largest supplier of duplicate microfilm
with an estimated 70% of the U.S. market and an estimated 65% of the non-U.S.
market. Anacomp's primary competitor in the duplicate microfilm market is Rexham
Graphics Ltd. ("Rexham") with an estimated 31% share of the worldwide duplicate
film market.
The Company's market share of the worldwide reader market is estimated to
be 63%, with the remainder of the market held by Eye Communication Systems, Inc.
and several small manufacturers, none of which has more than 10% of total unit
shipments. Anacomp's share of the worldwide reader/printer market is
approximately 28%. Anacomp competes with Canon Inc. ("Canon"), Information and
Graphics Systems Inc. and Minolta Co., Ltd. ("Minolta"). Anacomp has
approximately 5% of the worldwide digital scanner market with its DS 300 product
and competes with Canon, Kodak, Minolta and 3M.
Anacomp has an estimated 33% of the micrographics supplies and equipment
market in Europe and 39% of the supplies and equipment market in the Americas
(excluding the United States) and Asia. In Europe, the Company's primary
competitors for micrographics supplies and equipment are Kalle Microfilm
Division of Hoechst AG ("Kalle"), A. Messerli AG and Rexham. Its primary
competitors in Japan are Kodak and Fuji.
MAINTENANCE SERVICES
General
Anacomp provides 24-hour a day maintenance services through over 900
service employees operating in various countries worldwide. In such countries,
Anacomp maintains approximately 98% of all the COM recorders manufactured by the
Company and still in use (2,483 recorders), as well as another 287 COM recorders
not manufactured by Anacomp. With a network of maintenance service centers and
resident service representatives, the Company's maintenance organization offers
installation, ongoing maintenance and field technical support for existing and
new products. Increased maintenance margins usually result from incremental COM
systems sold to the same customer site because the Company is able to provide
maintenance without adding maintenance centers or a significant number of
personnel. The improved capacity and efficiency of the XFP 2000 will result in
reduced maintenance revenues as customers are able to process more volume on
fewer COM systems. However, Anacomp believes that operating margins will benefit
from sales of additional XFP 2000 systems because XFP 2000 systems require less
maintenance than older COM systems.
Customers and Distribution
Anacomp's maintenance services division is made up of 500 field service
engineers and managers who provide geographic coverage through ten districts in
the United States. Anacomp provides maintenance services primarily to its
installed base of COM systems, although the Company has begun to service
non-Anacomp COM systems and selected data processing products. As part of a
September 1993 agreement between Anacomp and First Image, Anacomp became First
Image's exclusive COM system maintenance provider nationally. Anacomp's standard
maintenance contract is an exclusive, two-year contract with an automatic
two-year renewal period. The prices under a standard maintenance contract are
fixed for nine months and thereafter are subject to up to 10% annual increases
upon 90 days' notice. Maintenance contracts on the XFP 2000 also provide for
incremental charges for every image over a certain number of images processed.
International operations accounted for 32% of the Company's maintenance
revenues in fiscal 1994. COM systems sold directly in foreign markets are
maintained by Anacomp employees operating through Anacomp's foreign
subsidiaries. COM systems sold in foreign markets through distributors are
generally maintained by the employees of such distributors.
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Competitors
Historically, competition in maintenance has been limited as most customers
tend to use the maintenance services of the vendor that installed their system,
though some customers choose to use in-house maintenance staffs. Thus, revenues
are primarily a function of new COM system sales and the size of the installed
base.
Anacomp has the infrastructure to compete for service contracts on other
COM products or selected data processing products, and the Company is actively
seeking such business. In March 1992, Anacomp acquired the COM maintenance
service operations of TRW Inc. ("TRW"), the last major third party provider of
such services. The TRW operations were integrated into Anacomp's existing
maintenance organization. These operations expanded the Company's maintenance
service base and created new opportunities for COM system and supplies sales.
Anacomp's maintenance market share is approximately 65% in the United
States, 50% in Europe and 15% in the Americas (excluding the United States) and
Asia.
NEW PRODUCTS AND MARKETS
The Company is introducing new data storage and management products and
services based on digital technologies. Anacomp seeks to establish strategic
alliances with leading technology companies in order to gain access to digital
technologies and reduce development time and expense. Anacomp's technological
leadership in micrographics, large customer base and worldwide distribution
network have made it an attractive strategic alliance partner. Anacomp's
digital-based products are sold through Anacomp's sales force to its
micrographics customer base. For a discussion of the risks associated with the
Company's development and introduction of new products, see "Risk Factors -- New
Products".
In November 1993, the Company announced an OEM agreement with IBM and an
alliance with RSD America Inc. to produce XSTAR, an extended data storage
product that combines on-line data management and long-term COM storage. XSTAR
allows users to store computer generated documents on a variety of storage media
(such as magnetic disks, optical disks, magnetic tape and COM) and remotely
retrieve them through desktop PCs or host computer terminals. XSTAR is well
suited for high-value, long-retention cycle documents that will migrate over
time from digital to micrographics storage. Anacomp received its first order in
the fourth quarter of fiscal 1994 and has placed additional units with selected
customers for evaluation and possible sale, although no sales were consummated
in the first quarter of fiscal 1995.
In April 1994, Anacomp announced an OEM agreement with FileNet to market
VELLOS, a rewritable magneto-optical disk storage system. VELLOS enables
customers to manage and store information that was initially stored on paper in
digital format. VELLOS software, developed by FileNet, is installed on hardware
that Anacomp buys from third parties and resells to its customers, unless
purchased by customers from a different source. In connection with the sale of
VELLOS, Anacomp also offers electronic scanning services as well as COM services
if the data stored on VELLOS eventually migrate to micrographics for long-term
archiving. VELLOS became available in late 1994 and is marketed through the ICS
division.
MAGNETICS
General
Anacomp manufactures, sells and distributes a broad range of magnetics
products such as open reel tape, 3480 data tape cartridges, TK 50/52
"CompacTape" data tape cartridges, 3490E data tape cartridges and "cookies",
which are the magnetic media used in manufacturing flexible (or "floppy")
diskettes. Anacomp also distributes other data storage products manufactured by
third parties, including flexible diskettes and emerging products such as
optical and magneto-optical disks and 1/4 inch, 4mm and 8mm data tape
cartridges.
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In May 1994, Anacomp acquired Graham, a leader in providing magnetic data
storage products. The acquisition of Graham increased Anacomp's share of the
open reel tape market to approximately 92% worldwide and its share of the
3480/3490E data tape cartridge market to approximately 38%. As a result of the
Graham acquisition, Anacomp also will be able to reduce by approximately $2
million annually its manufacturing costs for these products as a result of the
recent transfer of its domestic 3480/3490E manufacturing operation from Omaha,
Nebraska to its Graham, Texas facility.
Open reel tape, 3480 and 3490E data tape cartridges are used in mainframe
computers manufactured by companies such as Amdahl Corporation, IBM and NEC
Corporation. CompacTape data tape cartridges are used in Digital Equipment
Corporation mid-range computers. The demand for 3480 data tape cartridges,
CompacTape and open reel tape is estimated to be declining at per annum rates of
8%, 30% and 30%, respectively, as users migrate to 3490E data tape cartridges
(which contain up to four times as much information as 3480 data tape
cartridges) and other types of data storage technology. The market for 3490E
data cartridges is expected to grow 35% per year.
Anacomp is seeking new applications and markets based on its magnetics
coating capacity. The Company manufactures voice logging tape, which is used by
brokerage companies, "911" emergency service providers and other entities to
tape telephone conversations. Anacomp also uses coated media to manufacture
instrumentation tape, which is used by various government agencies to measure
and record sensitive data, and transfer tape, which is found on the back of
charge and credit cards.
The Company also seeks to increase its market share in the magnetic
"cookies" that it manufactures and sells to fabricators for insertion into
flexible diskettes. Anacomp has improved its cookie quality by investing capital
and labor to upgrade its Omaha, Nebraska facility and by transferring the
manufacture of 3480/3490E cartridges from Omaha to Graham, Texas. During fiscal
1994, Anacomp manufactured and sold approximately 200 million cookies, compared
to 188 million cookies in fiscal 1993, and Anacomp estimates that it will sell
approximately 325 million cookies during fiscal 1995.
Customers and Distribution
Anacomp primarily sells its magnetics products through its worldwide
distributor and dealer network and, to a lesser extent, through its 250-person
micrographics direct sales force. In addition, the Company also manufactures its
open reel, 3480 and 3490E tape products on an OEM basis for internationally
recognized brands. Anacomp manufactures its products under the "Dysan",
"StorageMaster" and "Graham Magnetics" trademarks. Anacomp's principal cookie
customers are Hanny Magnetics Limited and Eden Magnetics Limited, both of which
are flexible diskette fabricators located in Asia.
Competitors
Anacomp has no significant competitors with respect to the manufacture of
open reel tape, and its worldwide market share is estimated at 92%. Anacomp
competes with 3M, BASF AG and Memorex Telex N.V. in the sale of open reel tape,
3480 and 3490E data cartridges. Anacomp's worldwide market share for 3480 and
3490E data cartridges is estimated to be 35% and 30%, respectively. Anacomp
competes with Teijin Limited and TDK Corporation in the sale of cookies, and
Anacomp's worldwide market share is estimated to be 15%.
SALES FORCE
The Company employs 300 salespeople worldwide. The Company maintains four
separate domestic sales forces: (i) Area Business Units ("ABUs") responsible for
sales of micrographics services, COM systems and related maintenance services,
supplies and equipment, sales of digital products and direct sales of magnetics
products; (ii) the Strategic Resellers Division responsible for sales of all
micrographics equipment and supplies, other than original microfilm, to dealers
and distributors as well as through the Company's ABUs; (iii) Image Conversion
Services responsible for sales of source document and scanning services and
related equipment and supplies; and (iv) the Magnetics Division responsible for
sales of magnetics products to dealers and distributors.
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Anacomp's ABUs collectively employ 170 salespeople. Utilizing Anacomp's
"STAR" (Saving Through Application Review) program, an Anacomp salesperson
tracks the flow of information through a customer's organization to determine
which employees need access to various information and the urgency and frequency
of retrieval of such information. The salesperson then recommends a
comprehensive data storage and management program utilizing micrographics and
digital solutions that effectively manage the customer's information throughout
the document life cycle. For micrographics storage and retrieval, the Anacomp
salesperson works with the customer to determine the best alternative between
outsourcing to one of the Company's data service centers and purchasing COM
systems for in-house operation. The Anacomp salesperson also sells to these data
management and storage customers the maintenance services and consumable
supplies and equipment needed to support the use of micrographics.
Internationally, Anacomp employs 70 salespeople through its wholly owned
foreign operating subsidiaries. In countries in which Anacomp does not have a
subsidiary, the Company sells through approximately 100 distributors and agents.
RAW MATERIALS AND SUPPLIERS
Polyester is a principal raw material for microfilm and magnetics products.
There is currently a worldwide shortage of polyester, and the price of
magnetics-based products is expected to increase 5% to 10% over the next two
years. In fiscal 1994, Anacomp used more than 11 million pounds of polyester,
costing approximately $20 million, in its magnetics business (including amounts
purchased by Graham prior to its acquisition by Anacomp). In October 1993, SKC
purchased Anacomp's Sunnyvale, California duplicate microfilm facility and
entered into a ten-year supply agreement (the "Supply Agreement") pursuant to
which SKC became the Company's sole duplicate microfilm supplier. In connection
therewith, SKC invested several million dollars to consolidate and enhance the
Sunnyvale facilities in order to improve both productivity and quality. SKC's
duplicate film production is dedicated exclusively to Anacomp. Pursuant to the
Supply Agreement, SKC also provides Anacomp with a substantial portion of its
polyester requirements for its magnetics products.
The Company's XFP 2000 utilizes a proprietary, patented original film
canister. While all original film used for the XFP 2000 is supplied by Kodak,
the Company does have substantial (in excess of $15 million) original film
resale agreements with Fuji and Agfa with respect to microfilm utilized in other
COM systems. The Company believes that original film for its XFP 2000 systems
can be obtained by the Company, if necessary, from Fuji, Agfa and 3M. For a
discussion of certain of the risks involved in the Company's use of polyester
and Anacomp's relationships with its suppliers, see "Risk Factors --
Availability of Polyester and Certain Other Supplies".
RESEARCH AND DEVELOPMENT
The Company supports several engineering initiatives, including COM systems
and related software product development and support for existing customer
installations. The engineering department is located in the Company's principal
manufacturing facility in Poway, California and employs approximately 130
engineers and technicians. The total expenditures associated with all
engineering programs (including research and development) amounted to
approximately $10.4 million in 1994, $11.1 million in 1993 and $10.4 million in
1992. Most of these costs were related to continued software development for the
XFP 2000. Management expects that its near-term engineering efforts will
continue to be concentrated on adding additional software capabilities to the
XFP 2000.
Anacomp has intensified its development efforts aimed at providing bridge
technologies between micrographics and digital technologies. Anacomp expects to
continue to expand its efforts in this area over the next several years through
strategic alliances with other technology companies. See "Business -- Strategy".
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Anacomp owns several patents and licenses covering certain aspects of its
products and production processes. Nevertheless, the Company believes that the
patent protection is of lesser significance than the knowledge and experience of
its management and personnel and their abilities to develop and market the
Company's products.
FACILITIES
Anacomp's principal administrative headquarters is located at 11550 North
Meridian Street in Carmel, Indiana (a suburb of Indianapolis). In 1992, the
Company opened a new manufacturing and operations center in Poway, California,
near San Diego. The facility consolidated one-fourth of Anacomp's work force and
ten separate manufacturing facilities into one facility. Micrographics
manufacturing, engineering and product maintenance facilities are all located in
Poway.
Anacomp's magnetics manufacturing and engineering facilities are located in
Graham, Texas; Omaha, Nebraska; and Brynmawr, Wales. During 1994, Anacomp's
Graham and Brynmawr facilities received international recognition for quality
standards, earning International Standards Organization (ISO) 9002
certification.
The following table indicates the square footage of Anacomp's facilities:
<TABLE>
<CAPTION>
OPERATING OTHER CORPORATE
FACILITIES FACILITIES FACILITIES TOTAL
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
United States:
Leased............................. 982,000 629,000 74,000 1,685,000
Owned.............................. 163,000 168,000 -- 331,000
--------- ---------- --------- ---------
1,145,000 797,000 74,000 2,016,000
========= ======== ======== =========
International:
Leased............................. 160,000 -- -- 160,000
Owned.............................. 145,000 -- -- 145,000
--------- ---------- --------- ---------
305,000 -- -- 305,000
--------- ---------- --------- ---------
Total...................... 1,450,000 797,000 74,000 2,321,000
========= ======== ======== =========
</TABLE>
Other Facilities consist primarily of leased space from discontinued
operations and property held for sale. Approximately 776,000 square feet of the
Other Facilities have been sublet to others and an additional 21,000 square feet
is vacant as of November 1994. Anacomp also leases standard office space for its
sales and service centers in a variety of locations. Anacomp considers its
facilities adequate for its present needs and does not believe that it would
experience any difficulty in replacing any of its present facilities if any of
its current agreements were terminated.
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<PAGE> 40
MANAGEMENT
The current directors and executive officers of the Company and their ages
(as of September 30, 1994) and positions are listed below.
<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------- ---- ---------------------------------------------------
<S> <C> <C>
Louis P. Ferrero................... 52 Chairman of the Board and Chief Executive Officer
William C. Ater.................... 54 Vice President and Chief Administrative Officer
K. Gordon Fife..................... 49 Vice President -- Tax
Hasso Jenss........................ 51 Vice President -- European Micrographics
P. Lang Lowrey III................. 41 Vice President -- Magnetics Group
Thomas W. Murrel................... 54 Vice President and General Manager -- Poway
Operations
Jack R. O'Donnell.................. 64 Executive Vice President, Treasurer and Chief
Financial Officer
Michael H. Riley................... 47 Vice President -- Product Development and Marketing
Gary M. Roth....................... 52 Vice President -- Americas/Asia Division
Thomas R. Simmons.................. 47 Vice President -- Direct Sales Division -- East
Donald L. Viles.................... 48 Vice President and Controller
Michael P. Wessner................. 34 Vice President -- Strategic Resellers Group
J. Frederick Williams.............. 52 Vice President, Direct Sales Division -- West
J. Mark Woods...................... 52 President, Chief Operating Officer and Director
Clark A. Johnson................... 63 Director
Richard E. Neal.................... 69 Director
Roger S. Palamara.................. 48 Director
Paul G. Roland..................... 60 Director
Frederick W. Zuckerman............. 60 Director
</TABLE>
The business experience of the above officers and directors for the past
five years is described below. Each executive officer is elected for a term of
one year and holds office until his successor is chosen and qualified or until
his death, resignation or removal.
Louis P. Ferrero was appointed as President of the Company in May 1984, and
became a member of the Offices of the Chairman of the Board and Chief Executive
Officer in November 1984. In February 1985, the Board of Directors of the
Company amended the By-Laws of the Company to eliminate the Office of the
Chairman of the Board and Office of the Chief Executive Officer and elected Mr.
Ferrero Chairman of the Board and Chief Executive Officer. Mr. Ferrero has been
a member of the Company's senior management team since he joined the Company in
1979 as part of the Company's acquisition of Computer Micrographics, Inc. At the
Company, Mr. Ferrero initially served as a Senior Vice President with
responsibility for micrographics field operations, and later became a Senior
Division Vice President with responsibility for new business development. Mr.
Ferrero also is a director of Conseco, Inc.
The Commission conducted an investigation relating to the trading of the
common stock of Xidex Corporation ("Xidex") prior to the announcement in July
1988 of the possible acquisition of Xidex by the Company. In January 1991, the
Commission approved bringing a civil action against Mr. Ferrero and
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<PAGE> 41
certain other individuals alleging that Mr. Ferrero had been a source of
information to certain other individuals who traded prior to such announcement.
The Commission allegations did not include any trading by, or financial benefit
to, Mr. Ferrero. In March 1991, Mr. Ferrero settled the charges with the
Commission without admitting or denying guilt and paid a fine of $277,750.
Pursuant to the Company's Restated Articles of Incorporation and Mr. Ferrero's
Amended and Restated Employment Agreement, the Company indemnified Mr. Ferrero
for the amount of the Commission settlement plus an amount equal to the Federal
and state tax liability incurred by Mr. Ferrero as a result of such
indemnification (a total of $428,000) plus legal fees in the amount of $35,000.
After a non-jury trial before the United States District Court for the Southern
District of Indiana during 1993, the Court found that such other individuals had
engaged in insider trading in violation of the Federal securities laws and
ordered disgorgement of approximately $562,000 and payment of penalties and
interest of approximately $1.2 million.
William C. Ater was elected Vice President and Chief Administrative Officer
in February 1988. From March 1981 to February 1988, Mr. Ater served as Vice
President of Administration. He has served as Secretary since March 1985.
K. Gordon Fife was elected Vice President of Tax in October 1985.
Hasso Jenss was elected Vice President -- European Micrographics in
November 1993. Prior to that, he served from October 1989 to October 1993 as
Managing Director of Anacomp's German subsidiary.
P. Lang Lowrey III was elected Vice President -- Magnetics Group in
November 1992. Prior to that, he served from October 1990 to October 1992 as
Vice President -- Worldwide Marketing Division. He was Vice
President -- MultiproduX Division from December 1987 through September 1990.
Thomas W. Murrel was elected Vice President and General Manager of Poway
Operations in January 1993. Prior to that, he served from February 1988 to
December 1992 as Vice President -- Maintenance Division. From June 1987 to
February 1988, he served as Vice President -- Product Service, DatagraphiX.
Jack R. O'Donnell joined Anacomp in March 1992 as Executive Vice President,
Treasurer and Chief Financial Officer. Prior to joining Anacomp, Mr. O'Donnell
was an office managing partner with Arthur Andersen LLP.
Michael H. Riley was elected Vice President, Product Development and
Marketing in November 1994. From January 1993 to November 1994, he served as
Vice President, Product Planning and Marketing. Prior to that, he served from
1990 to 1992 as Vice President of Information Systems Marketing and from 1989 to
1990 as Director of Product Management.
Gary M. Roth was elected Vice President, Americas/Asia Division in November
1992. From October 1991 to October 1992, he served as Manager, LAAP/Canada
Operations. From October 1988 to October 1991, he served as Vice
President -- Data Systems Division. From July 1982 to October 1988, he served as
Regional Vice President -- COM Services Division.
Thomas R. Simmons was elected Vice President, Direct Sales Division -- East
on November 12, 1994. He had served as Vice President -- Information Systems
Division since November 4, 1991. Prior to that, he served from 1987 to 1991 as
Vice President -- Micrographics Services Division.
Donald L. Viles was elected Vice President and Controller of Anacomp in
October 1985.
Michael P. Wessner was elected Vice President -- Strategic Resellers Group
in November 1994. He had served as Vice President -- Strategic Resellers
Division since November 1992. Prior to that, from October 1991 to October 1992,
he served as a Regional Vice President in the Strategic Resellers Division. From
November 1988 to October 1991, he was a Regional Vice President in the
MultiproduX Division. Mr. Wessner joined Anacomp in July 1985, and served as
supplies sales representative until October 1988.
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<PAGE> 42
J. Fredrick Williams was elected Vice President, Direct Sales
Division -- West in November 1994. He had served as Vice
President -- Micrographics Services Division since November 1991. From October
1988 through October 1991, he served as a Regional Vice President in the
Micrographics Services Division. For the two years prior to that, he was Vice
President -- Commercial and Government Services Division.
J. Mark Woods was elected President and Chief Operating Officer in February
1993. Prior to that, he served as Executive Vice President and Chief Operating
Officer since May 1989. From August 1988 through April 1989, he served as
President of the Micrographics Group. He served as Executive Vice President and
Chief Operating Officer from January 1985 to August 1988. In February 1988, Mr.
Woods was elected a director of Anacomp.
Clark A. Johnson has served as a director since 1991. Mr. Johnson joined
Pier 1 Imports in 1985 as President and Chief Executive Officer and was elected
Chairman and Chief Executive Officer in 1988. Mr. Johnson also is a director of
Albertsons, Inc., Actava, Inc., Heritage Media Corp., and InterTAN, Inc.
Richard E. Neal has served as a director since 1984. Mr. Neal retired as an
Executive Vice President of the investment banking firm of City Securities
Corporation in Indianapolis, Indiana in June 1994, a position which he held for
more than the prior five years.
Roger S. Palamara has served as a director since 1983. Mr. Palamara has
been Vice President of Bank One, Indianapolis, N.A., in charge of its
International Services Department, since June 1984.
Paul G. Roland has served as a director since 1984. Mr. Roland has been a
partner with the law firm of Ruckelshaus, Roland, Hasbrook & O'Connor for more
than the past five years.
Frederick W. Zuckerman has served as a director since 1990. Mr. Zuckerman
is an independent consultant and professional director for public companies. Mr.
Zuckerman served as Vice President and Treasurer of IBM from September 1993
until January 1995. Prior to that, he was Senior Vice President and Treasurer of
Nabisco, Inc. from February, 1991. Prior to that, he was an independent
consultant and professional director. From 1981 until September 1990, he was
Vice President and Treasurer of Chrysler Corporation. Mr. Zuckerman is also a
director of Northeast Federal Corporation, Meditrust, Inc., The Singapore Fund,
Northeast Savings Bank, The Turner Corporation, The Japan Equity Fund and NVR,
Inc.
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<PAGE> 43
DESCRIPTION OF THE NOTES
The Notes will be issued under an Indenture to be dated as of
, 1995 (the "Indenture"), between the Company, as issuer, and The Bank of New
York, as Trustee (the "Trustee"), a copy of the proposed form of which is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summary, which describes certain material provisions of the
Indenture and the Notes, does not purport to be complete, and is subject to the
detailed provisions of, and is qualified in its entirety by reference to, the
provisions of the Indenture and the Notes, including the definitions therein of
certain terms. The terms of the Notes include those set forth in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (the "Trust Indenture Act"), as in effect on the date of the Indenture.
Wherever particular provisions or definitions of the Indenture, the Notes or
terms defined therein are referred to herein, such provisions or definitions are
incorporated herein by reference. Capitalized terms that are used but not
otherwise defined herein have the meanings assigned to them in the Indenture.
For purposes of this Description of the Notes, the term "Company" refers to
Anacomp, Inc. and does not include its subsidiaries except for purposes of
financial data determined on a consolidated basis.
GENERAL
The Notes will mature on , 2002, and will be limited to an
aggregate principal amount of $225,000,000. The Notes will bear interest at the
rate set forth on the cover page of this Prospectus from , 1995
(the "Issue Date"), or from the most recent interest payment date to which
interest has been paid, payable semi-annually on and of
each year, beginning on , 1995, to the person in whose name the Note (or
any predecessor Note) is registered at the close of business on the preceding
or , as the case may be.
Principal of, and premium, if any, and interest on, the Notes will be
payable, and the Notes will be exchangeable and transferable, at an office or
agency of the Company, one of which will be maintained for such purpose in New
York, New York (which initially will be the Corporate Trust Office of the
Trustee, at 101 Barclay Street, New York, New York) or such other office or
agency permitted under the Indenture; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
registered address of the holder entitled thereto. The Notes will be issued only
in fully registered form without coupons, in denominations of $1,000 or any
integral multiple thereof. No service charge will be made for any registration
of transfer or exchange of Notes, except for any tax or other governmental
charge that may be imposed in connection therewith.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of, or premium, if any, or interest on, any Notes that remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable may be repaid to the Company, and the holder of such Note
thereafter may look only to the Company for payment thereof.
RANKING
The Notes will be senior secured obligations of the Company ranking pari
passu in right of payment with all existing and future senior obligations of the
Company and senior in right of payment to all existing and future indebtedness
of the Company that is designated as subordinate or junior in right of payment
to the Notes. The Notes will be secured by a Lien on substantially all the
assets of the Company and the U.S. Restricted Subsidiaries (collectively
referred to as the "Collateral"). Although the Collateral will include the
Working Capital Collateral, the lien on behalf of the Notes on the Working
Capital Collateral will be second in priority and junior to the lien of the
lenders under the Revolving Credit Facility on the Working Capital Collateral.
The Collateral will include after-acquired assets of the Company and the U.S.
Restricted Subsidiaries to the extent that such assets are acquired by the
Company or any such U.S. Restricted Subsidiary without financing secured by a
lien on such assets. Excluding Working Capital Collateral, the Collateral
consists of (i) tangible assets with a book value substantially less than the
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<PAGE> 44
aggregate principal amount of the Notes and (ii) intangible assets (principally
goodwill). See "-- Collateral" and "Risk Factors -- Potential Inadequacy of
Security".
At December 31, 1994, after giving effect to the issuance of the Notes, the
creation of the Revolving Credit Facility (assuming no borrowings thereunder)
and the use of proceeds therefrom, the pro forma amount of Senior Indebtedness
of the Company outstanding would have been $226.8 million. In addition, after
the Issue Date the Company will be permitted to borrow $50 million under the
Revolving Credit Facility. Although the Indenture contains limitations on the
amount of additional indebtedness that the Company may incur, the amounts of
such indebtedness could be substantial and, in any case, such indebtedness may
be Senior Indebtedness. The Notes will be effectively subordinated to all
indebtedness and other liabilities of the Company's Subsidiaries, which, as of
December 31, 1994, amounted to $26.8 million. The Indenture permits the
Company's Subsidiaries to incur certain amounts of additional indebtedness. See
"-- Certain Covenants -- Limitation on Indebtedness" and "-- Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock".
MANDATORY REDEMPTION
The Indenture requires the Company to redeem $37.5 million aggregate
principal amount of Notes on each of December , 2000, and December , 2001,
in each case at a redemption price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest (if any) to the date of redemption.
The Company will receive a credit against the principal amount of the Notes
required to be redeemed equal to the principal amount (excluding premium) of any
Notes that the Company has acquired or redeemed (other than Notes mandatorily
redeemed) and delivered such Notes to the Trustee for cancellation. The Company
may receive such credit only once for any Note.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to , 2000. On and after such
date, the Notes will be redeemable at the option of the Company, at any time as
a whole, or from time to time in part, on not less than 45 days nor more than 60
days' notice, at a redemption price of % of the principal amount thereof,
plus accrued and unpaid interest (if any) to the date of redemption, through,
, 2001, and thereafter at 100%.
CHANGE OF CONTROL
In the event of a Change of Control, the Company will (i) within 30 days
after the occurrence of such Change of Control, notify the Trustee, who will in
turn notify the holders of the Notes, in writing of the occurrence of and the
circumstances and relevant facts regarding such Change of Control and (ii) make
an offer to purchase (the "Change of Control Offer") the Notes at a purchase
price equal to 101% of the principal amount thereof, plus any accrued and unpaid
interest thereon to the Change of Control Purchase Date (as defined below) (such
price, together with such interest, the "Change of Control Purchase Price") on
or before the date specified in such notice, which date shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed (the "Change
of Control Purchase Date"). The Change of Control Offer will remain open from
the time such offer is made until the Change of Control Purchase Date. The
Company will purchase all Notes properly tendered in the Change of Control Offer
and not withdrawn in accordance with the procedures set forth in such notice.
The Change of Control Offer will state, among other things, the procedures that
holders of the Notes must follow to accept the Change of Control Offer.
The occurrence of certain of the events which would constitute a Change of
Control could constitute a default under the Company's existing and future
indebtedness. In addition, the exercise by the holders of the Notes and of their
right to require the Company to repurchase Notes could cause a default under
such indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, if a Change of
Control Offer is made, there can be no assurance that
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<PAGE> 45
the Company will have sufficient funds or other resources to pay the Change of
Control Purchase Price for all the Notes that might be delivered by holders
thereof seeking to accept the Change of Control Offer.
The Change of Control provisions described above may deter certain mergers,
tender offers and other takeover attempts involving the Company and, thus, the
removal of incumbent management. The Change of Control provisions will not
prevent a change in a majority of the members of the Board of Directors of the
Company which is approved by a majority of the then-present Board of Directors
of the Company. One of the events that constitutes a Change of Control under the
Indenture is a sale, conveyance, transfer or lease of all or substantially all
the property of the Company and its Subsidiaries, taken as a whole, to any
Person (other than a Restricted Subsidiary). The phrase "all or substantially
all" is subject to judicial interpretation depending on the facts and
circumstances of the subject transaction. The Indenture will be governed by New
York law, and there is no established quantitative definition under New York law
of "substantially all" the assets of a corporation. Accordingly, in certain
circumstances it may be unclear whether a Change of Control has occurred and
whether the Company may therefore be required to make a Change of Control Offer.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to any Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with provisions relating to the Change of Control Offer, the Company
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Change of Control covenant by
virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness unless
(i) no Default or Event of Default shall have occurred and be continuing at the
time of such Incurrence or would occur as a consequence of such Incurrence and
(ii) in the case of the Company, such Indebtedness is Permitted Indebtedness or,
in the case of any Restricted Subsidiary, such Indebtedness is permitted under
"-- Limitation on Restricted Subsidiary Indebtedness and Preferred Stock".
"Permitted Indebtedness" will be defined as:
(i) Indebtedness represented by the Notes;
(ii) Indebtedness remaining outstanding immediately after the Issue Date
(and not otherwise permitted by clause (i) or (iv));
(iii) Indebtedness Incurred if, after giving pro forma effect to such
Incurrence, the Consolidated Coverage Ratio would be equal to at least 2 to 1;
(iv) Indebtedness Incurred under the Revolving Credit Facility or any other
revolving credit facility in an aggregate principal amount outstanding from time
to time not to exceed immediately after such Incurrence the sum of 80% of the
book value from time to time of the Accounts Receivable of the Company and 60%
of the book value from time to time of the Inventory of the Company, in each
case computed in accordance with GAAP;
(v) Indebtedness (A) under Interest Rate Protection Agreements relating to
Indebtedness permitted hereunder entered into in the ordinary course of the
Company's financial management and not for speculative purposes; provided,
however, that the notional amount of each such Interest Rate Protection
Agreement does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Agreement relates; or (B) under Currency Exchange
Protection Agreements entered into in the ordinary course of the Company's
financial management and not for speculative purposes; provided, however, in the
case of either clause (A) or (B), any such Interest Rate Protection Agreement or
Currency Exchange Protection Agreement, as the case may be, does not increase
the Indebtedness of
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<PAGE> 46
the Company outstanding at any time other than as a result of fluctuations in
the interest rates or exchange rates, as the case may be, or by reason of
customary fees, indemnities and compensation payable thereunder;
(vi) Indebtedness owing to and held by any Wholly Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any Capital Stock
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except to the
Company or another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(vii) Indebtedness in connection with a prepayment of the Notes pursuant to
a Change of Control Offer; provided, however, that the aggregate principal
amount of such Indebtedness does not exceed 101% of the aggregate principal
amount of the Notes prepaid; provided, further, however, that such Indebtedness
(A) has an Average Life equal to or greater than the remaining Average Life of
the Notes and (B) does not mature prior to the Stated Maturity of the Notes;
(viii) Indebtedness in respect of Purchase Money Indebtedness or Capital
Lease Obligations directly Incurred by the Company; provided, however, that the
sum of (A) the aggregate principal amount of such Purchase Money Indebtedness,
(B) the aggregate amount of such Capital Lease Obligations and (C) the aggregate
amount of Capital Lease Obligations Incurred by Restricted Subsidiaries as
permitted under clause (iii) under "-- Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock" does not at any one time outstanding exceed
$20 million;
(ix) Indebtedness Incurred (A) in the ordinary course of business of the
Company with respect to trade credit made available to the Company in connection
with the obtaining of goods or services by the Company (including commercial
letters of credit, bankers' acceptances or accommodation Guarantees for the
benefit of trade creditors or suppliers), in each case for a period not to
exceed 180 days, in an amount not to exceed the purchase price for the goods or
services for which such credit is made available and which do not constitute
obligations for borrowed money, and (B) with respect to standby letters of
credit, performance bonds and surety bonds that do not constitute obligations
for borrowed money Incurred by the Company in the ordinary course of business
relating to services to be performed by or on behalf of the Company; provided,
however, that the aggregate amount of related reimbursement obligations under
Indebtedness permitted by clause (A) or (B) and clause (iv) under "-- Limitation
on Restricted Subsidiary Indebtedness and Preferred Stock" does not exceed $25
million at any one time outstanding;
(x) Indebtedness in respect of Guarantees by the Company of Indebtedness of
any Restricted Subsidiary permitted to be Incurred under "-- Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock"; provided, however, that
any Guarantee by the Company of any Indebtedness of a Foreign Restricted
Subsidiary shall be limited to an aggregate principal amount at any one time not
to exceed (A) the sum of 80% of the book value from time to time of the Accounts
Receivable of the Company and 60% of the book value from time to time of the
Inventory of the Company, in each case computed in accordance with GAAP, minus
(B) the aggregate principal amount of Indebtedness of the Company outstanding at
any time pursuant to clause (iv);
(xi) Indebtedness represented by the Exchange Notes issued in exchange for
any of the 8.25% Preferred Stock outstanding on the Issue Date pursuant to the
terms of the 8.25% Preferred Stock as in effect on the Issue Date;
(xii) Refinancing Indebtedness Incurred in respect of Indebtedness Incurred
pursuant to clause (i), (ii), (iii), (vii) or (xi); and
(xiii) in addition to any Indebtedness permitted by clauses (i) through
(xii), up to an aggregate of (A) $25 million in principal amount of Indebtedness
at any one time outstanding minus (B) the principal amount of Indebtedness at
such time outstanding of any Restricted Subsidiaries permitted pursuant to
clause (viii) under "-- Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock".
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The Company will not directly or indirectly Incur any Indebtedness if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations; provided, however, that the Company may Incur up
to an aggregate principal amount of $5 million of Indebtedness under clause (iv)
if the proceeds of such Indebtedness are used to purchase or redeem any 15%
Subordinated Notes outstanding on the Issue Date.
Limitation on Restricted Subsidiary Indebtedness and Preferred Stock. The
Company will not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness or issue or permit to exist any Preferred Stock unless
(i) no Default or Event of Default shall have occurred and be continuing at the
time of such Incurrence or would occur as a consequence of such Incurrence and
(ii) such Indebtedness or Preferred Stock is Permitted Restricted Subsidiary
Indebtedness.
"Permitted Restricted Subsidiary Indebtedness" will be defined as:
(i) Indebtedness or Preferred Stock remaining outstanding immediately
after the Issue Date (and not otherwise permitted by clause (ii));
(ii) Indebtedness of any Foreign Restricted Subsidiary under any
foreign currency revolving credit facility in an aggregate principal amount
outstanding from time to time not to exceed the sum of 80% of the book
value from time to time of the Accounts Receivable of such Foreign
Subsidiary and 60% of the book value from time to time of the Inventory of
such Foreign Subsidiary, in each case computed in accordance with GAAP;
(iii) Indebtedness in respect of Capital Lease Obligations directly
Incurred by any Restricted Subsidiary; provided, however, that the sum of
(A) the aggregate amount of such Capital Lease Obligations, (B) the
aggregate principal amount of Purchase Money Indebtedness and (C) the
aggregate amount of Capital Lease Obligations Incurred by the Company
pursuant to clause (viii) under "-- Limitation on Indebtedness" does not at
any one time outstanding exceed $20 million;
(iv) Indebtedness Incurred (A) in the ordinary course of business of
any Restricted Subsidiary with respect to trade credit made available to
such Restricted Subsidiary in connection with the obtaining of goods or
services by such Restricted Subsidiary (including commercial letters of
credit, bankers' acceptances or accommodation Guarantees for the benefit of
trade creditors or suppliers), in each case for a period not to exceed 180
days, in an amount not to exceed the purchase price for the goods or
services for which such credit is made available and which do not
constitute obligations for borrowed money and (B) standby letters of
credit, performance bonds and surety bonds that do not constitute
obligations for borrowed money Incurred by any Restricted Subsidiary in the
ordinary course of business relating to services to be performed by or on
behalf of such Restricted Subsidiary; provided, however, that the aggregate
amount of any related reimbursement obligations under Indebtedness
permitted by clause (A) or (B) and clause (ix) under "-- Limitations on
Indebtedness" does not exceed $25 million at any one time outstanding;
(v) Indebtedness (A) under Interest Rate Protection Agreements
relating to Indebtedness permitted hereunder entered into in the ordinary
course of any Restricted Subsidiary's financial management and not for
speculative purposes; provided, however, that the notional amount of each
such Interest Rate Protection Agreement does not exceed the principal
amount of the Indebtedness to which such Interest Rate Protection Agreement
relates; or (B) under Currency Exchange Protection Agreements entered into
in the ordinary course of any Foreign Subsidiary's financial management and
not for speculative purposes; provided, however, in the case of either
clause (A) or (B), any such Interest Rate Protection Agreement or Currency
Exchange Protection Agreement, as the case may be, does not increase the
Indebtedness of such Subsidiary outstanding at any time other than as a
result of fluctuations in the interest rates or exchange rates, as the case
may be, or by reason of customary fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness or Preferred Stock owing to and held by the Company
or any Wholly Owned Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock that
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results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except to
the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(vii) Refinancing Indebtedness Incurred in respect of Indebtedness
Incurred pursuant to clause (i); and
(viii) in addition to any Indebtedness permitted by clauses (i)
through (vii), up to an aggregate of $5 million in principal amount of
Indebtedness at any one time outstanding.
Limitation on Restricted Payments. The Company will not, and the Company
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend on, or make any distribution on or in respect of,
its Capital Stock (including any such payment in connection with any merger or
consolidation involving the Company), except dividends payable solely in its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to purchase such Capital Stock and except dividends or distributions
payable to the Company or any Restricted Subsidiary, (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company or any
Restricted Subsidiary held by Persons other than the Company or any Restricted
Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value (including pursuant to mandatory repurchase covenants), prior
to any scheduled repayment, scheduled sinking fund payment or other scheduled
maturity, any Subordinated Obligation which had a Stated Maturity equal to or
later than the Stated Maturity of the Notes (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment"),
unless at the time of and after giving effect to the proposed Restricted Payment
(a) no Default or Event of Default shall have occurred and be continuing (or
would result therefrom), (b) the Company could Incur at least $1.00 of
additional Indebtedness pursuant to clause (iii) under "-- Limitation on
Indebtedness" and (c) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors of the Company, whose
determination shall be evidenced by a resolution of such Board furnished to the
Trustee) declared or made since the Issue Date, would not exceed, without
duplication, the sum of (1) an amount equal to 50% of the Consolidated Net
Income accrued during the period (treated as one accounting period) beginning on
the last day of the last completed fiscal quarter of the Company immediately
preceding the Issue Date and ending on the last day of the Company's last fiscal
quarter ended prior to the date of such proposed Restricted Payment (or, if such
Consolidated Net Income shall be a deficit, minus 100% of such deficit) and
minus 100% of the amount of any write-downs, write-offs, other negative
revaluations and other negative extraordinary charges not otherwise reflected in
Consolidated Net Income during such period, (2) the aggregate Net Cash Proceeds
received by the Company from the issue or sale of its Capital Stock, including
Capital Stock of the Company issued upon conversion of convertible debt or the
exercise of options, warrants or rights to purchase Capital Stock of the
Company, but excluding Disqualified Stock, subsequent to the Issue Date (other
than an issuance or sale to a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries), (3) the amount by which the Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company) subsequent to
the Issue Date of any Indebtedness of the Company or any Restricted Subsidiary
convertible or exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash or other property distributed by the
Company or any Restricted Subsidiary upon such conversion or exchange) and (4)
the amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from (x) payments of dividends, repayments of loans or
advances or other transfers of assets to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of
Unrestricted Subsidiaries as
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<PAGE> 49
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investment") not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was a Restricted
Payment.
The foregoing provisions will not prohibit: (i) any purchase or redemption
of Capital Stock of the Company or Subordinated Obligations of the Company made
by exchange for, or out of the proceeds of, a substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries) or out of proceeds of an equity contribution made substantially
concurrently with such purchase or redemption; provided, however, that (A) such
purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or equity
contribution will be excluded from subclause (2) of the above paragraph; (ii)
any purchase or redemption of Subordinated Obligations made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Indebtedness of the
Company which is permitted to be Incurred pursuant to "-- Limitation on
Indebtedness"; provided, however, that (A) such Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate sum of (1)
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of such Subordinated Obligations
being so purchased or redeemed and (2) any premiums, fees and other expenses
paid by the Company or any Restricted Subsidiary in connection with such
purchase or redemption, (B) such Indebtedness is at least as subordinated to the
Notes as such Subordinated Obligations so purchased or redeemed and the
covenants relating to such Indebtedness are no more restrictive in the aggregate
than those of such Subordinated Obligations, (C) such Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of such Subordinated Obligations,
(D) such Indebtedness has an Average Life at the time such Indebtedness is
Incurred equal to or greater than the Average Life of such Subordinated
Obligations and (E) such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments; (iii) any declaration or
payment of any dividend on the 8.25% Preferred Stock outstanding on the Issue
Date and required to be so declared or paid by the terms thereof; provided,
however, that such dividend will be included in the calculation of the amount of
Restricted Payments from and after the date of declaration of such dividend;
(iv) any purchase or redemption of the 8.25% Preferred Stock outstanding on the
Issue Date pursuant to the mandatory repurchase provisions of the 8.25%
Preferred Stock as in effect on the Issue Date; provided, however, that such
purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments; (v) any purchase or redemption of the 8.25% Preferred Stock
outstanding on the Issue Date in exchange for, or out of the proceeds of the
substantially concurrent sale of, the Exchange Notes which are permitted to be
Incurred pursuant to clause (xi) under "-- Limitation on Indebtedness";
provided, however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments; (vi) any payment in cash in
lieu of the issuance of fractional shares of Capital Stock to any holder of
Capital Stock warrants of the Company outstanding on the Issue Date pursuant to
the exchange of such warrants for other Capital Stock of the Company upon the
exercise of such warrants pursuant to the terms thereof; provided, however, that
such payment shall be excluded in the calculation of the amount of Restricted
Payments; (vii) any purchase or redemption of rights issued to holders of the
Company's Common Stock pursuant to the Company's Shareholder Rights Plan adopted
on February 4, 1990, as in effect on the Issue Date; provided, however, that (A)
all such purchases or redemptions shall not be in an aggregate principal amount
in excess of $250,000 and (B) such purchase or redemption will be included in
the calculation of the amount of Restricted Payments; (viii) any purchase or
redemption of any 15% Subordinated Notes outstanding on the Issue Date;
provided, however, that (A) such purchase or redemption is made solely with the
proceeds of Indebtedness Incurred pursuant to clause (iv) under "-- Limitation
on Indebtedness" and such Indebtedness does not exceed an aggregate principal
amount of $5 million and (B) such purchase or redemption will be included in the
calculation of the amount of Restricted Payments; or (ix) dividends paid within
60 days after the date of declaration thereof if at such date of declaration
such dividend would have complied with the above paragraph; provided, however,
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that (A) at the time of payment of such dividend, no other Default or Event of
Default shall have occurred and be continuing (or would result therefrom) and
(B) such dividend will be included in the calculation of the amount of
Restricted Payments from and after the date of declaration of such dividend.
Transactions with Affiliates. The Company will not, and the Company will
not permit any Restricted Subsidiary to, directly or indirectly, conduct any
business, enter into or permit to exist any transaction (including, without
limitation, the sale, conveyance, disposition, purchase, exchange or lease of
any property, the lending, borrowing or advancing of any money or the rendering
of any services) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction") unless (i) the terms of such Affiliate Transaction are
in writing, (ii) such Affiliate Transaction is in the best interest of the
Company or such Restricted Subsidiary, as the case may be, (iii) such Affiliate
Transaction is on terms as favorable to the Company or such Restricted
Subsidiary, as the case may be, as those that could be obtained at the time of
such Affiliate Transaction for a similar transaction in arm's-length dealings
with a Person who is not such an Affiliate and (iv) with respect to each
Affiliate Transaction involving aggregate payments or value in excess of $5
million, the Company delivers to the Trustee an opinion letter from an
Independent Appraiser (in which such Independent Appraiser identifies itself as
such) to the effect that such Affiliate Transaction complies with clauses (ii)
and (iii) and an Officer's Certificate certifying that such Affiliate
Transaction was approved by a majority of the Board of Directors of the Company,
including a majority of the disinterested members of such Board, as evidenced by
a resolution of such Board, and that such Affiliate Transaction complies with
clauses (ii) and (iii), such opinion letter and resolution to be dated within 30
days of such Affiliate Transaction; provided, however, that the foregoing will
not prohibit (A) any Restricted Payment permitted to be paid as described above
under "-- Limitation on Restricted Payments", (B) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors of the Company, (C) loans or advances
permitted under the Indenture from time to time to employees of the Company or
any Restricted Subsidiary in the ordinary course of business in accordance with
past practices of the Company, (D) the payment of reasonable fees to directors
of the Company and its Restricted Subsidiaries who are not employees of the
Company or any Restricted Subsidiary, (E) any transaction between the Company
and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries or (F)
reasonable and customary indemnification arrangements between the Company or any
Restricted Subsidiary and their respective directors and officers pursuant to
which the Company or any such Restricted Subsidiary agrees to indemnify such
directors and officers against losses and expenses incurred by such directors
and officers in connection with their service to the Company or such Restricted
Subsidiary, as the case may be (to the extent that such indemnification
arrangements are permitted under applicable law).
Limitation on Liens and Impairment of Collateral. The Company will not,
and the Company will not permit any Restricted Subsidiary to, directly or
indirectly, create or permit to exist any Lien on any of its property or assets
(including Capital Stock), whether owned or the Issue Date or thereafter
acquired, or any right, title or interest thereto, other than Permitted Liens.
Except as permitted by the Indenture or any of the other Collateral
Documents, the Company will not, and the Company will not permit any of its
Subsidiaries to, directly or indirectly, (i) take or omit to take any action
which might or would have the result of adversely affecting or impairing the
perfected first priority Lien of the Indenture and the other Collateral
Documents with respect to the Collateral or any right, title or interest thereto
or (ii) grant to any Person any interest in, or right, title or interest to, the
Collateral, other than, in each case, Permitted Liens.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and the Company will not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distribution on or in respect to its Capital Stock or pay any Indebtedness owed
to the Company or any Restricted Subsidiary, (ii) make loans or advances to the
Company or any Restricted Subsidiary or (iii) transfer any of its property or
assets to the Company or any Restricted Subsidiary, except for (a) any
encumbrance or restriction pursuant to an agreement in effect
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<PAGE> 51
at or entered into on the Issue Date, (b) any encumbrance or restriction with
respect to a Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary became a Subsidiary of, or was acquired by, the
Company (other than Indebtedness Incurred as consideration in, or to provide all
or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Subsidiary of, or was acquired by, the Company) and
outstanding on such date, (c) any encumbrance or restriction pursuant to an
agreement relating to an acquisition of property, so long as the encumbrances or
restrictions in such agreement relate solely to the property so acquired, (d)
any encumbrance or restriction pursuant to an agreement effecting a refinancing
of Indebtedness Incurred pursuant to an agreement referred to in clause (a), (b)
or (c) or contained in any amendment to any such agreement or amendment;
provided, however, that any encumbrance or restriction contained in any such
refinancing agreement is no less favorable to the holders of the Notes than any
encumbrance or restriction contained in such agreement and (e) in the case of
clause (iii), any encumbrance or restriction (1) that restricts 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, (2) arising
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 terms of the Indenture or (3) arising
or agreed to in the ordinary course of business and that does 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 such
Restricted Subsidiary.
Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries. The Company will not permit (i) any Restricted Subsidiary to
issue any Capital Stock other than to the Company or a Wholly Owned Subsidiary;
or (ii) any Person (other than the Company or a Wholly Owned Subsidiary) to,
directly or indirectly, own or control any Capital Stock of any Restricted
Subsidiary (other than directors' qualifying shares); provided, however, that
clauses (i) and (ii) will not prohibit (a) any sale of 100% of the shares of the
Capital Stock of any Restricted Subsidiary owned by the Company or any Wholly
Owned Subsidiary effected in accordance with "-- Limitation on Sales of Assets
and Restricted Subsidiary Stock", (b) any Person from owning any of the Pledged
Stock (as defined herein) subsequent to any foreclosure on or other transfer of
such Pledged Stock in connection with an exercise of remedies under any of the
Collateral Documents or (c) any issuance of Preferred Stock to any Person
permitted under "-- Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock".
Limitation on Sales of Assets and Restricted Subsidiary Stock. The Company
will not, and the Company will not permit any Restricted Subsidiary to, make any
Asset Disposition unless (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value of the shares, property and assets subject
to such Asset Disposition, (ii) at least 75% of such consideration (or, in the
event of any Asset Disposition of all or any portion of the Company's Magnetics
Division, at least 50% of such consideration) consists of cash, Temporary Cash
Investments or the assumption of Senior Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability under such Senior Indebtedness and (iii) in
connection with any Asset Disposition with an aggregate consideration greater
than $10 million, the Company delivers an Officers' Certificate to the Trustee
certifying that such Asset Disposition complies with clauses (i) and (ii) and
that such Asset Disposition was approved by a majority of the Board of Directors
of Company, including a majority of the disinterested members of such Board, as
evidenced by a resolution based on an opinion letter from an Independent
Appraiser to the effect that such Asset Disposition complies with clause (i)
(which opinion letter shall identify such Independent Appraiser as such and
shall be dated not more than 30 days prior to such Asset Disposition).
Upon the closing of any such Asset Disposition, the Company will cause the
Net Cash Proceeds from such Asset Disposition to be delivered to the Trustee and
pledged to the Trustee for deposit in a collateral account in the name and under
the sole dominion and control of the Trustee and will take such
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other actions, at the sole expense of the Company, as is reasonably requested by
the Trustee to create in favor of the Trustee on behalf of the holders of the
Notes a perfected first priority Lien in respect of such Net Cash Proceeds and
all other property and assets received in connection with such Asset Disposition
and to insure that all such Collateral is free and clear of all Liens other than
Permitted Liens. Any proceeds from an Asset Disposition, other than Net Cash
Proceeds, will be subject to the Lien of the Indenture and the other Collateral
Documents in accordance with the provisions of the Indenture.
Within 270 days after the receipt of any Net Cash Proceeds in connection
with any Asset Disposition, the Company or such Restricted Subsidiary, as the
case may be, may, subject to the procedures set forth below, reinvest such Net
Cash Proceeds in Replacement Collateral (other than Inventory) at a purchase
price which does not exceed the Fair Market Value of such Replacement Collateral
so purchased (a "Replacement Collateral Purchase"). If it so reinvests, the
Company or such Restricted Subsidiary shall (A) deliver an Officers' Certificate
to the Trustee certifying that such Replacement Collateral Purchase complies
with the first sentence of this paragraph and that, in the event such
Replacement Collateral Purchase involves Net Cash Proceeds in excess of $10
million, such Replacement Collateral Purchase was approved by a majority of the
Board of Directors, including a majority of the disinterested members of such
Board, as evidenced by a resolution of such Board, and (B) in the case of any
Replacement Collateral Purchase in excess of such amount, deliver to the Trustee
an opinion letter from an Independent Appraiser to the effect that such
Replacement Collateral Purchase complies with the first sentence of this
paragraph (which opinion letter shall identify such Independent Appraiser as
such and be dated within 30 days of the effective date of such Replacement
Collateral Purchase). The Company will take such actions, at the sole expense of
the Company, to create in favor of the Trustee for the benefit of the holders of
the Notes a perfected first priority Lien in respect of any Replacement
Collateral concurrently with the acquisition thereof. Such Replacement
Collateral will be free and clear of Liens other than Permitted Liens. Upon
receipt by the Trustee of such documents and instruments in a form satisfactory
to the Trustee and evidence of the taking of such actions satisfactory to the
Trustee, as may be necessary or desirable, to create then in favor of the
Trustee the Lien in respect of the related Replacement Collateral required by
the Indenture and the other Collateral Documents and compliance with the
provisions described under "-- Possession, Use and Release of Collateral",
unless a Default or Event of Default shall have occurred at any time and be
continuing, the Trustee will simultaneously release from the Lien of the
Indenture and the other Collateral Documents, and deliver to the Company, the
Net Cash Proceeds that were delivered to the Trustee, together with the proceeds
thereof in the amount requested by the Company or such Restricted Subsidiary;
provided, that such amount shall not exceed the purchase price of the
Replacement Collateral. In the event any Replacement Collateral is Capital Stock
of any Person and such Person will be a Restricted Subsidiary, the Company shall
cause such Capital Stock to be pledged to the Trustee for the benefit of holders
of the Notes; provided, that, in the event such Person is a Foreign Restricted
Subsidiary, such pledge will be limited to an amount equal to the lesser of: (i)
65% of the total voting power of shares of all the outstanding Capital Stock of
such Person entitled to vote in the election of directors, managers or trustees
of such Person and (ii) the percentage of the shares of such Capital Stock equal
to the maximum percentage of such shares that can be pledged to the Trustee
without constituting an investment of earnings in United States property under
Section 956 (or any successor provision) of the Code that would trigger an
increase in the gross income of the Company or any of its Subsidiaries pursuant
to Section 951 (or any successor provision) of the Code. In the event of any
such pledge of Capital Stock, all the assets and property of the issuer of such
Capital Stock will be considered, if such issuer shall be a U.S. Restricted
Subsidiary, Replacement Collateral and the requirements described above relating
to the pledge thereof to the Trustee will apply in full. Any Net Cash Proceeds
that are not used within the time period specified in the provisions described
in the first sentence of this paragraph and in accordance with the procedures
referenced in such sentence will constitute "Excess Proceeds".
To the extent that any or all of the Net Cash Proceeds of any Foreign Asset
Disposition received by a Restricted Subsidiary is prohibited or delayed by
applicable local law from being repatriated to the United States of America, the
portion of such Net Cash Proceeds so affected will not be required to be applied
at the time provided above, but may be retained by the applicable Restricted
Subsidiary so long, but only so
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long, as the applicable local law will not permit repatriation to the United
States of America (the Company agreeing to, and to cause such Restricted
Subsidiary to, promptly take all actions required by the applicable local law to
permit such repatriation). Once such repatriation of any such affected Net Cash
Proceeds is permitted under the applicable local law, such repatriation will be
immediately effected and such repatriated Net Cash Proceeds will be applied in
the manner set forth above.
Each time that the aggregate amount of Excess Proceeds relating to Asset
Dispositions equals or exceeds $10 million (the "Asset Disposition Trigger"),
taking into account income earned on such Excess Proceeds, the Company will make
an offer to purchase (an "Asset Disposition Purchase Offer") an aggregate
principal amount of outstanding Notes equal to the aggregate Excess Proceeds at
such time (the "Asset Disposition Purchase Amount") for cash at a purchase price
(such price, the "Asset Disposition Purchase Price") equal to 100% of the
principal amount thereof plus any accrued and unpaid interest thereon to the
Asset Disposition Purchase Date (as defined below), in accordance with the
procedures (including prorations in the event of oversubscription) set forth in
the Indenture. Any such Excess Proceeds which remain after the acquisition by
the Company of the Notes tendered (and not withdrawn) by holders thereof
pursuant to such Asset Disposition Purchase Offer in accordance with the
procedures in the Indenture will cease to be Excess Proceeds; provided, however,
that any such Excess Proceeds in respect of Collateral will continue to remain
on deposit with the Trustee until such time as the Company determines to
reinvest such Excess Proceeds in respect of Replacement Collateral in accordance
with the procedures and limitations set forth in the provisions described in the
Indenture; provided, further, however, that any such Excess Proceeds not so used
will remain on deposit with the Trustee in accordance with the provisions
described in the immediately preceding proviso of this paragraph.
Within 30 business days of the occurrence of an Asset Disposition Trigger,
(i) the Company will notify the Trustee in writing of the occurrence of the
Asset Disposition Trigger and will make the Asset Disposition Purchase Offer to
purchase Notes in an aggregate principal amount equal to the Asset Disposition
Purchase Amount at the Asset Disposition Purchase Price on or before the date
specified in such notice, which date shall be no more than 60 business days
after the occurrence of the Asset Disposition Trigger (the "Asset Disposition
Purchase Date"), (ii) the Trustee will mail a copy of the Asset Disposition
Purchase Offer to each holder of the Notes and (iii) the Company will cause a
notice of the Asset Disposition Purchase Offer to be sent to the Dow Jones News
Service or similar business news service in the United States of America. The
Asset Disposition Purchase Offer will remain open from the time such offer is
made until the Asset Disposition Purchase Date. The Company will purchase all
Notes properly tendered in the Asset Disposition Purchase Offer and not
withdrawn in accordance with the procedures set forth in the Asset Disposition
Purchase Notice (as defined in the Indenture). The Asset Disposition Purchase
Offer will state, among other things, the procedures that holders of the Notes
must follow to accept the Asset Disposition Purchase Offer.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to any Asset Disposition
Purchase Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions relating to the Asset Disposition Purchase
Offer, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations described
above by virtue thereof.
Limitation on Sale/Leaseback Transactions. The Company will not, and the
Company will not permit any Restricted Subsidiary to, directly or indirectly,
enter into, Guarantee or otherwise become liable with respect to any
Sale/Leaseback Transaction with respect to any property or assets unless (i)
such property or assets are, at the time the Company or such Restricted
Subsidiary enters into such Sale/Leaseback Transaction, subject to a Permitted
Lien under clause (viii) or (ix) of the definition of "Permitted Liens", (ii)
the Company or such Restricted Subsidiary, as the case may be, would be entitled
thereunder to Incur Indebtedness secured by a Permitted Lien on such property or
assets in an amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, (iii) the net proceeds from such Sale/Leaseback
Transaction are at least equal to the Fair Market Value
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of the property or assets subject to such Sale/Leaseback Transaction (such Fair
Market Value determined, in the event such property or assets have a Fair Market
Value in excess of $2 million, no more than 30 days prior to the effective date
of such Sale/Leaseback Transaction, by the Board of Directors of the Company,
including a majority of the disinterested members of such Board, as evidenced by
a resolution of such Board), (iv) the net proceeds of such Sale/Leaseback
Transaction are applied in accordance with the provisions described under
"-- Limitation on Sales of Assets and Restricted Subsidiary Stock" and (v) the
Company complies with the provisions described under "-- Possession, Use and
Release of Collateral".
Reports to Holders. The Company will file the annual report and other
documents, reports and information required by Section 13 or 15(d) of the
Exchange Act with the Securities and Exchange Commission (the "Commission") and,
upon such filing, will promptly furnish such reports, documents and information
to the Trustee and, within 15 days after such filing with the Commission, the
holders of the Notes. In the event the Company is no longer subject to the
periodic reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will continue to file with the Commission and furnish to the Trustee and
to the holders of the Notes the annual reports and other documents, reports and
information as if it were subject to such reporting requirements; provided,
however, that the Company will not be so obligated to file such reports,
documents and information with the Commission if the Commission does not permit
or accept such filings, in which event such reports, documents and information
will be provided to the Trustee and the holders of the Notes at the times the
Company would have been required to so provide such reports, documents and
information had it continued to have been subject to such reporting
requirements.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, and the Company will not permit any Restricted
Subsidiary to, enter into any transaction or series of transactions to
consolidate, amalgamate or merge with or into any other Person (other than the
merger of a Wholly Owned Subsidiary (i) with another Wholly Owned Subsidiary or
(ii) into the Company), or directly or indirectly through its Subsidiaries,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all its property and assets to any Person (other than to one or
more Wholly Owned Subsidiaries or to the Company) unless: (1) the Person, if the
Company is a party to such transaction and is not the surviving entity (the
"Surviving Entity"), formed by such consolidation or amalgamation or into which
the Company is merged or that acquires, by sale, conveyance, assignment,
transfer, lease or other disposition, all or substantially all the properties
and assets of the Company as an entirety shall be a corporation organized and
validly existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume (x) by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company pursuant to the Indenture and (y) by written
instruments executed and delivered to the Trustee, in form satisfactory to the
Trustee all the obligations of the Company pursuant to the other Collateral
Documents; (2) the Surviving Entity, if any Restricted Subsidiary is a party to
such transaction and is not the Surviving Entity, shall, by written instruments
executed and delivered to the Trustee, in form satisfactory to the Trustee,
expressly assume all the obligations of such Restricted Subsidiary pursuant to
the Collateral Documents; (3) immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the Company, the Surviving Entity or
any Restricted Subsidiary as a result of such transaction or series of
transactions as having been incurred by the Company, such Surviving Entity or
such Restricted Subsidiary at the time of such transaction or series of
transactions) no Default or Event of Default shall have occurred and be
continuing; (4) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the Company, the Surviving Entity or any Restricted Subsidiary
as a result of such transaction or series of transactions as having been
incurred by the Company, such Surviving Entity or such Restricted Subsidiary at
the time of such transaction or series of transactions), the Company or the
Surviving Entity, as the case may be, could incur at least $1.00 of additional
Indebtedness pursuant to clause (iii) under "-- Limitation on Indebtedness"; (5)
immediately after giving effect to such
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transaction or series of transactions on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the Company, the Surviving Entity or
any Restricted Subsidiary as a result of such transaction or series of
transactions as having been incurred by the Company, such Surviving Entity or
such Restricted Subsidiary at the time of such transaction or series of
transactions), the Company or the Surviving Entity, as the case may be, shall
have a Consolidated Net Worth which is not less than the Consolidated Net Worth
of the Company immediately prior to such transaction or transactions; and (6)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, amalgamation, merger
or transfer and such supplemental indenture (if any) comply with the Indenture
and that the perfected first priority Lien of the Trustee for the benefit of the
holders of the Notes with respect to the Collateral continues in all respects.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Subsidiary of the
Company or any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) the
Subsidiary to be so designated does not own any Capital Stock, Redeemable Stock
or Indebtedness of, or own or hold any Lien on any property or assets of, the
Company or any other Restricted Subsidiary, (ii) the Subsidiary to be so
designated is not obligated by any Indebtedness or Lien that, if in default,
would result (with the passage of time or notice or otherwise) in a default on
any Indebtedness of the Company or any Restricted Subsidiary, and (iii) either
(A) the Subsidiary to be so designated has total assets of $1,000 or less or (b)
such designation is effective immediately upon such Person becoming a Subsidiary
of the Company or of a Restricted Subsidiary. Unless so designated as an
Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or
any Restricted Subsidiary will be classified as a Restricted Subsidiary. Except
as provided in the first sentence of this paragraph, no Restricted Subsidiary
may be redesignated as an Unrestricted Subsidiary. Subject to the following
paragraph, an Unrestricted Subsidiary may not be redesignated as a Restricted
Subsidiary. Any such designation by the Board of Directors of the Company will
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of such Board giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
provisions.
The Company will not, and will not permit any Restricted Subsidiary to,
take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of an Unrestricted Subsidiary or otherwise)
unless after giving effect to such action, transaction or series of
transactions, on a pro forma basis, (i) the Company could incur at least $1.00
of additional Indebtedness pursuant to clause (iii) under "-- Limitation on
Indebtedness", (ii) such Restricted Subsidiary could then Incur under
"-- Limitation on Restricted Subsidiary Indebtedness and Preferred Stock" all
Indebtedness as to which it is obligated at such time, (iii) no Default or Event
of Default would occur or be continuing and (iv) there exist no Liens with
respect to the property or assets of such Restricted Subsidiary other than
Permitted Liens.
EVENTS OF DEFAULT
An "Event of Default" will occur under the Indenture if (i) the Company
fails to make any payment of interest on any Note when the same shall become due
and payable, and such failure continues for a period of 30 days; (ii) the
Company (A) fails to make the payment of the principal of, or premium, if any,
on, any Note when the same becomes due and payable at its Stated Maturity, upon
acceleration, redemption or declaration, or otherwise or (B) fails to redeem or
purchase Notes when required pursuant to the Indenture or the Notes; (iii) the
Company fails to comply with any of its covenants or agreements described under
"-- Consolidation, Merger and Sale of Assets"; (iv) the Company fails to comply
with any of its covenants or agreements described under "-- Change of Control",
"-- Limitation on Indebtedness", "-- Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock", "-- Limitation on Restricted Payments",
"-- Transactions with Affiliates", "-- Limitation on Liens and Impairment of
Collateral", "-- Limitation on Restrictions on Distributions from Restricted
Subsidiaries", "-- Limitation on Sales of Assets and Restricted Subsidiary
Stock", "-- Limitation on Sale/Leaseback Transac-
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tions", "-- Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" or "-- Reports to Holders" (other than a failure to purchase Notes
when required under "-- Change of Control" and "-- Limitation on Sales of Assets
and Restricted Subsidiary Stock"), and such failure continues for 30 days after
the notice specified below or the Company fails to give the notice specified
below; (v) the Company fails to comply with any of its agreements in the Notes
or the Indenture (other than those specified in clauses (i), (ii), (iii) and
(iv)) and such failure continues for a period of 60 days after the notice
specified below or the Company fails to give the notice specified below; (vi)
Indebtedness of the Company or any Restricted Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof, the total amount of such Indebtedness unpaid or accelerated which
exceeds $5 million or its Dollar Equivalent at the time; (vii) (A) the Company
fails to comply with any of its representations, warranties, covenants or
agreements contained or incorporated by reference in any Collateral Document
(other than the Indenture) and such failure continues beyond the applicable
grace period provided in such Collateral Document, (B) on or after the Issue
Date, other than in accordance with the provisions of the Indenture, for any
reason, other than the satisfaction in full and discharge of all obligations
secured thereby, any Collateral Document ceases to be or is not in full force
and effect or any Lien with respect to Collateral with a Fair Market Value that
exceeds $2 million in the aggregate intended to be created by any Collateral
Document ceases to be or is not a valid and perfected first priority Lien for
more than 5 days, (C) the occurrence of any event of default under any
Collateral Document or (D) on or after the Issue Date, other than in accordance
with the provisions of the Indenture, the Company asserts in writing that any
Collateral Document has ceased to be or is not in full force and effect; (viii)
any judgment or decree aggregating in excess of $5 million or its Dollar
Equivalent at the time is rendered against the Company or any Restricted
Subsidiary and is not discharged and either (A) an enforcement proceeding has
been commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during which
such judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of either clause (A) or (B), such default continues for
ten days after the notice specified below; (ix) the Company or any Restricted
Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A)
commences a voluntary case; (B) consents to the entry of an order for relief
against it in an involuntary case; (C) consents to the appointment of a
Custodian of it or for any substantial part of its property; or (D) makes a
general assignment for the benefit of its creditors; or takes any comparable
action under any foreign laws relating to insolvency; or (x) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary in an
involuntary case; (B) appoints a Custodian of the Company or any Restricted
Subsidiary or for any substantial part of its property; or (C) orders the
winding up or liquidation of the Company or any Restricted Subsidiary; or any
similar relief is granted under any foreign laws and the order or decree remains
unstated and in effect for 60 days.
A Default under clause (iv), (v), (vi) or (viii) will not be an Event of
Default until the Trustee or the holders of at least 25% in principal amount of
the Notes notify the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default".
The Company will deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which, with the giving of notice and the lapse of time, would become
an Event of Default under clause (iv), (v), (vi) or (viii), its status and what
action the Company is taking or proposes to take with respect thereto.
If an Event of Default (other than an Event of Default specified in clause
(ix) or (x)) occurs and is continuing, the Trustee, by notice to the Company or
the holders of at least 25% in principal amount of the Notes by notice to the
Trustee (who shall promptly notify the Company), may declare the principal of
and accrued interest on all the Notes to be due and payable. Upon such
declaration, such principal and interest will be due and payable immediately. If
an Event of Default specified in clause (ix) or (x) occurs, the principal of and
interest on all the Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders of Notes. The holders of a
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majority in principal amount of the Notes by notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission will affect any subsequent Default
or impair any right consequent thereto.
The holders of a majority in principal amount of the Notes by notice to the
Trustee may waive an existing Default and its consequences except (i) a Default
in the payment of the principal of or interest on a Note or (ii) a Default in
respect of a provision that cannot be amended without the consent of each holder
affected. When a Default is waived, it is deemed cured, but no such waiver will
extend to any subsequent or other Default or impair any consequent right.
The holders of a majority in principal amount of the Notes may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law,
the Indenture or the other Collateral Documents or that the Trustee determines
is unduly prejudicial to the rights of other holders or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action under the Indenture, the Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
A holder of Notes may not pursue any remedy with respect to the Indenture,
the other Collateral Documents or the Notes unless: (i) such holder gives to the
Trustee written notice stating that an Event of Default is continuing; (ii)
holders of at least 25% in principal amount of the Notes make a written request
to the Trustee to pursue the remedy; (iii) such holder or holders offer to the
Trustee reasonable security or indemnity against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of security or indemnity; and (v) the holders of a
majority in principal amount of the Notes do not give the Trustee a written
direction inconsistent with the request during such 60-day period.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to repossess and dispose of the Collateral upon
the occurrence of an Event of Default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
against the Company prior to the Trustee having repossessed and disposed of the
Collateral. Under the Bankruptcy Law, secured creditors such as the Trustee are
prohibited from repossessing their security from a debtor in a bankruptcy case,
or from disposing of security repossessed from such debtor, without bankruptcy
court approval. Moreover, the Bankruptcy Law permits the debtor to continue to
retain and to use collateral even though the debtor is in default under the
applicable debt instrument; provided, that the secured creditor is given
"adequate protection". The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the secured creditor's interest in the collateral and may include cash
payments or the granting of additional security, if and at such times as the
court in its discretion determines, for any diminution in the value of the
collateral as a result of the stay of repossession or disposition or any use of
the collateral by the debtor during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term "adequate protection" and the
broad discretionary powers of a bankruptcy court, it is impossible to predict
how long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could repossess or dispose of the
Collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection". In addition, the holders of the Notes
would not be entitled to post-petition interest in any bankruptcy involving the
Company if the bankruptcy court concluded that the Notes were not fully secured.
See "Risk Factors -- Potential Inadequacy of Security".
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COLLATERAL
General. The Notes will be secured by a Lien on the Collateral, which will
consist of substantially all the assets of the Company and the U.S. Restricted
Subsidiaries. Although the Collateral will include the Working Capital
Collateral, which will consist of Accounts Receivable, Inventory and the
Proceeds thereof, the lien on behalf of the Notes on the Working Capital
Collateral will be second in priority and junior to the lien of the lenders
under the Revolving Credit Facility on the Working Capital Collateral. The
Collateral will include after-acquired assets of the Company and the U.S.
Restricted Subsidiaries to the extent that such assets are acquired by the
Company or any such U.S. Restricted Subsidiary without financing secured by a
Lien on such assets.
In connection with the Offering, no appraisals have been prepared or
obtained for any of the Collateral. Excluding Working Capital Collateral, the
Collateral will consist of (i) tangible assets with, as of December 31, 1994, a
book value of $67.5 million, substantially less than the aggregate principal
amount of the Notes, and (ii) intangible assets (principally goodwill). If a
bankruptcy proceeding were to be commenced by or against the Company and the
bankruptcy court were to conclude that the Notes were inadequately secured, the
holders of the Notes would have only an unsecured deficiency claim to the extent
of such inadequacy and would not be entitled to post-petition interest. Any
deficiency claim (whether or not in a bankruptcy proceeding involving the
Company) of the holders of the Notes would rank pari passu with any deficiency
claims of the lenders under the Revolving Credit Facility and all other general
unsecured creditors of the Company. See "Risk Factors -- Potential Inadequacy of
Security".
The tangible assets of the Company pledged as part of the Collateral (other
than Working Capital Collateral) will consist primarily of processing equipment;
manufacturing equipment and tooling; spare parts; long-term receivables; and
office furniture. The only real property owned by Anacomp that will be part of
the Collateral is the Graham, Texas site on which the Company's primary
magnetics manufacturing facility is located. A portion of the Graham property is
subject to a non-subordinated lease with substantially below market value rents.
The Collateral will not include leases under which Anacomp operates data service
centers and certain other facilities. The Collateral includes substantially all
the assets of the Company's U.S. Restricted Subsidiaries (other than accounts
receivable, inventory and proceeds thereof) and a pledge of all the common stock
of the U.S. Restricted Subsidiaries and, subject to certain restrictions of
foreign law, 65% of the common stock of the Company's Foreign Restricted
Subsidiaries that are owned directly by the Company or a U.S. Restricted
Subsidiary (such stock collectively referred to herein as the "Pledged Stock").
The U.S. Restricted Subsidiaries are non-operating companies and have no
significant assets. Although certain of the Foreign Restricted Subsidiaries are
operating companies, they have few assets, other than accounts receivable and
inventory, which may be pledged under foreign currency revolving credit
facilities. No assets of the Foreign Restricted Subsidiaries are part of the
Collateral. There is no public market for the common stock of either the U.S.
Restricted Subsidiaries or the Foreign Restricted Subsidiaries.
Working Capital Collateral. The Lien on behalf of the Notes on the
Working Capital Collateral will be second in priority and junior to the lien of
the lenders under the Revolving Credit Facility. The Trustee will enter into an
Intercreditor Agreement with the agent (the "Revolver Agent") for the lenders
(the "Revolver Syndicate") under the Revolving Credit Facility with respect to
the Working Capital Collateral (the "Intercreditor Agreement"). The
Intercreditor Agreement will provide that (i) the Revolver Agent's lien on the
Working Capital Collateral will be prior and senior to any interest of the
Trustee therein, and all amounts owing with respect to any extension of credit
under the Revolving Credit Facility that is permitted under clause (iv) under "
-- Certain Covenants -- Limitation on Indebtedness", together with all
interest, fees, costs and expenses outstanding under the Revolving Credit
Facility, including post-petition interest in any bankruptcy proceeding
(collectively, "Permitted Revolver Obligations"), shall be paid in full out of
the proceeds of the Working Capital Collateral before any such proceeds are
applied to the Notes, (ii) for so long as any Permitted Revolver Obligation or
commitment relating thereto is outstanding under the Revolving Credit Facility,
the Revolver Agent (acting pursuant to the terms of the Revolving Credit
Agreement) will have the right, upon notice to the Trustee (subject to certain
exceptions), to control and make all determinations in respect of and relating
to the Working Capital Collateral, including, without limitation, (A) the
circumstances and manner in which all or any portion of
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the Working Capital Collateral will be disposed of or released from the lien of
the Revolving Credit Facility and the Lien on behalf of the Notes; provided,
that in no event will the Revolver Agent release the Lien on behalf of the Notes
in all or any portion of the Collateral other than in connection with a sale or
other disposition of the Working Capital Collateral, the proceeds of which are
applied in the priorities described in clause (vii) below, and in connection
with which the Lien on behalf of the Revolving Credit Facility is likewise
released, (B) the timing, circumstances and manner of foreclosure on the Working
Capital Collateral or exercise of any other remedies with respect thereto,
whether pursuant to a public or private sale, or turnover of collateral, under
Article 9 of the Uniform Commercial Code or otherwise, (C) in connection with
any bankruptcy, all matters relating to (1) asserting and obtaining adequate
protection rights pursuant to Section 361 of Title 11, United States Code, as
amended (the "Bankruptcy Code") or otherwise, (2) asserting and obtaining relief
from the automatic stay under Section 362 of the Bankruptcy Code or otherwise,
(3) the entry of any cash collateral orders in connection with the Working
Capital Collateral, (4) the entry of financing orders relating to the Working
Capital Collateral pursuant to Section 364 of the Bankruptcy Code or otherwise
or (5) the circumstances or manner of any sale or other disposition of all or
any part of the Working Capital Collateral pursuant to Section 363 of the
Bankruptcy Code or otherwise, (iii) for so long as any Permitted Revolver
Obligation or commitment relating thereto is outstanding under the Revolving
Credit Facility, the Trustee will acknowledge and agree that it has no right,
and the Revolver Agent has the sole right, to initiate, control and make any and
all determinations in respect of the Working Capital Collateral and any
foreclosure or enforcement actions or proceedings against the Working Capital
Collateral, (iv) the Trustee will acknowledge and agree that it will not contest
or seek to avoid any liens of the Revolver Syndicate in the Working Capital
Collateral, nor will it contest or seek to restrain any of the actions of the
Revolver Agent described in clauses (ii) or (iii) above, nor, for so long as any
Permitted Revolver Obligation or commitment relating thereto is outstanding
under the Revolving Credit Facility, will it independently for itself or the
holders of the Notes assert any rights in the Working Capital Collateral of the
type described in clauses (ii) or (iii) above, (v) the Trustee will agree not to
deny the Revolver Agent access to or use of any facilities where Working Capital
Collateral is located for purposes of enforcing any rights of the Revolver
Syndicate, (vi) so long as any Permitted Revolver Obligation or commitment
relating thereto is outstanding under the Revolving Credit Facility, the Trustee
will waive all rights to have the Working Capital Collateral marshalled in the
event of any foreclosure in respect thereof and will have no right of
subrogation with respect to the Working Capital Collateral and (vii) in the
event of any foreclosure or any other realization in respect of the Working
Capital Collateral, the proceeds thereof will be paid, first, to the payment of
all outstanding Permitted Revolver Obligations, second to the payment of all
obligations of the Company under the Notes and the Collateral Documents and the
balance of the proceeds, if any, will be paid to the Company or as a court of
competent jurisdiction may direct.
The Intercreditor Agreement also will provide, among other things, that the
Revolver Agent and the Trustee will provide notices (such notices to be provided
in the same manner and contemporaneously with any notice provided to the
Company) to each other with respect to the acceleration of the Revolving Credit
Facility or the Notes, as the case may be. The Trustee will acknowledge and
agree that the Revolver Agent is not the agent or a fiduciary for the Trustee or
the holders of the Notes (other than with respect to the perfection of
Collateral in the Revolver Agent's possession or control), and the Revolver
Agent and Revolver Syndicate will have no duty to the Trustee or the holders of
the Notes other than to account for surplus proceeds of the Working Capital
Collateral.
The Indenture for the Notes will permit Working Capital Collateral to be
released from the lien of the Collateral Documents so long as such disposition
is in the Ordinary Course of Business and an Officers' Certificate relating to
such dispositions is delivered to the Trustee semi-annually. See
" -- Disposition of Inventory and Accounts Receivable Without Release". The
Intercreditor Agreement also will provide for the delivery by the Trustee to the
Revolver Agent at closing of financing statement releases with respect to the
Working Capital Collateral to be utilized by the Revolver Agent as permitted by
the Intercreditor Agreement.
The Intercreditor Agreement (i) will be binding on and inure to the benefit
of the Trustee, the Revolver Agent, the holders of the Notes and the Revolver
Syndicate and their successors and assigns,
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and (ii) will be for the benefit of any lenders that refinance the Revolver
Syndicate and any agents therefor. Each Note will bear a legend stating that the
Note and the holder's rights thereunder are subject to the Intercreditor
Agreement. The Trustee also will covenant in the Security and Pledge Agreement
to enter into an intercreditor agreement substantially similar to the
Intercreditor Agreement with the lenders under any revolving credit facility
that replaces the Revolving Credit Facility (or such other revolving credit
facility) within six months of the satisfaction in full of the Company's
obligations under the Revolving Credit Facility (or such other revolving credit
facility).
In addition, SKC has a security interest in up to $10 million of products
purchased by Anacomp pursuant to the SKC Supply Agreement. See "Description of
Other Obligations -- SKC Trade Payable due 2001".
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the
Company will have the right to remain in possession and retain exclusive control
of the Collateral securing the Notes (other than any cash, securities,
obligations and Temporary Cash Investments constituting part of the Collateral
and deposited with the Trustee and other than as set forth in the Collateral
Documents), to freely operate the Collateral and to collect, invest and dispose
of any income thereon.
Release of Collateral with Trustee Consent. Unless an Event of Default
shall have occurred and be continuing, the Company will have the right at any
time and from time to time to sell, exchange or otherwise dispose of any of the
Collateral (other than Trust Monies, which are subject to release from the Lien
of the Indenture and the other Collateral Documents as described under "-- Use
of Trust Monies" or upon substituting Substitute Collateral therefor as
described under "-- Substitute Collateral" below) (a "Release Transaction"),
upon compliance with the requirements and conditions of the provisions described
above under "-- Limitation on Sales of Assets and Restricted Subsidiary Stock"
and the provisions described below, and the Trustee will release the same from
the Lien of the Indenture and any of the other Collateral Documents upon receipt
by the Trustee of a notice requesting such release and describing the property
to be so released, provided that:
(i) If the Collateral to be released has a book value of at least $3
million, the Trustee is provided with a resolution of the Board of
Directors of the Company requesting such release and authorizing an
application to the Trustee therefor.
(ii) The security afforded by the Indenture and the other Collateral
Documents will not be impaired by such release in contravention of the
provisions of the Indenture and the other Collateral Documents, and either
(1) other property is to be substituted as Substitute Collateral in
accordance with the provisions set forth below or (2) the proceeds from the
property to be released are being deposited in accordance with the
provisions set forth above under "-- Limitation on Sales of Assets and
Restricted Subsidiary Stock".
(iii) The Company has disposed of or will dispose of the Collateral so
to be released for a consideration representing its Fair Market Value.
(iv) No Event of Default has occurred and is continuing (or will
result therefrom).
(v) If the Collateral to be released is only a portion of a discrete
parcel of real property, following such release and the release of the Lien
of any applicable Mortgage with respect thereto, the non-released mortgaged
property will have sufficient utility services and sufficient access to
public roads, rail spurs, harbors, canals, terminal and other
transportation structures for the continued use of such mortgaged property
in substantially the manner carried on by the Company and its Subsidiaries
prior to such release.
(vi) If the Collateral to be released is only a portion of a discrete
parcel of real property, following such release, the non-released mortgaged
property will comply in all material respects with applicable laws, rules,
regulations and ordinances relating to land use and building and workplace
safety.
(vii) If the Collateral to be released is only a portion of a discrete
parcel of real property, following such release, the Fair Market Value of
the mortgaged property (exclusive of the Fair Market
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Value of the released mortgaged property) will not be less than the Fair
Market Value of such mortgaged property prior to such release.
(viii) If the Collateral to be released is only a portion of a
discrete parcel of real property, the Company will have delivered to the
Trustee a survey depicting the real property to be released.
(ix) The first priority perfected Lien pursuant to the Collateral
Documents shall be in full force and effect continuously and uninterrupted
at all times.
(x) If the Collateral to be released is subject to a prior Permitted
Lien, there will be delivered to the Trustee a certificate of the trustee,
mortgagee or other holder of such prior Permitted Lien that it has received
the applicable Net Cash Proceeds (except to the extent that the assignment
thereof would violate the terms thereof or any agreement relating thereto)
and has been irrevocably authorized by the Company to pay over to the
Trustee any balance of such Net Cash Proceeds remaining after the discharge
of the Indebtedness secured by such prior Permitted Lien; and, if any
property other than cash, Temporary Cash Investments or other obligations
is included in the consideration for any Collateral to be released, there
will be delivered to the Trustee such instruments of conveyance, assignment
and transfer, if any, as may be reasonably necessary, in the Opinion of
Counsel to be given pursuant to clause (xii), to subject to the Lien of the
Indenture and the other Collateral Documents all the right, title and
interest of the Company in and to such Collateral.
(xi) If the Collateral to be released is only a portion of a discrete
parcel of real property, there will be delivered to the Trustee evidence
that a title company shall have committed to issue an endorsement to the
title insurance policy relating to the non-released mortgaged property
confirming that after such release, the Lien of the applicable Mortgage
continues unimpaired as a first priority perfected Lien upon the remaining
mortgaged property.
(xii) There will be delivered to the Trustee an Opinion of Counsel
with respect to certain matters relating to the release.
(xiii) The Company will deliver to the Trustee an Officers'
Certificate, dated not more than 30 days prior to the date of the
application for such release, with respect to the matters described in
clauses (i) through (xi); provided, that, if the Collateral to be released
has a book value of at least $2 million, the matters described in clauses
(ii) (as to impairment of security), (iii) and (vii) shall also be
certified by an Independent Appraiser who, if such property consists of
securities, shall be a nationally or internationally recognized investment
banking firm.
In case an Event of Default shall have occurred and be continuing, the
Company, while in possession of the Collateral (other than cash, Temporary Cash
Investments, securities and other personal property held by, or required to be
deposited or pledged with, the Trustee under the Indenture or the other
Collateral Documents or with the trustee, mortgagee or other holder of a prior
Permitted Lien), may do any of the things described in the above paragraphs, if
the Trustee, in its discretion, or the holders of 66 2/3% in aggregate principal
amount of the Notes outstanding, by appropriate action of such holders shall
consent to such action, in which event any certificate filed pursuant to this
paragraph shall omit the statement to the effect that no Event of Default has
occurred and is continuing. This paragraph shall not apply, however, during the
continuance of an Event of Default of the type specified in paragraphs (i),
(ii), (iii), (ix) or (x) under "-- Events of Default".
All cash or Temporary Cash Investments received by the Trustee pursuant to
this covenant will be held by the Trustee, for the benefit of the holders of the
Notes, as Trust Monies subject to application as provided under "-- Use of Trust
Monies" and "-- Limitation on Sales of Assets and Restricted Subsidiary Stock".
Substitute Collateral. Unless an Event of Default shall have occurred and
be continuing, the Company will be permitted to, at its option, obtain a release
of any of the Collateral (including any Trust Monies other than Trust Monies
which at such time (i) constitute Excess Proceeds as described under
"-- Limitation on Sales of Assets and Restricted Subsidiary Stock" or (ii) have
been deposited with the Paying Agent in an amount sufficient to pay (A) the
aggregate Change of Control Purchase Price of all
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Notes or portions thereof that are to be purchased on the Change of Control
Purchase Date as described under "-- Change of Control" or (B) the redemption
price of and accrued interest on all Notes or portions thereof to be redeemed on
the redemption date in accordance with the requirements of the Notes) by
subjecting other property, if such substitute property has a Fair Market Value
equal to or greater than the Collateral to be released (the "Substitute
Collateral"), to the perfected first priority Lien of the Indenture and the
other Collateral Documents or a similar instrument in place of and in exchange
for any of the Collateral to be released upon receipt by the Trustee of certain
documentation, appraisals, an Opinion of Counsel, surveys (in certain cases) and
title insurance (in certain cases).
Disposition of Inventory and Accounts Receivable Without
Release. Notwithstanding "-- Release of Collateral with Trustee Consent", the
Company may without any release or consent by the Trustee sell, exchange or
otherwise dispose of Inventory in the Ordinary Course of Business, assign,
collect, liquidate, sell, factor or otherwise dispose of Accounts Receivable in
the Ordinary Course of Business and dispose of the Proceeds thereof in
connection with the Company's business or to make other cash payments permitted
by the Indenture. Notwithstanding the foregoing and the terms of the Security
and Pledge Agreement, the Company's right to rely upon the foregoing for each
six-month period beginning on January 1 and July 1 (a "Six-Month Period") will
be conditioned upon the Company delivering to the Trustee, within 30 days
following the end of such Six-Month Period, an Officers' Certificate to the
effect that all sales, exchanges or other dispositions of Inventory and
collections, liquidations, sales, factoring or other dispositions of Accounts
Receivable by the Company during such Six-Month Period were in the Ordinary
Course of Business and that all Proceeds therefrom were used by the Company in
connection with its business or to make other cash payments permitted by the
Indenture. The fair value of all sales, exchanges or other dispositions of
Inventory, collections, liquidations, sales, factoring or other dispositions of
Accounts Receivable and the use of each in connection with the Company's
business and to make cash payments as permitted as described above will not be
considered in determining whether the aggregate fair value of Collateral
released from the Lien of the Indenture in any calendar year exceeds the 10%
threshold specified in Section 314(d) of the Trust Indenture Act.
In the event that the Company has sold, exchanged or otherwise disposed of
or proposes to sell, exchange or otherwise dispose of any item of Inventory or
Accounts Receivable which under the provisions described above may be sold,
exchanged or otherwise disposed of by the Company without any release or consent
of the Trustee, and the Company requests the Trustee to furnish a written
disclaimer, release or quitclaim of any interest in such property under the
Indenture and the other Collateral Documents, the Trustee will execute such an
instrument upon delivery to the Trustee of (i) an Officers' Certificate reciting
the sale, exchange or other disposition made or proposed to be made, describing
in reasonable detail the property affected thereby, and stating that such
property may be sold, exchanged or otherwise disposed of by the Company without
any release or consent of the Trustee in compliance with the provisions
described above and (ii) an Opinion of Counsel to the effect that the sale,
exchange or other disposition made or proposed to be made by the Company is in
compliance with the provisions described above.
Any releases of Collateral made in compliance with the above-described
provisions will be deemed not to impair the Lien of the Indenture and the other
Collateral Documents in contravention of the provisions of the Indenture.
Disposition of Collateral Without Trustee Consent. Notwithstanding the
provisions of "-- Limitation on Liens and Impairment of Collateral", "-- Release
of Collateral with Trustee Consent", "-- Substitute Collateral" and
" -- Disposition of Inventory and Accounts Receivable Without Release", so long
as no Event of Default shall have occurred and be continuing, the Company will
be permitted to, without any consent by the Trustee:
(i) sell or otherwise dispose of any machinery, equipment, furniture,
apparatus, tools or implements, materials or supplies or other similar
property subject to the Lien of the Indenture and the other Collateral
Documents, which may have become worn or obsolete, not exceeding in value
in any one calendar year $1 million;
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(ii) grant rights-of-way and easements over or in respect of any real
property rights relating to the Collateral; provided, that such grant will
not impair the usefulness of such property in any material respect in the
conduct of the Company's business and will not be prejudicial to the
interests of the holders of the Notes;
(iii) abandon, terminate, cancel, release or make alterations in or
substitutions of any leases (other than the Poway Lease), contracts or
rights-of-way subject to the Lien of the Indenture and the other Collateral
Documents; provided, that any altered or substituted leases, contracts or
rights-of-way shall forthwith, without further action, be subject to the
Lien of the Indenture and the other Collateral Documents to the same extent
as those previously existing; provided, further, that, if the Company will
receive any money or property in excess of the Company's expenses in
connection with such termination, cancellation, release, alteration or
substitution (other than any such money or property received in connection
with a contract or lease terminated, cancelled, released, altered or
substituted in the ordinary course of business) as consideration or
compensation for such termination, cancellation, release, alteration or
substitution, such money or property, if it exceeds $1,000 (in which case
all the money and property so received and not just the portion in excess
of $1,000 will be subject to this clause), forthwith upon its receipt by
the Company, will be deposited with the Trustee (unless otherwise required
by a prior Permitted Lien) as Trust Monies subject to disposition as
provided in "-- Limitation on Sales of Assets and Restricted Subsidiary
Stock" and subjected to the Lien of the Indenture and the other Collateral
Documents;
(iv) surrender or modify any franchise, license or permit subject to
the Lien of the Indenture and the other Collateral Documents which it may
own or under which it may be operating; provided, that, if, after the
surrender or modification of any such franchise, license or permit, the
Company will not be entitled, under some other, or without any, franchise,
license or permit, to conduct its business in the territory in which it is
then operating and the Fair Market Value of such franchise, license or
permit exceeds $5 million, then the Board of Directors of the Company will
have determined, in its reasonable opinion, that such territory is not
material to the conduct of the Company's business; provided, further, that,
if the Company will be entitled to receive any money or property in excess
of the Company's expenses in connection with such surrender or modification
(other than any such money or property received in the ordinary course of
business in connection with a franchise, license or permit surrendered or
modified) as consideration or compensation for such surrender or
modification, such money or property, if it exceeds $1,000 (in which case
all the money and property so received and not just the portion in excess
of $1,000 will be subject to this clause), forthwith upon its receipt by
the Company, will be deposited with the Trustee (unless otherwise required
by a prior Permitted Lien) as Trust Monies subject to disposition as
provided in "-- Limitation on Sales of Assets and Restricted Subsidiary
Stock" and subjected to the Lien of the Indenture and the other Collateral
Documents;
(v) alter, repair, replace, change the location or position of and add
to its plants, structures, machinery, systems, equipment, fixtures and
appurtenances; provided, that no change in the location of any such
Collateral subject to the Lien of the Indenture and the other Collateral
Documents will be made which (A) removes such property into a jurisdiction
in which any instrument required by law to preserve the Lien of the
Indenture and any other Collateral Document on such property, including all
necessary financing statements and continuation statements, has not been
recorded, registered or filed in the manner required by law to preserve the
Lien of the Indenture and the other Collateral Documents on such property,
(B) does not comply with the terms of the Indenture and the other
Collateral Documents or (C) otherwise impairs the Lien of the Indenture and
the other Collateral Documents;
(vi) demolish, dismantle, tear down or scrap any Collateral (other
than the Poway Lease), or abandon any thereof including any leases (other
than the Poway Lease) but excluding land or interests in land, if such
demolition, dismantling, tearing down, scrapping or abandonment is in the
best interests of the Company and the Fair Market Value (except to the
extent of the relevant Collateral being released) and utility of the
Collateral as an entirety will not thereby be impaired; and
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(vii) sell or otherwise dispose of other Collateral that do not exceed
$100,000 per transaction, whether in a single transaction or a series of
related transactions which constitute a single plan of disposition, and
$1.5 million in the aggregate.
USE OF TRUST MONIES
All Trust Monies (including, without limitation, all Net Cash Proceeds
consisting of cash and Temporary Cash Investments required to be deposited with
the Trustee) will be held by the Trustee as a part of the Collateral securing
the Notes and, so long as no Event of Default shall have occurred and be
continuing, may, at the direction of the Company, be applied by the Trustee from
time to time in accordance with the provisions described under "-- Limitation on
Sales of Assets and Restricted Subsidiary Stock" or to the acquisition of
property or assets to be made subject to the Lien of the Indenture and the other
Collateral Documents pursuant to the provisions described under "-- Possession,
Use and Release of Collateral -- Substitute Collateral", to the payment of the
principal of, and premium, if any, and interest on, any Notes from time to time,
at maturity or upon redemption, declaration or acceleration or in any one or
more of such ways, in each case in accordance with the terms of the Indenture.
Application of Trust Monies as described in this paragraph requires that the
Company provide the Trustee with Officers' Certificates, Opinions of Counsel and
appraisals similar to those described in "-- Possession, Use and Release of
Collateral -- Release of Collateral with Trustee Consent" and "-- Substitute
Collateral".
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended or supplemented
with the written 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 provisions may be waived with the consent of the holders of at least a
majority in principal amount of the Notes then outstanding. However, without the
consent of each holder of an outstanding Note, no amendment may, among other
things, (i) reduce the percentage of principal amount of Notes whose holders
must consent to an amendment, (ii) reduce the rate of or extend the time for
payment of interest on any Notes, (iii) reduce the principal of or extend the
Stated Maturity of any Notes, (iv) reduce the premium payable upon the
redemption of any Note or change the time or times at which any Notes may be
redeemed, (v) make any Note payable in money other than that stated in the Note,
(vi) impair the right of any holder of Notes to institute suit for the
enforcement of any payment on or with respect to any Notes, (vii) permit the
creation of any Lien on the Collateral or any part thereof (other than the Lien
of the Indenture and the other Collateral Documents and other Permitted Liens
(as defined on the Issue Date)) or terminate the Lien of the Indenture and the
other Collateral Documents as to the Collateral or any part thereof or deprive
the holders of Notes of the security afforded by the Lien of the Indenture and
the other Collateral Documents or any part thereof, except as set forth under
"-- Limitation on Liens and Impairment of Collateral" and "-- Possession, Use
and Release of Collateral", or (viii) make any change in the amount of Notes
whose holders must consent to any amendment or action.
Without the consent of any holder of the Notes, the Company and the Trustee
may, among other things, amend or supplement the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
Successor Company of the obligations of the Company under the Indenture, to
establish or maintain the Lien of the Indenture and the other Collateral
Documents as a perfected first priority Lien of the Trustee in respect of the
Collateral, to correct or amplify the description of any Collateral subject to
the Lien of the Indenture or the other Collateral Documents, to subject
additional property or assets to the Lien of the Indenture or the other
Collateral Documents, to add Guarantees with respect to the Notes, to add to the
covenants of the Company for the benefit of the holders of the Notes or to
surrender any right or power conferred upon the Company, to enter into any
intercreditor agreement replacing the original Intercreditor Agreement, to make
any change that does not adversely affect the rights of any holder of the Notes
or to comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at any time, terminate (i) all the Company's obligations
under the Notes and the Indenture ("legal defeasance option") or (ii) the
Company's obligations to comply with certain restrictive covenants, including
certain of the covenants described under "-- Certain Covenants" ("covenant
defeasance option"). The legal defeasance option may be exercised
notwithstanding the prior exercise of its covenant defeasance option.
If the legal defeasance option is exercised, payment of the Notes may not
be accelerated because of an Event of Default. If the covenant defeasance option
is exercised, payment of the Notes may not be accelerated because of certain
Events of Default described under "-- Events of Defaults" (not including, among
others, Events of Default relating to non-payment, bankruptcy and insolvency
events) or because of the failure of the Company to comply with certain
covenants specified in the Indenture. Upon compliance with the provisions set
forth below, all rights of the Trustee in the Collateral shall be released.
The legal defeasance option or the covenant defeasance option may be
exercised only if: (1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of principal of and
interest on the Notes to maturity or redemption, as the case may be; (2) the
Company delivers to the Trustee a certificate from a nationally recognized firm
of independent certified public accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal and interest when due on all the Notes to maturity
or redemption, as the case may be; (3) 123 days pass after the deposit is made
and during the 123-day period no Default described in clause (ix) or (x) under
"-- Events of Defaults" occurs which is continuing at the end of the period; (4)
no Default or Event of Default has occurred and is continuing on the date of
such deposit and after giving effect thereto; (5) the deposit does not
constitute a default under any other agreement or instrument binding on the
Company; (6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company Act of
1940; (7) in the case of the legal defeasance option, the Company delivers to
the Trustee an Opinion of Counsel stating that (i) the Company has received from
the Internal Revenue Service a ruling, or (ii) since the date of the Indenture
there has been a change in the applicable Federal income tax law, to the effect,
in either case, that, and based thereon such Opinion of Counsel shall confirm
that, the holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred; (8) in
the case of the covenant defeasance option, the Company delivers to the Trustee
an Opinion of Counsel to the effect that the holders of the Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; and (9) the Company delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent to the defeasance and discharge of the Notes have been
complied with as required by the Indenture.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (i) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Trustee for cancellation or (ii) all outstanding Notes have
become due and payable and the Company has irrevocably deposited with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Notes, including interest thereon (other than lost, stolen or destroyed Notes
which have been replaced), and, in either case, the Company has paid all sums
payable under the Indenture. The Trustee is required to acknowledge satisfaction
and
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discharge of the Indenture on demand of the Company accompanied by an Officer's
Certificate and an Opinion of Counsel at the cost and expense of the Company.
NOTICES
Notices to holders of Notes will be given by mail to the registered
addresses of such holders.
CONCERNING THE TRUSTEE
The Bank of New York will be the Trustee under the Indenture. The Trustee's
current address is .
GOVERNING LAW
The Indenture will provide that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
The following definitions, among others, are used in the Indenture. Many of
the definitions of terms used in the Indenture have been negotiated specifically
for the purposes of the Offering and may not be consistent with the manner in
which such terms are defined in other contexts. Prospective purchasers of Notes
are encouraged to read each of the following definitions carefully and to
consider such definitions in the context in which they are used in the
Indenture.
"Accounts Receivable" will mean any and all rights of the Company to
payment for Inventory sold or services performed, whether due or to become due,
whether or not earned by performance, whether now in existence or arising from
time to time hereafter, including, without limitation, (a) rights evidenced by
or in the form of an account, note, draft, letter of credit, contract right,
security agreement, chattel paper or other evidence of indebtedness or security,
(b) the right to payment of any interest or finance charges with respect
thereto, (c) all proceeds of insurance with respect thereto, (d) all of the
Company's rights as an unpaid vendor, all pledged assets and letters of credit,
guaranty claims, liens and security interests held by or granted to the Company
to secure payment of any Accounts Receivable and (e) all books and records of
the Company (whether written or stored electronically) relating to any of the
foregoing; provided, however, that Accounts Receivable shall not include any
such right classified as long-term or the equivalent thereof on the Company's
financial statements prepared in accordance with GAAP; provided, further,
however, that for the purposes of " -- Certain Covenants -- Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock" and the definition of
"Permitted Liens", the term Accounts Receivable will mean such rights of any
Foreign Restricted Subsidiaries.
"Affiliate" of any specified Person will mean (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i). For the purposes
of this definition, "control" when used with respect to any Person will mean the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of "-- Transactions with Affiliates"
only, "Affiliate" will also mean any beneficial owner of shares representing 10%
or more of the total voting power of the Voting Stock (on a fully diluted basis)
of the Company or of rights or warrants to purchase such Voting Stock (whether
or not currently exercisable) and any Person who would be an Affiliate of any
such beneficial owner pursuant to the first sentence hereof. Notwithstanding the
foregoing, each Unrestricted Subsidiary shall be deemed to be an Affiliate of
the Company and of each other Subsidiary of the Company.
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"Asset Disposition" will mean any direct or indirect sale, lease, transfer,
conveyance or other disposition (or series of related sales, leases, transfers,
conveyances or other dispositions) of shares of Capital Stock (including,
without limitation, the Pledged Stock) of any Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any
Restricted Subsidiary (including by means of a merger, consolidation or similar
transaction), other than (i) a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of the Company's or any Foreign Restricted
Subsidiary's Accounts Receivable or Inventory (other than the disposition of
Inventory pursuant to a Sale/Leaseback Transaction), such disposition, in the
event the Revolving Credit Facility and any other revolving credit facility
permitted under "-- Certain Covenants -- Limitation on Indebtedness" shall have
been fully satisfied, is at Fair Market Value in the Ordinary Course of
Business, or (iii) a disposition of property or assets, whether in a single
transaction or a series of related transactions which constitute a single plan
of disposition, that have an aggregate Fair Market Value not in excess of
$100,000. The term "Asset Disposition" will include the requisition of title to,
seizure of or forfeiture of any property or assets, or any actual or
constructive total loss or an agreed or compromised total loss of any property
or assets. The term "Asset Disposition" when used with respect to the Company
will not include any disposition pursuant to "-- Merger, Consolidation and Sale
of Assets" which constitutes a disposition of all or substantially all the
assets of the Company.
"Attributable Indebtedness," in respect of a Sale/Leaseback Transaction,
will mean, as at the time of determination, the greater of (i) the Fair Market
Value of the property subject to such Sale/Leaseback Transaction (as determined
in good faith by the Board of Directors of the Company) or (ii) the present
value (discounted at the interest rate borne by the Notes, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" will mean, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bankruptcy Law" will mean Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
"Capital Lease Obligations" will mean an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP; the amount of Indebtedness represented by such
obligation will be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person will mean any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests (including partnership interests) in (however designated) equity of
such Person, including any Preferred Stock, but excluding any debt securities
convertible into such equity.
"Change of Control" will mean the occurrence of any of the following
events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than an underwriter engaged in a firm commitment
underwriting in connection with a public offering of the Voting Stock of the
Company or a Restricted Subsidiary, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 35% of
the total voting power of the Voting Stock of the Company; (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with
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any new directors whose election by such Board or whose nomination for election
by the shareholders of the Company was approved by a vote of 66 2/3% of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board then in office; or (iii) the Company, either individually or in
conjunction with one or more of its Subsidiaries, sells, conveys, leases or
otherwise transfers, or one or more of such Subsidiaries sell, convey, lease or
otherwise transfer, all or substantially all the assets of the Company and the
Restricted Subsidiaries, taken as a whole, to any Person (other than a
Restricted Subsidiary).
"Collateral Documents" will mean the Indenture, the Security and Pledge
Agreement, the Mortgages and each other document, agreement or instrument
evidencing, perfecting, assuring or otherwise relating to the Lien in respect of
the Collateral and all amendments, supplements or other modifications thereto.
"Commodity Price Protection Agreement" will mean, in respect of any Person,
any forward contract, commodity swap agreement, commodity option agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.
"Consolidated Coverage Ratio" will mean, as of any date of determination,
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) the aggregate Consolidated Interest Expense
for such four fiscal quarters; provided, however, that (1) if the Company or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period the Company or any Restricted Subsidiary shall have made any Asset
Disposition or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Asset Disposition, or both, EBITDA for such
period shall be reduced by an amount equal to EBITDA (if positive) directly
attributable to the property or assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to Consolidated Interest Expense directly attributable to any Indebtedness
of the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and the continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and the continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if
since the beginning of such period the Company or any Restricted Subsidiary (by
merger or otherwise) shall have made an Investment in any Restricted Subsidiary
(or any Person which becomes a Restricted Subsidiary) or an acquisition of
property or assets, including any acquisition of property or assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment that would have required an adjustment
pursuant to clause (2) or (3) if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset
Disposition or Investment occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of property or assets, the amount of income or
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earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of the Company and as further contemplated by the definition
of pro forma. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Protection Agreement applicable to such Indebtedness if such Interest Rate
Protection Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" will mean, for any period, the sum of (i)
the total cash and noncash interest expense of the Company and its consolidated
Subsidiaries, plus, to the extent not included in such interest expense, (A)
interest expense attributable to Capital Lease Obligations, (B) amortization of
debt discount and debt issuance cost, (C) capitalized interest, (D) accrued
interest, (E) commissions, discounts and other fees and charges paid or owed
with respect to letters of credit and bankers' acceptance financing, (F)
interest actually paid by the Company or any such Subsidiary under any Guarantee
of Indebtedness or other obligation of any other Person, (G) net costs
associated with Hedging Obligations (including amortization of discounts and
fees), (H) the interest portion of any deferred obligation, (I) Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Redeemable Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary and (J) cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
expense of any Unrestricted Subsidiary to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Restricted Subsidiary, less (ii) to
the extent included in clause (i), amortization or write-off of deferred
financing costs of the Company and its consolidated Subsidiaries during such
period and any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of the Company and its consolidated
Subsidiaries prior to its Stated Maturity.
"Consolidated Net Income" will mean, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries; provided, however, that there
will be excluded therefrom (i) any net income (loss) of any Person if such
Person is not a Restricted Subsidiary, except that (A) subject to the
limitations contained in clause (iv), the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution to
a Restricted Subsidiary, to the limitations contained in clause (iii)) and (B)
the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income, (ii) any net income (loss) of any Person acquired by
the Company or a Restricted Subsidiary in a pooling of interests transaction for
any period prior to the date of such acquisition, (iii) any net income (loss) of
any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) subject to the limitations contained in clause (iv),
the Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary as
a dividend (subject, in the case of a dividend to another Restricted Subsidiary,
to the limitation contained in this clause) and (B) the Company's equity in a
net loss of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (but not loss) realized
upon the sale or other disposition of any property, plant or equipment of the
Company or its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person, (v) any extraordinary
gain or loss, as well as the tax effects thereof and all reasonable expenses
incurred in
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connection therewith, (vi) any gain or loss, net of taxes, realized on the
termination of any employee pension benefit plan or (vii) the cumulative effect
of any change in accounting principles; provided, however, that, in the case of
Statement of Financial Accounting Standards No. 106, such cumulative effect
shall be excluded only to the extent expenses recognized pursuant to the
adoption thereof exceed the amounts with respect to such expenses which would
have been recognized during such period using the "pay as you go" accounting
method.
"Consolidated Net Worth" will mean the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined in
accordance with GAAP, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Currency Exchange Protection Agreement" will mean, in respect of any
Person, any foreign exchange contract, currency swap agreement, currency option
or other similar agreement or arrangement designed to protect such Person
against fluctuations in foreign currency exchange rates.
"Custodian" will mean any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Default" will mean any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disqualified Stock" of a Person will mean Redeemable Stock of such Person
as to which the maturity, mandatory redemption, conversion or exchange or
redemption at the option of the holder thereof occurs, or may occur, on or prior
to the first anniversary of the Stated Maturity of the Notes.
"EBITDA" will mean, for any period, the Consolidated Net Income for such
period, plus, to the extent deducted in calculating such Consolidated Net
Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense and (v) any charge related to
any premium or penalty paid in connection with redeeming or retiring any
Indebtedness prior to its Stated Maturity, in each case for such period.
"8.25% Preferred Stock" will mean the Company's 8.25% Cumulative
Convertible Redeemable Exchangeable Preferred Stock.
"Exchange Notes" will mean the 8.25% Convertible Senior Subordinated
Debentures due March 1, 2002 of the Company, if any, issued upon exchange for
the 8.25% Preferred Stock in accordance with the First Addendum to Restated
Articles of Incorporation of the Company, as in effect on the Issue Date.
"Fair Market Value" will mean, with respect to any property or asset, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction; provided, that the
foregoing will not prohibit sales of Inventory at a discount or on terms which
are typical in the industry to which such Inventory relates. Fair Market Value
will be determined, except as otherwise provided herein, (i) if such property or
asset has a Fair Market Value less than $5 million, by any officer of the
Company or (ii) if such property or asset has a Fair Market Value in excess of
$5 million, by a majority of each of the disinterested members of the Board of
Directors of the Company and such Board as a whole and evidenced by a
resolution, dated within 30 days of the relevant transaction, of such Board
delivered to the Trustee.
"Foreclosure Event" will mean any foreclosure upon and enforcement of the
Lien of the Collateral Documents by the Trustee or the Lien of the Revolving
Credit Facility by the lenders thereunder.
"Foreign Asset Disposition" will mean an Asset Disposition in respect of
Capital Stock or assets of a Restricted Subsidiary of the type described in
Section 936 of the Internal Revenue Code of 1986, as
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amended, to the extent that the proceeds of such Asset Disposition are received
by a Person subject in respect of such proceeds to the tax laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.
"Foreign Restricted Subsidiaries" will mean, collectively, (i) the
following Subsidiaries of the Company to the extent such Subsidiaries are
Restricted Subsidiaries: Anacomp Holdings Ltd., Anacomp Ltd. (UK), Xidex (UK)
Ltd., Anacomp International N.V., Anacomp Canada, Inc., Anacomp GesmbH, Anacomp
Belgium S.A., Xidex GmbH, Anacomp GmbH, Datamagnetics GmbH, Anacomp Pty Ltd.,
Xidex New Zealand Ltd., Anacomp Japan Ltd., Anacomp DO Brazil, Xidex Magnetics
S.A., Anacomp Italia SRL, Anacomp S.A., Anacomp B.V., Anacomp A.B., Anacomp A/S
(Norway), Anacomp A/S (Denmark) and Anacomp O.Y; and (ii) any other Restricted
Subsidiary that is incorporated in a jurisdiction other than the United States
of America, any State thereof or the District of Columbia.
"Guarantee" will mean any obligation, contingent or otherwise, of any
Person, directly or indirectly, guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay for (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, 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 or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" will not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb will have a corresponding meaning.
"Hedging Obligations" of any Person will mean the obligations of such
Person pursuant to any Interest Rate Protection Agreement, Commodity Price
Protection Agreements or Currency Exchange Protection Agreement or other similar
agreement or arrangement.
"Incur" will mean to, directly or indirectly, create, issue, assume,
Guarantee, incur (by conversion, exchange or otherwise) extend, assume, or
otherwise become liable for, contingently or otherwise; provided, however, that
any Indebtedness or Capital Stock of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) will be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary. "Incurrence", "Incurred" and "Incurring" shall each have a
correlative meaning.
"Indebtedness" will mean, with respect to any Person on any date of
determination, (without duplication) (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all Capital Lease
Obligations and all Attributable Indebtedness of such Person; (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except (A) Trade Payables and (B) any obligation to pay
any portion of such purchase price that becomes due only if the earnings
attributable to such property or services satisfy predetermined minimum amounts
subsequent to the purchase of such property or services and the amount of such
obligation cannot be determined on the date of such purchase); (v) all
obligations of such Person in respect of letters of credit, banker's acceptances
or other similar instruments or credit transactions (including reimbursement
obligations with respect thereto), other than obligations with respect to
letters of credit securing obligations (other than obligations described in
clauses (i) through (iv)) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the third
business day following receipt by such Person of a demand for reimbursement
following payment on any such letter of credit; (vi) the amount of all
obligations of such Person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, with respect to any Subsidiary of such
Person, any Preferred Stock (but excluding in each case, any accrued dividends);
(vii) all Indebtedness of other Persons secured by a Lien on any asset of such
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Person, whether or not such Indebtedness is assumed by such Person; provided,
however, 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 of such other Persons; (viii) all Indebtedness of other
Persons to the extent Guaranteed by such Person; and (ix) to the extent not
otherwise included in this definition, obligations of such Person in respect of
Hedging Obligations. For purposes of this definition, the maximum fixed
redemption, repayment or repurchase price of any Disqualified Stock or Preferred
Stock that does not have a fixed redemption, repayment or repurchase price shall
be calculated in accordance with the terms of such Stock as if such Stock were
redeemed, repaid or repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that if
such Stock is not then permitted to be redeemed, repaid or repurchased, the
redemption, repayment or repurchase price shall be the book value of such Stock
as reflected in the most recent financial statements of such Person. The amount
of Indebtedness of any Person at any date will be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Independent Appraiser" will mean a nationally or internationally
recognized appraisal, accounting, investment banking or other firm (which may
include the independent certified public accountants of the Company), as
appropriate, that (i) is in fact independent in respect of the transaction in
question, (ii) is an expert in respect of the relevant valuation or appraisal
activity, (iii) does not have any direct financial interest or any material
indirect financial interest in the Company, any Subsidiary of the Company or the
Trustee or in any Affiliate of any of them and (iv) is not connected with the
Company, a Subsidiary of the Company or the Trustee or with any such Affiliate
as a director, officer, employee or Affiliate.
"Interest Rate Protection Agreement" will mean, in respect of any Person,
any interest rate swap agreement, interest rate option agreement, interest rate
cap agreement, interest rate collar agreement, interest rate floor agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"Inventory" will mean all goods of the Company held for sale or lease, or
furnished or to be furnished, by the Company under contracts of service, or
consumed in the Company's business, including raw materials, intermediates, work
in process, packaging materials, finished goods, semi-finished inventory, scrap
inventory, manufacturing supplies and all such goods that have been returned to
or repossessed by or on behalf of the Company, including all Documents
evidencing or issued with respect thereto; provided, however, that the term
Inventory will not include repair or replacement parts; provided, further,
however, that, for purposes of " -- Certain Covenants -- Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock" and the definition of
"Permitted Liens", the term Inventory will mean such goods of any Foreign
Restricted Subsidiaries.
"Investment" in any Person will mean any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of any such Person) or
other extension of credit (including by way of Guarantee or similar arrangement)
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) such Person, or any purchase or acquisition of all or substantially all
the business or assets of, Capital Stock, Indebtedness, any other evidence of
beneficial ownership or other similar instruments issued by, such Person. For
purposes of "-- Limitation on Restricted Payments" and "-- Restricted and
Unrestricted Subsidiaries", (i) the term "Investment" will include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the Fair
Market Value of the net assets of any Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue and have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of such Subsidiary at the time that such
Subsidiary is so redesignated a Restricted Subsidiary;
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and (ii) any property transferred to or from an Unrestricted Subsidiary will be
valued at its Fair Market Value at the time of such transfer. In determining the
amount of any Investment in respect of any property or assets other than cash,
such property or asset will be valued at its Fair Market Value at the time of
such Investment (unless otherwise specified in this definition).
"Issue Date" will mean the date on which the Notes are originally issued.
"Lien" will mean any mortgage, deed of trusts, pledge, hypothecation,
assignment, deposit arrangement, preference, priority, security interest,
encumbrance, easement, restriction, covenant, right-of-way, servitude, lien
(statutory or otherwise), charge, other security or similar agreement or
preferential arrangement of any kind or nature whatsoever or other adverse claim
of any kind or nature (including, without limitation, any conditional sale or
other title retention agreement or lease having substantially the same economic
effect of any of the foregoing).
"Magnetics Division" will mean the property and assets of the Company or
any Restricted Subsidiary used in connection with the manufacture, marketing and
sale of magnetic tape, computer tape or other magnetic products.
"Net Cash Proceeds" from an Asset Disposition will mean the sum of (i) cash
payments and Temporary Cash Investments received (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to such
properties or assets or received in any other non-cash form) therefrom and (ii)
the Fair Market Value of all securities issued to the Company or a Subsidiary of
the Company in connection therewith, in each case net of (A) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be paid
or accrued as a liability under GAAP as a consequence of such Asset Disposition,
(B) all payments made on any Indebtedness which is secured by any property or
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon such property or assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (C) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (D) the
deduction of appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
assets disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition; provided, that, in the event
that any consideration for such Asset Disposition (which would otherwise
constitute Net Cash Proceeds) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Cash Proceeds only at
such time as it is released to the Company or any Restricted Subsidiary from
escrow; provided, further, that any non-cash consideration received in
connection with such Asset Disposition, which is subsequently converted to cash,
shall be deemed to be Net Cash Proceeds at such time and shall thereafter be
applied in accordance with "-- Limitation on Sales of Assets and Restricted
Subsidiary Stock". The term "Net Cash Proceeds" from an issuance or sale of
Capital Stock will mean the cash proceeds of such issuance or sale, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officers' Certificate" will mean a certificate signed by two officers of
the Company at least one of whom shall be the principal executive officer,
principal accounting officer or principal financial officer of the Company.
"Opinion of Counsel" will mean a written opinion, in form acceptable to the
Trustee, from legal counsel who is acceptable to the Trustee. The counsel may be
an employee of or counsel to the Company or the Trustee.
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"Ordinary Course of Business" will mean sales or assignments of Inventory
and Accounts Receivable or the performance of services at Fair Market Value or
the collection of Accounts Receivable in the ordinary course of business and
does not include any sale, assignment or collection (i) after any Foreclosure
Event or (ii) after the voluntary or involuntary bankruptcy of the Company. The
ordinary course of business shall include (a) sales of inventory to customers,
(b) returns of merchandise to manufacturers or distributors for refunds or
credit and (c) exchanges of inventory with manufacturers or distributors for
other inventory.
"Permitted Investment" will mean an Investment by the Company or any
Restricted Subsidiary in (i) (A) a Wholly Owned Subsidiary, (B) any Person which
will become a Wholly Owned Subsidiary as a result of such Investment or (C) all
or substantially all the business or assets of any Person; (ii) Temporary Cash
Investments; (iii) receivables owing to the Company or such Restricted
Subsidiary, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that nothing in this paragraph shall limit in any way the ability of
the Company or such Restricted Subsidiary to settle, compromise or otherwise
deal with such receivables in the ordinary course of business; (iv) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (v) loans or advances, in an
aggregate principal amount of $5 million outstanding from time to time, to
employees of the Company or such Restricted Subsidiary made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary, as the case may be; (vi) stock, obligations or securities
received in settlement of Indebtedness created in the ordinary course of
business and owing to the Company or such Restricted Subsidiary or in
satisfaction of judgments; (vii) joint ventures, whether in the form of cash or
through a contribution of assets (the nature of which, if other than cash, to be
determined in good faith by the Board of Directors of the Company, whose
determination shall be evidenced by a resolution of such Board delivered to the
Trustee) in an amount not to exceed $10 million at any one time; and (viii) any
other property, asset or Person if made pursuant to any written agreement of the
Company or such Restricted Subsidiary in effect on the Issue Date.
"Permitted Liens" will mean: (i) pledges or deposits by the Company or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws, other types of social security benefits or similar legislation, or good
faith deposits in connection with bids, tenders or contracts (other than for the
payment of Indebtedness) or leases to which the Company or any Restricted
Subsidiary is a party, or deposits to secure public or statutory obligations or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which the Company or any Restricted Subsidiary is a party, or deposits
as security for contested taxes or import duties or for the payment of rent, in
each case incurred by the Company or any Restricted Subsidiary in the ordinary
course of business consistent with past practice; (ii) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due from the Company or any Restricted Subsidiary or being contested in
good faith by appropriate proceedings by the Company or any Restricted
Subsidiary, as the case may be, or other Liens arising out of judgments or
awards against the Company or any Restricted Subsidiary with respect to which
the Company or such Restricted Subsidiary, as the case may be, shall then be
prosecuting an appeal or other proceedings for review; (iii) Liens for property
taxes or other taxes, assessments or governmental charges of the Company or any
Restricted Subsidiary not yet due or payable or subject to penalties for
nonpayment or which are being contested by the Company or such Restricted
Subsidiary, as the case may be, in good faith by appropriate proceedings; (iv)
Liens in favor of issuers of standby letters of credit, performance bonds and
surety bonds issued pursuant to clause (ix)(B) under "-- Limitation on
Indebtedness" or clause (iv)(B) under "-- Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock"; (v) survey exceptions, encumbrances,
easements or reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other similar purposes
or zoning or other restrictions as to the use of real property of the Company or
any Restricted Subsidiary incidental to the ordinary course of conduct of the
business of the Company or such Restricted Subsidiary or as to the ownership of
properties of the Company or any
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Restricted Subsidiary, which, in either case, were not incurred in connection
with Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the operation of
the business of the Company or any Restricted Subsidiary; (vi) Liens to secure
Indebtedness permitted under clause (i) under "-- Limitation on Indebtedness";
(vii) Liens remaining Outstanding immediately after the Issue Date as set forth
on Schedule 1.01 to the Indenture (and not otherwise permitted by clause (vi) or
(xiii)); (viii) Liens on property, assets or shares of stock of any Restricted
Subsidiary at the time such Restricted Subsidiary became a Subsidiary of the
Company; provided, however, that (A) if any such Lien shall have been Incurred
in anticipation of such transaction, such property, assets or shares of stock
subject to such Lien shall have a Fair Market Value at the date of the
acquisition thereof not in excess of the lesser of (1) the aggregate purchase
price paid or owed by the Company in connection with the acquisition of such
Restricted Subsidiary and (2) the Fair Market Value of all property and assets
of such Restricted Subsidiary and (B) any such Lien shall not extend to any
other property or assets owned by the Company or any Restricted Subsidiary; (ix)
Liens on property or assets at the time the Company or any Restricted Subsidiary
acquired such property or assets, including any acquisition by means of a merger
or consolidation with or into the Company or such Restricted Subsidiary;
provided, however, that (A) if any such Lien shall have been Incurred in
anticipation of such transaction, such property or assets subject to such Lien
shall have a Fair Market Value at the date of the acquisition thereof not in
excess of the lesser of (1) the aggregate purchase price paid or owed by the
Company or such Restricted Subsidiary in connection with the acquisition thereof
and of any other property and assets acquired simultaneously therewith and (2)
the Fair Market Value of all such property and assets acquired by the Company or
such Restricted Subsidiary and (B) any such Lien shall not extend to any other
property or assets owned by the Company or any Restricted Subsidiary; (x) Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or a Wholly Owned Subsidiary; (xi) Liens to secure any extension,
renewal, refinancing, replacement or refunding (or successive extensions,
renewals, refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (vii), (viii) and
(ix); provided, however, that any such Lien will be limited to all or part of
the same property or assets that secured the original Lien (plus improvements on
such property) and the aggregate principal amount of Indebtedness that is
secured by such Lien will not be increased to an amount greater than the sum of
(A) the outstanding principal amount, or, if greater, the committed amount, of
the Indebtedness described under clauses (vii), (viii) and (ix) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an amount
necessary to pay any premiums, fees and other expenses Incurred by the Company
in connection with such refinancing, refunding, extension, renewal or
replacement; (xii) Liens on property or assets of the Company securing Hedging
Obligations so long as the related Indebtedness is, and is permitted to be under
clause (v) under "-- Limitation on Indebtedness", secured by a Lien on the same
property securing the relevant Hedging Obligation; (xiii) Liens securing
Indebtedness incurred under (A) in the case of the Company, the Revolving Credit
Facility or any revolving credit facility; provided, that such Indebtedness was
incurred in compliance with clause (iv) under "-- Limitation on Indebtedness"
and such Liens relate only to the Accounts Receivable, Inventory and proceeds
thereof of the Company (other than proceeds from the disposition of Inventory
pursuant to any Sale/Leaseback Transaction); and (B) in the case of any Foreign
Restricted Subsidiary, any foreign currency revolving credit facility; provided,
that such Indebtedness was incurred in compliance with clause (ii) under
"-- Limitation on Restricted Subsidiary Indebtedness and Preferred Stock" and
such Liens relate only to the Accounts Receivable, Inventory and proceeds
thereof of such Foreign Restricted Subsidiary (other than proceeds from the
disposition of Inventory pursuant to any Sale/Leaseback Transaction); and (xiv)
Liens on property or assets of the Company or any Restricted Subsidiary securing
Indebtedness (1) under Purchase Money Indebtedness or Capital Lease Obligations
permitted under, in the case of the Company, clause (viii) under "-- Limitation
on Indebtedness" and, in the case of such Restricted Subsidiary, clause (iii)
under "-- Limitation on Restricted Subsidiary Indebtedness and Preferred Stock"
or (2) under Sale/Leaseback Transactions permitted under "-- Limitation on
Sale/Leaseback Transactions"; provided, that (A) the amount of Indebtedness
Incurred in any specific case does not, at the time such Indebtedness is
Incurred, exceed the lesser of the cost or Fair Market Value of the property or
asset acquired or constructed in connection with such
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Purchase Money Indebtedness or Capital Lease Obligation or subject to such
Sale/Leaseback Transaction, as the case may be, (B) such Lien shall attach to
such property or asset upon acquisition of such property or asset and or upon
commencement of such Sale/Leaseback Transaction, as the case may be, and (C) no
property or asset of the Company or any Restricted Subsidiary (other than the
property or asset acquired or contracted in connection with such Purchase Money
Indebtedness or Capital Lease Obligation or subject to such Sale/Leaseback
Transaction, as the case may be) are subject to any Lien securing such
Indebtedness.
"Poway Lease" will mean the lease dated as of March 5, 1991, between DAI
Industrial Partnership, predecessor in interest to Burnham Pacific Properties,
Inc., as landlord, and the Company, as tenant, as in effect on the Issue Date
and as such lease may from time to time be amended, supplemented or otherwise
modified in accordance with the terms thereof and hereof, in connection with the
real property located at 12365 Crosthwaithe Circle, Poway, California.
"Person" will mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, will
mean Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"pro forma" will mean, with respect to any calculation made or required to
be made as described above, a calculation in accordance with Article 11 of
Regulation S-X promulgated under the Securities Act (to the extent applicable)
as interpreted in good faith by the Board of Directors of the Company after
consultation with the independent certified public accountants of the Company,
or otherwise a calculation made in good faith by such Board after consultation
with such independent certified public accountants, as the case may be.
"Purchase Money Indebtedness" will mean, with respect to any Person, all
obligations of such Person (i) consisting of the deferred purchase price of any
property or assets, conditional sale obligations, obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business) and other purchase money obligations, in each case
where the maturity of such obligation does not exceed the anticipated useful
life of the property or asset being financed and (ii) Incurred to finance the
acquisition or construction of such property or asset.
"Redeemable Stock" will mean, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (including, without limitation,
upon the happening of any event) (i) matures or is mandatorily redeemable, in
whole or in part, pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness (other than Preferred Stock) or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part.
"Refinancing Indebtedness" will mean Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," "refinancing" and "refinanced"
shall have a correlative meaning) any Indebtedness (including Indebtedness of
the Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, that (i) the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the sum of (A) the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted
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value) then outstanding of the Indebtedness being refinanced and (B)
any premiums, fees and other expenses paid by the Company or the Restricted
Subsidiary, as the case may be, in connection with such refinancing; provided,
further, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary of the Company that refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary; provided, further, that the
Refinancing Indebtedness is at least as subordinated to the Notes as the
Indebtedness being refinanced and the covenants relating to such Indebtedness
are no more restrictive in the aggregate than those of the Indebtedness being
refinanced; provided, further that, in the event the Company refinances its 15%
Subordinated Notes as permitted under the Indenture, the Refinancing
Indebtedness Incurred in connection therewith also may refinance the Company's
13 7/8% Convertible Subordinated Debentures due 2002.
"Replacement Collateral" will mean, at any relevant date in connection with
an Asset Disposition, property or assets used in, or Capital Stock of any Person
related to, the Company's business, other than the Collateral.
"Restricted Subsidiary" will mean, as of the date of determination, any
Subsidiary of the Company, other than an Unrestricted Subsidiary.
"Revolving Credit Agreement" will mean the credit agreement dated as of the
Issue Date among the Company, the lenders named therein and The First National
Bank of Chicago, as agent.
"Revolving Credit Facility" will mean the revolving credit facility for an
aggregate principal amount of $50 million created pursuant to the Revolving
Credit Agreement.
"Sale/Leaseback Transaction" will mean any arrangement relating to property
or assets now owned or hereafter acquired whereby pursuant to a direct or
indirect arrangement the Company or any Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person.
"Senior Indebtedness" will mean all Indebtedness of the Company, including
interest thereon, whether outstanding on the Issue Date or thereafter issued,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are not superior in
right of payment to the Notes; provided, however, that Senior Indebtedness will
not include (i) any liability for Federal, state, local or other taxes owed or
owing by the Company, (ii) any Trade Payables, (iii) any Indebtedness, Guarantee
or obligation of the Company which is subordinate or junior in any respect to
any other Indebtedness, Guarantee or obligation of the Company, including any
Subordinated Obligations, (iv) any obligations with respect to any Capital
Stock, (v) any Indebtedness Outstanding or Incurred in violation of the
Indenture or (vi) any obligations of the Company to any Affiliate of the
Company. For purposes of "-- Limitation on Sales of Assets and Restricted
Subsidiary Stock", the amount of consideration received by the Company or any
Restricted Subsidiary for the assumption of Senior Indebtedness by any purchaser
of the Company's property, assets or shares shall be equal to the face value or
the accreted value of such Senior Indebtedness.
"Stated Maturity" will mean, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" will mean any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person will mean any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
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thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Temporary Cash Investments" will mean any of the following: (i)
investments in U.S. Government Obligations maturing within 90 days of the date
of acquisition thereof; (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 90 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 or any State thereof having capital,
surplus and undivided profits aggregating in excess of $500 million (or the
Dollar Equivalent thereof) and whose long-term indebtedness is rated "A" or
higher according to Moody's (or such equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)); (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
entered into with a bank meeting the qualifications described in clause (ii);
and (iv) investments in commercial paper, maturing not more than 90 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 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.
"Trust Monies" will mean all cash or Temporary Cash Investments received by
the Trustee in accordance with the terms of the Indenture and the other
Collateral Documents: (i) upon the release of property from the Lien of the
Indenture and the other Collateral Documents, including all moneys received in
respect of the principal of all purchase money, governmental and other
obligations; (ii) as compensation for, or proceeds of sale of, any part of the
Collateral taken by eminent domain or purchased by, or sold pursuant to an order
of, a governmental authority or otherwise disposed of; (iii) as proceeds of
insurance upon any part of the Collateral (other than any liability insurance
proceeds payable to the Company or the Trustee for any loss, liability or
expense Incurred by it); (iv) pursuant to certain provisions of the Mortgages;
or (v) for application under the Indenture as provided in the Indenture or any
other Collateral Documents, or whose disposition is not elsewhere specifically
provided for in the Indenture or the other Collateral Documents.
"Unrestricted Subsidiary" will mean (i) each Subsidiary of the Company that
the Company has designated, or is deemed to have designated, pursuant to the
provisions described under "-- Restricted and Unrestricted Subsidiaries" as an
Unrestricted Subsidiary and that has not been redesignated a Restricted
Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" will mean direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"U.S. Restricted Subsidiaries" will mean, collectively, (i) the following
Subsidiaries of the Company to the extent such Subsidiaries are Restricted
Subsidiaries: Stromberg DatagraphiX International Corp., Florida AAC
Corporation, Computer Services Corporation, Kalvar Microfilm, Inc., Anacomp
California, Sun-Flex Industries of Puerto Rico, Inc. and Xidex Development
Company; and (ii) any other Restricted Subsidiary that is not a Foreign
Restricted Subsidiary.
"Voting Stock" of a corporation will mean all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Subsidiary" will mean a Restricted Subsidiary, all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or another Wholly Owned Subsidiary.
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DESCRIPTION OF OTHER OBLIGATIONS
REVOLVING CREDIT FACILITY
As part of the Refinancing, the Company will be entering into a three-year
revolving credit facility (the "Revolving Credit Facility") with certain lenders
(the "Revolver Syndicate"). The aggregate commitment under the Revolving Credit
Facility will be $50 million, of which $15 million will be available for
commercial and standby letters of credit.
The Revolving Credit Facility will be secured by a first priority lien on
the Working Capital Collateral. This lien will be senior in right of payment to
the lien on behalf of the Notes on the Working Capital Collateral. Otherwise,
the Revolving Credit Facility will rank pari passu in right of payment with the
Notes. See "Description of the Notes -- Collateral -- Intercreditor
Arrangements".
Borrowings under the Revolving Credit Facility will incur interest at an
annual rate equal to, at the Company's option: (i) 1.25% (subject to performance
adjustment) plus the higher of (a) the corporate base rate of interest announced
from time to time by the agent for the Revolver Syndicate (the "Revolver Agent")
and (b) the Federal Funds effective rate for each day during the applicable
interest period plus .50% per annum; and (ii) 2.50% (subject to performance
adjustment) plus the London Interbank Offered Rate for deposits approximating
the Revolver Agent's commitment under the Revolving Credit Facility.
The annual commitment fee for the Revolving Credit Facility will be equal
to 0.5% of the average daily unborrowed portion of the aggregate commitment
under the Revolving Credit Facility. Anacomp also will be obligated to pay fees
to the Revolver Agent and certain issuance and participation fees with respect
to any letters of credit issued.
The aggregate amount of loans, together with the face amount of all issued
but undrawn letters of credit and all unreimbursed amounts with respect to drawn
letters of credit, under the Revolving Credit Facility (collectively, the
"Revolver Obligations") may not exceed the sum of (a) 80% of Anacomp's eligible
accounts receivable and 50% of Anacomp's eligible inventory minus (b) certain
permitted contingent obligations of the Company and its subsidiaries
(collectively, the "Borrowing Base"). If at any time the sum of the Revolver
Obligations and certain permitted contingent obligations of the Company and its
subsidiaries exceed the lesser of (a) the Borrowing Base and (b) the aggregate
commitments of all lenders under the Revolving Credit Facility, Anacomp will be
required to prepay under the Revolving Credit Facility an amount equal to such
excess. Anacomp may reduce, at its option, the aggregate commitment of the
Revolving Credit Facility in multiples of $5 million upon ten business days'
prior written notice.
The Revolving Credit Facility will have such customary affirmative and
negative covenants, including financial covenants, regarding the maintenance of
consolidated net worth and interest coverage, leverage and fixed charge coverage
ratios, as are negotiated between the Company and the Revolver Syndicate.
15% SUBORDINATED NOTES DUE 2000
General
The 15% Senior Subordinated Notes due 2000 (the "15% Subordinated Notes")
were issued on October 29, 1990 with a fully accreted value of $224.9 million.
Interest on the 15% Subordinated Notes is payable on May 1 and November 1 of
each year until maturity. The 15% Subordinated Notes bear interest at a rate of
15% per annum multiplied by the fully accreted value thereof. The 15%
Subordinated Notes represent debt incurred as part of the Company's refinancing
of the majority of its debt in October 1990. As of December 31, 1994, there was
$224.9 million fully accreted value of 15% Subordinated Notes outstanding.
In connection with the Refinancing, the Company solicited Consents (the
"Consent Solicitation") from holders of the 15% Subordinated Notes in order to,
among other things, modify or eliminate certain
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provisions of the Subordinated Indenture necessary to permit the Refinancing. As
required by the Subordinated Indenture, the Company received Consents from
holders of at least 66 2/3% of the outstanding principal amount of the 15%
Subordinated Notes. In connection with the Consent Solicitation, Anacomp will
pay a fee equal to $20 for each $1,000 fully accreted value of 15% Subordinated
Notes for which a Consent has been accepted by the Company. On March 13, 1995,
the Consent Solicitation expired and the Company and the trustee for the 15%
Subordinated Notes executed an amendment and restatement of the Subordinated
Indenture that gives effect to the amendments that are the subject of the
Consents. The application of such amendment and restatement of the Subordinated
Indenture will be conditioned upon the closing of the Refinancing.
In connection with the Consent Solicitation, on February 28, 1995, the
Company commenced an offer to purchase up to $50 million fully accreted value of
the 15% Subordinated Notes at a price of $1,035 per each $1,000 fully accreted
value plus accrued interest (the "Tender Offer"). The Tender Offer expires on
March 28, 1995, unless extended by the Company pursuant to the terms of the
Tender Offer (the "Tender Expiration Date"). The Company intends to extend the
Tender Offer so that the Tender Expiration Date occurs on or about the same date
the Refinancing is consummated. A portion of the proceeds of the Offering will
be used to pay any tendering holders. In the event less than $50 million fully
accreted value of the 15% Subordinated Notes is tendered pursuant to the Tender
Offer, the Company will purchase any such 15% Subordinated Notes tendered and
will apply the difference between $50 million and such lesser amount to retire
additional indebtedness, which may be subordinated, and other obligations of the
Company or for general corporate purposes. Anacomp's obligations to pay the fee
for the Consents described above and purchase any tendered 15% Subordinated
Notes is conditioned upon the closing of the Refinancing.
The following summary of certain terms of the 15% Subordinated Notes
reflects the amendment and restatement of the Subordinated Indenture pursuant to
the Consents. Capitalized terms used but not otherwise defined in this summary
have the meanings assigned thereto in the Subordinated Indenture.
Subordination
Payment of principal and interest and all other amounts on the 15%
Subordinated Notes is subordinated and subject to the prior payment in full of
all Senior Indebtedness. Senior Indebtedness includes the Notes and the
Revolving Credit Facility. Upon (i) the maturity of any Senior Indebtedness,
whether by lapse of time, acceleration of otherwise, (ii) any default in the
payment of any amount due in respect of principal or interest in respect of any
Senior Indebtedness or (iii) any distribution or payment of assets or securities
of the Company upon any dissolution, winding up, liquidation or reorganization
of the Company, the holders of Senior Indebtedness will be entitled to receive
payment in full of the principal thereof and interest due thereon before the
holders of the 15% Subordinated Notes are entitled to receive any payment.
During the continuance of any default or event of default under any agreement
governing Senior Indebtedness permitting acceleration of the maturity thereof
(other than a default or event of default relating to payment of principal or
interest, either at maturity, upon redemption, by declaration or otherwise) and
upon giving notice thereof, no payment may be made on the 15% Subordinated Notes
for a period of 179 days after the notice is given, but payments may thereafter
be resumed unless such payments are then otherwise prohibited by the
Subordinated Indenture. Only one notice may be given effect within any period of
360 consecutive days, and no more than one notice may be given with respect to
any continuing default or event of default. If, in any of the situations
referred to above, a payment is made to the trustee for the 15% Subordinated
Notes or to any holder of 15% Subordinated Notes before all Senior Indebtedness
has been paid in full or provision has been made for such payment to such
trustee or such holder, such payment must be paid over to the holders of Senior
Indebtedness or their respective representatives. Such subordination will not
prevent the occurrence of any event of default under the Subordinated Indenture.
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Optional Redemption
The 15% Subordinated Notes may be redeemed at the option of the Company, in
whole or from time to time in part, at any time on or after November 1, 1995, at
the following redemption prices (expressed as percentages of fully accreted
value) during the twelve-month periods commencing on each November 1 in the
following years, in each case, together with accrued interest (without
duplicating interest included in fully accreted value): (i) 1995 - 107.5%; (ii)
1996 - 105.0%; (iii) 1997 - 102.5%; and (iv) 1998 and thereafter - 100.0%.
Anacomp is effecting the Refinancing in order to, among other things, provide
the Company with the flexibility to refinance the remaining 15% Subordinated
Notes if the Company elects, subject to market conditions, to redeem such 15%
Subordinated Notes after they become redeemable in November 1995.
Mandatory Redemption
The Company must redeem $22 million in aggregate principal amount of 15%
Subordinated Notes on November 1, 1998, assuming $50 million fully accreted
value of 15% Subordinated Notes are purchased by the Company pursuant to the
Tender Offer and $72 million on November 1, 1999 at a redemption price of 100%
of the fully accreted value thereof, plus accrued interest (without duplicating
interest included in fully accreted value) to the redemption date. The Company
may reduce any mandatory redemption obligation by the principal amount of any
cancelled, redeemed or repurchased 15% Subordinated Notes, other than through
operation of the mandatory redemption provision or pursuant to any offer to
purchase 15% Subordinated Notes required to be made under the Subordinated
Indenture.
Mandatory Repurchase Offers
As further described below, subject to certain conditions and exceptions,
the Subordinated Indenture requires the Company to make offers to repurchase
some or all of the 15% Subordinated Notes under certain circumstances,
including: (i) failure by the Company to maintain a minimum consolidated net
worth; (ii) prior to the incurrence of indebtedness by Anacomp in certain
circumstances; (iii) upon certain changes of control; (iv) upon certain sales of
assets or subsidiary stock; and (v) upon the application of free cash flow,
which is determined by a financial formula set forth in the Subordinated
Indenture. Offers to repurchase pursuant to the circumstances described in
clause (i), (ii), (iii) or (iv) or payments pursuant thereto could, under
certain circumstances, conflict with the provisions of the Indenture for the
Notes. For a discussion of the risks associated with these conflicts between the
Indenture and the Subordinated Indenture, see "Risk Factors -- Conflicts Between
the Indenture and the Subordinated Indenture".
Restrictive Covenants
Certain of the covenants in the Subordinated Indenture are more restrictive
on the operations and activities of Anacomp than the covenants in the Indenture
for the Notes. The covenants described are subject to a number of important
qualifications and limitations.
Limitation on Restricted Payments. The Subordinated Indenture provides
that, subject to certain exceptions, the Company will not, and will not permit
any subsidiary of the Company to, directly or indirectly, make certain
restricted payments if at the time of such restricted payments or after giving
effect thereto (i) a default or an event of default shall have occurred and be
continuing, (ii) the consolidated net worth of the Company as of the last day of
its preceding fiscal quarter for which financial information is publicly
available is less than or equal to zero or (iii) the aggregate amount expended
for such restricted payments subsequent to the end of the Company's first fiscal
quarter that the Company reports a consolidated net worth greater than zero (the
"Trigger Date"), equals or exceeds (A) 25% of the consolidated net income (or if
consolidated net income shall be a deficit, minus 100% of such deficit) of the
Company accrued for the period commencing immediately following the Trigger Date
through and including the last day of the fiscal quarter for which financial
information is publicly available (taken as a single accounting period) and (B)
the sum of (i) the aggregate net proceeds, including the fair market value of
property other than cash, received by the Company from the issue or sale after
the Trigger Date
80
<PAGE> 82
of its capital stock (other than (W) capital stock issued upon conversion or
exercise of the $25 million Aggregate Liquidation Preference Cumulative
Convertible Redeemable Exchangeable Preferred Shares, Series 1, due 2002 of the
Company (the "Convertible Preferred Stock"), the 8.25% Convertible Senior
Subordinated Debentures of the Company, if any, issued upon exchange for the
Convertible Preferred Stock (the "Exchange Debentures") or the Warrants, (X)
Restricted Capital Stock (provided, that the proceeds from the issuance of such
Restricted Capital Stock may be included only when and to the extent that shares
of such Restricted Capital Stock are subsequently converted into or exchanged
for other shares of capital stock which do not constitute Restricted Capital
Stock), (Y) capital stock issued to a subsidiary or other controlled affiliate
of the Company and (Z) capital stock which, by its terms, is convertible into or
exchangeable for securities other than capital stock of the Company which is not
Restricted Capital Stock) and (ii) the aggregate net proceeds, including the
fair market value of property other than cash received by the Company from the
issue and sale after the Trigger Date of certain indebtedness (other than the
Exchange Debentures) that has been converted into capital stock (other than
Restricted Capital Stock) of the Company.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Subordinated Indenture provides that the Company will not,
and will not permit any subsidiary of the Company to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of such subsidiary to (i) pay dividends or make
any other distributions on any capital stock of such subsidiary to its parent,
make any distributions on any other interest or participation in, or measured
by, its profits, owned by the Company or any of its subsidiaries, or pay certain
indebtedness owed to the Company or any of its subsidiaries, (ii) make any loans
or advances to the Company or any subsidiary of the Company, (iii) pay any
indebtedness owed to the Company or a subsidiary of the Company or (iv) transfer
any of its property or assets to the Company or any subsidiary of the Company,
except, in each such case, for such encumbrances or restrictions existing under
or by reasons of (a) applicable law, (b) any instrument governing certain
indebtedness of a person acquired by the Company or any subsidiary of the
Company at the time of such acquisition, which indebtedness was not incurred in
connection with or in contemplation of such acquisition of and which encumbrance
or restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person, so
acquired, (c) the agreements governing the Notes and the Revolving Credit
Facility as in effect on the date of the closing of the Refinancing, (d) the
Subordinated Indenture and (e) the indenture pursuant to which the Exchange
Debentures might be issued, as in effect on October 29, 1990.
Maintenance of Consolidated Net Worth. The Subordinated Indenture provides
that if the Company's consolidated net worth at the end of each of any two
consecutive fiscal quarters of the Company is less than the applicable Minimum
Amount (as defined below), then the Company shall make an offer (the "Offer") to
purchase on the last day of the fiscal quarter of the Company next following
such second fiscal quarter (any such date being referred to herein as a
"Purchase Date"), 10% aggregate principal amount of 15% Subordinated Notes
originally issued (or such lesser amount as may be outstanding at the time) (the
"Offer Amount") on the Purchase Date at a purchase price equal to 100% of the
fully accreted value of the 15% Subordinated Notes plus (without duplicating
interest included in fully accreted value) accrued interest thereon to the
Purchase Date; provided, however, that if such second fiscal quarter is the last
quarter of the Company's fiscal year, the Purchase Date shall be 15 days after
the last day of the fiscal quarter next following such second fiscal quarter.
The term "Minimum Amount" means consolidated net worth of the Company equalling
the following amounts: (i) $10 million for the period from September 30, 1994
through and including September 29, 1996; and (ii) $85 million for the period
from September 30, 1996 and thereafter.
Limitation on Indebtedness and Restricted Capital Stock. The Subordinated
Indenture provides that, subject to certain exceptions, the Company will not,
and will not permit any of its subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to, contingently or otherwise (collectively, "incur"),
certain indebtedness or Restricted Capital Stock, except that the Company may
incur such indebtedness and Restricted Capital
81
<PAGE> 83
Stock if, immediately after giving effect thereto, the Company's consolidated
cash flow coverage ratio for the twelve-month period ending on the last day of
the first full fiscal quarter immediately preceding the date such additional
Indebtedness or Restricted Capital Stock is incurred would have been at least
1.50 to 1.00. Notwithstanding the foregoing, the Company may not incur
subordinated indebtedness or Restricted Capital Stock at any time if,
immediately after giving effect to such incurrence, its consolidated cash flow
coverage ratio would be less than 2.50 to 1.00, unless prior to the incurrence
of certain indebtedness, the Company will (i) repay in full all indebtedness
under the Notes and the Revolving Credit Facility or obtain the consent from the
requisite holders of Notes and the Banks to permit the repurchase of the 15%
Subordinated Notes pursuant to the following clause (ii), and (ii) make and
consummate an offer (a "4.08 Offer") to purchase all of the outstanding 15%
Subordinated Notes at a purchase price equal to 100% of the fully accreted value
thereof plus (without duplicating interest included in fully accreted value)
accrued interest thereon to the date of purchase; provided, that the Company
must first comply with the covenant in the preceding clause (i) before it shall
be required to repurchase the 15% Subordinated Notes pursuant to the 4.08 Offer
(it being understood and agreed by the Company that any failure by the Company
to comply with such clause (i) or to make the 4.08 Offer shall constitute a
default and any failure by the Company to purchase the 15% Subordinated Notes
pursuant to the 4.08 Offer will constitute an event of default). After the
Company has consummated one 4.08 Offer, no further 4.08 Offers shall be required
in connection with the incurrence of certain indebtedness or any Restricted
Capital Stock under the Subordinated Indenture.
Restriction on Liens. The Subordinated Indenture provides that the Company
will not, and will not permit any of its subsidiaries to, create or, with
respect to any lien arising after October 29, 1990, suffer to exist any liens
upon any assets of the Company or any subsidiary of the Company, including any
shares of capital stock of any subsidiary of the Company, unless the Company or
such subsidiary shall secure all payments under the Subordinated Indenture and
under the 15% Subordinated Notes on an equal and ratable basis with the
obligation so secured until such time as such obligation is no longer secured by
a lien; provided, however, that this limitation does not apply to any Permitted
Liens. Liens securing the Notes and the Revolving Credit Facility are Permitted
Liens under the Subordinated Indenture.
Liquidation. The Subordinated Indenture provides that the Board of
Directors or the shareholders of the Company may not adopt a plan of liquidation
which provides for, contemplates or the effectuation of which is preceded by (i)
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company otherwise than pursuant to and in compliance with the
terms of the Subordinated Indenture and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and of the remaining assets of the Company, unless the Company
shall, in connection with the adoption of such plan and prior to making any
liquidating distributions or accounting pursuant to such plan, make provisions
for the satisfaction of the Company's obligations under the Subordinated
Indenture and under the 15% Subordinated Notes as to the payment of principal
and interest.
Limitation on Certain Senior Indebtedness. The Subordinated Indenture
provides that the Company will not, and will not permit any subsidiary of the
Company to, incur, directly or indirectly, certain indebtedness which, by its
terms, is both (i) subordinate in right of payment to the Notes or the Revolving
Credit Facility and (ii) senior in right of payment to the 15% Subordinated
Notes. The Company is permitted to incur Senior Indebtedness under the
Subordinated Indenture under certain circumstances. See "-- Limitation on
Indebtedness and Restricted Capital Stock".
Change of Control. The Subordinated Indenture provides that upon the
occurrence of a Change of Control (the "Change of Control Date") and prior to
the mailing of the notice to holders of the 15% Subordinated Notes as provided
for therein but in any event within 30 days following the Change of Control
Date, the Company will (i) repay in full all indebtedness under the Revolving
Credit Facility and the Notes or (ii) obtain the consent from the requisite
holders of Notes and the Banks to permit the repurchase of the 15% Subordinated
Notes pursuant to such covenant. The Company must first comply with the
obligations in the preceding sentence before it shall be required to repurchase
the 15%
82
<PAGE> 84
Subordinated Notes pursuant to such covenant; however, any failure by the
Company to comply with the preceding sentence or to make a Change of Control
Offer constitutes a default and any failure by the Company to purchase the 15%
Subordinated Notes pursuant to a Change of Control Offer constitutes an event of
default. Each holder of the 15% Subordinated Notes has the right to require a
Change of Control Offer at a purchase price equal to 101% of the fully accreted
value of the 15% Subordinated Notes plus (without duplicating interest included
in fully accreted value) accrued interest thereon to the date of purchase.
Change of Control, for purposes of the Subordinated Indenture, means the
occurrence of one or more of the following events: (i) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Company to any person or related
group for purposes of Section 13(d) of the Exchange Act (a "Group"), together
with any Affiliates thereof (whether or not otherwise in compliance with the
provisions of the Subordinated Indenture); (ii) the shareholders of the Company
approving any plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of the Subordinated
Indenture); (iii) any person or Group, together with any Affiliates thereof,
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing at least a majority of the
Voting Stock of the Company; or (iv) a majority of the members of the Board of
Directors of the Company not constituting Continuing Directors.
Limitation on Asset Sales and Sales of Subsidiary Stock. The Subordinated
Indenture provides that the Company will not, and will not permit any of its
subsidiaries to, consummate any Asset Sale if, after giving effect to the
proposed Asset Sale, the fair market value of all such Asset Sales consummated
by the Company and its subsidiaries during any fiscal year would exceed 10% of
the Company's consolidated net tangible assets as of the first day of such
fiscal year; provided, however, that notwithstanding the foregoing, the Company
may, or may cause its subsidiaries to, consummate any Asset Sale so long as (i)
such Asset Sale is for fair market value, (ii) at least 85% of the net proceeds
therefrom consist of cash and (iii) if the aggregate of net cash proceeds from
Asset Sales and majority stock sales exceeds $5 million, the net cash proceeds
of such Asset Sale are applied as follows: (A) within 180 days of receipt
thereof (such 180th day, the "Application Date"), the Company may apply all or a
portion of such net cash proceeds to the repayment of indebtedness outstanding
under the Revolving Credit Facility and/or the Notes or the reinvestment
(whether by acquisition of an existing business or expansion) in one or more of
the lines of business in which the Company or any of its Subsidiaries are
engaged on October 29, 1990, or any combination thereof, and (B) to the extent
any or all of such net cash proceeds are not applied as set forth above in
clause (A), the Company must apply all remaining net cash proceeds of such Asset
Sale to an offer to purchase (an "Asset Sale Offer") 15% Subordinated Notes on
the first business day occurring 40 days after the Application Date (the "Asset
Sale Purchase Date") at a purchase price equal to 101% of the fully accreted
value of the 15% Subordinated Notes plus (without duplicating interest included
in fully accreted value) accrued interest thereon to the Asset Sale Purchase
Date; provided, further, that, notwithstanding the foregoing, the Company may
consummate any Asset Sale with respect to (x) assets held for sale on the
financial statements of the Company as of October 29, 1990 or (y) assets listed
on Schedule 1 to the Subordinated Indenture, so long as the requirements of
clause (iii) of the preceding proviso are met.
The Subordinated Indenture also provides that the Company will not, and
will not permit any of its subsidiaries to, consummate any majority capital
stock sale unless (i) such majority capital stock sale is for fair market value,
(ii) at least 85% of the net proceeds therefrom consist of cash, (iii) if the
aggregate amount of net cash proceeds from Asset Sales and majority stock sales
exceeds $5 million, the net cash proceeds of such majority capital stock sale
are applied as follows: (A) within 180 days of receipt thereof (such 180th day,
the "Stock Application Date"), the Company may apply all or a portion of such
net cash proceeds to the repayment of indebtedness outstanding under the
Revolving Credit Facility and/or the Notes and (B) to the extent any or all of
such net cash proceeds are not applied as set forth above in clause (A), the
Company must apply all remaining net cash proceeds of such majority capital
stock sale
83
<PAGE> 85
to an offer to purchase (the "Stock Sale Offer") 15% Subordinated Notes on the
first business day occurring 40 days after the Stock Application Date (the
"Stock Sale Purchase Date") at a purchase price equal to 101% of the fully
accreted value of the 15% Subordinated Notes plus (without duplicating interest
included in fully accreted value) accrued interest thereon to the Stock Sale
Purchase Date.
Application of Free Cash Flow. If the Company has Free Cash Flow for any
period of two consecutive fiscal quarters (a "Period") commencing with the
Period beginning immediately after the repayment in full of all indebtedness
under the Notes, and at the end of such period any borrowings under the
Revolving Credit Facility are outstanding, then the Company must apply, within
55 days of the last day of each Period (in the case of any Period which does not
end on the last day of the Company's fiscal year) or 100 days of the last day of
each Period (in the case of any Period ending on the last day of the Company's
fiscal year) an amount equal to 50% of the Company's Free Cash Flow for such
Period.
If the Company has Free Cash Flow for any Period commencing with the Period
beginning immediately after the earlier to occur of (i) the later of the
repayment in full of any indebtedness under the Notes or (ii) receipt of a
consent from the requisite holders of Notes and the Lenders under the Revolving
Credit Facility, the Company must apply within 60 days of the last day of each
Period (such 60th day, the "Prepayment Date"), an amount equal to 50% of the
Company's Free Cash Flow for such Period (the "Free Cash Flow Offer Amount") to
an offer to purchase (the "Free Cash Flow Offer") 15% Subordinated Notes at a
purchase price equal to 100% of the fully accreted value of the 15% Subordinated
Notes plus (without duplicating interest included in fully accreted value)
accrued interest thereon to the Prepayment Date.
13 7/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002
The 13 7/8% Convertible Subordinated Debentures due 2002 (the "13 7/8%
Debentures") mature on January 15, 2002 and require mandatory sinking fund
payments of $3.75 million annually commencing January 15, 1999, unless
sufficient 13 7/8% Debentures have been converted or repurchased by Anacomp. The
13 7/8% Debentures are convertible at the option of the holders thereof at a
rate of 57.1428 shares of Common Stock of Anacomp for each $1,000 principal
amount of 13 7/8% Debentures ($17.50 per share). The 13 7/8% Debentures are
redeemable at the Company's option at a redemption price equal to 100% of the
principal amount thereof, together with accrued interest to the date of
redemption. In the event of a consolidation of the Company with, or merger of
the Company into, any other corporation (where the Company is not the continuing
corporation), or the sale or transfer of all or substantially all the assets of
the Company, the holders of the 13 7/8% Debentures have the right to convert
such 13 7/8% Debentures into the kind and amount of shares of stock and other
securities and property receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock of the Company into
which such 13 7/8% Debentures might have been converted immediately prior to
such consolidation, merger, sale or transfer. The 13 7/8% Debentures will be
subordinated to the Notes.
SKC TRADE PAYABLE DUE 2001
Anacomp's Supply Agreement with SKC described under "Business -- Raw
Materials and Suppliers" provides trade credit arrangements whereby the Company
may defer payment for certain products purchased under the Supply Agreement
having an aggregate purchase price of up to $25 million (the "SKC Trade
Payable"). As of December 31, 1994, the SKC Trade Payable had an outstanding
balance of $25 million. Interest on amounts owing under the SKC Trade Payable
begins to accrue 30 days after the date of the related product invoice at a rate
of 1.75% above the prime rate of the First National Bank of Boston (10.25% as of
December 31, 1994). Anacomp is obligated to pay for products purchased under the
Supply Agreement on a first in, first out basis as necessary to ensure that the
outstanding amount owed under the SKC Trade Payable is equal to or less than $25
million and that the total amount of unpaid invoices due under the Supply
Agreement is equal to or less than $29 million (subject to certain annual
adjustments).
84
<PAGE> 86
Amounts owing under the SKC Trade Payable become due and payable on the
earlier of (i) December 31, 2001, (ii) the date on which SKC terminates the
Supply Agreement as a result of an event of default under the SKC Trade Payable
and (iii) the date the Company restructures or refinances substantially all the
15% Subordinated Notes currently outstanding.
SKC has a security interest in up to $10 million of the products purchased
by Anacomp under the Supply Agreement. The SKC Trade Payable will rank pari
passu in right of payment with the Notes and the Revolving Credit Facility.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement") among the Company and
Salomon Brothers Inc and Smith Barney Inc. (collectively, the "Underwriters"),
the Company has agreed to issue and sell to the Underwriters, and each of the
Underwriters has agreed to purchase from the Company, the principal amount of
Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
--------------------------------------------------------------------- ----------------
<S> <C>
Salomon Brothers Inc................................................. $
Smith Barney Inc. ...................................................
----------------
Total...................................................... $225,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions set forth therein. The
Underwriters will be obligated to purchase all the Notes offered hereby if any
Notes are purchased.
The Underwriters have advised the Company that the Underwriters propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % of such principal amount. After the initial public offering, the public
offering price and such concessions may be changed.
The Company does not intend to apply for listing the Notes on any
securities exchange or for quotation of the Notes through the Nasdaq National
Market. Each of the Underwriters has indicated that it intends to make a market
in the Notes, subject to applicable laws and regulations. However, neither of
the Underwriters is obligated to do so, and any such market making may be
discontinued at any time, without notice, at such Underwriter's sole discretion.
No assurance can be given as to the development or liquidity of any trading
market for the Notes. See "Risk Factors -- Lack of Public Market".
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Underwriters are acting as dealer managers to the Company in connection
with the Company's solicitation of Consents and tenders from the holders of the
15% Subordinated Notes. See "The Refinancing -- Consent Solicitation and Tender
Offer". Certain mutual funds managed by Smith Barney Mutual Funds Management
Inc. owned, as of January 27, 1995, approximately 33% of the fully accreted
value of the outstanding 15% Subordinated Notes. Smith Barney Mutual Funds
Management Inc. and Smith Barney Inc. are both indirectly owned by The Travelers
Inc. The solicitation of Consents has been, and tenders from these mutual funds
will be, conducted by Salomon Brothers Inc. Smith Barney Inc. has performed
various investment banking services for the Company from time to time.
85
<PAGE> 87
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by
Cadwalader, Wickersham & Taft, New York, New York. Certain legal matters will be
passed upon for the Underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
September 30, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1994, included in this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto appearing herein, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
86
<PAGE> 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Financial Statements
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets -- September 30, 1994 and 1993.......................... F-3
Consolidated Statements of Operations -- Years Ended September 30, 1994, 1993
and 1992......................................................................... F-4
Consolidated Statements of Cash Flows -- Years Ended September 30, 1994, 1993
and 1992......................................................................... F-5
Consolidated Statements of Stockholders' Equity -- Years Ended September 30, 1994,
1993 and 1992.................................................................... F-7
Notes to Consolidated Financial Statements.......................................... F-8
Unaudited Financial Statements
Condensed Consolidated Balance Sheets -- December 31, 1994 and
September 30, 1994............................................................... F-27
Condensed Consolidated Statements of Operations -- Three Months Ended December 31,
1994 and 1993.................................................................... F-28
Condensed Consolidated Statements of Cash Flows -- Three Months Ended December 31,
1994 and 1993.................................................................... F-29
Condensed Consolidated Statements of Stockholders' Equity -- Three Months Ended
December 31, 1994 and 1993....................................................... F-30
Notes to Condensed Consolidated Financial Statements................................ F-31
</TABLE>
F-1
<PAGE> 89
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Anacomp, Inc.:
We have audited the accompanying consolidated balance sheets of Anacomp,
Inc. (an Indiana Corporation) and subsidiaries as of September 30, 1994 and
1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended September
30, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anacomp,
Inc. and subsidiaries as of September 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 1 to the financial statements, effective October 1,
1993, the Company changed its method of accounting for income taxes.
ARTHUR ANDERSEN LLP
-------------------
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
December 7, 1994
F-2
<PAGE> 90
ANACOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 19,871 $ 24,922
Accounts and notes receivable, less allowances for doubtful
accounts of $3,550 and $4,245, respectively..................... 117,441 109,251
Current portion of long-term receivables........................... 8,021 7,489
Inventories........................................................ 63,375 69,192
Prepaid expenses and other......................................... 5,421 7,157
-------- --------
Total current assets....................................... 214,129 218,011
Property and equipment, at cost less accumulated depreciation and
amortization of $100,574 and $105,523, respectively................ 66,769 66,399
Long-term receivables, net of current portion........................ 16,383 17,619
Excess of purchase price over net assets of businesses acquired and
other intangibles, net............................................. 279,607 296,426
Deferred tax asset, net of valuation allowance of $57,000............ 29,000 --
Other assets......................................................... 52,751 45,093
-------- --------
$658,639 $643,548
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................. $ 45,222 $ 34,355
Accounts payable................................................... 82,790 67,246
Accrued compensation, benefits and withholdings.................... 16,573 16,452
Accrued income taxes............................................... 9,000 11,502
Accrued interest................................................... 19,701 20,089
Other accrued liabilities.......................................... 35,027 37,438
-------- --------
Total current liabilities.................................. 208,313 187,082
-------- --------
Long-term debt, net of current portion............................... 366,625 404,738
Other noncurrent liabilities......................................... 9,467 13,546
-------- --------
Total noncurrent liabilities............................... 376,092 418,284
-------- --------
Commitments and Contingencies (Note 11)
Redeemable preferred stock, $.01 par value, issued and outstanding
500,000 shares (aggregate preference value of $25,000)............. 24,478 24,383
-------- --------
Stockholders' Equity:
Common stock, $.01 par value; authorized 100,000,000 shares;
45,728,505 and 40,629,524 issued, respectively.................. 457 406
Capital in excess of par value of common stock..................... 181,843 163,209
Cumulative translation adjustment.................................. (269) (4,744)
Accumulated deficit................................................ (132,275) (145,072)
-------- --------
Total stockholders' equity................................. 49,756 13,799
-------- --------
$658,639 $643,548
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 91
ANACOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Services provided......................................... $223,511 $213,302 $220,544
Equipment and supply sales................................ 369,088 376,906 408,396
-------- -------- --------
592,599 590,208 628,940
-------- -------- --------
Operating costs and expenses:
Costs of services provided................................ 156,214 141,998 147,040
Costs of equipment and supplies sold...................... 264,269 262,754 281,268
Selling, general and administrative expenses.............. 92,539 96,822 100,330
-------- -------- --------
513,022 501,574 528,638
-------- -------- --------
Income before interest, other income, income taxes,
extraordinary credit, and cumulative effect of accounting
change.................................................... 79,577 88,634 100,302
-------- -------- --------
Interest income............................................. 3,144 3,042 3,081
Interest expense and fee amortization....................... (67,174) (68,960) (71,947)
Other income (expense)...................................... (192) (2,225) 985
-------- -------- --------
(64,222) (68,143) (67,881)
-------- -------- --------
Income before income taxes, extraordinary credit and
cumulative effect of accounting change.................... 15,355 20,491 32,421
Provision for income taxes.................................. 8,400 8,800 14,200
-------- -------- --------
Income before extraordinary credit and cumulative effect of
accounting change......................................... 6,955 11,691 18,221
Extraordinary credit -- Reduction of income taxes arising
from utilization of tax loss carryforwards................ -- 6,900 8,700
Cumulative effect on prior years of a change in accounting
for income taxes.......................................... 8,000 -- --
-------- -------- --------
Net income.................................................. 14,955 18,591 26,921
Preferred stock dividends and discount accretion............ 2,158 2,158 2,158
-------- -------- --------
Net income available to common stockholders....... $ 12,797 $ 16,433 $ 24,763
========= ========= =========
Earnings per common and common equivalent share:
Income from operations.................................... $ .10 $ .22 $ .38
Extraordinary credit...................................... -- .17 .21
Cumulative effect on prior years of a change in accounting
for income taxes....................................... .17 -- --
-------- -------- --------
Net income........................................ $ .27 $ .39 $ .59
========= ========= =========
Earnings per common share assuming full dilution:
Income from operations.................................... $ .10 $ .22 $ .38
Extraordinary credit...................................... -- .17 .20
Cumulative effect on prior years of a change in accounting
for income taxes....................................... .17 -- --
-------- -------- --------
Net income........................................ $ .27 $ .39 $ .58
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 92
ANACOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 14,955 $ 18,591 $ 26,921
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 40,649 38,208 39,847
Cumulative effect of a change in accounting for income
taxes................................................ (8,000) -- --
Loss (gain) on disposition of assets................... 776 (721) 979
Change in assets and liabilities net of effects from
acquisitions:
Decrease in accounts and long-term receivables....... 2,345 323 163
Decrease (increase) in inventories and prepaid
expenses.......................................... 15,254 1,308 (1,680)
Increase in other assets............................. (11,349) (5,329) (913)
Increase in accounts payable and accrued expenses.... 2,377 1,125 5,474
Decrease in other noncurrent liabilities............. (4,323) (7,613) (11,156)
-------- -------- --------
Net cash provided by operating activities......... 52,684 45,892 59,635
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of assets.............................. 7,805 15,956 7,794
Purchases of property, plant and equipment................ (18,868) (20,726) (18,755)
Proceeds from notes receivable............................ -- 1,343 6,027
Payments to acquire companies and customer rights......... (14,565) (1,114) (6,830)
-------- -------- --------
Net cash used in investing activities............. (25,628) (4,541) (11,764)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants....... 1,484 2,262 2,532
Proceeds from revolving line of credit and long-term
borrowings............................................. 39,000 39,799 51,951
Principal payments on long-term debt...................... (71,095) (77,958) (89,757)
Preferred dividends paid.................................. (2,062) (2,062) (2,062)
Payments related to the issuance of debt and equity....... -- (7,707) (507)
-------- -------- --------
Net cash used in financing activities............. (32,673) (45,666) (37,843)
-------- -------- --------
Effect of exchange rate changes on cash..................... 566 (644) 42
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ (5,051) (4,959) 10,070
Cash and cash equivalents at beginning of year.............. 24,922 29,881 19,811
-------- -------- --------
Cash and cash equivalents at end of year.......... $ 19,871 $ 24,922 $ 29,881
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 93
ANACOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash paid (refunded) during the year for:
Interest...................................................... $57,781 $59,552 $64,120
Income taxes.................................................. 2,007 3,468 (3,041)
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During 1994, 1993 and 1992 the Company acquired companies and rights to
provide future services. In conjunction with these acquisitions, the purchase
price consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1994 1993 1992
------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash paid......................................................... $14,565 $1,114 $6,830
Credit memos issued............................................... 3,085 150 1,500
Notes payable issued.............................................. 4,290 3,170 1,272
Stock issued...................................................... 17,201 -- --
------- ------ ------
Total fair value of acquisitions........................ $39,141 $4,434 $9,602
======== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 94
ANACOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994, 1993 AND 1992
------------------------------------------------------
CAPITAL
IN
EXCESS OF
PAR VALUE CUMULATIVE
COMMON OF COMMON TRANSLATION
STOCK STOCK ADJUSTMENT DEFICIT TOTAL
------ --------- ---------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1991........... $387 $157,128 $ 3,736 $(186,268) $(25,017)
Common stock issued for purchases under
the Employee Stock Purchase Plan...... 3 991 -- -- 994
Restricted Stock Bonus Plan Right of
First Refusal......................... -- 55 -- -- 55
Exercise of stock options............... 7 1,476 -- -- 1,483
Preferred stock dividends............... -- -- -- (2,062) (2,062)
Accretion of redeemable preferred stock
discount.............................. -- -- -- (96) (96)
Translation adjustments for year........ -- -- 4,464 -- 4,464
Other................................... -- 1,548 -- -- 1,548
Net income for the year................. -- -- -- 26,921 26,921
------ --------- ---------- --------- --------
BALANCE AT SEPTEMBER 30, 1992........... 397 161,198 8,200 (161,505) 8,290
Common stock issued for purchases under
the Employee Stock Purchase Plan...... 4 1,253 -- -- 1,257
Exercise of stock options............... 5 997 -- -- 1,002
Preferred stock dividends............... -- -- -- (2,062) (2,062)
Accretion of redeemable preferred stock
discount.............................. -- -- -- (96) (96)
Translation adjustments for year........ -- -- (12,944) -- (12,944)
Other................................... -- (239 ) -- -- (239)
Net income for the year................. -- -- -- 18,591 18,591
------ --------- ---------- --------- --------
BALANCE AT SEPTEMBER 30, 1993........... 406 163,209 (4,744) (145,072) 13,799
Common stock issued for purchases under
the Employee Stock Purchase Plan...... 3 872 -- -- 875
Exercise of stock options............... 3 606 -- -- 609
Preferred stock dividends............... -- -- -- (2,062) (2,062)
Accretion of redeemable preferred stock
discount.............................. -- -- -- (96) (96)
Translation adjustments for year........ -- -- 4,475 -- 4,475
NBS stock issuance...................... 20 7,380 -- -- 7,400
Graham stock issuance................... 25 9,776 -- -- 9,801
Net income for the year................. -- -- -- 14,955 14,955
------ --------- ---------- --------- --------
BALANCE AT SEPTEMBER 30, 1994........... $457 $181,843 $ (269) $(132,275) $ 49,756
======= ========= ========= ========== =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 95
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION
The consolidated financial statements include the accounts of Anacomp, Inc.
(Anacomp or the Company) and its wholly-owned subsidiaries. Material
intercompany transactions have been eliminated. Certain amounts in the prior
year consolidated financial statements have been reclassified to conform to the
current presentation.
FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of Anacomp's international
operations are translated at the year-end exchange rates; income and expenses
are translated at the average exchange rates prevailing during the year.
Translation adjustments are accumulated in a separate section of stockholders'
equity. Foreign currency transaction gains and losses are included in net
income.
SEGMENT REPORTING
Anacomp operates in a single business segment -- providing equipment,
supplies and services for information management, including storage, processing
and retrieval.
REVENUE RECOGNITION
Sales of products and services are recorded based on shipment of products
or performance of services. Revenue from maintenance contracts is deferred and
recognized in earnings on a pro rata basis over the period of the agreement.
Revenues from the lease of equipment under sales-type leases are also recognized
as shipments are made. Accordingly, the present value of all payments due under
the lease contracts is recorded as revenue, cost of sales is charged with the
book value of the equipment plus installation costs, and future interest income
is deferred and recognized over the lease term.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis.
The cost of the inventories is distributed as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................................... $41,661 $38,289
Work in process.............................................. 5,903 7,105
Raw materials and supplies................................... 15,811 23,798
------- -------
$63,375 $69,192
======== ========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation and amortization
of property and equipment are generally provided under the straight-line method
for financial reporting purposes over the shorter of the estimated useful lives
or the lease terms. Tooling costs are amortized over the total estimated units
of production, not to exceed three years.
F-8
<PAGE> 96
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RESEARCH AND DEVELOPMENT
The costs associated with research and development programs are expensed as
incurred, and amounted to $2,973,000 in 1994, $2,525,000 in 1993, and $1,849,000
in 1992.
Included in "Other assets" on the accompanying Consolidated Balance Sheets
are unamortized deferred software costs of $19,745,000 and $14,134,000 as of
September 30, 1994 and 1993, respectively. Deferred software costs are the
capitalized costs of software products to be sold with COM systems in future
periods. The unamortized costs are evaluated for impairment each year by
determining net realizable value. Such costs are amortized under the
straight-line method or over the estimated units of sale, not to exceed five
years. See Note 12 for the amortization expense recorded during the past three
years.
INTANGIBLES
Excess of purchase price over net assets of businesses acquired (goodwill)
is amortized on the straight-line method over the estimated periods of future
demand for the product acquired. Goodwill, net of accumulated amortization, of
$5,202,000 relates to the Company's magnetics products, and is primarily being
amortized over 15 years. Goodwill, net of accumulated amortization, of
$249,167,000 relates to the Company's micrographics business, including
supplies, COM systems, micrographics services and maintenance services, and is
primarily being amortized over 40 years. Subsequent to acquisitions, the Company
continually evaluates whether later events and circumstances have occurred that
indicate that the remaining estimated useful life of goodwill remains
appropriate or the remaining balance of goodwill may not be recoverable. When
factors indicate that goodwill should be evaluated for possible impairment, the
Company uses an estimate of the related products undiscounted operating income
over the remaining life of goodwill in measuring whether the goodwill is
recoverable. If it is determined that impairment has occurred, the appropriate
charge to income will be recorded. Other intangibles represent the purchase of
the rights to provide microfilm or maintenance services to certain customers and
are being amortized on a straight-line basis over 10 years.
Balances are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Excess of purchase price over net assets of businesses
acquired................................................... $320,200 $342,663
Other intangibles............................................ 37,277 21,580
-------- --------
357,477 364,243
Less accumulated amortization................................ (77,870) (67,817)
-------- --------
$279,607 $296,426
========= =========
</TABLE>
At September 30, 1994, the aggregate amortization of intangibles by year
through fiscal year 1999 are: 1995 - $12,954,000; 1996 - $12,627,000;
1997 - $12,137,000; 1998 - $11,586,000; and 1999 - $10,998,000.
ACCRUED LEASE RESERVES
Other noncurrent liabilities include acquisition reserves established for
unfavorable facility lease commitments, vacant facilities and related future
lease costs. Total obligations recorded for these unfavorable lease commitments
and future lease and related costs at their estimated present value were
$12,460,000 and $19,402,000 at September 30, 1994 and 1993, respectively. The
current portion of these obligations was $3,427,000 and $6,081,000 as of
September 30, 1994 and 1993, respectively,
F-9
<PAGE> 97
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and is included in "Other accrued liabilities." The accretion recorded related
to these obligations has been reclassified from discontinued operations to
interest expense in the accompanying Consolidated Statements of Operations.
SALE/LEASEBACK TRANSACTIONS
Anacomp entered into sale/leaseback transactions of $11,870,000 in 1994 and
$9,858,000 in 1993 relating to COM systems installed in the data service
centers. Part of the proceeds were treated as fixed asset sales and the
remainder as sales of equipment. Revenues of $5,620,000 and $4,739,000 were
recorded respectively. All profits were deferred and are being recognized over
the applicable leaseback periods. In October 1994, Anacomp entered into
additional sale/leaseback transactions of $19,320,000 relating to COM systems
installed in the data service centers.
INCOME TAXES
In general, Anacomp's practice is to reinvest the earnings of its foreign
subsidiaries in those operations and to repatriate these earnings only when it
is advantageous to do so. It is expected that the amount of U.S. federal tax
resulting from a repatriation will not be significant. Accordingly, deferred tax
is not being recorded related to undistributed foreign earnings.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). FAS 109 mandates the liability method for computing deferred income taxes
and requires that the benefit of certain loss carryforwards be estimated and
recorded as an asset unless it is "more likely than not" that the benefit will
not be realized. Another principal difference is that changes in tax rates and
laws will be reflected in income from continuing operations in the period such
changes are enacted.
Anacomp adopted FAS 109 in the first quarter of fiscal 1994. Under FAS 109,
the Company has recorded a significant deferred tax asset to reflect the benefit
of loss carryforwards that could not be recognized under prior accounting rules.
The recording of this asset reduced goodwill and increased income as discussed
in more detail in Note 10.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. These temporary
investments, primarily repurchase agreements and other overnight investments,
are recorded at cost, which approximates market, and totalled $8,000,000,
$14,000,000, and $8,000,000 at September 30, 1994, 1993 and 1992, respectively.
NOTE 2 -- FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires disclosure of fair value
information for certain financial instruments. The carrying amounts for trade
receivables and payables are considered to be their fair values. The carrying
amounts
F-10
<PAGE> 98
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and fair values of the Company's other financial instruments at September 30,
1994, and 1993, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-Term Debt:
Revolving Loan.......................... $ 23,000 $ 23,000 $ 18,000 $ 18,000
Multicurrency Revolving Loan............ 20,665 20,665 21,468 21,468
Term Loans.............................. 40,261 40,261 59,087 59,087
Series A Senior Notes................... 3,548 3,548 12,537 12,537
Series B Senior Notes................... 67,500 74,410 75,000 85,840
15% Senior Subordinated Notes........... 219,384 249,357 218,490 260,884
13.875% Convertible Subordinated
Debentures........................... 20,922 23,232 20,723 23,232
9% Convertible Subordinated
Debentures........................... 10,479 10,479 10,479 10,479
Redeemable Preferred Stock................ 24,478 19,371 24,383 19,500
</TABLE>
The estimated fair values of Long-Term Debt and Redeemable Preferred Stock
are based on quoted market values or discounted future cash flows using current
interest rates.
NOTE 3 -- ACQUISITIONS:
During the three years ended September 30, 1994, Anacomp made the
acquisitions set forth below, each of which has been accounted for as a
purchase. The consolidated financial statements include the operating results of
each business from the date of acquisition. Pro forma results of operations have
not been presented because the effects of these acquisitions were not
significant.
FISCAL 1994
During fiscal 1994, Anacomp acquired 16 data service centers or the related
customer base (all were incorporated with existing Anacomp service centers), a
computer tape products company and the customer base of a micrographics supplies
business. Total consideration for these acquisitions was $39,141,000 of which
approximately $24,173,000 has been assigned to excess of purchase price over net
assets of businesses acquired and other intangible assets. In connection with
these acquisitions, Anacomp issued $17,201,000 of its common stock and increased
debt and accrued liabilities by $4,290,000.
NATIONAL BUSINESS SYSTEMS
One of the acquisitions included above was the purchase of the COM services
customer base of 14 data service centers operated by National Business Systems
(NBS), effective on January 3, 1994. The total cost of the acquisition was
$15,216,000, of which $14,216,000 has been assigned to the right to provide
microfilm services and is being amortized over 10 years. The acquisition cost
consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash paid to NBS shareholders................................... $ 7,400
Common stock issued to NBS shareholders......................... 7,400
Acquisition costs incurred...................................... 416
--------------
$ 15,216
==============
</TABLE>
F-11
<PAGE> 99
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Anacomp issued 1,973,000 common shares to the NBS shareholders at a price
of $3.75 per share. As part of the acquisition agreement, Anacomp agreed to
provide stock price protection at the end of two years on those shares so
designated by the NBS shareholders (1,128,000 of the shares issued are subject
to this protection).
On January 3, 1996, Anacomp will recalculate the share price based on the
average closing price of Anacomp stock for the 30 consecutive trading days
ending on December 29, 1995. The revised price will be used to adjust the number
of issued shares which are subject to the price protection. However, the revised
price to be used for the revaluation will not be higher than 150% or lower than
50% of the original $3.75 per share price.
If the per share price reached the 150% maximum, NBS shareholders would
return 376,000 shares to Anacomp. If the per share price reached the 50%
minimum, Anacomp would issue 1,128,000 additional shares to the NBS
shareholders. The adjustment in the number of shares issued in connection with
the NBS acquisition will not affect the recorded purchase price. Contingently
issuable shares under the arrangement are measured at each reporting period
based on the market price of the Company's stock at the close of the period
being reported on and are considered in the computation of earnings per share.
GRAHAM MAGNETICS
Another of the acquisitions included above was the purchase of Graham
Acquisition Corporation (Graham), a computer tape products company, which was
effective on May 4, 1994. The cost of the acquisition was $20,270,000, of which
$5,335,000 has been assigned to the excess of purchase price over net assets of
businesses acquired and is being amortized over 15 years. The acquisition cost
consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Common stock issued to Graham shareholders...................... $ 8,515
Common stock issued for a note payable.......................... 1,286
Issuance of note payable to a creditor.......................... 4,240
Cash paid to retire bank debt................................... 5,540
Acquisition costs incurred...................................... 689
--------------
$ 20,270
==============
</TABLE>
Anacomp issued 2,129,000 common shares to the Graham shareholders based on
an agreed upon per share price. However, to determine the acquisition cost, the
shares were valued at the market price on the date of closing.
The contingent consideration of $7,600,000 is payable in Anacomp common
stock and will be based upon defined future earnings through September 1997. The
contingent consideration will be computed based upon an agreed upon formula
using a minimum stock price of $2.00 per share and will be issuable beginning in
January 1995. The contingent consideration is not included in the acquisition
cost total above but is recorded when the future earnings requirements have been
met. The contingent consideration amount for fiscal 1994 is estimated to be
approximately $144,000.
Anacomp also issued 360,000 common shares to a Graham creditor at $3.57 per
share to reduce the note payable to $4,240,000. The note is unsecured and bears
interest at 10%. Principal payments of $345,000 plus accrued interest are
payable quarterly beginning July 15, 1994. The note holder may at any time
require Anacomp to prepay any amount of the note by issuing common stock. The
shares of common stock to be issued will equal the prepayment amount divided by
$3.57. The current outstanding note balance subject to prepayment was $3,895,000
at September 30, 1994.
F-12
<PAGE> 100
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Anacomp has reserved 3,800,000 shares of authorized common stock for the
contingent acquisition consideration and 1,091,000 shares of authorized common
stock for the contingent prepayment of the note.
FISCAL 1993
During fiscal 1993, Anacomp acquired four micrographics service centers
(all four were merged with existing Anacomp service centers) and certain assets
of a microfilm reader maintenance services business for a total consideration of
$4,434,000, of which approximately $1,904,000 has been assigned to excess of
purchase price over net assets of businesses acquired and other intangible
assets.
FISCAL 1992
During fiscal 1992, Anacomp acquired four micrographics service centers and
one microforms service center (all five were merged with existing Anacomp
service centers) and certain selected assets of a computer output microfilm
maintenance services business, for a total consideration of $9,602,000, of which
approximately $6,356,000 has been assigned to excess of purchase price over net
assets of businesses acquired and other intangible assets.
NOTE 4 -- SKC AGREEMENT:
In March 1992, Anacomp entered into a ten-year supply agreement (the Supply
Agreement) with SKC America, Inc., a New Jersey corporation (SKCA), and SKC
Limited (SKCL), an affiliated corporation of SKCA organized pursuant to the laws
of the Republic of Korea. SKCA and SKCL are collectively referred to as SKC.
Pursuant to the Supply Agreement, Anacomp purchases substantially all of its
requirements for magnetic-base polyester and coated duplicate microfilm from
SKC.
SKC is providing Anacomp with a $25 million trade credit arrangement which
expires December 31, 2001. The trade credit arrangement may be terminated prior
to the expiration in the event Anacomp restructures or refinances substantially
all of its subordinated debt or in the event Anacomp breaches the Supply
Agreement. The trade credit arrangement bears interest at 2.5% over the prime
rate of The First National Bank of Boston (7.75% as of September 30, 1994).
In October 1993, the Supply Agreement was extended to December 2003 and
amended to include finished microfilm products manufactured by SKC exclusively
for Anacomp. Concurrent with the modification of the Supply Agreement, SKC
purchased Anacomp's Sunnyvale, California, duplicate microfilm manufacturing
operation for $900,000, payable over five years. At September 30, 1994, $720,000
is due from SKC. Costs of $3,392,000 associated with the Supply Agreement have
been deferred and are being amortized over the life of the Supply Agreement.
F-13
<PAGE> 101
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
ESTIMATED USEFUL ---------------------
LIFE IN YEARS 1994 1993
---------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings.......................... 10-40 $ 7,590 $ 8,206
Office furniture............................ 3-12 12,553 11,647
Manufacturing equipment and tooling......... 2-10 28,901 34,048
Field support spare parts................... 4-7 25,555 27,921
Leasehold improvements...................... Term of Lease 12,826 15,957
Equipment leased to others.................. 2-4 1,824 2,797
Processing equipment........................ 3-12 78,094 71,346
--------- ---------
167,343 171,922
Less accumulated depreciation and
amortization.............................. (100,574) (105,523)
--------- ---------
$ 66,769 $ 66,399
========== ==========
</TABLE>
NOTE 6 -- LONG-TERM RECEIVABLES:
Long-term receivables consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Lease contracts receivable................................... $21,160 $21,634
Other lease receivables...................................... -- 204
Notes receivable from asset sales............................ 1,015 856
Other........................................................ 2,229 2,414
------- -------
24,404 25,108
Less current portion......................................... (8,021) (7,489)
------- -------
$16,383 $17,619
======== ========
</TABLE>
Other long-term receivables include $1,116,000 and $1,243,000 at September
30, 1994 and 1993, respectively, due from officers.
F-14
<PAGE> 102
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Lease contracts receivable result from customer leases of products under
agreements which qualify as sales-type leases. Annual future lease payments
under sales-type leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------
(IN THOUSANDS)
<S> <C>
1995.......................................................... $ 9,003
1996.......................................................... 6,354
1997.......................................................... 5,211
1998.......................................................... 2,618
1999.......................................................... 1,541
---------------
24,727
Less deferred interest........................................ (3,567)
---------------
$21,160
===============
</TABLE>
NOTE 7 -- LONG-TERM DEBT:
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revolving Loan at 7.81% and 5.94%, respectively.............. $ 23,000 $ 18,000
Multicurrency Revolving Loan at 7.67% and 8.40%,
respectively............................................... 20,665 21,468
Term Loans at 7.56% and 6.06%, respectively.................. 40,261 59,087
Series A Senior Notes at 7.56% and 6.06%, respectively....... 3,548 12,537
Series B Senior Notes at 12.25%.............................. 67,500 75,000
15% Senior Subordinated Notes (net of unamortized discount of
$5,516 and $6,410, respectively)........................... 219,384 218,490
13.875% Convertible Subordinated Debentures due January 15,
2002 (net of unamortized discount of $2,309 and $2,508,
respectively).............................................. 20,922 20,723
9% Convertible Subordinated Debentures due January 15,
1996....................................................... 10,479 10,479
Installment note payable at 10% due July 15, 1997............ 3,895 --
Other........................................................ 2,193 3,309
-------- --------
411,847 439,093
Less current portion......................................... (45,222) (34,355)
-------- --------
$366,625 $404,738
========= =========
</TABLE>
On March 26, 1993, the Company completed amendments to its Senior Credit
Agreements and its 15% Senior Note Indenture. The provisions of these amendments
include the elimination of the requirement for the Company to make Additional
Amortization Payments as defined, allowance for the Company to use up to 50% of
its annual Excess Cash Flow to repurchase subordinated debt and the creation of
a Multicurrency Revolving Loan due in October 1995. The amendments also reduced
the existing Revolving Loan from $50 million to $43 million at March 26, 1993
with a further reduction to $40 million on September 30, 1994 and provide for a
final due date of October 1995. Additionally, the amendments provided for the
Company to retain specified sale proceeds in connection with the sale/leaseback
of certain fixed assets and rescheduled the remaining amortization payments due
on the Term Loan in a manner favorable to the Company.
F-15
<PAGE> 103
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Revolving Loan carries an interest rate of 275 basis points over the
one- , two-, three- or six-month reserve adjusted London Interbank Offered Rate
(LIBOR), selected at the Company's option.
The Multicurrency Revolving Loan is available to the Company and certain of
its foreign subsidiaries in U.S. dollars, British pounds, French francs, German
marks, Italian lira and Swedish krona in an equivalent amount of $30 million,
and carries an interest rate of 275 basis points over the one-, two-, three- or
six-month reserve adjusted London Interbank Offered Rate (LIBOR) of the borrowed
currency, selected at the Company's option.
The Term Loans and Series A Senior Notes carry an interest rate of 275
basis points over the three-month LIBOR and have scheduled installment payments
of $10.3 million in October 1994; $12.5 million in April 1995; $12.5 million in
October 1995; and $8.5 million in April 1996.
The Series B Senior Notes carry an interest rate of 12.25% and require
semi-annual installment payments commencing April 26, 1994, in amounts
increasing from 10% to 16.67% of the original principal amount.
In addition to scheduled payments, the Company is required to make annual
prepayments of the Revolving Loan, the Term Loans and Series A Senior and Series
B Senior Notes (the Senior Debt) in amounts between 50% and 75% of the Company's
Excess Cash Flow, as defined, depending on the amount of Excess Cash Flow used
to repurchase subordinated debt per the provisions of the March 1993 Senior Debt
Agreement amendments. Also, subject to certain exceptions, 100% of proceeds from
the sale of assets must be applied to repayment of the Senior Debt.
The 15% Senior Subordinated Notes (the 15% Notes) were issued in 224,900
units of $1,000 and 30.351 detachable warrants to purchase Anacomp Common Stock
at $1.873 per share. The 15% Notes are callable given 30 days notice beginning
November 1995, at 107.5% of the fully accreted value, and declining to 100% of
the fully accreted value by November 1998. Mandatory sinking fund payments of
$72,000,000 are due November 1998, and November 1999. After the Term Loans and
the Series A Senior Notes and Series B Senior Notes are fully repaid and cash
collateralization of any remaining Revolving Credit Facility Commitment occurs,
additional prepayments equal to 75% of Excess Cash Flow, as defined, are also
required.
The Master Agreement, which governs the Term Loans, the Revolving Credit
Commitments, and the Series A Senior Notes and Series B Senior Notes, gives the
Senior Creditors a security interest in all of the assets of Anacomp; contains
various limitations on advances and investments made by the Company; prohibits
or restricts, without prior approval of the Senior Creditors, mergers,
acquisitions, change of control, certain types of lease transactions, payment of
dividends on Anacomp Common Stock, and voluntary payment in cash of any
principal amount of Anacomp's subordinated debt; and contains certain other
restrictive covenants related to net worth, cash flow, fixed charges, debt
incurrence, capital expenditures and the current ratio. Subsequent to September
30, 1994, Anacomp completed an amendment to the Master Agreement lowering the
Interest Coverage Ratio covenant for September 30, 1994, and all of fiscal year
1995. Based on information currently available, the Company is uncertain as to
whether it will be able to satisfy certain of the restrictive covenants in place
as of September 30, 1995. The Company believes that in connection with the
replacement of the revolving credit facilities which expire in October 1995,
these restrictive covenants will be modified or eliminated such that the Company
expects to be in compliance with its covenants under the debt agreements in
place at that time. The Master Agreement also provides for the availability of
letters of credit in an amount up to $15,000,000. As of September 30, 1994,
letters of credit for approximately $9,000,000 have been issued which reduce the
amount of available revolver. A default under the Master Agreement, which is not
remedied within the applicable grace period, would result in an event of default
permitting the acceleration of all senior debt upon the approval of the
requisite senior lenders.
F-16
<PAGE> 104
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with entering into the SKC Supply Agreement discussed in
Note 4, Anacomp sought and received from its senior lenders certain amendments
to its senior loan documents including certain financial covenant adjustments.
The 15% Notes are subordinated to the payment in full of the principal and
interest on all Senior indebtedness. The 15% Notes rank pari passu to the
remaining 12.25% Notes and 8.25% Senior Subordinated Notes (if and when issued)
discussed in Note 8. Additionally, they are senior to the outstanding 9%
Convertible Subordinated Debentures due 1996 and the 13.875% Convertible
Subordinated Debentures due 2002.
The 15% Note Indenture contains covenants relating to net worth, and
limitations on restricted payments, liens, transactions with affiliates,
incurrence of additional debt, asset sales, acquisitions, and change of control.
The 15% Note holders will be granted a security interest in all of Anacomp's
assets upon the repayment of all Senior Secured Indebtedness.
The 13.875% Convertible Subordinated Debentures require mandatory sinking
fund payments of $3,750,000 annually commencing January 15, 1999, unless
sufficient debentures have been converted or repurchased by Anacomp. The
debentures are convertible into 1,327,542 shares of Anacomp Common Stock at a
conversion price of $17.50 per common share, and allow optional redemption at a
price of 100% at any time. Anacomp International, N.V., a wholly-owned
Netherlands Antilles subsidiary, has issued the 9% Convertible Subordinated
Debentures due January 15, 1996, guaranteed by Anacomp. The 9% debentures are
convertible into 663,227 shares of Anacomp Common Stock at a conversion price of
$15.80 per common share. In the event of certain changes affecting United States
or Netherlands Antilles taxation, the interest rate will be increased for any
taxes required to be withheld or, at Anacomp's option, all debentures
outstanding may be redeemed at 100% of the principal amount plus accrued
interest.
The maturities of long-term debt in each of the next five years and
thereafter will be as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
--------------
(IN THOUSANDS)
<S> <C>
1995.......................................................... $ 45,222
1996.......................................................... 87,505
1997.......................................................... 22,510
1998.......................................................... 11,294
1999.......................................................... 74,561
2000 and thereafter........................................... 170,755
--------------
$411,847
============
</TABLE>
NOTE 8 -- REDEEMABLE PREFERRED STOCK:
Anacomp issued in a private placement in 1987, 500,000 shares of 8.25%
Cumulative Convertible Redeemable Exchangeable Preferred Stock (the Preferred
Shares). Each Preferred Share has a preference value of $50 and is convertible
into Anacomp common stock at a conversion price of $7.50. The redeemable
preferred stock was recorded at fair value on the date of issuance less issue
costs. The excess of the preference value over the carrying value is being
accreted by periodic charges to retained earnings over the life of the issue.
The Preferred Shares may be redeemed by Anacomp at prices declining from
105.78% to 100% of preference value, or earlier if the price of Anacomp common
stock remains at 160% of the conversion price for 20 of 30 consecutive trading
days. On March 15, 2000 and 2001, Anacomp must redeem at the
F-17
<PAGE> 105
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
preference value 125,000 shares each year unless a sufficient number of shares
has already been redeemed or converted. All remaining outstanding shares must be
redeemed by March 1, 2002.
At any dividend payment date after March 15, 1990, Anacomp may exchange the
Preferred Shares for an equal face amount of 8.25% Senior Subordinated Notes due
March 1, 2002 (the Exchange Debentures). Except for certain shareholder rights,
the Exchange Debentures will carry terms similar to the Preferred Shares. There
were no such exchanges as of September 30, 1994.
NOTE 9 -- CAPITAL STOCK:
SHAREHOLDER RIGHTS PLAN
The Company has a Shareholder Rights Plan which was adopted by the Board of
Directors on February 4, 1990. The Rights Plan provides that each share of the
Company's common stock has associated with it a Common Stock Purchase Right.
Each right entitles the registered holder to purchase from the Company one-tenth
of a share of Anacomp common stock, par value $.01 per share, at a cash exercise
price of $3.20 subject to adjustment.
The rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the outstanding shares of common stock of
Anacomp, or announces a tender or exchange offer upon consummation of which,
such person or group would beneficially own 30% or more of the Company's common
stock. If any person acquires 15% of Anacomp's common stock, the rights would
entitle stockholders (other than the 15% acquiror) to purchase at $32 (as such
price may be adjusted) a number of shares of Anacomp's common stock which would
have a market value of $64 (as such amount may be adjusted). In the event that
Anacomp is acquired in a merger or other business combination, the rights would
entitle the stockholders (other than the acquiror) to purchase securities of the
surviving company at a similar discount.
Anacomp can redeem the rights at $.001 per right at any time until the
tenth day following the announcement that a 15% ownership position has been
acquired. Under certain circumstances set forth in the Rights Plan, the decision
to redeem shall require the concurrence of a majority of the Continuing
Directors (as such term is defined in the Rights Plan). The rights expire
February 26, 2000.
PREFERRED STOCK
Anacomp has authorized 1,000,000 shares of preferred stock, of which
500,000 shares of redeemable preferred stock were issued and outstanding at
September 30, 1994 and 1993 (see Note 8).
STOCK OPTION PLANS
Anacomp's stock option plans provide that the exercise price of the options
be determined by the Board of Directors (the Board), and in no case be less than
100% of fair market value at the time of grant for qualified options, or less
than the par value of the stock for non-qualified options. An option may be
exercised subject to such restrictions as the Board may impose at the time the
option is granted. In any event, each option shall terminate not later than 10
years after the date on which it is granted, except for certain non-qualified
options which shall terminate not later than 20 years after the date on which
granted.
F-18
<PAGE> 106
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Shares available for grant under the plans were 725,827 and 895,145 at
September 30, 1994 and 1993, respectively. Options outstanding, of which
3,310,464 are exercisable as of September 30, 1994, are as follows:
<TABLE>
<CAPTION>
OPTION PRICE PER
SHARES SHARE
--------- -------------------
<S> <C> <C> <C> <C>
Outstanding at September 30, 1992...................... 3,680,709 $1.000 - $7.875
Granted.............................................. 1,308,834 2.750 - 9.000
Cancelled............................................ (72,839) 2.000 - 7.875
Expired.............................................. (38,701) 2.000 - 7.875
Exercised............................................ (463,475) 2.000 - 3.500
--------- -------------------
Outstanding at September 30, 1993...................... 4,414,528 1.000 - 9.000
Granted.............................................. 205,381 2.750 - 4.000
Cancelled............................................ (81,908) 1.000 - 7.875
Expired.............................................. (23,096) 2.000 - 7.875
Exercised............................................ (306,646) 1.000 - 3.375
--------- -------------------
Outstanding at September 30, 1994...................... 4,208,259 $1.000 - $9.000
========= ===================
</TABLE>
WARRANTS
In October 1990, Anacomp issued 6,825,940 warrants to holders of the 15%
Senior Subordinated Notes. Each warrant entitles the holder to purchase one
common share at a price of $1.873 and is exercisable through the date of
expiration, November 11, 2000. Anacomp filed a shelf registration statement with
respect to the warrants which became effective on February 25, 1991.
RESTRICTED STOCK BONUS PLAN
In December 1984, Anacomp adopted a Restricted Stock Bonus Plan (the Plan)
allowing for the issuance of up to 2,800,000 shares of Anacomp common stock to
certain employees as determined by the Compensation Committee of the Board. The
purposes of the Plan are to assist Anacomp in retaining key employees, to
provide additional motivation for those employees to continue their best efforts
on behalf of Anacomp and to conserve cash. At September 30, 1994, 1,246,819
shares were issued and outstanding under the Plan. All issued and outstanding
shares related to the plan were awarded from 1985 through 1988. All vesting in
the shares was completed by September 30, 1988. No shares have been issued since
1988. Anacomp retained a right of first refusal to repurchase these shares at
market value on the date of sale less 80% of market value on the date of grant.
At the time the shares were granted, they were recorded at 20% of the market
value at the date of grant. This cost was amortized as compensation expense over
the various vesting periods involved. When the stock is offered to the Company
for resale in the marketplace, the Company will record the difference between
the proceeds from the sale of the shares and the amount paid to the employee as
paid in capital.
OTHER ITEMS
Under an Employee Stock Purchase Plan, Anacomp may offer to sell common
stock to its employees. Purchases of these shares are made by employee
participants periodically at 85% of the market price on the date of offer or
exercise, whichever is lower.
At September 30, 1994, approximately 23,900,000 shares of Anacomp common
stock are reserved for exercise of stock options, conversion of convertible
subordinated debentures, purchases by stock purchase plan participants,
conversion of preferred stock, exercise of warrants, Graham acquisition
agreement requirements and other corporate purposes.
F-19
<PAGE> 107
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- INCOME TAXES:
The components of income before income taxes and extraordinary credits
were:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States....................................... $ 7,143 $10,761 $15,748
Foreign............................................. 8,212 9,730 16,673
------- ------- -------
$15,355 $20,491 $32,421
======== ======== ========
</TABLE>
The components of income tax expense after utilization of net operating
loss carryforwards and the adjustment of the tax reserves are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal............................................. $ -- $ 5,800 $ 6,000
Foreign............................................. 3,300 4,800 6,400
State............................................... 300 1,900 1,800
------- ------- -------
3,600 12,500 14,200
Tax reserve adjustment.............................. (1,200) (3,700) --
Deferred............................................ 6,000 -- --
------- ------- -------
Continuing operations............................... 8,400 8,800 14,200
Extraordinary credit, reduction of income taxes
arising from carryforward of prior year's
operating losses.................................. -- (6,900) (8,700)
------- ------- -------
$ 8,400 $ 1,900 $ 5,500
======== ======== ========
</TABLE>
The following is a reconciliation of the United States federal statutory
rate to the rate used for the provision for income taxes:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1994 1993 1992
---- ----- ----
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. statutory rate........................................ 35.0% 34.8% 34.0%
Tax reserve adjustment..................................... (7.8)% (18.1)% --
Nontaxable foreign exchange gains.......................... -- -- (3.3)%
Refunds from state tax audits (net of federal income
tax)..................................................... -- -- (2.4)%
State and foreign income taxes (net of federal income tax
benefit)................................................. 2.4% 5.5% 4.5%
Other foreign taxes (difference between foreign and
U.S. rates).............................................. 2.9% 4.9% 3.3%
Nondeductible amortization and write-off of intangible
assets................................................... 20.7% 14.5% 9.0%
Other...................................................... 1.5% 1.3% (1.3)%
---- ----- ----
54.7% 42.9% 43.8%
==== ===== ====
</TABLE>
The Company adopted FAS 109 in the first quarter of fiscal 1994 and
recorded a deferred tax asset of $95 million representing the federal and state
tax savings from net operating loss carryforwards (NOLs) and tax credits. The
Company also recorded a valuation allowance of $60 million reducing the deferred
tax asset to a net $35 million. Recognition of the deferred tax asset reduced
goodwill by
F-20
<PAGE> 108
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$27 million and provided a cumulative effect increase to income of $8 million.
During 1994, the net deferred tax asset was reduced to $29 million, reflecting
usage of the asset to reduce income taxes payable by $6 million. Future
utilization, if any, of NOLs and tax credits for which a valuation allowance was
provided, will further reduce goodwill up to $37 million, increase accrued
income taxes up to $13 million and increase capital in excess of par value up to
$7 million.
The components of deferred tax assets and liabilities at September 30, 1994
and October 1, 1993 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
NET DEFERRED TAX ASSET 1994 1993
---------------------------------------------------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C>
Tax effects of future tax deductible differences related
to:
Inventory reserves...................................... $ 2,600 $ 2,900
Depreciation............................................ 1,600 1,400
Building reserves....................................... 5,000 7,400
EPA reserve............................................. 2,300 3,400
Sale/leaseback of assets................................ 900 1,800
Other net deductible differences........................ 4,100 4,300
Tax effects of future taxable differences related to:
Leases.................................................. (4,500) (4,600)
Capitalized software.................................... (6,000) (4,600)
------------- ----------
Net tax effects of future differences..................... 6,000 12,000
------------- ----------
Tax effects of carryforward benefits:
Federal net operating loss carryforwards................ 73,000 80,000
Federal general business tax credits.................... 3,000 3,000
Foreign tax credits..................................... 4,000 --
------------- ----------
Tax effects of carryforwards.............................. 80,000 83,000
------------- ----------
Tax effects of future differences and carryforwards....... 86,000 95,000
Less valuation allowance.................................. (57,000) (60,000)
------------- ----------
Net deferred tax asset.................................... $ 29,000 $ 35,000
=========== =========
</TABLE>
At September 30, 1994, the Company has NOLs of approximately $200 million
available to offset future taxable income. This amount will increase to $217
million as certain timing differences reverse in future periods. The Company
also has tax credit carryforwards of $3 million available to reduce future tax
liabilities, including $1 million of preacquisition tax credits. The NOLs expire
commencing in 1995 ($2 million) with remaining amounts in various periods
through 2007. The tax credit carryforwards expire substantially in 1997.
During 1994 and 1993, the Company settled various income tax matters,
including issues associated with the 1988 Xidex acquisition. Settlement of these
issues and other considerations resulted in a favorable adjustment to federal
and foreign tax reserves of $1.2 million and $3.7 million, respectively. The
adjustments are reflected as a credit to the income tax expense from continuing
operations.
In 1993 and 1992 the provisions for income taxes include amounts which are
offset by the utilization of federal and foreign NOLs. The tax benefits from
utilization of NOLs is reported as an extraordinary credit in the Consolidated
Statements of Operations. The net tax provisions result from foreign and state
income taxes which cannot be reduced by NOLs from prior years.
F-21
<PAGE> 109
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the cumulative effect adjustment on the statement of
operations, the adoption of FAS 109 reduced goodwill amortization expense by
$773,000 during 1994. Accordingly, income from continuing operations and net
income increased by these same amounts. Earnings per common and common
equivalent share increased by $.02.
If FAS 109 had been adopted beginning October 1, 1991, the following pro
forma results would have been reported for the periods ended (in thousands
except per share amounts):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
(PRO FORMA) (PRO FORMA) (PRO FORMA)
Income from operations........................... $ 6,913 $12,422 $18,952
Net income....................................... 6,913 12,422 42,552
Earnings per common and common equivalent
share.......................................... .10 .24 .97
</TABLE>
NOTE 11 -- COMMITMENTS AND CONTINGENCIES:
Anacomp has commitments under long-term operating leases, principally for
building space and data service center equipment. Lease terms generally cover
periods from five to twelve years. The following summarizes the future minimum
lease payments under all non-cancellable operating lease obligations, including
the unfavorable lease commitments and vacant facilities discussed in Note 1,
which extend beyond one year:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
--------------
(IN THOUSANDS)
<S> <C>
1995.................................................................. $ 28,097
1996.................................................................. 23,693
1997.................................................................. 15,360
1998.................................................................. 11,357
1999.................................................................. 5,768
2000 and thereafter................................................... 31,846
--------------
116,121
Less liabilities recorded as of September 30, 1994 related to
unfavorable lease commitments and future lease costs for vacant
facilities.......................................................... (12,330)
--------------
$103,791
============
</TABLE>
The total of future minimum rentals to be received under noncancellable
subleases related to the above leases is $8,740,000. No material losses in
excess of the liabilities recorded are expected in the future.
In October 1992, Anacomp and Xerox Corp. announced a joint effort to
develop a Xerox Compatibility Feature (XCF) that will enable the XFP 2000 to
process and image Xerox high speed printing data streams. This effort will
result in the XFP 2000 being able to output virtually all Xerox print data
streams, including those containing fonts, forms, logos, signatures and other
images on microfiche. At September 30, 1994, $350,000 remains to be paid related
to services to be performed.
Anacomp also executed a software license agreement with Xerox to use the
XCF. The agreement obligates Anacomp to pay Xerox $1,277,000 as a prepayment for
100 software license fees. The payment is due upon final acceptance of the XCF
scheduled for January 1995.
F-22
<PAGE> 110
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1993, Anacomp and Pennant Systems, a division of IBM, announced
a joint effort to develop software which will allow Anacomp's XFP 2000 to
process and image IBM Advanced Function Presentation (AFP) formatted data. This
program will result in the XFP 2000 being able to interpret AFP data streams,
including, as with the Xerox program, those containing fonts, logos, signatures
and other images on microfiche.
As consideration for the development of the AFP, Anacomp agreed to pay
Pennant Systems a development fee of $6,500,000 payable quarterly from January
1994, through April 1995. At September 30, 1994, $5,250,000 remains to be paid:
$2.5 million has been accrued; and $2.75 million relates to services to be
performed.
Anacomp also must pay Pennant Systems royalty payments for the licensed
system installations over the next six years. The minimum royalty payments for
years one through three is $1,500,000 per year and $1,000,000 per year for years
four through six. In addition, Anacomp must pay Pennant Systems for ongoing
system support which begins in December 1995 and continues for 10 years. The
minimum system support payments over the 10-year period are $5,671,000.
During 1994, the Company sold $5.9 million of lease receivables. Under the
terms of the sales, the purchasers have recourse to the Company should the
receivables prove to be uncollectible. The amount of the recourse at September
30, 1994 is $3.4 million.
Anacomp also is involved in various claims and lawsuits incidental to its
business and believes that the outcome of any of those matters will not have a
material adverse effect on its consolidated financial position or results of
operations.
NOTE 12 -- SUPPLEMENTARY INCOME STATEMENT INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs............................. $12,759 $11,765 $12,227
Depreciation and amortization:
Property and equipment........................... 17,524 17,149 20,531
Deferred software costs.......................... 3,673 2,873 1,619
Intangible assets................................ 13,418 12,984 12,419
Rent and lease expense.............................. 19,371 19,312 18,825
</TABLE>
NOTE 13 -- OTHER ACCRUED LIABILITIES:
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred profit on sale/leaseback transactions................ $ 9,165 $ 4,890
EPA reserve................................................... 6,420 9,530
Accrued lease reserve......................................... 3,427 6,081
Other......................................................... 16,015 16,937
------- -------
$35,027 $37,438
======== ========
</TABLE>
F-23
<PAGE> 111
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Xidex was designated by the United States Environmental Protection Agency
(EPA) as a potentially responsible party for investigatory and cleanup costs
incurred by state and federal authorities involving locations included on a list
of EPA's priority sites for investigation and remedial action under the federal
Comprehensive Environmental Response, Compensation, and Liability Act. The EPA
reserve noted above relates to its estimated liability for cleanup costs for the
aforementioned location and other sites. No material losses are expected in
excess of the liabilities recorded above.
NOTE 14 -- EARNINGS PER SHARE:
The computation of earnings per share is based upon the weighted average
number of common shares outstanding during the period plus (in periods in which
they have a dilutive effect) the effect of common shares contingently issuable,
primarily from stock options, exercise of warrants and acquisitions. Fully
diluted earnings per share also reflect additional dilution related to stock
options, due to the use of the market price at the end of the period, when
higher than the average price for the period.
The weighted average number of common and common equivalent shares used to
compute earnings per share is:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
For earnings per common and common equivalent
share....................................... 46,691,337 42,749,933 41,712,865
For earnings per share assuming full
dilution.................................... 46,890,599 42,964,380 42,771,365
</TABLE>
NOTE 15 -- INTERNATIONAL OPERATIONS:
Anacomp's international operations are conducted principally through
subsidiaries, a substantial portion of whose operations are located in Western
Europe. Information as to U.S. and international operations for the years ended
September 30, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
U.S. INTERNATIONAL ELIMINATION CONSOLIDATED
-------- ------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1994
Customer sales........................ $421,339 $ 171,260 $ -- $592,599
Inter-geographic...................... 23,726 -- (23,726) --
-------- ------------- ----------- ------------
Total sales........................... $445,065 $ 171,260 $ (23,726) $592,599
========= ========== ========= ==========
Operating income...................... $ 60,794 $ 18,783 $ -- $ 79,577
========= ========== ========= ==========
Identifiable assets................... $551,147 $ 107,492 $ -- $658,639
========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. INTERNATIONAL ELIMINATION CONSOLIDATED
-------- ------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1993
Customer sales........................ $414,726 $ 175,482 $ -- $590,208
Inter-geographic...................... 26,101 -- (26,101) --
-------- ------------- ----------- ------------
Total sales........................... $440,827 $ 175,482 $ (26,101) $590,208
========= ========== ========= ==========
Operating income...................... $ 66,883 $ 21,751 $ -- $ 88,634
========= ========== ========= ==========
Identifiable assets................... $539,328 $ 104,220 $ -- $643,548
========= ========== ========= ==========
</TABLE>
F-24
<PAGE> 112
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
U.S. INTERNATIONAL ELIMINATION CONSOLIDATED
-------- ------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1992
Customer sales........................ $433,951 $ 194,989 $ -- $628,940
Inter-geographic...................... 35,806 -- (35,806) --
-------- ------------- ----------- ------------
Total sales........................... $469,757 $ 194,989 $ (35,806) $628,940
========= ========== ========= ==========
Operating income...................... $ 71,312 $ 28,990 $ -- $100,302
========= ========== ========= ==========
Identifiable assets................... $569,132 $ 112,429 $ -- $681,561
========= ========== ========= ==========
</TABLE>
NOTE 16 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL 1994
Revenues................................ $136,949 $146,569 $145,581 $163,500
Gross profit............................ 41,337 42,049 40,945 47,785
Income from operations.................. 1,401 942 2,125 2,425
Cumulative effect on prior years of a
change in accounting for income
taxes................................. 8,000 -- -- --
-------- -------- -------- --------
Net income.................... $ 9,401 $ 942 $ 2,125 $ 2,427
========= ========= ========= =========
Earnings per common share (primary):
Income from operations before
cumulative effect of accounting
change............................. $ .02 $ .01 $ .03 $ .04
Net income.................... .20 .01 .03 .04
Earnings per common share (fully
diluted):
Income from operations before
cumulative effect of accounting
change............................. $ .02 $ .01 $ .03 $ .04
Net income.................... .20 .01 .03 .04
</TABLE>
F-25
<PAGE> 113
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL 1993
Revenues................................ $141,152 $144,284 $140,409 $164,363
Gross profit............................ 42,039 44,689 43,686 55,042
Income from operations.................. 1,312 1,501 2,109 6,769
Extraordinary credit-reduction of income
taxes arising from utilization of tax
loss carryforwards.................... 700 900 1,100 4,200
-------- -------- -------- --------
Net income.................... $ 2,012 $ 2,401 $ 3,209 $ 10,969
========= ========= ========= =========
Earnings per common share (primary):
Income from operations before
extraordinary credit............... $ .02 $ .02 $ .03 $ .15
Net income.................... .04 .04 .06 .25
Earnings per common share (fully
diluted):
Income from operations before
extraordinary credit............... $ .02 $ .02 $ .03 $ .15
Net income.................... .04 .04 .06 .25
</TABLE>
NOTE 17 -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
The following is a summary of activity in the Company's valuation and
qualifying accounts and reserves for the fiscal years ended September 30, 1994,
1993 and 1992:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING ACCOUNTING COSTS AND END OF
DESCRIPTION OF PERIOD CHANGE EXPENSES DEDUCTIONS PERIOD
------------------------------------ ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994:
Deferred tax asset valuation
allowance......................... $ -- $ 60,000(1) $ -- $3,000(2) $ 57,000
Allowance for doubtful accounts..... 4,245 -- (268) 427(3) 3,550
---------- ---------- ---------- ---------- ----------
$4,245 $ 60,000 $ (268) $3,427 $ 60,550
======== ========= ========= ========= ========
YEAR ENDED SEPTEMBER 30, 1993:
Allowance for doubtful accounts..... $7,365 $ -- $ 669 $3,789(3) $ 4,245
======== ========= ========= ========= ========
YEAR ENDED SEPTEMBER 30, 1992:
Allowance for doubtful accounts..... $8,619 $ -- $ (674) $ 580(3) $ 7,365
======== ========= ========= ========= ========
</TABLE>
---------------
(1) Estimate of deferred tax asset not expected to be realized upon adoption of
FAS 109.
(2) Reduction in available NOL.
(3) Uncollectible accounts written off, net of recoveries.
F-26
<PAGE> 114
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1994
------------ -------------
(NOTE 3)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 5,337 $ 19,871
Accounts and notes receivable, less allowances for doubtful
accounts of $3,447 and $3,550, respectively................ 113,111 117,441
Current portion of long-term receivables...................... 8,630 8,021
Inventories................................................... 66,692 63,375
Prepaid expenses and other.................................... 7,048 5,421
------------ -------------
Total current assets.................................. 200,818 214,129
------------ -------------
Property and equipment, at cost less accumulated depreciation
and amortization.............................................. 57,750 66,769
Long-term receivables, net of current portion................... 20,042 16,383
Excess of purchase price over net assets of businesses acquired
and other intangibles, net.................................... 276,969 279,607
Deferred tax asset, net of valuation allowance of $57,000....... 29,000 29,000
Other assets.................................................... 51,784 52,752
------------ -------------
$636,363 $ 658,639
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................. $ 95,806 $ 45,222
Accounts payable.............................................. 79,686 82,790
Accrued compensation, benefits and withholdings............... 11,964 16,573
Accrued income taxes.......................................... 9,249 9,000
Accrued interest.............................................. 11,792 19,701
Other accrued liabilities..................................... 45,895 35,027
------------ -------------
Total current liabilities............................. 254,392 208,313
------------ -------------
Long-term debt, net of current portion.......................... 300,001 366,625
Other noncurrent liabilities.................................... 8,561 9,467
------------ -------------
Total noncurrent liabilities.......................... 308,562 376,092
------------ -------------
Redeemable preferred stock, $.01 par value, issued and
outstanding 500,000 shares (aggregate preference value of
$25,000)...................................................... 24,502 24,478
------------ -------------
Stockholders' Equity:
Common stock, $.01 par value; authorized 100,000,000 shares;
45,895,285 and 45,728,505 issued, respectively............. 459 457
Capital in excess of par value of common stock................ 182,223 181,843
Cumulative translation adjustment............................. (1,241) (269)
Accumulated deficit........................................... (132,534) (132,275)
------------ -------------
Total stockholders' equity............................ 48,907 49,756
------------ -------------
$636,363 $ 658,639
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-27
<PAGE> 115
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1994 1993
-------- --------
(NOTE 3)
<S> <C> <C>
Revenues:
Services provided.................................................. $ 54,880 $ 54,424
Equipment and supply sales......................................... 96,932 82,525
-------- --------
151,812 136,949
-------- --------
Operating costs and expenses:
Costs of services provided......................................... 38,122 37,274
Costs of equipment and supplies sold............................... 71,601 58,338
Selling, general and administrative expenses....................... 24,196 21,757
-------- --------
133,919 117,369
-------- --------
Income before interest, other income, income taxes, and cumulative
effect of accounting change........................................ 17,893 19,580
-------- --------
Interest income...................................................... 475 777
Interest expense and fee amortization................................ (17,949) (17,086)
Other income (expense)............................................... 162 (270)
-------- --------
(17,312) (16,579)
-------- --------
Income before income taxes and cumulative effect of accounting
change............................................................. 581 3,001
Provision for income taxes........................................... 300 1,600
-------- --------
Income before cumulative effect of accounting change................. 281 1,401
Cumulative effect on prior years of a change in accounting for income
taxes.............................................................. -- 8,000
-------- --------
Net income........................................................... 281 9,401
Preferred stock dividends and discount accretion..................... 540 540
-------- --------
Net income (loss) available to common stockholders......... $ (259) $ 8,861
========= =========
Earnings (loss) per common and common equivalent share:
Income (loss) from operations (net of preferred stock dividends and
discount accretion)............................................. $ (.01) $ .02
Cumulative effect on prior years of a change in accounting for
income taxes.................................................... -- .18
-------- --------
Net income (loss).......................................... $ (.01) $ .20
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-28
<PAGE> 116
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1994 1993
-------- --------
(NOTE 3)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 281 $ 9,401
Adjustments to reconcile net income to net cash used in operating
activities:
Cumulative effect of a change in accounting for income taxes...... -- (8,000)
Depreciation and amortization..................................... 11,515 9,278
Loss on disposition of assets..................................... 72 69
Change in assets and liabilities, net of acquisitions:
Decrease (increase) in accounts and long-term receivables....... (912) 12,879
Increase in inventories and prepaid expenses.................... (5,294) (220)
Increase in other assets........................................ (3,588) (3,485)
Decrease in accounts payable and accrued expenses............... (9,828) (20,297)
Decrease in other noncurrent liabilities........................ (906) (921)
-------- --------
Net cash used in operating activities........................ (8,660) (1,296)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets......................................... 14,519 7,018
Purchases of property, plant and equipment........................... (3,236) (3,039)
Payments to acquire companies and customer rights.................... (542) (2,600)
-------- --------
Net cash provided by investing activities.................... 10,741 1,379
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock............................... 238 559
Proceeds from revolving line of credit and long-term borrowings...... 20,000 22,628
Principal payments on long-term debt................................. (36,209) (19,771)
Preferred dividends paid............................................. (516) (516)
-------- --------
Net cash provided by (used in) financing activities.......... (16,487) 2,900
-------- --------
Effect of exchange rate changes on cash................................ (128) (8)
-------- --------
Increase (decrease) in cash and cash equivalents....................... (14,534) 2,975
Cash and cash equivalents at beginning of period....................... 19,871 24,922
-------- --------
Cash and cash equivalents at end of period............................. $ 5,337 $ 27,897
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest............................................................. $ 22,294 $ 21,775
Income taxes......................................................... $ 2,508 $ 460
</TABLE>
See notes to condensed consolidated financial statements.
F-29
<PAGE> 117
ANACOMP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1994
-----------------------------------------------------
CAPITAL
IN
EXCESS OF
PAR VALUE CUMULATIVE RETAINED
COMMON OF COMMON TRANSLATION EARNINGS
STOCK STOCK ADJUSTMENT (DEFICIT) TOTAL
------ --------- ---------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1994............ $457 $181,843 $ (269) $(132,275) $49,756
Exercise of stock options................ -- 14 -- -- 14
Shares issued for purchases under the
Employee Stock Purchase Plan........... 1 223 -- -- 224
Preferred stock dividends................ -- -- -- (516) (516)
Accretion of redeemable preferred stock
discount............................... -- -- -- (24) (24)
Translation adjustment for period........ -- -- (972) -- (972)
Graham Stock Issuances................... 1 143 -- -- 144
Net income for the period (Note 3)....... -- -- -- 281 281
------ --------- ---------- --------- -------
BALANCE AT DECEMBER 31, 1994............. $459 $182,223 $ (1,241) $(132,534) $48,907
======= ========= ========= ========== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1993
-----------------------------------------------------
CAPITAL
IN
EXCESS OF
PAR VALUE CUMULATIVE RETAINED
COMMON OF COMMON TRANSLATION EARNINGS
STOCK STOCK ADJUSTMENT (DEFICIT) TOTAL
------ --------- ---------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993............ $406 $163,209 $ (4,744) $(145,072) $13,799
Exercise of stock options................ 2 300 -- -- 302
Shares issued for purchases under the
Employee Stock Purchase Plan........... 1 256 -- -- 257
Preferred stock dividends................ -- -- -- (516) (516)
Accretion of redeemable preferred stock
discount............................... -- -- -- (24) (24)
Translation adjustments for period....... -- -- 192 -- 192
Net income for the period (Note 3)....... -- -- -- 9,401 9,401
------ --------- ---------- --------- -------
BALANCE AT DECEMBER 31, 1993............. $409 $163,765 $ (4,552) $(136,211) $23,411
======= ========= ========= ========== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-30
<PAGE> 118
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
The condensed consolidated financial statements included herein have been
prepared by Anacomp, Inc. ("Anacomp" or the "Company") and its wholly-owned
subsidiaries without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. The condensed
consolidated financial statements included herein should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Annual Report to Stockholders and its Report on Form 10-K as of September 30,
1994.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the consolidated financial condition,
results of operations, and changes in financial position and stockholders'
equity of Anacomp and its subsidiaries for interim periods. Certain amounts in
the prior interim consolidated financial statements have been reclassified to
conform to the current period presentation.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION
The consolidated financial statements include the accounts of Anacomp, Inc.
and its wholly-owned subsidiaries. Material intercompany transactions have been
eliminated.
FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of Anacomp's international
operations are translated at the period-end exchange rates; income and expenses
are translated at the average exchange rates prevailing during the period.
Translation adjustments are accumulated in a separate section of stockholders'
equity. Foreign currency transaction gains and losses are included in net
income.
SEGMENT REPORTING
Anacomp operates in a single business segment -- providing equipment,
supplies and services for information management, including storage, processing
and retrieval.
REVENUE RECOGNITION
Revenues from sales of products and services or from lease of equipment
under sales-type leases are recorded based on shipment of products or
performance of services. Under sales-type leases, the present value of all
payments due under the lease contracts is recorded as revenue, cost of sales is
charged with the book value of the equipment plus installation costs, and future
interest income is deferred and recognized over the lease term. Revenue from
maintenance contracts is recognized in earnings on a pro rata basis over the
period of the agreement.
F-31
<PAGE> 119
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis.
The cost of the inventories is distributed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1994
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................................ $ 40,987 $41,661
Work in process........................................... 7,551 5,903
Raw materials and supplies................................ 18,154 15,811
------------ -------------
$ 66,692 $63,375
=========== ===========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation and amortization
of property and equipment are generally provided under the straight-line method
for financial reporting purposes over the shorter of the estimated useful lives
or the lease terms. Tooling costs are amortized over the total estimated units
of production, not to exceed three years.
RESEARCH AND DEVELOPMENT
The costs associated with research and development programs are expenses as
incurred.
Included in "Other assets" on the accompanying Condensed Consolidated
Balance Sheets are unamortized deferred software costs. Deferred software costs
are the capitalized costs of software products to be sold with COM systems in
future periods. The unamortized costs are evaluated for impairment each period
by determining net realizable value. Such costs are amortized under the
straight-line method or over the estimated units of sale, not to exceed five
years.
INTANGIBLES
Excess of purchase price over net assets of businesses acquired (goodwill)
is amortized on the straight-line method over 15 to 40 years. Subsequent to
acquisitions, the Company continually evaluates whether later events and
circumstances have occurred that indicate that the remaining estimated useful
life of goodwill remains appropriate or the remaining balance of goodwill may
not be recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related products
undiscounted operating income over the remaining life of goodwill in measuring
whether goodwill is recoverable. If it is determined that impairment has
occurred, the appropriate charge to income will be recorded. Other intangibles
represent the purchase of the rights to provide microfilm or maintenance
services to certain customers and are being amortized on a straight-line basis
over 10 years.
SALE/LEASEBACK TRANSACTIONS
Anacomp enters into sale/leaseback transactions relating to COM systems
installed in the Company's data service centers. Part of the proceeds were
treated as fixed asset sales and the remainder as sales of equipment. Revenues
of $3.5 million and $750,000 were recorded in the three months ended December
31, 1994 and 1993 respectively. All profits are deferred and are being
recognized over the applicable leaseback periods.
F-32
<PAGE> 120
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
INCOME TAXES
In general, Anacomp's practice is to reinvest the earnings of its foreign
subsidiaries in those operations and to repatriate these earnings only when it
is advantageous to do so. It is expected that the amount of U.S. federal tax
resulting from a repatriation will not be significant. Accordingly, deferred tax
is not being recorded related to undistributed foreign earnings.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. These temporary
investments, primarily repurchase agreements and other overnight investments,
are recorded at cost, which approximates market.
NOTE 3
The Company has restated its financial statements for the three months
ending December 31, 1994 and 1993 to recognize revenues for COM systems
warehoused for certain customers in the periods the units are shipped. The
impact of this restatement resulted in a decrease in revenues of $5.4 million
and $1.8 million, and a decrease in net income of $1.2 million and $500,000 for
the three months ended December 31, 1994 and 1993, respectively. In addition,
the Company has reclassified accreted interest on unfavorable lease reserves
from discontinued operations to interest expense in all periods presented.
NOTE 4
Income tax expense is reported during interim periods using an estimated
annual effective tax rate for the taxable jurisdictions in which the Company
operates.
At December 31, 1994 the Company had U.S. federal net operating loss
carryforwards ("NOLs") of approximately $200 million available to offset future
taxable income. These NOLs expire commencing in 1996.
NOTE 5
The computation of earnings (loss) per common and common equivalent share
is based upon the weighted average number of common shares outstanding during
the period plus (in periods in which they have a dilutive effect) the effect of
common shares contingently issuable, primarily from stock options and exercise
of warrants.
The fully diluted per share computation reflects the effect of common
shares contingently issuable upon the exercise of warrants in periods in which
such exercise would cause dilution. Fully diluted earnings (loss) per share also
reflect additional dilution related to stock options due to the use of the
market price at the end of the period, when higher than the average price for
the period.
Fully diluted earnings (loss) per share are the same as primary earnings
per share for the periods represented.
F-33
<PAGE> 121
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 6
On January 20, 1995 the Company issued 71,876 shares of common stock
pursuant to the Stock Purchase Agreement dated April 8, 1994 between the Company
and Graham Acquisition Corporation ("Graham Shareholders"). The shares represent
a portion of the contingent deferred purchase price payable in connection with
the Company's acquisition of Graham. The Graham Shareholders transferred their
right to the common shares to Carlisle Companies, Inc. ("Carlisle") pursuant to
the agreement dated May 4, 1994 between Carlisle and Graham Shareholders. The
Company intends to file a Registration Statement with the Securities and
Exchange Commission relating to the sale by Carlisle of the 71,876 shares of
common stock. The Company will not receive any proceeds from this offering.
F-34
<PAGE> 122
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 3
Prospectus Summary..................... 4
Risk Factors........................... 10
The Refinancing........................ 16
Use of Proceeds........................ 17
Capitalization......................... 18
Selected Consolidated Operating and
Financial Data....................... 19
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................ 20
The Data Storage and Management
Industry............................. 26
Business............................... 28
Management............................. 39
Description of the Notes............... 42
Description of Other Obligations....... 78
Underwriting........................... 85
Legal Matters.......................... 86
Experts................................ 86
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
$225,000,000
ANACOMP, INC.
% SENIOR SECURED
NOTES DUE 2002
SALOMON BROTHERS INC
SMITH BARNEY INC.
PROSPECTUS
DATED , 1995
<PAGE> 123
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by the registrant in connection with this offering
(other than the underwriting discount and commission) are estimated as follows:
<TABLE>
<S> <C>
Registration Fee under the Securities Act of 1933........................ $ 77,587
NASD Filing Fee.......................................................... 23,000
Printing Expenses........................................................ 150,000
Accounting Fees and Expenses............................................. 150,000
Legal Fees and Expenses.................................................. 500,000
Blue Sky Fee and Expenses................................................ 20,000
Miscellaneous Expenses................................................... 50,000
--------
Total.......................................................... $970,587
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chapter 37 of the Indiana Business Corporation Law (the "Corporation Law")
and the Restated Articles of Incorporation of the Company provide for or permit
indemnification of directors and officers of the Company under certain
circumstances. The indemnification provided is applicable to claims, actions,
suits or proceedings whether arising from actions or omissions to act in the
director's or officer's official capacity and as to action in any other capacity
while holding such office.
Article VIII, Section 5, of the Company's Restated Articles of
Incorporation provides that directors are immune from liability for any action
taken or failure to take any action to the fullest extent permitted by the
Corporation Law and by general principles of corporate law. The Corporation Law
requires that such action or failure to take action must constitute willful
misconduct or recklessness for a director to be held personally liable.
ITEM 16. EXHIBITS
The following instruments and documents are included as exhibits to this
Registration Statement and are filed herewith unless otherwise indicated.
Exhibits incorporated by reference are so indicated by parenthetical
information.
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement dated , 1995, by and among the Company,
as issuer, and Salomon Brothers Inc and Smith Barney Inc., as underwriters.
4.1 -- Form of Indenture dated as of , 1995, between the Company, as issuer, and
The Bank of New York, as trustee, with respect to the securities being
registered.
4.2 -- Form of Security and Pledge Agreement dated as of , 1995, among the Company,
the U.S. Restricted Subsidiaries, any other U.S. Restricted Subsidiaries as may
become parties thereto from time to time pursuant to Section 4.08 thereof and The
Bank of New York, as trustee.
4.3 -- Form of Amended and Restated Indenture, dated as of March 13, 1995, between the
Company, as issuer, and State Street Bank, as trustee, with respect to the 15%
Notes.
4.4 -- Form of First Deed of Trust, Assignment of Rents and Profits, Security Agreement
and Fixture Filing dated as of , 1995, by Anacomp, Inc., Trustor to
, as Trustee and The Bank of New York as Beneficiary relating to
Premises in Graham, Texas.
4.5 -- Form of First Leasehold Deed of Trust, Assignment of Rents and Profits, Security
Agreement and Fixture Filing dated as of , 1995, by Anacomp, Inc.,
Trustor to , as Trustee and The Bank of New York as Beneficiary
relating to Premises in Poway, California.
</TABLE>
II-1
<PAGE> 124
<TABLE>
<C> <C> <S>
4.6 -- Form of Intercreditor Agreement dated as of April , 1995, among The First
National Bank of Chicago, as agent under the Credit Agreement on behalf of the
lender parties to the Credit Agreement, and The Bank of New York, as trustee
under the Senior Note Indenture, on behalf of the holders of the Senior Notes.
5.1 -- Opinion of Cadwalader, Wickersham & Taft as to the legality of the securities
being registered.
12.1 -- Statement re computation of ratios of earnings to fixed charges.
23.1 -- Consent of Cadwalader, Wickersham & Taft (contained in the opinion filed as
Exhibit 5.1 hereof).
23.2 -- Consent of Arthur Andersen LLP.
99 -- Dealer Manager Agreement, dated February 28, 1995, by and among the Company, as
issuer, and Salomon Brothers Inc and Smith Barney Inc., as dealer managers.
*24.1 -- Power of Attorney pursuant to which amendments to this Registration Statement may
be filed (included on the signature page contained in Part II hereof).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of a
Corporation designated to act as Trustee.
</TABLE>
---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
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.
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.
The undersigned registrant hereby undertakes:
For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE> 125
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF INDIANAPOLIS, STATE OF INDIANA, ON MARCH 27,
1995.
ANACOMP, INC.
(Registrant)
By: *
------------------------------------
Louis P. Ferrero
Chief Executive Officer,
and Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------- ------------------------ ---------------------
<C> <S> <C>
* Chief Executive Officer, March 27, 1995
--------------------------------------------- and Chairman of the
Louis P. Ferrero Board
* Executive Vice March 27, 1995
--------------------------------------------- President, Treasurer
Jack R. O'Donnell and Chief Financial
Officer
* Vice President and March 27, 1995
--------------------------------------------- Controller
Donald L. Viles
* President, Chief March 27, 1995
--------------------------------------------- Operating Officer and
J. Mark Woods Director
* Director March 27, 1995
---------------------------------------------
Clark A. Johnson
* Director March 27, 1995
---------------------------------------------
Richard E. Neal
* Director March 27, 1995
---------------------------------------------
Roger S. Palamara
* Director March 27, 1995
---------------------------------------------
Paul G. Roland
* Director March 27, 1995
---------------------------------------------
Frederick W. Zuckerman
*By: /s/ GEORGE C. GASKIN
---------------------------------------------
George C. Gaskin, Attorney-in-fact
</TABLE>
II-3
<PAGE> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ -----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement, dated , 1995, by and among the Company,
as issuer, and Salomon Brothers Inc and Smith Barney Inc., as underwriters
4.1 Form of Indenture dated as of , 1995, between the Company, as issuer, and
The Bank of New York, as trustee, with respect to the securities being registered
4.2 Form of Security and Pledge Agreement dated as of , 1995, among the
Company, the U.S. Restricted Subsidiaries, any other U.S. Restricted Subsidiaries
as may become parties thereto from time to time pursuant to Section 4.08 thereof
and The Bank of New York, as trustee
4.3 Form of Amended and Restated Indenture, dated as of March 13, 1995, between the
Company, as issuer, and State Street Bank, as trustee, with respect to the 15%
Notes
4.4 Form of First Deed of Trust, Assignment of Rents and Profits, Security Agreement
and Fixture Filing dated as of , 1995, by Anacomp, Inc., Trustor to
, as Trustee and The Bank of New York as Beneficiary relating to
Premises in Graham, Texas.
4.5 Form of First Leasehold Deed of Trust, Assignment of Rents and Profits, Security
Agreement and Fixture Filing dated as of , 1995, by Anacomp, Inc.,
Trustor to , as Trustee and The Bank of New York as Beneficiary
relating to Premises in Poway, California.
4.6 Form of Intercreditor Agreement dated as of April , 1995, among The First National
Bank of Chicago, as agent under the Credit Agreement on behalf of the lender
parties to the Credit Agreement, and The Bank of New York, as trustee under the
Senior Note Indenture, on behalf of the holders of the Senior Notes
5.1 Opinion of Cadwalader, Wickersham & Taft as to the legality of the securities being
registered
12.1 Statement re computation of ratios of earnings to fixed charges
23.1 Consent of Cadwalader, Wickersham & Taft (contained in the opinion filed as Exhibit
5.1 hereof)
23.2 Consent of Arthur Andersen LLP
*24.1 Power of Attorney pursuant to which amendments to this Registration Statement may
be filed (included on the signature page contained in Part II hereof)
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of a
Corporation designated to act as Trustee
99 Dealer Manager Agreement, dated February 28, 1995, by and among the Company, as
issuer, and Salomon Brothers Inc and Smith Barney Inc., as dealer managers
</TABLE>
---------------
* Previously filed
<PAGE> 1
[Draft--3/21/95]
Exhibit 1.1
Anacomp, Inc.
$225,000,000
% Senior Secured Notes Due 2002
Underwriting Agreement
New York, New York
, 1995
Salomon Brothers Inc
Smith Barney Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Anacomp, Inc., an Indiana corporation (the "Company"),
proposes to sell to you as underwriters (the "Underwriters"), $225,000,000
principal amount of its % Senior Secured Notes due 2002 (the "Notes"), to be
issued under an indenture (the "Indenture") to be dated as of , 1995,
between the Company and , as trustee (the "Trustee"). The Notes
will be secured by a perfected first priority Lien (as defined in the
Indenture), on the Collateral (as defined in the Indenture), which consists of
the following: (i) substantially all the assets of the Company and the U.S.
Restricted Subsidiaries (as defined in the Indenture), other than the Company's
and the U.S. Restricted Subsidiaries' accounts receivable, inventory and the
proceeds thereof, (ii) all the common stock of the U.S. Restricted Subsidiaries
and (iii) 65% of the common stock of the Foreign Restricted Subsidiaries (as
defined in the Indenture), whether now owned or hereafter acquired, as more
fully described in (i) the Security and Pledge Agreement to be dated as of
, 1995 (the "Security and Pledge Agreement"), between the Company
and the Trustee, (ii) certain fee and leasehold mortgages and deeds of trust
with related security agreements and assignments of leases and rents to be
dated as of , 1995 (the "Mortgages"), between the Company and the
Trustee and (iii) the other Collateral Documents (as defined in the Indenture).
<PAGE> 2
2
1. Representations and Warranties. The Company represents
and warrants to, and agrees with, each Underwriter as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (1)
hereof.
(a) The Company meets the requirements for use of Form S-3
under the Securities Act of 1933 (the "Act") and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (file number 33-57391) on such Form, including a related
preliminary prospectus, for the registration under the Act of the
offering and sale of the Notes. The Company may have filed one or
more amendments thereto, including the related preliminary prospectus,
each of which has previously been furnished to you. The Company will
next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment to
such registration statement, including the form of final prospectus,
(ii) a final prospectus in accordance with Rules 430A and 424(b)(1) or
(4) or (iii) a final prospectus in accordance with Rules 415 and
424(b)(2) or (5). In the case of clause (ii), the Company has
included in such registration statement, as amended at the Effective
Date, all information (other than Rule 430A Information) required by
the Act and the rules thereunder to be included in the Prospectus with
respect to the Notes and the offering thereof. As filed, such
amendment and form of final prospectus, or such final prospectus,
shall contain all Rule 430A Information, together with all other such
required information, with respect to the Notes and the offering
thereof and, except to the extent the Underwriters shall agree in
writing to a modification, shall be in all material respects in the
form furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior
to the Execution Time, will be included or made therein. If the
Registration Statement contains the undertaking specified by
Regulation S-K Item 512(a), the Registration Statement, at the
Execution Time, meets the requirements set forth in Rule 415(a)(1)(x).
<PAGE> 3
3
(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date, the Prospectus
(and any supplements thereto) will, comply in all material respects
with the applicable requirements of the Act, the Securities Exchange
Act of 1934 (the "Exchange Act") and the Trust Indenture Act of 1939
(the "Trust Indenture Act") and the respective rules thereunder; on
the Effective Date, the Registration Statement did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading; on the Effective Date and
on the Closing Date, the Indenture did or will comply in all material
respects with the applicable requirements of the Trust Indenture Act
and the rules thereunder; and, on the Effective Date, the Prospectus,
if not filed pursuant to Rule 424(b), did not or will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Prospectus (together with any supplement thereto) will not,
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no
representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee
or (ii) the information contained in or omitted from the Registration
Statement or the Prospectus (or any supplement thereto) in reliance
upon and in conformity with information furnished in writing to the
Company by the Underwriters specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).
(c) All the subsidiaries of the Company, whether directly or
indirectly owned by the Company, as of the date hereof are listed on
Exhibit A and Exhibit B; the Company and each such subsidiary (other
than the subsidiaries of the Company listed in Exhibit B) has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is chartered
or organized, with full corporate power and authority to own, lease
<PAGE> 4
4
and operate its property (including, without limitation, the
Collateral) and conduct its business as described in the Prospectus,
and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction wherein it owns,
leases or operates property (including, without limitation the
Collateral) or conducts business, excluding such jurisdictions where
the failure to so register, qualify or be authorized does not have a
material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect").
(d) All the outstanding shares of capital stock of each
subsidiary of the Company (other than the subsidiaries of the Company
listed in Exhibit B) have been duly authorized and validly issued and
are fully paid and nonassessable; except as set forth in the
Prospectus, all outstanding shares of capital stock of such
subsidiaries (except for director's qualifying shares to the extent
required by local law) are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any Lien, other
than Permitted Liens (as defined in the Indenture).
(e) The shares of capital stock constituting Pledged
Securities (as defined in the Indenture) comprise all the capital
stock of the U.S. Restricted Subsidiaries and 65% of the capital stock
of the Foreign Restricted Subsidiaries owned directly by the Company
or a U.S. Restricted Subsidiary; such Pledged Securities constitute
all the capital stock owned directly by the Company or any U.S.
Restricted Subsidiary; the promissory notes constituting Pledged
Securities comprise all the promissory notes issued or payable to the
Company or any U.S. Restricted Subsidiary; there are no outstanding
rights (including, without limitation, preemptive rights), warrants or
options to acquire or instruments convertible into or exchangeable for
any shares of the capital stock or other equity interest of or in any
issuer of Pledged Securities or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of
any such capital stock, any such convertible or exchangeable
securities or any such rights, warrants or options; and the U.S.
Restricted Subsidiaries and the Foreign Restricted Subsidiaries
<PAGE> 5
5
constitute all the subsidiaries of the Company (other than
subsidiaries of the Company listed in Exhibit B). None of the Pledged
Securities are "margin stock" as such term is defined in Section 221.1
of Regulation U of the Board of Governors of the Federal Reserve
System, or any successor regulation.
(f) The subsidiaries of the Company listed in Exhibit B have
no assets and no employees and do not conduct any business and, with
respect to such subsidiaries, the Company would be able to designate
such subsidiaries as Unrestricted Subsidiaries (as defined in the
Indenture) pursuant to Section 4.15 of the Indenture.
(g) On the Closing Date, the Trustee will have a valid and
enforceable perfected first priority Lien on the Collateral pursuant
to the Collateral Documents and, at the Closing Date, the Collateral
will be free and clear of all Liens, other than Permitted Liens.
(h) On the Closing Date, all filings, recordings,
registrations and other actions necessary or desirable to preserve and
protect the rights with respect to, and perfect and make valid and
enforceable, the first priority Lien of the Trustee under the
Collateral Documents will have been obtained and taken and be in full
force and effect.
(i) The requisite number of consents solicited by the Company
from the holders of the Company's 15% Senior Subordinated Notes due
2000, issued under an Indenture dated as of October 24, 1990, as
amended by a First Supplemental Indenture dated as of March 22, 1993
(as so amended, the "Subordinated Notes Indenture"), between the
Company and State Street Bank and Trust Company, as trustee, have been
obtained, are effective and have not been revoked in order for the
Company and the Trustee to have duly and properly executed and
delivered an amendment and restatement of the Subordinated Notes
Indenture that permits the Company to (i) issue the Notes and
establish the Revolving Credit Facility pursuant to a Revolving Credit
Agreement dated as of , 1995 (the "Revolving Credit
Facility"), between the Company and , (ii) use the proceeds
thereof as described in the Prospectus; and such amendment and
restatement of the Subordinated Notes Indenture has been executed and
<PAGE> 6
6
delivered by the parties thereto and is in full force and effect.
(j) The Company and each of its subsidiaries has good and
marketable title to all properties and assets owned by it (including,
without limitation, any owned property and assets constituting part of
the Collateral), free and clear of all Liens except for Permitted
Liens and Liens that will be released in connection with the
Refinancing (as defined in the Prospectus). All the leases and
subleases material to the business of the Company and under which the
Company or any of its subsidiaries has an interest (including, without
limitation, any leases or subleases constituting part of the
Collateral) are in full force and effect, and neither the Company nor
any of its subsidiaries has received any notice of any material claim
of any sort that has been asserted by any person or entity adverse to
the rights of the Company or any of its subsidiaries under any such
leases or subleases, or affecting or questioning the rights of the
Company or any of its subsidiaries to the continued possession of the
leased or subleased premises under any such lease or sublease.
(k) The Company and each of its subsidiaries, (A) owns,
possess or has obtained all material governmental licenses, permits,
certificates, consents, orders, approvals and other authorizations
(the "Authorizations") necessary for the legal ownership (including
leasing) and operation of its properties (including, without
limitation, the Collateral), and to carry on its business as presently
conducted, except where the failure to own, possess or have obtained
any of the foregoing would not have a Material Adverse Effect or with
respect to real property for which a Mortgage (as defined in the
Indenture) is to be obtained in favor of the Trustee (collectively,
the "Mortgaged Property") would not have a material adverse effect on
the use and operation of the Mortgaged Property to which any such
Authorization relates and (B) no such person has received any notice
of proceedings relating to the revocation or modification of any such
Authorization.
(1) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term the "Effective Date"
shall mean each date that the
<PAGE> 7
7
Registration Statement and any post-effective amendment or amendments
thereto became or become effective and each date after the date hereof
on which a document incorporated by reference in the Registration
Statement is filed. "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph (a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that
omits Rule 430A Information. "Prospectus" shall mean the prospectus
relating to the Notes that is first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the
Notes included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time
(or, if not effective at the Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended.
Such term shall include any Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A.
"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such
rules or regulation under the Act. "Rule 430A Information" means
information with respect to the Notes and the offering thereof
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. Any reference herein to the
Registration Statement, a Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 which were filed
under the Exchange Act on or before the Effective Date of the
Registration Statement or the issue date of such Preliminary
Prospectus or the Prospectus, as the case may be; and any reference
herein to the terms "amend", "amendment" or "supplement" with respect
to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement, or
<PAGE> 8
8
the issue date of any Preliminary Prospectus or the Prospectus, as the
case may be, deemed to be incorporated therein by reference.
2. Purchase and Sale. Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
% of the principal amount thereof, plus accrued interest, if any, on the
Notes from , 1995, to the Closing Date, the principal amount of
the Notes set forth opposite such Underwriter's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the
Notes shall be made at 10:00 AM, New York City time, on , 1995, or
such later date (not later than , 1995) as the Underwriters shall
designate, which date and time may be postponed by agreement between the
Underwriters and the Company or as provided in Section 9 hereof (such date and
time of delivery and payment for the Notes being herein called the "Closing
Date"). Delivery of the Notes shall be made to the Underwriters for the
respective accounts of the several Underwriters against payment by the several
Underwriters of the purchase price thereof by wire transfer in immediately
available funds, provided that an amount equal to the difference between making
such payment in immediately available funds and next day funds shall be
deducted from such payment. Delivery of the Notes shall be made at such
location as the Underwriters shall reasonably designate at least one business
day in advance of the Closing Date and payment for the Notes shall be made at
the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York. Certificates for the Notes shall be registered in such names
and in such denominations as the Underwriters may request not less than three
full business days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Underwriters in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
4. Offering by Underwriters. It is understood that the
several Underwriters propose to offer the Notes for sale to the public as set
forth in the Prospectus.
<PAGE> 9
9
5. Agreements. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and
any amendment thereof, to become effective. Prior to the termination
of the offering of the Notes, the Company will not file any amendment
of the Registration Statement or supplement to the Prospectus unless
the Company has furnished you a copy for your review prior to filing
and will not file any such proposed amendment or supplement to which
you reasonably object. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to
Rule 430A, or filing of the Prospectus is otherwise required under
Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the
Underwriters of such timely filing. The Company will promptly advise
the Underwriters (i) when the Registration Statement, if not effective
at the Execution Time, and any amendment thereto, shall have become
effective, (ii) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the Notes,
any amendment to the Registration Statement shall have been filed or
become effective, (iv) of any request by the Commission for any
amendment of the Registration Statement or supplement to the
Prospectus or for any additional information, (v) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (vi) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use
its best efforts to prevent the issuance of any such stop order and,
if issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Notes
is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as
<PAGE> 10
10
then supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend the
Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the
Company promptly will (i) prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this Section 5, an
amendment or supplement which will correct such statement or omission
or effect such compliance and (ii) supply any supplemented Prospectus
to you in such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Underwriters an earning
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) The Company will furnish to the Underwriters and counsel
for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Act, as many copies of each Preliminary
Prospectus and the Prospectus and any supplement thereto as the
Underwriters may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering.
(e) The Company will arrange for the qualification of the
Notes for sale under the laws of such jurisdictions as the
Underwriters may designate, will maintain such qualifications in
effect so long as required for the distribution of the Notes, will
arrange for the determination of the legality of the Notes for
purchase by institutional investors and will pay the fee of the
National Association of Securities Dealers, Inc., in connection with
its review of the offering; provided, however, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction
in which it is not now so qualified or to take any action which would
subject it to service of
<PAGE> 11
11
process in suits in any jurisdiction in which it is not now so subject.
(f) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date
is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department; provided,
however, that the Company's obligation to provide such notice will
terminate at the date on which the distribution of the Notes has
terminated.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Notes shall be subject to the
accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and the Closing Date, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Underwriters agree in writing
to a later time, the Registration Statement will become effective not
later than (i) 6:00 PM New York City time, on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date or
(ii) 12:00 Noon on the business day following the day on which the
public offering price was determined, if such determination occurred
after 3:00 PM New York City time on such date; if filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule
424(b), the Prospectus, and any such supplement, will be filed in the
manner
<PAGE> 12
12
and within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have furnished to the Underwriters the
opinions of George C. Gaskin, Corporate Counsel for the Company, and
Cadwalader, Wickersham & Taft, counsel for the Company, each dated the
Closing Date, and each to the effect that (except that George C.
Gaskin need not furnish an opinion with respect to the matters set
forth in (vii) and (viii)):
(i) each of the Company and its subsidiaries (other
than the subsidiaries of the Company listed in Exhibit B),
whether directly or indirectly owned by the Company, has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it
is chartered or organized, with full corporate power and
authority to own its properties and conduct its business as
described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such
qualification wherein it owns or leases properties or conducts
business, except where the failure to so qualify does not have
a Material Adverse Effect; the Company has no subsidiaries
other than those listed in Exhibit A and Exhibit B;
(ii) all the outstanding shares of capital stock of
each subsidiary of the Company (other than the subsidiaries of
the Company listed in Exhibit B) have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of such subsidiaries
(except for director's qualifying shares to the extent
required by local law) are owned by the Company either
directly or through wholly owned subsidiaries free and clear
of any Lien, other than Permitted Liens;
(iii) the shares of capital stock constituting the
Pledged Securities comprise all the capital
<PAGE> 13
13
stock of the U.S. Restricted Subsidiaries and 65% of the
capital stock of the Foreign Restricted Subsidiaries owned
directly by the Company or a U.S. Restricted Subsidiary; such
Pledged Securities constitute all the capital stock directly
owned by the Company or any U.S. Restricted Subsidiary; the
promissory notes constituting Pledged Securities comprise all
the promissory notes issued or payable to the Company or any
U.S. Restricted Subsidiary; there are no outstanding rights
(including, without limitation, preemptive rights), warrants
or options to acquire or instruments convertible into or
exchangeable for any shares of the capital stock or other
equity interest of or in any issuer of Pledged Securities or
any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any such
capital stock, any such convertible or exchangeable securities
or any such rights, warrants or options; and the U.S.
Restricted Subsidiaries and the Foreign Restricted
Subsidiaries constitute all the subsidiaries of the Company
(other than subsidiaries of the Company listed in Exhibit B).
None of the Pledged Securities are "margin stock" as such term
is defined in Section 221.1 of Regulation U of the Board of
Governors of the Federal Reserve System, or any successor
regulation;
(iv) the subsidiaries of the Company listed in
Exhibit B have no assets and no employees and do not conduct
any business, and with respect to such subsidiaries, the
Company would be able to designate such subsidiaries as
Unrestricted Subsidiaries pursuant to Section 4.15 of the
Indenture;
(v) the Company's authorized equity capitalization is
as set forth in the Prospectus; and the Notes conform to the
description thereof contained in the Prospectus;
(vi) the Indenture, the Security and Pledge Agreement
and the other Collateral Documents have been duly authorized,
executed and delivered by the Company and the U.S. Restricted
Subsidiaries, as applicable; the Indenture has been duly
qualified under the Trust Indenture Act; and,
<PAGE> 14
14
assuming due authorization, execution and delivery thereof by
each party thereto other than the Company and the U.S.
Restricted Subsidiaries, as applicable, the Indenture, the
Security and Pledge Agreement and the other Collateral
Documents constitute legal, valid and binding obligations of
the Company and the U.S. Restricted Subsidiaries, as
applicable, enforceable against the Company and the U.S.
Restricted Subsidiaries, as applicable, in accordance with
their respective terms (subject, as to enforcement of legal
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and, as to
remedies of specific performance and injunctive and other
forms of equitable relief, to equitable defenses or principles
and to the discretion of the court before which any proceeding
may therefor be brought); the Notes have been duly authorized
and executed and, when authenticated in accordance with the
Indenture and delivered to and paid by the Underwriters
pursuant to this Agreement, will constitute legal, valid and
binding obligations of the Company entitled to the benefits of
the Indenture;
(vii) the Trustee has a valid and enforceable perfected
first priority Lien in the Collateral pursuant to the
Collateral Documents, and the Collateral is free and clear
of all Liens, other than Permitted Liens;
(viii) all filings, recordings, registrations and other
actions necessary or desirable to preserve and protect the
rights with respect to, and perfect and make valid and
enforceable, the first priority Lien of the Trustee under the
Collateral Documents have been obtained and taken and are in
full force and effect;
(ix) to the best knowledge of such counsel, there is
no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries of
a character required to be disclosed in the Registration
Statement which is not adequately
<PAGE> 15
15
disclosed in the Prospectus, and there is no franchise,
contract or other document of a character required to be
described in the Registration Statement or Prospectus, or to
be filed as an exhibit, which is not described or filed as
required;
(x) the Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b);
to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued, no proceedings for that purpose have been
instituted or threatened and the Registration Statement and
the Prospectus (other than the financial statements, financial
schedules and other financial and statistical information
contained therein as to which such counsel need express no
opinion) comply as to form in all material respects with the
applicable requirements of the Act, the Exchange Act and the
Trust Indenture Act and the respective rules thereunder; and
such counsel has no reason to believe that at the Effective
Date the Registration Statement contained any untrue statement
of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of
the date hereof includes any untrue statement of a material
fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(xi) this Agreement has been duly authorized, executed
and delivered by the Company;
(xii) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in the
Indenture, the Security and Pledge Agreement and the other
Collateral Documents, except such as have been obtained under
the Act and such as may be required under the blue sky laws of
any
<PAGE> 16
16
jurisdiction in connection with the purchase and distribution
of the Notes by the Underwriters and such other approvals
(specified in such opinion) as have been obtained;
(xiii) neither the execution and delivery of this
Agreement, the Indenture, the Security and Pledge Agreement,
or the other Collateral Documents, the issue and sale of the
Notes, nor the consummation of any other of the transactions
herein or therein contemplated nor the fulfillment of the
terms hereof or thereof will conflict with, result in a breach
or violation of, or constitute a default, under any law or the
charter or by-laws of the Company or any of its subsidiaries
or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Company or any of its
subsidiaries is a party or bound or any judgment, order or
decree known to such counsel to be applicable to the Company
or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its subsidiaries;
(xiv) the Company and each of its subsidiaries (A)
owns, possesses or has obtained all Authorizations necessary
for the legal ownership (including leasing) and operation of
its properties (including, without limitation, the
Collateral), and to carry on its business as presently
conducted, except where the failure to own, possess or have
obtained any of the foregoing would not have a Material
Adverse Effect or with respect to the Mortgaged Property would
not have a material adverse effect on the use and operation of
the Mortgaged Property to which any such Authorization relates
and (B) has not received any notice of proceedings relating to
the revocation or modification of any such Authorization; and
(xv) no holders of securities of the Company have
rights to the registration of such securities under the
Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
State of New York or the
<PAGE> 17
17
United States or of the General Corporation Law of the State of
Delaware, to the extent they deem proper and specified in such
opinion, upon the opinion of Leagre and Barnes, with respect to
Indiana law, and other counsel of good standing whom in each such case
they believe to be reliable and who are reasonably satisfactory to the
Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials. References to the Prospectus in this paragraph (b)
include any supplements thereto at the Closing Date.
(c) The Company shall have furnished to the Underwriters the
opinions of Leagre & Barnes, special Indiana counsel for the Company,
dated the Closing Date, and to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of Indiana, with full corporate power and authority to
own its properties and conduct its business;
(ii) the Company has the full corporate power and
authority under Indiana law (A) to execute, deliver and
perform its obligations under this Agreement and the
Collateral Documents; (B) to file, record, register and take
all other actions necessary or desirable to preserve and
protect the rights with respect to, and perfect and make valid
and enforceable, the first priority Lien of the Trustee under
the Collateral Documents; and (C) to take all action necessary
to effect the Refinancing;
(iii) the Company's authorized equity capitalization is
as set forth in the Prospectus;
(iv) the Indenture, the Security and Pledge Agreement
and the other Collateral Documents have been duly authorized,
executed and delivered by the Company; and assuming due
authorization, execution and delivery thereof by each party
thereto other than the Company, the Indenture, the Security
and Pledge Agreement and the other Collateral Documents
constitute legal, valid and binding obligations of the Company
enforceable
<PAGE> 18
18
against the Company in accordance with their respective terms
(subject, as to enforcement of legal remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time
in effect and, as to remedies of specific performance and
injunctive and other forms of equitable relief, to equitable
defenses or principles and to the discretion of the court
before which any proceeding may therefor be brought); the
Notes have been duly authorized and executed and, when
authenticated in accordance with the Indenture and delivered
to and paid by the Underwriters pursuant to this Agreement,
will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the Indenture;
(v) this Agreement has been duly authorized, executed
and delivered by the Company;
(vi) no consent, approval, authorization or order of
any Indiana court or Indiana governmental agency or body is
required for the consummation of the transactions contemplated
herein or in the Indenture, the Security and Pledge Agreement
and the other Collateral Documents, except such approvals
(specified in such opinion) as have been obtained;
(vii) neither the execution and delivery of this
Agreement, the Indenture, the Security and Pledge Agreement,
or the other Collateral Documents, the issue and sale of the
Notes, nor the consummation of any other of the transactions
herein or therein contemplated nor the fulfillment of the
terms hereof or thereof will conflict with, result in a breach
or violation of, or constitute a default, under any Indiana
law or the charter or by-laws of the Company or the terms of
any indenture or other agreement or instrument known to such
counsel and to which the Company is a party or bound or any
judgment, order or decree known to such counsel to be
applicable under Indiana law to the Company of any court,
regulatory body, administrative agency, governmental body or
arbitrator having
<PAGE> 19
19
jurisdiction over the Company or any of its subsidiaries; and
(viii) the Company (A) owns, possesses or has obtained
all Authorizations in Indiana necessary for the legal
ownership (including leasing) and operation of its properties
(including, without limitation, the Collateral), and to carry
on its business as presently conducted, except where the
failure to own, possess or have obtained any of the foregoing
would not have a Material Adverse Effect and (B) has not
received any notice of proceedings relating to the revocation
or modification of any such Authorization.
In rendering such opinion, such counsel may rely as to the matters of
fact, to the extent they deem proper, on certificates of responsible officers
of the Company and public officials.
(d) The Company shall have furnished to the Underwriters the
opinions of Smeets, Thesseling & Van Bokhorst, special Netherland Antilles
counsel for the Company (with respect to Anacomp International N.V.), Gardiner,
Roberts, special Canadian counsel for the Company (with respect to Anacomp
Canada Inc.), Prunbauer Peyrer-Helmstat & Romig, special Austrian counsel for
the Company (with respect to Anacomp GesmbH), Slaughter and May, special
British counsel for the Company, (with respect to Anacomp Holdings, Ltd.,
Anacomp, Ltd. and Xidex (U.K.) Ltd.), De Kock, special Belgian counsel for the
Company (with respect to Anacomp Belgium, S.A.), Trenite Van Doorne, special
Dutch counsel for the Company (with respect to Anacomp B.V.), Baker & McKenzie,
special Swedish counsel for the Company (with respect to Anacomp A.B.), Baker &
McKenzie, special Norwegian counsel for the Company (with respect to Anacomp
A/S (Norway)), Baker & McKenzie, special Finnish counsel for the Company (with
respect to Anacomp O.Y.), Baker & McKenzie, special Danish counsel for the
Company (with respect to Anacomp A/S (Denmark), Doser Amereller Noack, special
German counsel for the Company (with respect to Datamagnetics GmbH, Anacomp
GmbH and Xidex GmbH), Baker & McKenzie, special Swiss counsel for the Company
(with respect to Xidex Magnetics, S.A.), Baker & McKenzie, special Italian
counsel for the Company (with respect to Anacomp Italia SRL), Baker & McKenzie,
special French counsel for the Company (with respect to Anacomp S.A.), Baker &
McKenzie, special Australian counsel for the Company (with
<PAGE> 20
20
respect to Anacomp Pty, Ltd.) Baker & McKenzie, special New Zealand counsel for
the Company (with respect to Xidex New Zealand Ltd.), Mikako Fujiki of Tokyo
Aoyama Law Office, special Japanese counsel for the Company (with respect to
Anacomp Japan Ltd.) and Vaz e Rolim, special Brazilian counsel for the Company
(with respect to Anacomp Do Brasil), each dated the Closing Date and each to
the effect that:
(i) the applicable Foreign Restricted Subsidiary
specified above has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and
conduct its business, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws
of each jurisdiction which requires such qualification wherein
it owns or leases properties or conducts business, except
where the failure to so qualify does not have a Material
Adverse Effect;
(ii) all outstanding shares of capital stock of such
Foreign Restricted Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable;
(iii) with respect to Foreign Restricted Subsidiaries
owned directly by the Company or a U.S. Restricted Subsidiary,
the shares of capital stock constituting the Pledges
Securities of the applicable Foreign Restricted Subsidiary
specified above comprise 65% of the capital stock of such
Foreign Restricted Subsidiary; there are no outstanding rights
(including, without limitation, preemptive rights), warrants
or options to acquire or instruments convertible into or
exchangeable for any shares of the capital stock or other
equity interest of or in such Foreign Restricted Subsidiary or
any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any such
capital stock, any such convertible or exchangeable securities
or any such rights, warrants or options;
(iv) with respect to Foreign Restricted Subsidiaries
owned directly by the Company or a
<PAGE> 21
21
U.S. Restricted Subsidiary, the Trustee has a valid and
enforceable perfected first priority Lien in the Pledge
Securities of the applicable Foreign Restricted Subsidiary
specified above pursuant to the Security and Pledge Agreement,
and the Pledged Securities of such Foreign Restricted
Subsidiary are free and clear of all Liens, other than
Permitted Liens;
(v) with respect to Foreign Restricted Subsidiaries
owned directly by the Company or a U.S. Restricted Subsidiary,
all filings, recordings, registrations and other actions
necessary or desirable to preserve and protect the rights with
respect to, and perfect and make valid and enforceable, the
first priority Lien of the Trustee in the Pledged Securities
of the applicable Foreign Restricted Subsidiary specified
above under the Security and Pledge Agreement have been
obtained and taken and are in full force and effect;
(vi) with respect to Foreign Restricted Subsidiaries
owned directly by the Company or a U.S. Restricted Subsidiary,
no consent, approval, authorization or order of any court or
governmental agency or body having jurisdiction over the
applicable Foreign Restricted Subsidiary specified above is
required for the valid pledge of 65% of the capital stock of
such Foreign Restricted Subsidiary pursuant to the Security
and Pledge Agreement, except such approvals (specified in such
opinion) as have been obtained; and
(vii) with respect to Foreign Restricted Subsidiaries
owned directly by the Company or a U.S. Restricted Subsidiary,
neither the pledge of 65% of the capital stock of the
applicable Foreign Restricted Subsidiary specified above
pursuant to the Security and Pledge Agreement, nor the
consummation of any of the transactions therein contemplated
nor the fulfillment of the terms thereof, will conflict with,
result in a breach or violation of, or constitute a default,
under any law under which such Foreign Restricted Subsidiary
exists or the charter or by-laws of such Foreign Restricted
Subsidiary or the terms of any indenture or other agreement
or instrument known
<PAGE> 22
22
to such counsel and to which such Foreign Restricted
Subsidiary is a party or bound or any judgment, order or
decree known to such counsel to be applicable to such Foreign
Restricted Subsidiary of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over such Foreign Restricted Subsidiary.
In rendering such opinion, such counsel may rely as to the
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials.
(e) The Company shall have furnished to the Underwriters the
opinions, dated the Closing Date, of local counsel in each
jurisdiction in which Mortgaged Property is located, which counsel
shall be reasonably satisfactory to the Underwriters, to the effect
that the Collateral Documents create a valid and enforceable first
priority Lien in the Collateral located in such jurisdiction and such
other matters as the Underwriters shall reasonably require. In
rendering such opinion, such counsel may rely as to the matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials.
(f) The Underwriters shall have received from Cravath, Swaine
& Moore, counsel for the Underwriters, an opinion and disclosure
letter, each dated the Closing Date, with respect to the issuance and
sale of the Notes, the Indenture, the other Collateral Documents, the
Registration Statement, the Prospectus (together with any supplement
thereto) and other related matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass
upon such matters.
(g) The Company shall have furnished to the Underwriters a
certificate of the Company, signed by (i) the Chairman of the Board
and Chief Executive Officer or the President and Chief Operating
Officer and (ii) the Executive Vice President, Treasurer and Chief
Financial Officer of the Company, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined
the Registration
<PAGE> 23
23
Statement, the Prospectus, any supplement to the Prospectus and this
Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has complied with
all the agreements, and satisfied all the conditions, on its
part to be performed or satisfied at or prior to the Closing
Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened;
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
in the condition (financial or other), earnings, business
affairs, properties or business prospects of the Company and
its subsidiaries, whether or not arising from transactions in
the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement
thereto);
(iv) the subsidiaries of the Company listed in
Exhibit B have no assets and no employees and do not conduct
any business, and with respect to such subsidiaries, the
Company would be able to designate such subsidiaries as
Unrestricted Subsidiaries pursuant to Section 4.15 of the
Indenture; and
(v) in the opinion of such officers, all conditions
precedent to the authentication and delivery of the Notes set
forth in the Indenture have been satisfied.
(h) At the Execution Time and at the Closing Date, Arthur
Andersen LLP shall have furnished to the Underwriters a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Underwriters,
confirming that they are independent accountants within
<PAGE> 24
24
the meaning of the Act and the Exchange Act and the respective
applicable published rules and regulations thereunder and that they
have performed a review of the unaudited interim financial information
of the Company for the three-month period ended and as of December 31,
1994, in accordance with Statement on Accounting Standards No. 71 and
stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included or incorporated in
the Registration Statement and the Prospectus and reported on
by them comply in form in all material respects with the
applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; carrying out certain specified procedures (but
not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters
of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders, directors and nominating, compensation and audit
committees of the Company and its subsidiaries; and inquiries
of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to
September 30, 1994, nothing came to their attention which
caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the Registration Statement and the
Prospectus do not comply in form in all material respects
with applicable accounting requirements and with the
published rules and regulations of the Commission with
respect to financial statements included or incorporated
in quarterly reports on Form 10-Q under the Exchange Act;
and said unaudited financial statements are not in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of
the audited financial
<PAGE> 25
25
statements included or incorporated in the Registration
Statement and the Prospectus;
(2) with respect to the period subsequent to December
31, 1994, there were any changes, at a specified date not
more than five business days prior to the date of the
letter, in the long-term debt, net of current portion of
long-term debt, of the Company and its subsidiaries or
capital stock of the Company or decreases in the
stockholders' equity of the Company or decreases in
working capital (current assets less current liabilities)
of the Company and its subsidiaries as compared with the
amounts shown on the December 31, 1994, consolidated
balance sheet included or incorporated in the
Registration Statement and the Prospectus, or for the
period from January 1, 1995, to such specified date there
were any decreases, as compared with the corresponding
period in the preceding year, in consolidated net sales,
income from continuing operations before interest, other
income, income taxes and cumulative effect of accounting
change; or income from continuing operations before
interest, other income, income taxes, cumulative effect
of accounting change and depreciation and amortization
related to property and equipment, deferred software
costs and intangible assets, except in all instances for
changes or decreases set forth in such letter, in which
case the letter shall be accompanied by an explanation by
the Company as to the significance thereof unless said
explanation is not deemed necessary by the Underwriters;
or
(3) the information included or incorporated by
reference in the Registration Statement and the
Prospectus in response to Regulation S-K, Item 301
(Selected Financial Data), Item 302 (Supplementary
Financial Information) and Item 402 (Executive
Compensation) is not in conformity with the applicable
disclosure requirements of Regulation S-K;
<PAGE> 26
26
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus and in Exhibit 12 to the
Registration Statement, including the information set forth
under the captions "Capitalization", "Selected Consolidated
Financial Data", "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in the
Prospectus, the information included or incorporated in Items
1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-K,
incorporated in the Registration Statement and the Prospectus
and the information included in the "Management's Discussion
and Analysis of Results of Operations and Financial Condition"
included or incorporated in the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1994,
incorporated in the Registration Statement and the Prospectus,
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation;
and
(iv) they have performed certain procedures with
respect to sales of the Company's XFP 2000 system, including,
without limitation, a review of inventory records, purchase
orders and shipping documents, for the three-month period
ended December 31, 1994, such documentation is in agreement
with the information with respect to sales of the Company's
XFP 2000 system for such period set forth in the Prospectus
and they agree that such sales of XFP 2000 systems are
material to the financial statements of the Company for such
three-month period.
References to the Prospectus in this paragraph (h) include any
supplement thereto at the date of the letter.
(i) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Registration Statement
(exclusive of any amendment
<PAGE> 27
27
thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (h) of this Section 6 or
(ii) any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and its
subsidiaries taken as a whole the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the
Underwriters, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Notes as
contemplated by the Registration Statement (exclusive of any amendment
thereof) and the Prospectus (exclusive of any supplement thereto).
(j) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act)
or any notice given of any intended or potential decrease in any such
rating or of a possible change in any such rating that does not
indicate the direction of the possible change.
(k) At the Closing Date, the Company shall have applied the
net proceeds from the sale of the Notes as set forth under the caption
"Use of Proceeds" in the Prospectus and the Underwriters shall have
been furnished with evidence (satisfactory to the Underwriters) of
such applications.
(l) Prior to or simultaneous with the delivery of and payment
for the Notes pursuant to Section 3 hereof, all the conditions
precedent necessary for making all borrowings under the Revolving
Credit Facility shall have been satisfied in full, the Refinancing (as
defined in the Prospectus) shall have been fully consummated in the
manner contemplated by the Prospectus and each agreement, opinion,
certificate and other document necessary or relating to making all
borrowings under the Revolving Credit Facility shall be in form and
substance satisfactory to the Underwriters, shall have been executed
and delivered by the parties thereto and shall be in full force and
effect.
(m) At or prior to the Closing Date, each Collateral Document
shall be in form and substance satisfactory to the Underwriters, shall
have been
<PAGE> 28
28
executed and delivered by the parties thereto and shall be in full
force and effect.
(n) The requisite number of consents solicited by the Company
from the holders of the Company's 15% Senior Subordinated Notes due
2000 have been obtained and are effective in order to effect an
amendment and restatement of the Subordinated Notes Indenture to
permit the Company to (i) issue the Notes and establish the Revolving
Credit Facility and (ii) use the proceeds thereof as described in the
Prospectus; and such amendment and restatement of the Subordinated
Notes Indenture has been executed and delivered by the parties thereto
and is in full force and effect.
(o) At or prior to the Closing Date, the Company shall have
caused to be delivered to the Underwriters the following documents and
instruments with regard to any real property constituting the
Collateral:
(i) fully executed and acknowledged Mortgages, in
form and substance satisfactory to the Underwriters, with
respect to the real property, securing the amounts described
in Exhibit C encumbering the Company's fee interest or
leasehold interest, as the case may be, in each such real
property, duly executed and acknowledged by the Company as
owner or holder of the fee interest or leasehold interest, as
the case may be, constituting such real property and otherwise
in form for recording in the recording office of the
appropriate political subdivision where such real property is
situated, together with such certificates, affidavits,
questionnaires and returns as shall be required in connection
with the recording or filing thereof and such UCC-1 financing
statements and other similar statements as are contemplated in
respect of such Mortgages by the counsel opinion referred to
in paragraphs (b) and (c) above, and any other instruments
necessary to grant the interests purported to be granted by
such Mortgages under the laws of any applicable jurisdiction,
which instruments shall be effective to create a valid and
enforceable first priority Lien on such real and personal
property;
<PAGE> 29
29
(ii) with respect to such real property, such consents,
approvals, amendments, supplements, estoppels,
non-disturbance, tenant subordination agreements and other
instruments as shall reasonably be deemed necessary by the
Underwriters in order for the owner or holder of the fee
interest or leasehold interest, as the case may be, to grant
the Lien contemplated by the Mortgages with respect to such
real property;
(iii) with respect to each parcel of such real
property, a policy of title insurance insuring the Lien of
such Mortgage as a valid first priority Lien on the real
property and fixtures described therein in an amount not less
than the amount for such real property set forth on Exhibit C
hereto which policy (or commitment) shall (A) be issued by a
title company reasonably acceptable to counsel for the
Underwriters, (B) include such reinsurance arrangements (with
provisions for direct access) as shall be reasonably
acceptable to counsel for the Underwriters, (C) have been
supplemented by such endorsements, or, where such endorsements
are not available at commercially reasonable premium costs,
and where opinions customarily are given respecting such
matters, opinion letters of special counsel, architects or
other professionals, which counsel, architects or other
professionals shall be reasonably acceptable to counsel for
the Underwriters, as shall be requested by counsel for the
Underwriters (including, without limitation, endorsements or
opinion letters on matters relating to first loss,
non-imputation, public road access, contiguity (where
appropriate), cluster, survey, variable rate and so-called
comprehensive coverage over covenants and restrictions), (D)
contain only such exceptions to title as are customary or as
may otherwise be agreed to by counsel for the Underwriters
prior to the Closing Date with respect to such real property
and (E) be effective on the Closing Date;
(iv) with respect to each parcel of such real
property (and all improvements thereon), a survey (A) prepared
by a surveyor or engineer licensed to perform surveys in the
state where such property is located, (B) dated (or redated)
not earlier
<PAGE> 30
30
than 60 days prior to the date of delivery thereof, (C)
certified by the surveyor in a manner reasonably acceptable to
counsel for the Underwriters and (D) complying in all respects
with the minimum detail requirements of the American Land
Title Association, or local equivalent, as such requirements
are in effect on the date of preparation of such survey;
(v) with respect to such real property, policies or
certificates of insurance as required by the Mortgages
relating thereto, which policies or certificates shall bear
mortgagee endorsements of the character required by such
Mortgages;
(vi) with respect to such real property, UCC, judgment
and tax lien searches confirming that the personal property
comprising a part of such real property is subject to no liens
other than (A) as set forth in the Mortgages and (B) Permitted
Liens;
(vii) with respect to such real property, such
affidavits, certificates and instruments of indemnification as
shall reasonably be required to induce the title company to
issue the policy or policies (or commitment) contemplated in
subparagraph (iii) above;
(viii) certified checks payable to the appropriate
public officials or title company (or checks or wire transfers
to the title company in respect of such amounts) in payment of
all mortgage, recording, documentary, intangible or similar
governmental charges due in respect of the execution, delivery
or recording of such Mortgages, together with a check or wire
transfer for the title company in payment of its premium,
search and examination charges, survey costs and any other
amounts due in connection with issuance of its policies (or
commitments);
(ix) with respect to such real property owned in fee,
certified copies of all leases or subleases, as the case may
be, and all amendments thereto, all of which leases or
subleases, as the case may be, shall, to the extent not
previously
<PAGE> 31
31
approved in writing by the Underwriters, be reasonably
satisfactory to the Underwriters;
(x) with respect to such real property, a certificate
of an officer of the Company certifying that, as of the date
of delivery of such certificate, there is not outstanding any
material citation, violation or similar notice indicating that
such real property contains conditions which are not in
compliance with local codes or ordinances relating to building
or fire safety or structural soundness (other than any
provisions of such codes or ordinances the validity or
applicability of which is being contested in good faith by
appropriate proceedings diligently prosecuted and as to which
enforcement proceedings have not been instituted or, if
instituted, have been stayed) with copies of certificates of
occupancy (to the extent in the Company's possession) for each
parcel of such real property attached thereto; and
(xi) a certificate of an officer of the Company
certifying on behalf of the Company, in his capacity as an
officer of the Company, that, as of the date of delivery of
such certificate, there has not occurred any Taking or
Destruction (each as defined in the Mortgages) of any such
real property and that the Company has no knowledge of any
facts which have not been disclosed to the Underwriters and
which, if disclosed, would materially and adversely affect the
Fair Market Value (as defined in the Indenture) of such real
property.
(p) At or prior to the Closing Date, evidence satisfactory to
the Underwriters shall be furnished of the completion and
effectiveness of all filings, recordings, registrations and other
actions of the Collateral Documents, and such other financing
statements and security documents, as may be necessary or, in the
opinion of the Underwriters, desirable to perfect the first priority
Lien created, or intended to be created, by the Collateral Documents.
All filing fees, taxes and other amounts payable in connection with
such filings, recordings, registrations and other actions shall have
been paid and the Underwriters shall have received evidence
satisfactory to them of such
<PAGE> 32
32
filings, recordings, registrations and other actions and payments.
(q) At the Closing Date, the Company shall have furnished the
Underwriters and counsel for the Underwriters with copies of any
consent, waivers and releases obtained in connection with the
authorization, execution, delivery and performance of this Agreement,
the Indenture, the other Collateral Documents, the Notes and the
transactions contemplated hereby and thereby, including, without
limitation, those relating to any indebtedness of the Company and its
subsidiaries outstanding immediately prior to the Closing Date.
(r) Prior to or at the Closing Date, the Company shall have
furnished to the Underwriters such further information, certificates
and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Underwriters. Notice of such cancellation shall be given to the Company in
writing or by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cravath, Swaine & Moore, counsel for the
Underwriters, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the
Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of
the Notes provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses
<PAGE> 33
33
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Notes.
8. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter and each person who controls either
Underwriter within the meaning of either the Act or the Exchange Act against
any and all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Notes as originally filed or in any amendment thereof, or
in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by the Underwriters specifically for inclusion therein
and (ii) such indemnity with respect to any Preliminary Prospectus shall not
inure to the benefit of such Underwriter (or any of the directors, officers,
employees and agents of such Underwriter or any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased the Notes which are the subject thereof if such person did
not receive a copy of the Prospectus, excluding documents incorporated therein
by reference, at or prior to the confirmation of the sale of such Notes to such
person in any case where such delivery is required by the Act and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus included in the Registration
Statement at the time it was
<PAGE> 34
34
declared effective by the Commission and it is finally judicially determined
that such delivery was required to be made under the Act and was not so made.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to the
Company by the Underwriters specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which either Underwriter may otherwise have. The
Company acknowledges that the statements set forth in the last paragraph of the
cover page and under the heading "Underwriting" in any Preliminary Prospectus
and the Prospectus constitute the only information furnished in writing by or
on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus, and the Underwriters confirm that such statements
are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
<PAGE> 35
35
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded,
based on the advice of counsel, that there may be legal defenses available to
it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding. No indemnified party,
without the prior written consent of the indemnifying party (which consent
shall not be unreasonably withheld) will settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect to which indemnification or contribution may be
sought hereunder (whether or not such indemnifying party is an actual or
potential party to such claim or action) unless such indemnifying party fails,
or such indemnified party has reasonable grounds to believe such indemnifying
party will fail, to perform or comply with its obligations hereunder, provided
that if such consent shall have been obtained or there is a final judgment
against the indemnified party in any such claim, action, suit or proceeding,
such indemnified party shall be entitled to indemnification or, if such
<PAGE> 36
36
indemnification is judicially determined to be unavailable, contribution as
provided herein.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively, "Losses") to which the Company and one or both
of the Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company and by the Underwriters
from the offering of the Notes; provided, however, that in no case shall either
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Notes) be responsible for any amount in excess
of the underwriting discount or commission applicable to the Notes purchased by
such Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Underwriters shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company and
of the Underwriters in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits received
by the Underwriters shall be deemed to be equal to the total underwriting
discounts and commissions, in each case as set forth on the cover page of the
Prospectus. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Underwriters. The Company and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 8, each person who controls an Underwriter within the
meaning of either the Act or the Exchange Act and each director, officer,
employee and agent of an Underwriter shall have the same rights to contribution
as such Under-
<PAGE> 37
37
writer, and each person who controls the Company within the meaning of either
the Act or the Exchange Act, each officer of the Company who shall have signed
the Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
9. Default by an Underwriter. If either Underwriter shall
fail to purchase and pay for any of the Notes agreed to be purchased by such
Underwriter hereunder and such failure to purchase shall constitute a default
in the performance of its obligations under this Agreement, the remaining
Underwriter shall be obligated to take up and pay for the Notes which the
defaulting Underwriter agreed but failed to purchase; provided, however, that
in the event that the aggregate principal amount of Notes which the defaulting
Underwriter agreed but failed to purchase shall exceed 10% of the aggregate
principal amount of Notes set forth in Schedule I hereto, the remaining
Underwriter shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Notes, and if such nondefaulting Underwriter
does not purchase all the Notes, this Agreement will terminate without
liability to the nondefaulting Underwriter or the Company. In the event of a
default by either Underwriter as set forth in this Section 9, the Closing Date
shall be postponed for such period, not exceeding seven days, as the
Underwriters shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall
relieve the defaulting Underwriter of its liability, if any, to the Company and
the nondefaulting Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Underwriters, by notice given to
the Company prior to delivery of and payment for the Notes, if after the
Execution Time and prior to such time (i) trading in the Company's Common Stock
shall have been suspended by the Commission or the New York Stock Exchange or
trading in securities generally on the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on the New
York Stock Exchange, (ii) a banking moratorium shall have been declared either
by Federal or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities,
<PAGE> 38
38
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Underwriters, impracticable or inadvisable to
proceed with the offering or delivery of the Notes as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of either Underwriter or
the Company or any of the officers, directors or controlling persons referred
to in Section 8 hereof, and will survive delivery of and payment for the Notes.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Underwriters, will be
mailed, delivered or telegraphed and confirmed to them, care of Salomon
Brothers Inc, at Seven World Trade Center, New York, New York, 10048; or, if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at Anacomp, Inc., One Buckhead Plaza, 3060 Peachtree Road, N.W., Suite 1700,
Atlanta, GA 30305, attention of the legal department.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your
<PAGE> 39
39
acceptance shall represent a binding agreement among the Company and the
several Underwriters.
Very truly yours,
Anacomp, Inc.
By: .....................
[Title]
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Smith Barney Inc.
By: Salomon Brothers Inc
By:
............................
[Title]
<PAGE> 40
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Notes to
Underwriters be Purchased
------------ ----------------
<S> <C>
Salomon Brothers Inc . . . . . . $
Smith Barney Inc. . . . . . . . ____________
Total. . . . . . . . . . . . . . $225,000,000
</TABLE>
<PAGE> 41
Exhibit A
Subsidiaries of the Company
Anacomp International N.V.
Stromberg Datagraphix International
Anacomp Canada Inc.
Anacomp GESMBH
Kalvar Microfilm Inc.
Florida AAC Corporation
Anacomp Holdings, Ltd.
Anacomp Ltd.
Xidex (U.K.) Ltd.
Anacomp Belgium S.A.
Anacomp B.V.
Anacomp A.B.
Anacomp A/S (Norway)
Anacomp O.Y.
Anacomp A/S (Denmark)
Datamagnetics GmbH
Anacomp GmbH
Sun-Flex Industries of Puerto Rico, Inc.
Xidex Magnetics, S.A.
Anacomp Italia SRL
Anacomp S.A.
Xidex GmbH
Xidex Development Corporation
Anacomp California
Anacomp Pty, Ltd.
Xidex New Zealand Ltd.
Anacomp Japan Ltd
Anacomp DO Brasil
<PAGE> 42
Exhibit B
Inactive Subsidiaries of the Company with
No Assets or Employees
U.S. Video Corporation
Teksad Corporation
Applied Peripheral System
Data Management Inc.
Cadran Systems, Inc.
Xidex International Sales Corp.
Xidex Magnetics International Sales Corp.
Dysan International Sales Corp.
Dysan International Sales Corp. II
Xidex (Pty) Ltd.
Xidex Corporation S.A.
Computer Services Corporation
<PAGE> 43
Exhibit C
Description of Mortgages
------------------------
<TABLE>
<CAPTION>
Title
-----
Property Type of Mortgage Insurance
-------- ------- -------- ---------
Description Mortgage Amount Amount
----------- -------- ------ ------
<S> <C> <C> <C>
Graham, TX Deed of Trust $ $
Poway, CA Leasehold Deed of Trust $ $
</TABLE>
<PAGE> 1
========================================================
ANACOMP, INC.
% Senior Secured Notes due 2002
________________________
INDENTURE
Dated as of , 1995
________________________
THE BANK OF NEW YORK,
Trustee
========================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1 PAGE
----
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . 28
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act . . . . . . . . . . . . . . . . . . . . 29
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . 29
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . 30
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . 31
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . 32
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . 32
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . 32
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . 33
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . 33
SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . . 34
SECTION 2.10. Cancelation . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . 35
SECTION 2.12. Record Date . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . 37
SECTION 3.02. Selection of Securities To Be
Redeemed . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . 38
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . 38
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . 39
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . 39
<PAGE> 3
2
Page
----
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . 39
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . 40
SECTION 4.04. Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock . . . . . . . . . . . 44
SECTION 4.05. Limitation on Restricted Payments . . . . . . . . . . . 46
SECTION 4.06. Limitation on Restrictions on Dis-
tributions from Restricted Subsidiaries . . . . . . . 51
SECTION 4.07. Limitation on Sales of Assets and
Restricted Subsidiary Stock . . . . . . . . . . . . . 52
SECTION 4.08. Limitation on Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.09. Change of Control . . . . . . . . . . . . . . . . . . . 62
SECTION 4.10. Compliance Certificate . . . . . . . . . . . . . . . . . 66
SECTION 4.11. Further Instruments and Acts . . . . . . . . . . . . . . 66
SECTION 4.12. Limitation on Liens and Impairment of
Collateral . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 4.13. Limitation on Sale/Leaseback
Transactions . . . . . . . . . . . . . . . . . . . . . 66
SECTION 4.14. Limitation on Issuance and Sale of
Capital Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.15. Restricted and Unrestricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.16. After-Acquired Property . . . . . . . . . . . . . . . . 68
SECTION 4.17. Additions to Schedules . . . . . . . . . . . . . . . . . 69
SECTION 4.18. Maintenance of Properties; Insurance . . . . . . . . . . 69
SECTION 4.19. Corporate Existence . . . . . . . . . . . . . . . . . . 70
SECTION 4.20. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 4.21. Conflicting Agreements . . . . . . . . . . . . . . . . . 70
SECTION 4.22. Contingent Security Interest
in Hartford Property . . . . . . . . . . . . . . . . . 70
ARTICLE 5
SUCCESSOR COMPANY . . . . . . . . . . . . 71
<PAGE> 4
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Page
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . 73
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . 77
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . 77
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . 77
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . 77
SECTION 6.07. Rights of Holders To Receive Payment . . . . . . . . . . 78
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . 78
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . 78
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . 79
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . 80
SECTION 6.13. Suits to Protect the Collateral . . . . . . . . . . . . 80
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . 80
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . 82
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . 82
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 83
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . 83
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . 83
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . 83
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . 84
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . 85
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . 86
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . 86
SECTION 7.12. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . . 86
<PAGE> 5
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Page
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ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities;
Defeasance . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . 89
SECTION 8.03. Application of Trust Money . . . . . . . . . . . . . . . . 91
SECTION 8.04. Repayment to Company . . . . . . . . . . . . . . . . . . . 91
SECTION 8.05. Indemnity for Government
Obligations . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . 92
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . 93
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . 94
SECTION 9.04. Revocation and Effect of Consents
and Waivers . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 9.05. Notation on or Exchange of
Securities . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . 95
SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . . . . 96
ARTICLE 10
COLLATERAL DOCUMENTS
SECTION 10.01. Collateral Documents . . . . . . . . . . . . . . . . . . 96
SECTION 10.02. General Authority . . . . . . . . . . . . . . . . . . . . 97
SECTION 10.03. Recording, Deposit of Pledge,
Securities, etc. . . . . . . . . . . . . . . . . . . . 98
SECTION 10.04. Disposition of Collateral Without
Trustee Consents . . . . . . . . . . . . . . . . . . . 101
SECTION 10.05. Disposition of Inventory and Accounts
Receivable Without Release . . . . . . . . . . . . . . 104
SECTION 10.06. Release of Collateral with Trustee
Consent . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 10.07. Substitute Collateral . . . . . . . . . . . . . . . . . . 110
SECTION 10.08. Eminent Domain and Other Governmental
Takings . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 10.09 TIA Requirements . . . . . . . . . . . . . . . . . . . . 114
<PAGE> 6
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Page
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SECTION 10.10. Suits to Protect the Collateral . . . . . . . . . . . . . 115
SECTION 10.11. Purchaser Protected . . . . . . . . . . . . . . . . . . . 115
SECTION 10.12. Powers Exercisable by Receiver or
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 10.13. Disposition of Obligations
Received . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 10.14. Limitation on Duty of Trustee in
Respect of Collateral;
Indemnification . . . . . . . . . . . . . . . . . . . . 118
SECTION 10.15. Release Upon Termination of the
Company's Obligations . . . . . . . . . . . . . . . . . 118
ARTICLE 11
APPLICATION OF TRUST MONIES
SECTION 11.01 "Trust Monies" Defined . . . . . . . . . . . . . . . . . 118
SECTION 11.02. Retirement of Securities . . . . . . . . . . . . . . . . 119
SECTION 11.03. Withdrawal of Insurance
Proceeds and Condemnation
Awards . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 11.04. Release of Real Estate Tax
Monies; Rents . . . . . . . . . . . . . . . . . . . . . 123
SECTION 11.05. Powers Exercisable Notwithstanding
Event of Default . . . . . . . . . . . . . . . . . . . 124
SECTION 11.06. Powers Exercisable by Trustee or
Receiver . . . . . . . . . . . . . . . . . . . . . . . 124
SECTION 11.07. Disposition of Securities Retired . . . . . . . . . . . . 125
SECTION 11.08. Investment of Trust Monies . . . . . . . . . . . . . . . 125
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . 125
SECTION 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 12.03. Communication by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . . . . . . . . 126
SECTION 12.05. Statements Required in Certificate
or Opinion . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 12.06. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 12.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 127
<PAGE> 7
6
Page
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SECTION 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . 128
SECTION 12.09. No Recourse Against Others . . . . . . . . . . . . . . 128
SECTION 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . 128
SECTION 12.11. Multiple Originals . . . . . . . . . . . . . . . . . . 128
SECTION 12.12. Table of Contents; Headings . . . . . . . . . . . . . . 128
SECTION 12.13. Severability . . . . . . . . . . . . . . . . . . . . . 129
Exhibit A - Form of Security
Exhibit B - Form of Mortgage
Exhibit C - Form of Security and Pledge Agreement
Schedule I - Existing Liens
Schedule II - U.S. Restricted Subsidiaries
Schedule III - Jurisdictions for UCC Filings
Schedule IV - Jurisdictions for Real Property Filings
and Recordings
<PAGE> 8
ANACOMP, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 ("TIA") AND
INDENTURE DATED AS OF , 1995.*
TIA INDENTURE
SECTION SECTION
------- ---------
310(a)(1) . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . 7.12
(a)(4) . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . 7.08, 7.10
(c) . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . 4.07, 4.09,
7.06, 10.04,
10.06, 10.07
(b)(2) . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . 12.02
(d) . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . 4.02, 4.10,
12.02
(b) . . . . . . . . . . . . . . . . . 10.03, 10.09
(c)(1) . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . 10.05, 10.06,
10.07, 12.04
(e) . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . 4.10
315(a) . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . 12.06
(a)(1)(A) . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . 6.07
<PAGE> 9
2
317(a)(1) . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . 12.01
N.A. means Not Applicable.
---------------------
* This reconciliation and tie shall not, for any purpose, be deemed to be part
of the Indenture. This reconciliation and tie shall only apply subsequent to
qualification of this Indenture under the TIA.
<PAGE> 10
INDENTURE dated as of , 1995,
between Anacomp, Inc., an Indiana corporation (the
"Company"), and The Bank of New York, a New York
banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
% Senior Secured Notes due 2002 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accounts Receivable" means any and all rights of the Company
to payment for Inventory sold or services performed, whether due or to become
due, whether or not earned by performance, whether now in existence or arising
from time to time hereafter, including, without limitation, (a) rights
evidenced by or in the form of an account, note, draft, letter of credit,
contract right, security agreement, chattel paper or other evidence of
indebtedness or security, (b) the right to payment of any interest or finance
charges with respect thereto, (c) all proceeds of insurance with respect
thereto, (d) all of the Company's rights as an unpaid vendor, all
pledged assets and letters of credit, guaranty claims, liens and security
interests held by or granted to the Company to secure payment of any Accounts
Receivable and (e) all books and records of the Company (whether written or
stored electronically) relating to any of the foregoing; provided, however,
that Accounts Receivable shall not include any such right classified as
long-term or the equivalent thereof on the Company's financial statements
prepared in accordance with GAAP; provided, further, however, that for purposes
of Section 4.04, the term Accounts Receivable means such rights of any Foreign
Restricted Subsidiaries.
"Affiliate" of any specified Person means (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person who
is a director or officer (A) of such specified Person, (B) of any Subsidiary of
such specified Person or (C) of any Person described in clause (i). For the
purposes of this
<PAGE> 11
2
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Section 4.08 only, "Affiliate" also shall mean any
beneficial owner of shares representing 10% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof. Notwithstanding the foregoing, each Unrestricted
Subsidiary shall be deemed an Affiliate of the Company and of each other
Subsidiary of the Company.
"Asset Disposition" means any direct or indirect sale, lease,
transfer, conveyance or other disposition (or series of related sales, leases,
transfers, conveyances or dispositions) of shares of Capital Stock (including,
without limitation, the Pledged Stock) of any Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any
Restricted Subsidiary (including any disposition by means of a merger,
consolidation or similar transaction), other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of the Company's or
any Restricted Subsidiary's Accounts Receivable or Inventory (other than the
disposition of Inventory pursuant to a Sale/Leaseback Transaction), such
disposition, in the event the Revolving Credit Facility and any other revolving
credit facility permitted under Section 4.03 shall have been fully satisfied,
at Fair Market Value in the Ordinary Course of Business or (iii) a disposition
of property or assets, whether in a single transaction or a series of related
transactions which constitute a single plan of disposition, that have an
aggregate Fair Market Value not in excess of $100,000. An Asset Disposition
shall include the requisition of title to, seizure of or forfeiture of any
property or assets, or any actual or constructive total loss
<PAGE> 12
3
or an agreed or compromised total loss of any property or assets. The term
"Asset Disposition" when used with respect to the Company shall not include any
disposition pursuant to Article 5 which constitutes a disposition of all or
substantially all the assets of the Company.
"Attributable Indebtedness", in respect of a Sale/Leaseback
Transaction, means, as at the time of determination, the greater of (i) the
Fair Market Value of the property subject to such Sale/Leaseback Transaction
(as determined in good faith by the Board of Directors) or (ii) the present
value (discounted at the interest rate borne by the Securities, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such
Board.
"Board Resolution" means a duly adopted Board Resolution of
the Board of Directors in full force and effect at the time of determination
and certified as such by the Secretary or an Assistant Secretary of the
Company.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP; the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease
<PAGE> 13
4
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests (including partnership interests) in (however
designated) equity of such Person, including any Preferred Stock, but excluding
any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the
following events: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than an underwriter engaged in a firm
commitment underwriting in connection with a public offering of the Voting
Stock of the Company or a Restricted Subsidiary, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board or whose nomination for election
by the shareholders of the Company was approved by a vote of 66 2/3% of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board then in office; or (iii) the Company, either individually or in
conjunction with one or more of its Subsidiaries, sells, conveys, leases or
otherwise transfers, or one or more of such Subsidiaries sell, convey, lease or
otherwise transfer, all or substantially all the assets of the Company and the
Restricted Subsidiaries, taken as a whole, to any Person (other than a
Restricted Subsidiary).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the property and assets subject to the Lien
of the Indenture or any of the other Collateral Documents.
<PAGE> 14
5
"Collateral Documents" means the Indenture, the Security and
Pledge Agreement, the Mortgages and each other document, agreement or
instrument evidencing, perfecting, assuring or otherwise relating to the Lien
in respect of the Collateral and all amendments, supplements or other
modifications thereto.
"Commodity Price Protection Agreement" means, in respect of a
Person, any forward contract, commodity swap agreement, commodity option
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in commodity prices.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Coverage Ratio" means, as of any date of
determination, the ratio of (i) the aggregate amount of EBITDA for the period
of the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination to (ii) Consolidated Interest Expense
for such four fiscal quarters; provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (2) if since
the beginning of such period the Company or any Restricted Subsidiary shall
have made any Asset Disposition or if the transaction giving rise to the need
to calculate the Consolidated Coverage Ratio is an Asset Disposition, or both,
EBITDA for such period shall be reduced by an amount equal to EBITDA (if
positive) directly attributable to the property or assets which are the subject
of such Asset Disposition for such period, or increased by an amount equal to
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the
<PAGE> 15
6
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and the continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and the continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (3)
if since the beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto as if
such Asset Disposition or Investment occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of
the Company and as further contemplated by the definition of pro forma. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such
<PAGE> 16
7
Interest Rate Protection Agreement has a remaining term in excess of 12
months).
"Consolidated Interest Expense" means, for any period, the sum
of (i) the total cash and noncash interest expense of the Company and its
consolidated Subsidiaries, plus, to the extent not included in such interest
expense, (A) interest expense attributable to Capital Lease Obligations, (B)
amortization of debt discount and debt issuance cost, (C) capitalized interest,
(D) accrued interest, (E) commissions, discounts and other fees and charges
paid or owed with respect to letters of credit and bankers' acceptance
financing, (F) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(G) net costs associated with Hedging Obligations (including amortization of
discounts and fees), (H) the interest portion of any deferred obligation, (I)
Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries of
the Company and Redeemable Stock of the Company held by Persons other than the
Company or a Wholly Owned Subsidiary and (J) cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
expense of any Unrestricted Subsidiary to the extent the related Indebtedness
is not Guaranteed or paid by the Company or any Restricted Subsidiary, less
(ii) to the extent included in clause (i), amortization or write-off of
deferred financing costs of the Company and its consolidated Subsidiaries
during such period and any charge related to any premium or penalty paid in
connection with redeeming or retiring any Indebtedness of the Company and its
consolidated Subsidiaries prior to its State Maturity.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries; provided,
however, that there shall not be included in such Consolidated Net Income (i)
any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in (iv) below,
the Company's equity in the net income of any such Person for such period shall
be included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a
<PAGE> 17
8
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iii) below) and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income, (ii) any net income (loss) of any
person acquired by the Company or a Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that (A) subject to the
limitations contained in (iv) below, the Company's equity in the net income of
any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend (subject, in the case of a dividend
to another Restricted Subsidiary, to the limitation contained in this clause)
and (B) the Company's equity in a net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated Net Income,
(iv) any gain (but not loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person, (v) any extraordinary gain or loss and (vi) the cumulative effect of a
change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending at least 45 days prior to
the taking of any action for the purpose of which the determination is being
made, as (i) the par or stated value of all outstanding Capital Stock of the
Company plus (ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
<PAGE> 18
9
"Currency Exchange Protection Agreement" means, in respect of
any Person, any foreign exchange contract, currency swap agreement, currency
option or other similar agreement or arrangement designed to protect such
Person against fluctuations in foreign currency exchange rates.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" of a Person means Redeemable Stock of
such Person as to which the maturity, mandatory redemption, conversion or
exchange or redemption at the option of the Holder thereof occurs, or may
occur, on or prior to the first anniversary of the Stated Maturity of the
Securities.
"Documents" means, only for purposes of the definition of
Inventory herein, all documents of title and goods evidenced thereby,
including, without limitation, all bills of lading, dock warrants, dock
receipts, warehouse receipts and orders for the delivery of goods, and also any
other document which in the regular course of business or financing is treated
as adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Dollar Equivalent" means, with respect to any monetary amount
in a currency other than U.S. dollars, at any time for the 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
Bankers Trust Company in New York City at approximately 11:00 a.m. (New York
time) on the date two Business Days prior to such determination.
"EBITDA" for any period means the Consolidated Net Income for
such period, plus, to the extent deducted in calculating such Consolidated Net
Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense and (v) any charge related to
any premium or penalty paid in connection with redeeming or retiring any
Indebtedness prior to its Stated Maturity, in each case for such period.
<PAGE> 19
10
"8.25% Preferred Stock" means the Company's 8.25% Cumulative
Convertible Redeemable Exchangeable Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Notes" means the 8.25% Convertible Senior
Subordinated Debentures due March 1, 2002 of the Company, if any, issued upon
exchange for the 8.25% Preferred Stock in accordance with the First Addendum to
the Restated Articles of Incorporation of the Company as in effect on the Issue
Date.
"Fair Market Value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction;
provided, that the foregoing shall not prohibit sales of Inventory at a
discount or on terms which are typical in the industry to which such Inventory
relates. Fair Market Value shall be determined, except as otherwise provided
herein, (i) if such property or asset has a Fair Market Value less than
$5,000,000, by any officer of the Company or (ii) if such property or asset has
a Fair Market Value in excess of $5,000,000, by a majority of each of the
disinterested members of the Board of Directors and the Board of Directors as a
whole and evidenced by a Board Resolution, dated within 30 days of the relevant
transaction, of the Board of Directors delivered to the Trustee.
"15% Subordinated Notes" means the Company's 15% Senior
Subordinated Notes due 2000.
"Foreclosure Event" means any foreclosure upon and enforcement
of the Lien of the Collateral Documents by the Trustee or the Lien of the
Revolving Credit Facility by the lenders thereunder.
"Foreign Asset Disposition" means an Asset Disposition in
respect of Capital Stock or assets of a Restricted Subsidiary of the type
described in Section 936 of the Code to the extent that the proceeds of such
Asset Disposition are received by a Person subject in respect of such proceeds
to the tax laws of a jurisdiction other than the United States of America, any
State thereof or the District of Columbia.
"Foreign Restricted Subsidiaries" means, collectively, (i) the
following Subsidiaries of the Company
<PAGE> 20
11
to the extent such Subsidiaries are Restricted Subsidiaries: Anacomp Holdings
Ltd., Anacomp Ltd. (UK), Xidex (UK) Ltd., Anacomp International N.V., Anacomp
Canada, Inc., Anacomp GesmbH, Anacomp Belgium S.A., Xidex GmbH, Anacomp GmbH,
Datamagnetics GmbH, Anacomp Pty Ltd., Xidex New Zealand Ltd., Anacomp Japan
Ltd., Anacomp DO Brazil, Xidex Magnetics S.A., Anacomp Italia SRL, Anacomp
S.A., Anacomp B.V., Anacomp A.B., Anacomp A/S (Norway), Anacomp A/S (Denmark)
and Anacomp O.Y.; and (ii) any other Restricted Subsidiary that is incorporated
in a jurisdiction other than the United States of America, any State thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including 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 based on GAAP contained in
this Indenture shall be computed in conformity with GAAP consistently applied.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and 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 or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, 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 or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, 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.
"Hartford Property" means the real property located at 857
State Street, Hartford, Wisconsin.
<PAGE> 21
12
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Protection Agreement, Commodity Price
Protection Agreement or Currency Exchange Protection Agreement or other similar
agreement or arrangement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means to, directly or indirectly, create, issue,
assume, Guarantee, incur (by conversion, exchange or otherwise) extend, assume,
or otherwise become liable for, contingently or otherwise; provided, however,
that any Indebtedness or Capital Stock of a Person existing at the time such
Person becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) will be deemed to be incurred by such Subsidiary at the time it
becomes a Subsidiary. The terms "Incurrence", "Incurred" and "Incurring" shall
each have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication),
(i) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(iii) all Capital Lease Obligations and all Attributable
Indebtedness of such Person;
(iv) all obligations of such Person to pay the deferred
and unpaid purchase price of property or services (except (A) Trade
Payables and (B) any obligation to pay any portion of such purchase
price that becomes due only if the earnings attributable to such
property or services satisfy predetermined minimum amounts subsequent
to the purchase of such property or services and the amount of such
obligation cannot be determined on the date of such purchase);
(v) all obligations of such Person in respect of letters
of credit, banker's acceptances or other similar instruments or credit
transactions (including
<PAGE> 22
13
reimbursement obligations with respect thereto), other than
obligations with respect to letters of credit securing obligations
(other than obligations described in (i) through (iv) above) entered
into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for
reimbursement following payment on any such letter of credit;
(vi) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person,
any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vii) 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, however, 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 of such other Persons;
(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person; and
(ix) to the extent not otherwise included in this
definition, obligations of such Person in respect of Hedging
Obligations.
For purposes of this definition, the maximum fixed redemption, repayment or
repurchase price of any Disqualified Stock or Preferred Stock that does not
have a fixed redemption, repayment or repurchase price shall be calculated in
accordance with the terms of such Stock as if such Stock were redeemed, repaid
or repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; provided, however, that if such Stock is
not then permitted to be redeemed, repaid or repurchased, the redemption,
repayment or repurchase price shall be the book value of such Stock as
reflected in the most recent financial statements of such Person. 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 the maximum
liability,
<PAGE> 23
14
upon the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the TIA that are deemed to be a part of and govern
this instrument, and any such supplemental indenture, respectively.
"Indenture Obligations" means the obligations of the Company
(and any other obligor hereunder or under the Securities) to pay principal of,
and premium, if any, and interest (including, without limitation, any default
interest) on, the Securities when due and payable, whether at maturity, by
acceleration, call for redemption or repurchase, in each case as required
hereunder, and all other amounts due or to become due under or in connection
with this Indenture, the Securities and the other Collateral Documents and the
performance of all other obligations to the Trustee and the Holders under this
Indenture, the Securities and the other Collateral Documents, according to the
terms hereof and thereof.
"Independent Appraiser" means a nationally or internationally
recognized appraisal, accounting, investment banking or other firm (which may
include the independent certified public accountants of the Company), as
appropriate, that (i) is in fact independent in respect of the transaction in
question, (ii) is an expert in respect of the relevant valuation or appraisal
activity, (iii) does not have any direct financial interest or any material
indirect financial interest in the Company or any Subsidiary, the Trustee or in
any Affiliate of any of them and (iv) is not connected with the Company or a
Subsidiary of the Company, the Trustee or any such Affiliate as a director,
officer, employee or Affiliate.
"Interest Rate Protection Agreement" means, in respect of any
Person, any interest rate swap agreement, interest rate option agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
floor agreement or other similar agreement or arrangement designed to protect
such Person against fluctuations in interest rates.
<PAGE> 24
15
"Inventory" means all goods of the Company held for sale or
lease, or furnished or to be furnished, by the Company under contracts of
service, or consumed in the Company's business, including raw materials,
intermediates, work in process, packaging materials, finished goods,
semi-finished inventory, scrap inventory, manufacturing supplies and spare
parts, and all such goods that have been returned to or repossessed by or on
behalf of the Company, including all Documents evidencing or issued with
respect thereto; provided, however, that the term Inventory shall not include
repair or replacement parts; provided, further, however, that, for the purposes
of Section 4.04, the term Inventory means such goods of any Foreign Restricted
subsidiaries.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of such
Person) or other extension of credit (including by way of Guarantee or similar
arrangement) 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) such Person, or any purchase or acquisition of all or
substantially all the business or assets of, Capital Stock, Indebtedness, any
other evidence of beneficial ownership or other similar instruments issued by,
such Person. For purposes of Sections 4.05 and 4.15, (i) the term "Investment"
shall include the portion (proportionate to the Company's equity interest in
such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary
of the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer. In determining the amount of any Investment in respect of any
property or assets other than cash, such property or asset shall be valued at
its Fair Market Value at the time of such Investment (unless otherwise
specified in this definition).
<PAGE> 25
16
"Issue Date" means the date on which the Securities are
originally issued.
"Lien" means any mortgage, deed of trusts, pledge,
hypothecation, assignment, deposit arrangement, preference, priority, security
interest, encumbrance, easement, restriction, covenant, right-of-way,
servitude, lien (statutory or otherwise), charge, other security or similar
agreement or preferential arrangement of any kind or nature whatsoever or other
adverse claim of any kind or nature (including, without limitation, any
conditional sale or other title retention agreement or lease having
substantially the same economic effect of any of the foregoing).
"Magnetics Division" means the property and assets of the
Company or any Restricted Subsidiary used in connection with the manufacture,
marketing and sale of magnetic tape, computer tape or other magnetic products.
"Mortgage" means a fee or leasehold mortgage instrument or
deed of trust with any related security agreements and assignments of lease and
rents to secure the Indenture Obligations, substantially in the form of Exhibit
B (including such changes to such form as may be necessary or desirable to
conform such form to the local laws or customs applicable to property in the
jurisdiction where such mortgage instrument or deed of trust is to be
recorded), as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof, hereof and of any other
Collateral Document.
"Net Cash Proceeds" from an Asset Disposition means the sum of
(i) cash payments and Temporary Cash Investments received (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to such
properties or assets or received in any other non-cash form) therefrom and (ii)
the Fair Market Value of all securities issued to the Company or a Subsidiary
of the Company in connection therewith, in each case net of (A) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP as a consequence of such Asset
<PAGE> 26
17
Disposition, (B) all payments made on any Indebtedness which is secured by any
property or assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon such property or assets, or which must by its terms, or
in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (C)
all distributions and other payments required to be made to minority interest
Holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (D) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition; provided,
that, in the event that any consideration for such Asset Disposition (which
would otherwise constitute Net Cash Proceeds) is required to be held in escrow
pending determination of whether a purchase price adjustment shall be made,
such consideration (or any portion thereof) shall become Net Cash Proceeds only
at such time as it is released to the Company or any Restricted Subsidiary from
escrow; provided, further, that any non-cash consideration received in
connection with such Asset Disposition, which is subsequently converted to
cash, shall be deemed to be Net Cash Proceeds at such time and shall thereafter
be applied in accordance with Section 4.07. The term "Net Cash Proceeds" from
an issuance or sale of Capital Stock means the cash proceeds of such issuance
or sale, net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Officer" means the Chairman of the Board and Chief Executive
Officer, the President and Chief Operating Officer, the Vice President and
Chief Administrative Officer, any other Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers at least one of whom shall be the principal executive officer,
principal accounting officer or principal financial officer of the Company.
"Opinion of Counsel" means a written opinion, in form
acceptable to the Trustee, from legal counsel who is
<PAGE> 27
18
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Ordinary Course of Business" means sales or assignments of
Inventory and Accounts Receivable or the performance of services at Fair Market
Value or the collection of Accounts Receivable in the ordinary course of
business and does not include any sale, assignment or collection (i) after any
Foreclosure Event or (ii) after the voluntary or involuntary bankruptcy of the
Company, including, without limitation, those events of the type described in
Section 6.01(9) and (10). The ordinary course of business shall include (i)
sales of inventory to customers, (ii) returns of merchandise to manufacturers
or distributors for refunds or credit and (iii) exchanges of inventory with
manufacturers or distributors for other inventory.
"pari passu", as applied to the ranking of any Indebtedness of
a Person in relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not subordinate in right of payment to any
Indebtedness or (ii) is subordinate in right of payment to the same
Indebtedness as is the other, and is so subordinate to the same extent, and is
not subordinate in right of payment to each other or to any Indebtedness as to
which the other is not so subordinate.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) (A) a Wholly Owned Subsidiary, (B) any Person
which will become a Wholly Owned Subsidiary as a result of such Investment or
(C) all or substantially all the business or assets of any Person; (ii)
Temporary Cash Investments; (iii) receivables owing to the Company or such
Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided, however, that nothing in this paragraph shall limit in any way the
ability of the Company or such Restricted Subsidiary to settle, compromise or
otherwise deal with such receivables in the ordinary course of business; (iv)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (v) loans or
advances, in the aggregate principal amount of $5,000,000 outstanding from time
to time, to employees of the Company or such Restricted Subsidiary made in the
<PAGE> 28
19
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary, as the case may be; (vi) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or such Restricted Subsidiary or in
satisfaction of judgments; (vii) joint ventures, whether in the form of cash or
through a contribution of assets (the nature of which, if other than cash, to
be determined in good faith by the Board of Directors, whose determination
shall be evidenced by a Board Resolution delivered to the Trustee) in an amount
not to exceed $10,000,000 at any one time; and (viii) any other property, asset
or Person if made pursuant to any written agreement of the Company or such
Restricted Subsidiary in effect on the Issue Date.
"Permitted Liens" means (i) pledges or deposits by the Company
or any Restricted Subsidiary under workmen's compensation laws, unemployment
insurance laws, other types of social security benefits or similar legislation,
or good faith deposits in connection with bids, tenders or contracts (other
than for the payment of Indebtedness) or leases to which the Company or any
Restricted Subsidiary is a party, or deposits to secure public or statutory
obligations or deposits of cash or United States government bonds to secure
surety or appeal bonds to which the Company or any Restricted Subsidiary is a
party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case incurred by the Company or any Restricted
Subsidiary in the ordinary course of business consistent with past practice;
(ii) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens, in each case for sums not yet due from the Company or any Restricted
Subsidiary or being contested in good faith by appropriate proceedings by the
Company or any Restricted Subsidiary, as the case may be, or other Liens
arising out of judgments or awards against the Company or any Restricted
Subsidiary with respect to which the Company or such Restricted Subsidiary, as
the case may be, shall then be prosecuting an appeal or other proceedings for
review; (iii) Liens for property taxes or other taxes, assessments or
governmental charges of the Company or any Restricted Subsidiary not yet due or
payable or subject to penalties for nonpayment or which are being contested by
the Company or such Restricted Subsidiary, as the case may be, in good faith by
appropriate proceedings; (iv) Liens in favor of issuers of standby letters of
credit, performance bonds and surety bonds issued pursuant to Section
4.03(b)(ix)(B) or Section 4.04(b)(iv)(B); (v) survey
<PAGE> 29
20
exceptions, encumbrances, easements or reservations of, or rights of others
for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone
lines and other similar purposes or zoning or other restrictions as to the use
of real property of the Company or any Restricted Subsidiary incidental to the
ordinary course of conduct of the business of the Company or such Restricted
Subsidiary or as to the ownership of properties of the Company or any
Restricted Subsidiary, which, in either case, were not incurred in connection
with Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the operation of
the business of the Company or any Restricted Subsidiary; (vi) Liens to secure
Indebtedness permitted under Section 4.03(b)(i); (vii) Liens remaining
outstanding immediately after the Issue Date as set forth on Schedule 1.01
hereto (and not otherwise permitted by clause (vi) or (xiii)); (viii) Liens on
property, assets or shares of stock of any Restricted Subsidiary at the time
such Restricted Subsidiary became a Subsidiary of the Company; provided,
however, that (A) if any such Lien shall have been Incurred in anticipation of
such transaction, such property, assets or shares of stock subject to such Lien
shall have a Fair Market Value at the date of the acquisition thereof not in
excess of the lesser of (1) the aggregate purchase price paid or owed by the
Company in connection with the acquisition of such Restricted Subsidiary and
(2) the Fair Market Value of all property and assets of such Restricted
Subsidiary and (B) any such Lien shall not extend to any other property or
assets owned by the Company or any Restricted Subsidiary; (ix) Liens on
property or assets at the time the Company or any Restricted Subsidiary
acquired such property or assets, including any acquisition by means of a
merger or consolidation with or into the Company or such Restricted Subsidiary;
provided, however, that (A) if any such Lien shall have been Incurred in
anticipation of such transaction, such property or assets subject to such Lien
shall have a Fair Market Value at the date of the acquisition thereof not in
excess of the lesser of (1) the aggregate purchase price paid or owed by the
Company or such Restricted Subsidiary in connection with the acquisition
thereof and of any other property and assets acquired simultaneously therewith
and (2) the Fair Market Value of all such property and assets acquired by the
Company or such Restricted Subsidiary and (B) any such Lien shall not extend to
any other property or assets owned by the Company or any Restricted Subsidiary;
(x) Liens securing Indebtedness or other obligations of a Restricted Subsidiary
owing to the
<PAGE> 30
21
Company or a Wholly Owned Subsidiary; (xi) Liens to secure any extension,
renewal, refinancing, replacement or refunding (or successive extensions,
renewals, refinancings, replacements or refundings), in whole or in part, of
any Indebtedness secured by Liens referred to in any of clauses (vii), (viii)
and (ix); provided, however, that any such Lien will be limited to all or part
of the same property or assets that secured the original Lien (plus
improvements on such property) and the aggregate principal amount of
Indebtedness that is secured by such Lien will not be increased to an amount
greater than the sum of (A) the outstanding principal amount, or, if greater,
the committed amount, of the Indebtedness described under clauses (vii), (viii)
and (ix) at the time the original Lien became a Permitted Lien under the
Indenture and (B) an amount necessary to pay an premiums, fees and other
expenses Incurred by the Company in connection with such refinancing,
refunding, extension, renewal or replacement; (xii) Liens on property or assets
of the Company securing Hedging Obligations so long as the related Indebtedness
is, and is permitted to be under Section 4.03(b)(v), secured by a Lien on the
same property securing the relevant Hedging Obligation; (xiii) Liens securing
Indebtedness incurred under (A) in the case of the Company, the Revolving
Credit Facility or any revolving credit facility; provided, that such
Indebtedness was incurred in compliance with Section 4.03(b)(iv) and such Liens
relate only to Accounts Receivable, Inventory and proceeds thereof (other than
proceeds from the disposition of Inventory pursuant to any Sale/Leaseback
Transaction); and (B) in the case of any Foreign Restricted Subsidiary, any
foreign currency revolving credit facility; provided, that such Indebtedness
was incurred in compliance with Section 4.04(b)(ii) and such Liens relate only
to the Accounts Receivable, Inventory and proceeds thereof of such Foreign
Restricted Subsidiary (other than proceeds from the disposition of Inventory
pursuant to any Sale/Leaseback Transaction); and (xiv) Liens on property or
assets of the Company or any Restricted Subsidiary securing Indebtedness (1)
under Purchase Money Indebtedness or Capital Lease Obligations permitted under,
in the case of the Company, Section 4.03(b)(viii) and, in the case of such
Restricted Subsidiary, Section 4.04(b)(iii) or (2) under Sale/Leaseback
Transactions permitted under Section 4.13; provided, that (A) the amount of
Indebtedness Incurred in any specific case does not, at the time such
Indebtedness is Incurred, exceed the lesser of the cost or Fair Market Value of
the property or asset acquired or constructed in connection with such Purchase
Money
<PAGE> 31
22
Indebtedness or Capital Lease Obligation or subject to such Sale/Leaseback
Transaction, as the case may be, (B) such Lien shall attach to such property or
asset upon acquisition of such property or asset and or upon commencement of
such Sale/Leaseback Transaction, as the case may be, and (C) no property or
asset of the Company or any Restricted Subsidiary (other than the property or
asset acquired or contracted in connection with such Purchase Money
Indebtedness or Capital Lease Obligation or subject to such Sale/Leaseback
Transaction, as the case may be) are subject to any Lien securing such
Indebtedness.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Poway Lease" means the lease dated as of March 5, 1991,
between DAI Industrial Partnership, predecessor in interest to Burnham Pacific
Properties, Inc., as landlord, and the Company, as tenant, as in effect on the
Issue Date and as such lease may from time to time be amended, supplemented or
otherwise modified in accordance with the terms thereof and hereof, in
connection with the real property located at 12365 Crosthwaithe Circle, Poway,
California.
"Pledged Securities" has the meaning set forth in the Security
and Pledge Agreement.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Proceeds" has the meaning set forth in the Security and Pledge
Agreement.
<PAGE> 32
23
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation in accordance
with Article 11 of Regulation S-X promulgated under the Securities Act (to the
extent applicable), as interpreted in good faith by the Board of Directors
after consultation with the independent certified public accountants of the
Company, or otherwise a calculation made in good faith by the Board of
Directors after consultation with the independent certified public accountants
of the Company, as the case may be.
"Purchase Money Indebtedness" means, with respect to any
Person, all obligations of such Person (i) consisting of the deferred purchase
price of any property or assets, conditional sale obligations, obligations
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business) and other purchase money
obligations, in each case where the maturity of such obligation does not exceed
the anticipated useful life of the property or asset being financed and (ii)
Incurred to finance the acquisition or construction of such property or asset.
"Redeemable Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or otherwise (including,
without limitation, upon the happening of any event) (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii)
is convertible or exchangeable for Indebtedness (other than Preferred Stock) or
Disqualified Stock or (iii) is redeemable at the option of the Holder thereof,
in whole or in part.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," "refinancing"
and "refinanced" shall have a correlative meaning) any Indebtedness (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such
<PAGE> 33
24
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the sum of (A) aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced and (B) any premiums, fees and other expenses
paid by the Company or the Restricted Subsidiary, as the case may be, in
connection with such refinancing; provided, further, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Subsidiary of the Company
that refinances Indebtedness of the Company or (y) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary; provided, further, that the Refinancing Indebtedness is at least as
subordinated to the Securities as the Indebtedness being refinanced and the
covenants relating to such Indebtedness are no more restrictive in the
aggregate than those of the Indebtedness being refinanced; provided, further,
that, in the event the Company refinances the 15% Subordinated Notes as
permitted hereunder, the Refinancing Indebtedness Incurred in connection
therewith also may refinance the Company's 13 7/8% Convertible Subordinated
Debentures due 2002.
"Replacement Collateral" means, at any relevant date in
connection with an Asset Disposition, property or assets used in, or Capital
Stock of any Person related to, the Company's business, other than the
Collateral.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Revolving Credit Agreement" means the credit agreement dated
as of the Issue Date among the Company, the lenders named therein and The First
National Bank of Chicago, as agent.
"Revolving Credit Facility" means the revolving credit
facility for an aggregate principal amount of $50,000,000 created pursuant to
the Revolving Credit Agreement.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby pursuant to a direct or
indirect arrangement the Company or
<PAGE> 34
25
any Restricted Subsidiary of the Company transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933.
"Security and Pledge Agreement" means the Security and Pledge
Agreement pursuant to which certain Collateral is pledged to secure the
Company's obligations under the Securities substantially in the form of Exhibit
C, as the same may from time to time be amended, supplemented or otherwise
modified in accordance with the terms thereof and hereof.
"Senior Indebtedness" means all Indebtedness of the Company,
including interest thereon, whether outstanding on the Issue Date or thereafter
issued, unless in the instrument creating or evidencing the same or pursuant to
which the same is outstanding it is provided that such obligations are not
superior in right of payment to the Securities; provided, however, that Senior
Indebtedness shall not include (1) any liability for Federal, state, local or
other taxes owed or owing by the Company, (2) any Trade Payables, (3) any
Indebtedness, Guarantee or obligation of the Company which is subordinate or
junior in any respect to any other Indebtedness, Guarantee or obligation of the
Company, including any Subordinated Obligations, (4) any obligations with
respect to any Capital Stock, (5) any Indebtedness outstanding or Incurred in
violation of this Indenture or (6) any obligations of the Company to any
Affiliate of the Company. For purposes of Section 4.07, the amount of
consideration received by the Company or any Restricted Subsidiary for the
assumption of Senior Indebtedness by any purchaser of the Company's property,
assets or shares shall be equal to the face value or the accreted value of such
Senior Indebtedness.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing
<PAGE> 35
26
for the repurchase of such security at the option of the Holder thereof upon
the happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i)
investments in U.S. Government Obligations maturing within 90 days of the date
of acquisition thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 90 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 or any State thereof having capital,
surplus and undivided profits aggregating in excess of $500,000,000 (or the
Dollar Equivalent thereof) and whose long-term debt is rated "A" or higher
according to Moody's Investors Service, Inc. (or such equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)), (iii) repurchase obligations with a
term of not more than 7 days for underlying securities of the types described
in clause (i) entered into with a bank meeting the qualifications described in
clause (ii) and (iv) investments in commercial paper, maturing not more than 90
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 with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's Corporation.
<PAGE> 36
27
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date of this Indenture; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary course of
business of such Person in connection with the acquisition of goods or
services, including under the Company's Amended and Restated Master Supply
Agreement dated as of October 8, 1993, among the Company, SKC Limited and SKC
America, Inc., as such Agreement is in effect on the Issue Date.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in, unless the context otherwise specifies, New
York.
"Unrestricted Subsidiary" means (i) each Subsidiary of the
Company that the Company has designated, or is deemed to have designated,
pursuant to the provisions described under Section 4.15 as an Unrestricted
Subsidiary and that has not been redesignated a Restricted Subsidiary and (ii)
any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Restricted Subsidiaries" means, collectively, (i) the
following Subsidiaries of the Company
<PAGE> 37
28
to the extent such Subsidiaries are Restricted Subsidiaries: Stromberg
DatagraphiX International Corp., Florida AAC Corporation, Kalvar Microfilm,
Inc., Anacomp California, Sun Flex Industries of Puerto Rico, Inc. and Xidex
Development Company; and (ii) any other Restricted Subsidiary that is not a
Foreign Restricted Subsidiary.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- ----------
<S> <C>
"Affiliate Transaction" ................ 4.07
"Asset Disposition Purchase Amount" .... 4.07(c)
"Asset Disposition Purchase Date" ...... 4.07(d)
"Asset Disposition Purchase Notice" .... 4.07(e)
"Asset Disposition Purchase Offer" ..... 4.07(c)
"Asset Disposition Purchase Price" ..... 4.07(c)
"Asset Disposition Trigger" ............ 4.07(c)
"Bankruptcy Law" ....................... 6.01
"Change of Control Offer" .............. 4.09(a)
"Change of Control Purchase Date"....... 4.09(a)
"Change of Control Purchase Notice" .... 4.09(a)
"Change of Control Purchase Price" ..... 4.09(b)
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Defaulted Interest" ................... 2.11
"Event of Default" ..................... 6.01
"Excess Proceeds" ...................... 4.07(b)
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Notice of Default" .................... 6.01
"Offer" ................................ 4.06
"Offer Amount" ......................... 4.06
"Offer Period" ......................... 4.06
"Paying Agent" ......................... 2.03
"Permitted Indebtedness" ............... 4.03(b)
"Permitted Restricted Subsidiary
Indebtedness" ........................ 4.04(b)
</TABLE>
<PAGE> 38
29
<TABLE>
<S> <C>
"Purchase Date" ........................ 4.06
"Refinanced Indebtedness" .............. 4.03(e)
"Registrar"............................. 2.03
"Release Notice" ....................... 10.06
"Release Termination" .................. 10.06
"Replacement Collateral Purchase" ...... 4.07(b)
"Restricted Payment" ................... 4.04
"Substitute Collateral.................. 10.07
"Surviving Entity" ..................... 5.01
"Trust Monies" ......................... 11.01(a)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
<PAGE> 39
30
(5) words in the singular include the plural and words in the
plural include the singular;
(6) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP; and
(7) the principal amount of any Preferred Stock shall be the
greater of (i) the maximum liquidation value of such Preferred Stock
or (ii) the maximum mandatory redemption or mandatory repurchase price
with respect to such Preferred Stock.
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if
any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Security shall be dated
the date of its authentication. The terms of the Securities set forth in
Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers
shall sign the Securities for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be con-
<PAGE> 40
31
clusive evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities for original issue in an aggregate principal amount of $225,000,000,
upon a written order of the Company signed by two Officers. Such order shall
specify the amount of the Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated and shall further
provide instructions concerning registration, amounts for each Holder and
delivery. The aggregate principal amount of Securities outstanding at any time
may not exceed that amount except as provided in Section 2.07. The Securities
shall be issued in fully registered form, without coupons in denominations of
$1,000 or any integral multiple thereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or
agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"), at least one of
each such office to be located in the City of New York. The Registrar shall
keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor
<PAGE> 41
32
pursuant to Section 7.07. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money held by
the Paying Agent for the payment of principal of or interest on the Securities
and shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary of the Company acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and to account for any funds disbursed by
the Paying Agent. Upon complying with this Section, the Paying Agent shall
have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of Securityholders. If the Trustee
is not the Registrar, the Company shall furnish to the Trustee, in writing at
least five Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of
a Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of
Section 8-401(1) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request
<PAGE> 42
33
to exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-registrar's request. The Company may require payment of a
sum sufficient to pay all taxes, assessments or other governmental charges in
connection with any transfer or exchange pursuant to this Section.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall
be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated
Security is surrendered to the Registrar or if the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee or the
Company. If required by the Trustee or the Company, such Holder shall furnish
an indemnity bond sufficient in the judgment of the Company and the Trustee to
protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss which any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their expenses
in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by
<PAGE> 43
34
the Trustee except for those canceled by it, those delivered to it for
cancelation and those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal of, and premium, if any, and interest payable
on, that date with respect to the Securities (or portions thereof) to be
redeemed or maturing, as the case may be, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction or consent or any
amendment, modification or other change to the Indenture, Securities owned by
the Company or by an Affiliate of the Company shall be disregarded and treated
as if they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent or any amendment, modification or other change to the Indenture,
only Securities which the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith shall
not be disregarded if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to the Securities and that
the pledgee is not the Company or an Affiliate of the Company.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities and deliver them in exchange for temporary
Securities.
<PAGE> 44
35
SECTION 2.10. Cancelation. The Company at any time may
deliver Securities to the Trustee for cancelation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer, exchange,
payment or cancelation and deliver such canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancelation.
SECTION 2.11. Defaulted Interest. Any interest on any
Security which is payable, but is not punctually paid or duly provided for, on
the dates and in the manner provided in the Securities and this Indenture
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant record date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities are registered
at the close of business on a special record date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a special record date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such
special record date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor
<PAGE> 45
36
to be given to each Holder, not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names
the Securities are registered at the close of business on such special
record date.
(ii) The Company may make payment of any Defaulted Interest
on the Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.11, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 2.12. Record Date. The Company may set a record date
for purposes of determining the identity of Securityholders entitled to vote or
to consent to any action by vote of consent authorized or permitted by Sections
6.04, 6.05 and 13.07. Unless this Indenture provides otherwise, such record
date shall be the later of 30 days prior to the first solicitation of such
consent or the date of the most recent list of Securityholders furnished to the
Trustee pursuant to Section 2.05 prior to such solicitation.
SECTION 2.13. CUSIP Numbers. The Company in issuing the
Securities may use CUSIP numbers (if then generally in use), and, if so, the
Trustee shall use CUSIP numbers in notices of redemption as of convenience to
Holders; provided, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers.
<PAGE> 46
37
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities or is required to
redeem Securities pursuant to paragraph 6 of the Securities, it shall notify
the Trustee in writing of the redemption date, the principal amount of
Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.
If the Company is required to redeem Securities pursuant to
paragraph 6 of the Securities, it may reduce the principal amount of Securities
required to be redeemed to the extent it is permitted a credit by the terms of
the Securities and it notifies the Trustee of the amount of the credit and the
basis for it. If the reduction is based on a credit for redeemed or canceled
Securities that the Company has not previously delivered to the Trustee for
cancelation, it shall deliver such Securities with the Notice.
The Company shall give each notice to the Trustee provided for
in this Section at least 45 days but not more than 60 days before the
redemption date unless the Trustee consents to a shorter period. Such notice
shall be accompanied by an Officers' Certificate and an Opinion of Counsel from
the Company to the effect that such redemption will comply with the conditions
herein. If fewer than all the Securities are to be redeemed, the record date
relating to such redemption shall be selected by the Company and given to the
Trustee, which record date shall be not less than 15 days after the date of
notice to the Trustee.
SECTION 3.02. Selection of Securities To Be Redeemed. If
fewer than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions
<PAGE> 47
38
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed.
The notice shall identify the Securities (including CUSIP
numbers) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for
<PAGE> 48
39
redemption become due and payable on the redemption date and at the redemption
price stated in the notice. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price stated in the notice, plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date). Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest (subject
to the right of Holders of record on the relevant record date to receive
interest due on the related interest payment date) on all Securities to be
redeemed on that date other than Securities or portions of Securities called
for redemption which have been delivered by the Company to the Trustee for
cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal and interest then due.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
<PAGE> 49
40
SECTION 4.02. SEC Reports. The Company shall file the annual
report and other documents, reports and information required by Section 13 or
15(d) of the Exchange Act with the SEC and, upon such filing, shall promptly
furnish such reports, documents and information to the Trustee and, within 15
days after such filing with the SEC, the Securityholders. In the event the
Company is no longer subject to the periodic reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company shall file with the SEC and
furnish to the Trustee and to the Securityholders the annual reports and other
documents, reports and information as if it were subject to such reporting
requirements; provided, however, that the Company shall not be so obligated to
file such reports, documents and information with the SEC if the SEC does not
permit or accept such filings, in which event such reports, documents and
information shall be provided to the Trustee and the Holders at the times the
Company would have been required to provide such reports, documents and
information had it continued to have been subject to such reporting
requirements. The Company also shall comply with the other provisions of TIA
Section 314(a).
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, Incur any Indebtedness unless (i) no Default or Event of Default
shall have occurred and be continuing at the time of such Incurrence or would
occur as a consequence of such Incurrence and (ii) in the case of the Company,
such Indebtedness is Permitted Indebtedness under Section 4.03(b) or, in the
case of any Restricted Subsidiary, such Indebtedness is permitted under Section
4.04(b).
(b) "Permitted Indebtedness" means:
(i) Indebtedness represented by the Securities;
<PAGE> 50
41
(ii) Indebtedness remaining outstanding immediately after
the Issue Date (and not otherwise permitted by clause (i) or (iv));
(iii) Indebtedness Incurred if, after giving pro forma
effect to such Incurrence, the Consolidated Coverage Ratio would be
equal to at least 2 to 1;
(iv) Indebtedness Incurred under the Revolving Credit
Facility or any other revolving credit facility in an aggregate
principal amount outstanding from time to time not to exceed
immediately after such Incurrence the sum of 80% of the book
value from time to time of the Accounts Receivable of the Company and
60% of the book value from time to time of the Inventory of the
Company, in each case computed in accordance with GAAP;
(v) Indebtedness (A) under Interest Rate Protection
Agreements relating to Indebtedness permitted hereunder entered into
in the ordinary course of the Company's financial management and not
for speculative purposes; provided, however , that the notional amount
of each such Interest Rate Protection Agreement does not exceed the
principal amount of the Indebtedness to which such Interest Rate
Protection Agreement relates; or (B) under Currency Exchange
Protection Agreements entered into in the ordinary course of the
Company's financial management and not for speculative purposes;
provided, however, in the case of either clause (A) or (B), any such
Interest Rate Protection Agreement or Currency Exchange Protection
Agreement, as the case may be, does not increase the Indebtedness of
the Company outstanding at any time other than as a result of
fluctuations in the interest rates or exchange rates, as the case may
be, or by reason of customary fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness owing to and held by any Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock that results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of any such Indebtedness (except to the Company or another
Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the incurrence of such Indebtedness by the issuer thereof;
<PAGE> 51
42
(vii) Indebtedness in connection with a prepayment of the
Securities pursuant to a Change of Control Offer; provided, however,
that the aggregate principal amount of such Indebtedness does not
exceed 101% of the aggregate principal amount of the Securities
prepaid; provided, further, however, that such Indebtedness (A) has an
Average Life equal to or greater than the remaining Average Life of
the Securities and (B) does not mature prior to the Stated Maturity of
the Securities;
(viii) Indebtedness in respect of Purchase Money
Indebtedness or Capital Lease Obligations directly Incurred by the
Company; provided, however, that the sum of (A) the aggregate
principal amount of such Purchase Money Indebtedness, (B) the
aggregate amount of such Capital Lease Obligations and (C) the
aggregate amount of Capital Lease Obligations Incurred by Restricted
Subsidiaries as permitted under Section 4.04(b)(iii) does not at any
one time outstanding exceed $20,000,000;
(ix) Indebtedness Incurred (A) in the ordinary course of
business of the Company with respect to trade credit made available to
the Company in connection with the obtaining of goods or services by
the Company (including commercial letters of credit, bankers'
acceptances or accommodation Guarantees for the benefit of trade
creditors or suppliers), in each case for a period not to exceed 180
days, in an amount not to exceed the purchase price for the goods or
services for which such credit is made available and which do not
constitute obligations for borrowed money, and (B) with respect to
standby letters of credit, performance bonds and surety bonds that do
not constitute obligations for borrowed money Incurred by the Company
in the ordinary course of business relating to services to be
performed by or on behalf of the Company; provided, however, that the
aggregate amount of related reimbursement obligations under
Indebtedness permitted by clause (A) or (B) and Section 4.04(b)(iv)
does not exceed $25,000,000 at any one time outstanding;
(x) Indebtedness in respect of Guarantees by the Company
of Indebtedness of any Restricted Subsidiary permitted to be Incurred
under Section 4.04(b); provided, however, that any Guarantee by the
Company of any Indebtedness of a Foreign Restricted Subsidiary
<PAGE> 52
43
shall be limited to an aggregate principal amount at any one time not
to exceed (A) the sum of 80% of the book value from time to time of
the Accounts Receivable of the Company and 60% of the book value from
time to time of the Inventory of the Company, in each case computed in
accordance with GAAP, minus (B) the aggregate principal amount of
Indebtedness of the Company outstanding at any time pursuant to clause
(iv) above;
(xi) Indebtedness represented by the Exchange Notes issued
in exchange for any of the 8.25% Preferred Stock outstanding on the
Issue Date pursuant to the terms of the 8.25% Preferred Stock as in
effect on the Issue Date;
(xii) Refinancing Indebtedness Incurred in respect of
Indebtedness Incurred pursuant to clause (i), (ii), (iii), (vii) or
(xi) above; and
(xiii) in addition to any Indebtedness permitted by clauses
(i) through (xii) above, up to an aggregate of (A) $25,000,000 in
principal amount of Indebtedness at any one time outstanding minus (B)
the principal amount of Indebtedness at such time outstanding of any
Restricted Subsidiaries permitted pursuant to Section 4.04(b)(viii).
(c) The Company shall not directly or indirectly Incur any
Indebtedness if the proceeds thereof are used, directly or indirectly, to
repay, prepay, redeem, defease, retire, refund or refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Securities to
at least the same extent as such Subordinated Obligations; provided, however,
that the Company may Incur up to an aggregate principal amount of $5,000,000 of
Indebtedness under Section 4.03(b)(iv) if the proceeds of such Indebtedness are
used to purchase or redeem any 15% Subordinated Notes outstanding on the Issue
Date.
(d) For purposes of determining the outstanding principal
amount of any particular Indebtedness Incurred pursuant to this Section or
Section 4.04, (1) Indebtedness permitted by this Section or Section 4.04 need
not be permitted solely by reference to one provision permitting such
Indebtedness but may be permitted in part by one such provision and in part by
one or more other provisions of this Section or Section 4.04 permitting such
Indebtedness
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44
and (2) in the event that Indebtedness or any portion thereof meets the
criteria of more than one of the types of Indebtedness described in this
Section or Section 4.04, the Company, in its sole discretion, shall classify
such Indebtedness and only be required to include the amount of such
Indebtedness in one of such types.
(e) For purposes of determining whether the principal amount
of any Refinancing Indebtedness permitted by this Section or Section 4.04 does
not, in the event it is issued in a currency different from the currency in
which the Indebtedness being refunded or refinanced or paid at maturity
("Refinanced Indebtedness") was issued, exceed the principal amount of the
Refinanced Indebtedness, the spot rate for the purchase of the currency of the
Refinanced Indebtedness with the currency of the Refinancing Indebtedness, as
published in The Wall Street Journal in the "Exchange Rates" column under the
heading "Currency Trading" on the date two Business Days prior to such
determination, shall be used. If The Wall Street Journal does not publish such
spot rate on such date, then the spot rate for the purchase of the currency of
the Refinanced Indebtedness with the currency of the Refinancing Indebtedness,
as quoted by Bankers Trust Company, or any successor thereto, in New York City
at approximately 11:00 a.m. (New York time) on the date two Business Days
prior to such determination, shall be used.
Except as provided in the preceding paragraph, for purposes of
determining the Dollar Equivalent of any Indebtedness denominated in a currency
other than U.S. dollars outstanding at any time as permitted by this Section or
Section 4.04, such Dollar Equivalent shall be the Dollar Equivalent of such
currency at the date such Indebtedness is issued; provided, however, that if
such Indebtedness constituted Refinancing Indebtedness, such conversion shall
be made based on the Dollar Equivalent of the Refinanced Indebtedness at the
date of the issuance of the Refinanced Indebtedness (or any preceding
Refinanced Indebtedness, as applicable).
SECTION 4.04. Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock. (a) The Company shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness or
issue or permit any Preferred Stock unless (i) no Default or Event of Default
shall have occurred and be continuing at the time of such Incurrence or would
occur as a consequence of such
<PAGE> 54
45
Incurrence and (ii) such Indebtedness or Preferred Stock is Permitted
Restricted Subsidiary Indebtedness.
(b) Permitted Restricted Subsidiary Indebtedness means:
(i) Indebtedness or Preferred Stock remaining outstanding
immediately after the Issue Date (and not otherwise permitted by
clause (ii) below);
(ii) Indebtedness of any Foreign Restricted Subsidiary under
any foreign currency revolving credit facility in an aggregate
principal amount outstanding from time to time not to exceed the sum
of 80% of the book value from time to time of the Accounts Receivable
of such Foreign Subsidiary and 60% of the book value from time to time
of the Inventory of such Foreign Subsidiary, in each case computed in
accordance with GAAP;
(iii) Indebtedness in respect of Capital Lease Obligations
directly Incurred by any Restricted Subsidiary; provided, however,
that the sum of (A) the aggregate amount of such Capital Lease
Obligations, (B) the aggregate principal amount of Purchase Money
Indebtedness and (C) the aggregate amount of Capital Lease Obligations
Incurred by the Company pursuant to Section 4.03(b)(viii) does not at
any one time outstanding exceed $20,000,000;
(iv) Indebtedness incurred (A) in the ordinary course of
business of any Restricted Subsidiary with respect to trade credit
made available to such Restricted Subsidiary in connection with the
obtaining of goods or services by such Restricted Subsidiary
(including commercial letters of credit, bankers' acceptances or
accommodation Guarantees for the benefit of trade creditors or
suppliers), in each case for a period not to exceed 180 days, in an
amount not to exceed the purchase price for the goods or services for
which such credit is made available and which do not constitute
obligations for borrowed money and (B) standby letters of credit,
performance bonds and surety bonds that do not constitute obligations
for borrowed money Incurred by any Restricted Subsidiary in the
ordinary course of business relating to services to be performed by or
on behalf of such Restricted Subsidiary; provided, however, that the
aggregate
<PAGE> 55
46
amount of any related reimbursement obligations under Indebtedness
permitted by clause (A) or (B) and Section 4.03(b)(ix) does not exceed
$25,000,000 at any one time outstanding;
(v) Indebtedness (A) under Interest Rate Protection Agreements
relating to Indebtedness permitted hereunder entered into in
the ordinary course of any Restricted Subsidiary's financial
management and not for speculative purposes; provided, however, that
the notional amount of each such Interest Rate Protection Agreement
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Agreement relates; or (B) under Currency
Exchange Protection Agreements entered into in the ordinary course of
any Foreign Subsidiary's financial management and not for speculative
purposes; provided, however, in the case of either clause (A) or (B),
any such Interest Rate Protection Agreement or Currency Exchange
Protection Agreement, as the case may be, does not increase the
Indebtedness of such Subsidiary outstanding at any time other than as
a result of fluctuations in the interest rates or exchange rates, as
the case may be, or by reason of customary fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness or Preferred Stock owing to and held by the
Company or any Wholly Owned Subsidiary; provided, however , that any
subsequent issuance or transfer of any Capital Stock that results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except
to the Company or a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the incurrence of such Indebtedness by the issuer
thereof;
(vii) Refinancing Indebtedness Incurred in respect of
Indebtedness Incurred pursuant to clause (i) and
(viii) in addition to any Indebtedness permitted by clauses
(i) through (vii) above, up to an aggregate of $5,000,000 in principal
amount of Indebtedness at any one time outstanding.
SECTION 4.05. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, to, directly
or indirectly,
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47
(i) declare or pay any dividend on, or make any distribution on or in respect
of, its Capital Stock (including any payment in connection with any merger or
consolidation involving the Company), except dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase such Capital Stock and except dividends or
distributions payable to the Company or any Restricted Subsidiary, (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of
the Company or any Restricted Subsidiary held by Persons other than the Company
or a Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value (including pursuant to mandatory
repurchase covenants), prior to any scheduled repayment, scheduled sinking fund
payment or other scheduled maturity, any Subordinated Obligation which had a
Stated Maturity equal to or later than the Stated Maturity of the Securities
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition) or (iv) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment") unless at the time of and
after giving effect to the proposed Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing (or would result therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(b)(iii); and
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Board of Directors, whose
determination shall be evidenced by a Board Resolution furnished to
the Trustee) declared or made since the Issue Date, would exceed,
without duplication, the sum of:
(a) an amount equal to 50% of the Consolidated Net
Income accrued during the period (treated as one accounting
period) beginning on the last day of the last completed fiscal
quarter
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48
of the Company immediately preceding the Issue Date and ending
on the last day of the Company's last fiscal quarter ended
prior to the date of such proposed Restricted Payment (or, if
such Consolidated Net Income shall be a deficit, minus 100% of
such deficit) and minus 100% of the amount of any write-downs,
write-offs, other negative revaluations and other negative
extraordinary charges not otherwise reflected in Consolidated
Net Income during such period;
(b) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of its Capital Stock, including
Capital Stock of the Company issued upon conversion of
convertible debt or the exercise of options, warrants or
rights to purchase Capital Stock of the Company, but excluding
Disqualified Stock, subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary of the Company or an
employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries);
(c) the amount by which Indebtedness of the Company
or its Restricted Subsidiaries is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company or its Restricted Subsidiaries
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any
cash or other property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange); and
(d) the amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from (i)
payments of dividends, repayments of loans or advances or
other transfers of assets to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary
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49
in such Unrestricted Subsidiary, which amount was treated as a
Restricted Payment.
(b) The provisions of Section 4.05(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company
or Subordinated Obligations made by exchange for, or out of the
proceeds of a substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries) or out of proceeds of an equity contribution made
substantially concurrently with such purchase or redemption; provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from Section 4.05(a)(3)(b);
(ii) any purchase or redemption of Subordinated Obligations
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to
be Incurred pursuant to Section 4.03; provided, however, that (A) such
Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate sum of (1) the aggregate principal
amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of such Subordinated Obligations
being so purchased or redeemed and (2) any premiums, fees and other
expenses paid by the Company or any Restricted Subsidiary in
connection with such purchase or redemption, (B) such Indebtedness is
at least as subordinated to the Securities as such Subordinated
Obligations so purchased or redeemed and the covenants relating to
such Indebtedness are no more restrictive in the aggregate than those
of such Subordinated Obligations, (C) such Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of such Subordinated
Obligations, (D) such Indebtedness has an Average Life at the time
such Indebtedness is Incurred equal to or greater than the Average
Life of such Subordinated Obligations and (E) such purchase or
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redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) any declaration or payment of any dividend on the 8.25%
Preferred Stock outstanding on the Issue Date and required to be so
declared or paid by the terms thereof; provided, however, that such
dividend will be included in the calculation of the amount of
Restricted Payments from and after the date of declaration of such
dividend;
(iv) any purchase or redemption of the 8.25% Preferred Stock
outstanding on the Issue Date pursuant to the mandatory repurchase
provisions of the 8.25% Preferred Stock as in effect on the Issue
Date; provided, however, that such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments;
(v) any purchase or redemption of the 8.25% Preferred Stock
outstanding on the Issue Date in exchange for, or out of the proceeds
of the substantially concurrent sale of, the Exchange Notes which are
permitted to be Incurred pursuant to Section 4.03(b)(xi); provided,
however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments;
(vi) any payment in cash in lieu of the issuance of fractional
shares of Capital Stock to any Holder of Capital Stock warrants of the
Company outstanding on the Issue Date pursuant to the exchange of such
warrants for other Capital Stock of the Company upon the exercise of
such warrants pursuant to the terms thereof; provided, however, that
such payment shall be excluded in the calculation of the amount of
Restricted Payments;
(vii) any purchase or redemption of rights issued to holders
of the Company's Common Stock pursuant to the Company's Shareholder
Rights Plan adopted on February 4, 1990, as in effect on the Issue
Date; provided, however, that (A) all such purchases or redemptions
shall not be in an aggregate principal amount in excess of $250,000
and (B) such purchase or redemption will be included in the
calculation of the amount of Restricted Payments;
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(viii) any purchase or redemption of any 15% Subordinated
Notes outstanding on the Issue Date; provided, however, that (A) such
purchase or redemption is made solely with the proceeds of
Indebtedness Incurred pursuant to Section 4.03(b)(iv) and such
Indebtedness does not exceed an aggregate principal amount of
$5,000,000 and (B) such purchase or redemption will be included in the
calculation of the amount of Restricted Payments; or
(ix) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with Section 4.05(a); provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided, further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments from and after the date of declaration of such
dividend.
SECTION 4.06. Limitation on Restrictions on Distributions
from Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on or in respect to its Capital Stock or pay any Indebtedness
owed to the Company or any Restricted Subsidiary, (ii) make loans or advances
to the Company or (iii) transfer any of its property or assets to the Company
or any Restricted Subsidiary, except for:
(a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(b) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary became a Subsidiary of, or
was acquired by, the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted
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Subsidiary became a Subsidiary of, or was acquired by, the Company)
and outstanding on such date;
(c) any encumbrance or restriction pursuant to an agreement
relating to an acquisition of property, so long as the encumbrances or
restrictions in such agreement relate solely to the property so
acquired;
(d) any encumbrance or restriction pursuant to an agreement
effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (a), (b) or (c) or contained in any
amendment to any such agreement or amendment; provided, however, that
any encumbrance and any restriction contained in any such refinancing
agreement or amendment is no less favorable to the Securityholders
than any encumbrance or restriction contained in such agreement; and
(e) in the case of clause (iii), any encumbrance or
restriction (1) that restricts 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, (2)
arising 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 (3) arising or agreed to in the ordinary course of
business and that does 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 such Restricted
Subsidiary.
SECTION 4.07. Limitation on Sales of Assets and Restricted
Subsidiary Stock. (a) The Company shall not, and shall not permit any
Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Disposition at least equal to the Fair Market Value of the
shares, property and assets subject to such Asset Disposition, (ii) at least
75% of such consideration (or, in the event of any Asset Disposition of all or
any portion of the Company's Magnetics Division, at least 50% of such
consideration) consists of cash, Temporary Cash Investments or the assumption
of Senior Indebtedness of the Company or any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all liability
<PAGE> 62
53
under such Senior Indebtedness and (iii) in connection with any Asset
Disposition with an aggregate consideration greater than $10,000,000, the
Company delivers an Officers' Certificate to the Trustee certifying that such
Asset Disposition complies with clauses (i) and (ii) and that such Asset
Disposition was approved by a majority of the Board of Directors including a
majority of the disinterested members of the Board of Directors, as evidenced
by a Board Resolution based on an opinion letter from an Independent Appraiser
to the effect that such Asset Disposition complies with clause (i) (which
opinion letter shall identify such Independent Appraiser as such and shall be
dated note more than 30 days prior to such Asset Disposition). Upon the
closing of any such Asset Disposition, the Company shall cause the Net Cash
Proceeds from such Asset Disposition to be delivered to the Trustee and pledged
to the Trustee for deposit in a collateral account in the name and under the
sole dominion and control of the Trustee and shall take such other actions, at
the sole expense of the Company, as shall be reasonably requested by the
Trustee to create in favor of the Trustee on behalf of the Securityholders a
perfected first priority Lien in respect of such Net Cash Proceeds and all
other property and assets received in connection with such Asset Disposition
and to insure that all such Collateral shall be free and clear of all Liens
other than Permitted Liens. Any proceeds from an Asset Disposition, other than
Net Cash Proceeds, shall be subject to the Lien of this Indenture and the other
Collateral Documents in accordance with the provisions of this Indenture.
(b) Within 270 days after the receipt of any Net Cash
Proceeds in connection with any Asset Disposition, the Company or such
Restricted Subsidiary, as the case may be, may, subject to the procedures set
forth in Section 4.07(c) and Article 10, reinvest such Net Cash Proceeds in
Replacement Collateral (other than Inventory) at a purchase price which does
not exceed the Fair Market Value of such Replacement Collateral so purchased (a
"Replacement Collateral Purchase").
(c) If the Company or a Restricted Subsidiary reinvests any
Net Cash Proceeds pursuant to Section 4.07(b), the Company or such Restricted
Subsidiary shall (i) deliver an Officers' Certificate to the Trustee certifying
that such Replacement Collateral Purchase complies with Section 4.07(b) and
that, in the event such Replacement Collateral Purchase involves Net Cash
Proceeds in excess of $10,000,000, such Replacement Collateral was approved by
a
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54
majority of the Board of Directors, including a majority of the disinterested
members of the Board of Directors, as evidenced by a Board Resolution and (ii)
in the case of any Replacement Collateral Purchase in excess of such amount,
deliver to the Trustee an opinion letter from an Independent Appraiser to the
effect that such Replacement Collateral Purchase complies with Section 4.07(b)
(which opinion letter shall identify such Independent Appraiser as such and be
dated within 30 days of the effective date of such Replacement Collateral
Purchase). The Company shall take such actions, at the sole expense of the
Company, to create in favor of the Trustee for the benefit of the Holders a
perfected first priority Lien in respect of any Replacement Collateral
concurrently with the acquisition thereof. Such Replacement Collateral shall
be free and clear of Liens, other than Permitted Liens.
(d) Upon receipt by the Trustee of the documents and
instruments described in Section 4.07(c) in a form satisfactory to the Trustee,
evidence of the taking of such actions satisfactory to the Trustee, as may be
necessary or desirable, to create then in favor of the Trustee the Lien in
respect of the related Replacement Collateral required by Section 4.07(c) and
the Collateral Documents, and compliance with the provisions of Section 10.07,
unless a Default or Event of Default shall have occurred at any time and be
continuing, the Trustee shall simultaneously release from the Lien of the
Indenture and the other Collateral Documents, and deliver to the Company, the
Net Cash Proceeds that were delivered to the Trustee, together with the
proceeds thereof in the amount requested by the Company or such Restricted
Subsidiary; provided, that such amount shall not exceed the purchase price of
the Replacement Collateral. In the event any Replacement Collateral is Capital
Stock of any Person and such Person shall be a Restricted Subsidiary, the
Company shall cause such Capital Stock to be pledged to the Trustee for the
benefit of Holders of the Securities; provided, that, in the event such Person
shall be a Foreign Restricted Subsidiary, such pledge shall be limited to an
amount equal to the lesser of: (i) 65% of the total voting power of shares of
all the outstanding Capital Stock of such Person entitled to vote in the
election of directors, managers or trustees of such Person and (ii) the
percentage of the shares of such Capital Stock equal to the maximum percentage
of such shares that can be pledged to the Trustee without constituting an
investment of earnings in United States property under Section 956 (or any
successor provision) of the Code that would trigger an increase in the
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gross income of the Company or any of its Subsidiaries pursuant to Section 951
(or any successor provision) of the Code. In the event of any such pledge of
the Capital Stock, all the assets and property of the issuer of such Capital
Stock shall be considered, if such issuer shall be a U.S. Restricted
Subsidiary, Replacement Collateral and the requirements described in Section
4.07(c) relating to the pledge thereof to the Trustee shall apply in full. Any
Net Cash Proceeds that are not used within the time period specified in the
provisions described in the first sentence of this paragraph and in accordance
with the procedures referenced in such sentence shall constitute "Excess
Proceeds".
(e) To the extent that any or all of the Net Cash Proceeds of
any Foreign Asset Disposition received by a Restricted Subsidiary is prohibited
or delayed by applicable local law from being repatriated to the United States,
the portion of such Net Cash Proceeds so affected shall not be required to be
applied at the time provided above, but may be retained by the applicable
Restricted Subsidiary so long, but only so long, as the applicable local law
will not permit repatriation to the United States of America (the Company
hereby agreeing, and to cause such Restricted Subsidiary to, promptly take all
actions required by the applicable local law to permit such repatriation).
Once such repatriation of any of such affected Net Cash Proceeds is permitted
under the applicable local law, such repatriation shall be immediately effected
and such repatriated Net Cash Proceeds shall be applied in the manner set forth
in this Section.
(f) Each time that the aggregate amount of Excess Proceeds
relating to Asset Dispositions equals or exceeds $10,000,000 (the "Asset
Disposition Trigger"), taking into account income earned on such Excess
Proceeds, the Company shall make an offer to purchase (an "Asset Disposition
Purchase Offer") an aggregate principal amount of outstanding Securities equal
to the aggregate Excess Proceeds at such time (the "Asset Disposition Purchase
Amount") for cash at a purchase price (such price, the "Asset Disposition
Purchase Price") equal to 100% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Asset Disposition Purchase Date (as defined
in Section 4.07(g)), in accordance with the procedures (including prorationing
in the event of over subscription) set forth in Section 4.07(g). Any such
Excess Proceeds which remain after the acquisition by the Company
<PAGE> 65
56
of Securities tendered (and not withdrawn) by Securityholders pursuant to such
Asset Disposition Purchase Offer in accordance with the procedures (including
proration in the event of oversubscription) set forth in Section 4.07(h), shall
cease to be Excess Proceeds; provided, however, that any such Excess Proceeds
in respect of Collateral shall continue to remain on deposit with the Trustee
until such time as the Company shall determine to reinvest such Excess Proceeds
in respect of Replacement Collateral in accordance with the procedures and
limitations set forth in this Section 4.07; provided, further, however, that
any such Excess Proceeds not so used shall remain on deposit with the Trustee
in accordance with the provisions described in the immediately preceding
proviso of this paragraph.
(g) Within 30 business days of the occurrence of an Asset
Disposition Trigger, (i) the Company shall notify the Trustee in writing of the
occurrence of the Asset Disposition Trigger and shall make the Asset
Disposition Purchase Offer to purchase Securities in an aggregate principal
amount equal to the Asset Disposition Purchase Amount at the Asset Disposition
Purchase Price on or before the date specified in such notice, which date shall
be no more than 60 Business Days after the occurrence of the Asset Disposition
Trigger (the "Asset Disposition Purchase Date"), (ii) the Trustee shall mail a
copy of the Asset Disposition Purchase Offer to each Securityholder and (iii)
the Company shall cause a notice of the Asset Disposition Purchase Offer to be
sent to the Dow Jones News Service or similar business news service in the
United States of America. The Asset Disposition Purchase Offer shall remain
open from the time such offer is made until the Asset Disposition Purchase
Date. The Company shall purchase all Securities properly tendered in the Asset
Disposition Purchase Offer and not withdrawn in accordance with the procedures
set forth in the Asset Disposition Purchase Notice (as defined below). The
Trustee shall be under no obligation to ascertain, and the Trustee shall not be
deemed to have knowledge of, the occurrence of an Asset Disposition Trigger or
to give notice with respect thereto other than as provided above upon receipt
of an Asset Disposition Purchase Offer from the Company. The Trustee may
conclusively assume, in the absence of receipt of an Asset Disposition Purchase
Offer from the Company, that no Asset Disposition Trigger has occurred. The
Asset Disposition Purchase Offer shall include a form of Asset Disposition
Purchase Notice to be completed by the Securityholder and shall state or
provide:
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57
(1) the nature of the Asset Dispositions resulting in the
Asset Disposition Trigger, the date or dates such Asset Dispositions
occurred and the amount of the Excess Proceeds consisting of Net Cash
Proceeds;
(2) that the Asset Disposition Purchase Offer is being made
pursuant to this Section 4.07(g) and that Securities in an aggregate
principal amount equal to the Asset Disposition Purchase Amount,
selected in accordance with this Indenture (if more than such amount
shall be tendered) on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be
purchased) from among all the Securities properly tendered pursuant to
the Asset Disposition Purchase Offer, will be accepted for payment;
(3) the date by which the Asset Disposition Purchase Notice
pursuant to this Section 4.07(g) must be given;
(4) the Asset Disposition Purchase Date;
(5) the Asset Disposition Price;
(6) the name and address of the Paying Agent;
(7) that Securities must be surrendered to the Paying Agent at
the office of the Paying Agent to collect payment;
(8) information concerning the business of the Company which
the Company in good faith believes will enable such Holders to make an
informed decision (which at a minimum shall include (i) the most
recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of the Company filed subsequent to such Quarterly
Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding
successor reports) and (ii) a description of material developments in
the Company's business subsequent to the date of the latest of such
Reports.
<PAGE> 67
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(9) that the Asset Disposition Purchase Price for any Security
as to which an Asset Disposition Purchase Notice has been duly given
and not withdrawn (subject to proration if Securities with an
aggregate principal amount greater than the Asset Sale Purchase Amount
are so tendered) will be paid promptly upon the later to occur of the
first Business Day following the Asset Disposition Purchase Date and
the time of surrender of such Security as described in clause (7);
(10) the procedures the Securityholder must follow to accept
the Asset Disposition Purchase Offer; and
(11) the procedures for withdrawing an Asset Disposition
Purchase Notice.
(h) A Holder may accept an Asset Disposition Purchase Offer
by delivering to the Paying Agent at the office of the Paying Agent a written
notice (an "Asset Disposition Purchase Notice") at any time prior to the close
of business in the location of the office of the Paying Agent on the Asset Sale
Purchase Date, stating:
(1) that such Securityholder elects to have a Security
purchased pursuant to the Asset Disposition Purchase Offer;
(2) the principal amount of the Security that the Holder
elects to have purchased by the Company, which amount must be $1,000
or an integral multiple thereof, and the certificate numbers of the
Securities to be delivered by such Securityholder for purchase by the
Company; and
(3) that such Security shall be purchased on the Asset
Disposition Purchase Date pursuant to the terms and conditions
specified in this Indenture.
The delivery of such Security (together with all necessary
endorsements, as determined by the Company) to the Paying Agent at the office
of the Paying Agent prior to, on or after the Asset Disposition Purchase Date
shall be a condition to the receipt by the Holder of the Asset Disposition
Purchase Price therefor; provided, that such Asset Disposition Purchase Price
shall be so paid pursuant to this Section 4.07(h) only if the Security so
delivered to the Paying Agent shall conform in all respects to the description
thereof set forth in the related Asset
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Disposition Purchase Notice. If at the expiration of the Asset Disposition
Purchase Offer the aggregate principal amount of Securities surrendered by
Holders exceeds the Asset Disposition Amount, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Securities in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
The Company shall purchase from the Holder thereof, pursuant
to this Section 4.07, a portion of a Security if the principal amount of such
portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of a portion of such Security.
The Paying Agent shall promptly notify the Company of the
receipt by it of any Asset Disposition Purchase Notice or written notice of
withdrawal thereof.
Upon receipt by the Company of the Asset Disposition Purchase
Notice, the Holder of the Security in respect of which such Asset Disposition
Purchase Notice was given shall (unless such Asset Disposition Purchase Notice
is withdrawn as specified in the following paragraph) thereafter be entitled to
receive solely the Asset Disposition Purchase Price with respect to such
Security (subject to proration if Securities with an aggregate principal amount
greater than the Asset Disposition Purchase Amount are properly tendered).
Such Asset Disposition Purchase Price shall be paid to such Securityholder by
the Paying Agent promptly upon the later of (a) the first Business Day
following the Asset Disposition Purchase Date (provided the conditions in this
Section 4.07(h) have been satisfied) and (b) the first Business Day following
the time of delivery of the Security to the Paying Agent at the office of the
Paying Agent by the Holder thereof in the manner required by this Section
4.07(h).
An Asset Disposition Purchase Notice may be withdrawn before
or after delivery by the Holder to the Paying Agent at the office of the Paying
Agent of the Security to which such Asset Disposition Purchase Notice relates,
by means of a written notice of withdrawal delivered by the Holder to the
Paying Agent at the office of
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the Paying Agent to which the related Asset Disposition Purchase Notice was
delivered at any time prior to the close of business on the Asset Disposition
Purchase Date specifying, as applicable:
(1) the certificate number of the Security in respect of which
such notice of withdrawal is being submitted;
(2) the principal amount of the Security (which shall be
$1,000 or an integral multiple thereof) with respect to which such
notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Security (which
shall be $1,000 or an integral multiple thereof) that remains subject
to the original Asset Disposition Purchase Notice and that has been or
will be delivered for purchase by the Company.
No later than the date upon which written notice of an Asset
Disposition Purchase Offer is delivered to the Trustee, the Company shall cause
to be irrevocably deposited with the Paying Agent, subject to the provisions of
Section 2.04, in cash or Temporary Cash Investments an amount sufficient to pay
the aggregate Asset Disposition Purchase Price, to be held for payment in
accordance with the provisions of this Section.
(i) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.08. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business, enter into or permit to exist any
transaction (including, without limitation, the sale, conveyance, disposition,
purchase, exchange or lease of any property, the lending the borrowing or
advancing of any money or the rendering of any services) with, or for the
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benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless
(i) the terms of such Affiliate Transaction are set forth in writing, (ii) such
Affiliate Transaction is in the best interest of the Company or such Restricted
Subsidiary, as the case may be, (iii) such Affiliate Transaction is on terms as
favorable to the Company or such Restricted Subsidiary, as the case may be, as
those that could be obtained at the time of such Affiliate Transaction for a
similar transaction in arm's length dealings with a Person who is not such an
Affiliate and (iv) with respect to each Affiliate Transaction involving
aggregate payments or value in excess of $5,000,000, the Company delivers to
the Trustee an opinion letter from an Independent Appraiser (in which such
Independent Appraiser identifies itself as such) to the effect that such
Affiliate Transaction complies with clauses (ii) and (iii) and an Officers'
Certificate certifying that such Affiliate Transaction was approved by a
majority of the Board of Directors, including a majority of the disinterested
members of the Board of Directors, as evidenced by a Board Resolution, and that
such Affiliate Transaction complies with clauses (ii) and (iii), such opinion
letter and Board Resolution to be dated within 30 days of such Affiliate
Transaction.
(b) The provisions of Section 4.08(a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 4.05, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii)
loans or advances permitted under this Indenture to employees in the ordinary
course of business in accordance with past practices of the Company, (iv) the
payment of reasonable fees to directors of the Company and its Restricted
Subsidiaries who are not employees of the Company or of Restricted
Subsidiaries, (v) any transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries or (vi) reasonable and
customary indemnification arrangements between the Company or any Restricted
Subsidiary and their respective directors and officers pursuant to which the
Company or any such Restricted Subsidiary agrees to indemnify such directors
and officers against losses and expenses incurred by such directors and
officers in connection with their service to the Company or such Restricted
Subsidiary, as the case may be (to the extent
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that such indemnification arrangements are permitted under applicable law).
SECTION 4.09. Change of Control. (a) Upon a Change of
Control, (i) the Company shall notify the Trustee, who shall in turn notify the
Holders, in writing of the occurrence of the Change of Control and shall make
an offer to purchase (the "Change of Control Offer") the Securities for cash at
a purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon (collectively the "Change of Control Purchase
Price") to the Change of Control Purchase Date (as defined below) on or before
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 Business Days after the occurrence of the Change of
Control (the "Change of Control Purchase Date"), (ii) the Trustee shall mail a
copy of the Change of Control Offer to each Holder and (iii) the Company shall
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States.
The Change of Control Offer shall remain open from the time such offer is made
until the Change of Control Purchase Date. The Company shall purchase all
Securities properly tendered in the Change of Control Offer and not withdrawn
in accordance with the procedures set forth in Section 4.09(b). The Trustee
shall be under no obligation to ascertain, and the Trustee shall not be deemed
to have knowledge of, the occurrence of a Change of Control or to give notice
with respect thereto other than as provided above upon receipt of a Change of
Control Offer from the Company. The Trustee may conclusively assume, in the
absence of receipt of a Change of Control Offer from the Company, that no
Change of Control has occurred. The Change of Control Offer shall include a
form of change of control purchase notice (the "Change of Control Purchase
Notice") to be completed by the Holder and shall state:
(1) the events causing a Change of Control and the date such
Change of Control is deemed to have occurred;
(2) the circumstances and relevant facts regarding such Change
of Control which the Company in good faith believes will enable
Holders to make an informed decision (which at a minimum will include
(i) the most recently filed Annual Report on Form 10-K (including
audited financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of the Company filed
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subsequent to such Quarterly Report, (ii) a description of material
business developments in the Company's business subsequent to the date
of the latest of such Reports and (iii) information with respect to
pro forma historical income, cash flow and capitalization, each after
giving effect to such Change of Control, events causing such Change of
Control and the date such Change of Control is deemed to have
occurred);
(3) that the Change of Control Offer is being made pursuant to
this Section 4.09(a) and that all Securities properly tendered
pursuant to the Change of Control Offer will be accepted for payment;
(4) the date by which the Change of Control Purchase Notice
pursuant to this Section 4.09 must be given;
(5) the Change of Control Purchase Date;
(6) the Change of Control Purchase Price;
(7) the name and address of the Paying Agent;
(8) that Securities must be surrendered to the Paying Agent at
the office of the Paying Agent to collect payment;
(9) that the Change of Control Purchase Price for any Security
as to which a Change of Control Purchase Notice has been duly given
and not withdrawn will be paid promptly upon the later of the first
Business Day following the Change of Control Purchase Date and the
time of surrender of such Security as described in clause (8);
(10) the procedure the Securityholder must follow to accept
the Change of Control Offer; and
(11) the procedures for withdrawing a Change of Control
Purchase Notice.
(b) A Securityholder may accept a Change of Control Offer by
delivering to the Paying Agent at the office of the Paying Agent a Change of
Control Purchase Notice at any time prior to the close of business in the
location of the office of the Paying Agent on the Change of Control Purchase
Date, stating:
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(1) that such Securityholder elects to have a Security
purchased pursuant to the Change of Control Offer;
(2) the principal amount of the Security that the
Securityholder elects to have purchased by the Company, which amount
must be $1,000 or an integral multiple thereof, and the certificate
numbers of the Securities to be delivered by such Securityholder for
purchase by the Company; and
(3) that such Security shall be purchased on the Change of
Control Purchase Date pursuant to the terms and conditions specified
in this Indenture.
The delivery of such Security (together with all necessary
endorsements) to the Paying Agent at the office of the Paying Agent prior to,
on or after the Change of Control Purchase Date shall be a condition to the
receipt by the Securityholder of the Change of Control Purchase Price therefor;
provided, that such Change of Control Purchase Price shall be so paid pursuant
to this Section only if the Security so delivered to the Paying Agent shall
conform in all respects to the description thereof set forth in the related
Change of Control Purchase Notice. Securityholders whose Securities are
purchased only in part will be issued new Securities equal in principal amount
to be unpurchased portion of the Securities surrendered.
The Company shall purchase from the Holder thereof, pursuant
to this Section, a portion of a Security if the principal amount of such
portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the Purchase of all of a Security also apply to the
Purchase of a portion of such Security.
The Paying Agent shall promptly notify the Company of the
receipt by it of any Change of Control Purchase Notice or written notice of
withdrawal thereof.
Upon receipt by the Company of the Change of Control Purchase
Notice, the Holder of the Security in respect of which such Change of Control
Purchase Notice was given shall (unless such Change of Control Purchase Notice
is withdrawn as specified in the following paragraph) thereafter be entitled to
receive solely the Change of Control Purchase Price with respect to such
Security. Such Change of Control Purchase Price shall be paid to such
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Holder promptly upon the later of (a) the first Business Day following the
Change of Control Purchase Date (provided the conditions in this Section
4.09(b) have been satisfied) and (b) the first Business Day following the time
of delivery of the Security to the Paying Agent at the office of the Paying
Agent by the Holder thereof in the manner required by this Section 4.09(b).
A Change of Control Purchase Notice may be withdrawn before or
after delivery by the Holder to the Paying Agent at the office of the Paying
Agent of the Security to which such Change of Control Purchase Notice relates,
by means of a written notice of withdrawal delivered by the Holder to the
Paying Agent at the office of the Paying Agent to which the related Change of
Control Purchase Notice was delivered at any time prior to the close of
business on the Change of Control Purchase Date specifying, as applicable:
(1) the certificate number of the Security in respect of which
such notice of withdrawal is being submitted;
(2) the principal amount of the Security (which shall be
$1,000 or an integral multiple thereof) with respect to which such
notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Security (which
shall be $1,000 or an integral multiple thereof) that remains subject
to the original Change of Control Purchase Notice and that has been or
will be delivered for purchase by the Company.
No later than the date upon which the Change of Control Offer
is delivered to the Trustee, the Company shall irrevocably deposit with the
Paying Agent, subject to the provisions of Section 2.04, in cash or Temporary
Cash Investments an amount equal to the Change of Control Purchase price to the
Holders entitled thereto, to be held for payment in accordance with the
provisions of this Section.
(c) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any
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securities laws or regulations conflict with provisions of this Section, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section by
virtue thereof.
SECTION 4.10. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and whether or not the signers know of any
Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
Section 314(a)(4).
SECTION 4.11. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.12. Limitation on Liens and Impairment of
Collateral. (a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Lien on
any of its property or assets (including Capital Stock), whether owned on the
Issue Date or thereafter acquired, or any right, title or interest thereto,
other than Permitted Liens.
(b) Except as permitted by this Indenture or any of the other
Collateral Documents, the Company shall not, and the Company shall not permit
any of its Subsidiaries to, directly or indirectly, (i) take or omit to take
any action which might or would have the result of adversely affecting or
impairing the perfected first priority Lien of the Indenture and the other
Collateral Documents with respect to the Collateral or any right, title or
interest thereto or (ii) grant to any Person any interest in, or right, title
or interest to, the Collateral, other than, in each case, Permitted Liens.
SECTION 4.13. Limitation on Sale/Leaseback Transactions. The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into, Guarantee or otherwise become liable with respect to
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any Sale/Leaseback Transaction with respect to any property or assets unless
(i) such property or assets are, at the time the Company or such Restricted
Subsidiary enters into such Sale/Leaseback Transaction, subject to a Permitted
Lien under Section 4.03(b)(viii) or 4.03(b)(ix), (ii) the Company or such
Restricted Subsidiary, as the case may be, would be entitled thereunder to
incur indebtedness secured by a Permitted Lien on such property or assets in an
amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, (iii) the net proceeds from such Sale/Leaseback
Transaction are at least equal to the Fair Market Value of the property or
assets subject to such Sale/Leaseback Transaction (such Fair Market Value
determined, in the event such property or assets have a Fair Market Value in
excess of $2,000,000, no more than 30 days prior to the effective date of such
Sale/Leaseback Transaction, by the Board of Directors including a majority of
the disinterested members of the Board of Directors, as evidenced by a Board
Resolution), (iv) the net proceeds of such Sale/Leaseback Transaction are
applied in accordance with Section 4.07 and (v) the Company complies with
Article 10.
SECTION 4.14. Limitation of Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company shall not permit (i) any
Restricted Subsidiary to issue any Capital Stock other than to the Company or a
Wholly Owned Subsidiary; or (ii) any Person (other than the Company or a Wholly
Owned Subsidiary) to, directly or indirectly, own or control any Capital Stock
of any Restricted Subsidiary (other than directors' qualifying shares);
provided, however, that clauses (i) and (ii) shall not prohibit (a) any sale of
100% of the shares of the Capital Stock of any Restricted Subsidiary owned by
the Company or any Wholly Owned Subsidiary effected in accordance with Section
4.07, (b) any Person from owning any of the Pledged Securities subsequent to
any foreclosure on or other transfer of such Pledged Securities in connection
with an exercise of remedies under any of the Collateral Documents or (c) any
issuance of Preferred Stock to any Person permitted under Section 4.04.
SECTION 4.15. Restricted and Unrestricted Subsidiaries. (a)
The Board of Directors may designate any Subsidiary of the Company or any
Restricted Subsidiary to be an Unrestricted Subsidiary if (i) the Subsidiary to
be so designated does not own any Capital Stock, Redeemable Stock or
Indebtedness of, or own or hold any Lien on any property
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or assets of, the Company or any other Restricted Subsidiary, (ii) the
Subsidiary to be so designated is not obligated by any Indebtedness or Lien
that, if in default, would result (with the passage of time or notice or
otherwise) in a default on any Indebtedness of the Company or any Restricted
Subsidiary, and (iii) either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) such designation is effective immediately upon
such Person becoming a Subsidiary of the Company or of a Restricted Subsidiary.
Unless so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company or any Restricted Subsidiary shall be classified as a
Restricted Subsidiary. Except as provided in the first sentence of this
paragraph (a), no Restricted Subsidiary shall be redesignated as an
Unrestricted Subsidiary. Subject to Section 4.15(b), an Unrestricted
Subsidiary shall not be redesignated as a Restricted Subsidiary. 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 complies with the foregoing provisions.
(b) The Company shall not, and shall not permit any
Restricted Subsidiary to, take any action or enter into any transaction or
series of transactions that would result in a Person becoming a Restricted
Subsidiary (whether through an acquisition, the redesignation of an
Unrestricted Subsidiary or otherwise) unless after giving effect to such
action, transaction or series of transactions, on a pro forma basis, (i) the
Company could incur at least $1.00 of additional Indebtedness pursuant to
Section 4.03(b)(iii), (ii) such Restricted Subsidiary could then Incur under
Section 4.04 all indebtedness as to which it is obligated at such time, (iii)
no Default or Event of Default would occur or be continuing and (iv) there
exist no Liens with respect to the property or assets of such Restricted
Subsidiary other than Permitted Liens.
SECTION 4.16. After-Acquired Property. The Company shall,
and shall cause each Restricted Subsidiary to, cause all property (real and
personal, including, without limitation, Pledged Securities) and assets that
are acquired by the Company or such Restricted Subsidiary after the Issue Date
to be subject to the Lien of the Indenture and the other Collateral Documents,
in the case of such
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property that is not Substitute Collateral, within 60 days after the date of
acquisition thereof.
SECTION 4.17. Revisions to Schedules. (a) Schedule II shall
be revised from time to time by the Company to accurately reflect all the U.S.
Restricted Subsidiaries, whether now existing or hereafter created, formed,
designated or acquired.
(b) Schedule III and Schedule IV shall be revised from time
to time by the Company to reflect all governmental, regulatory and other
offices where filings, recordings, registrations and other actions necessary or
advisable to publish notice of the, to perfect, preserve and protect the
validity of the, and to establish a valid and perfected, Lien in favor of the
Trustee in respect of all Collateral.
SECTION 4.18. Maintenance of Properties; Insurance. The
Company shall, and shall cause each Restricted Subsidiary to, at all times
maintain or cause to be maintained insurance in accordance with the provisions
of the Collateral Documents and to maintain or cause to be maintained its
properties and assets in accordance with the provisions of the Collateral
Documents and to:
(a) keep all property necessary in its business, including,
without limitation, the Collateral, in good working order and
condition (keep ordinary wear and tear excepted), in compliance with
applicable regulations, laws or restrictions 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 its business may be
properly and advantageously conducted at all times; and
(b) maintain with recognized national or international
insurance companies, or through self-insurance programs, insurance on
such of its property and assets, including, without limitation, the
Collateral, and against such liabilities in at least such amounts,
against at least such risks and with such deductibles or self-insured
retentions as in each case are customarily insured against in the same
general area by companies engaged in the same or a similar business
and consistent with the past practices of the Company, and furnish to
the Trustee an Officers'
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Certificate specifying the nature of the insurance carried and
adequacy thereof at such times as it shall deliver to the Trustee an
Officers' Certificate pursuant to Section 4.10.
SECTION 4.19. Corporate Existence. Subject to Article 5, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and the corporate, partnership
or other existence of each of its Subsidiaries, in accordance with the
respective organizational documents of the Company and each such Subsidiary and
the rights (charter and statutory), registrations, licenses and franchises of
the Company and such Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license, registration or franchise,
or the corporate, partnership or other existence of any such Subsidiary, if the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries taken as a whole, and the loss thereof is not
adverse in any material respect to the Holders; provided, further, however,
that if such Subsidiary has more than a de minimis amount of assets, the Board
of Directors shall be required to make a determination to the foregoing effect.
SECTION 4.20. Taxes. The Company shall, and shall cause each
of its Subsidiaries to, pay, prior to delinquency, all taxes, assessments and
governmental levies, except as the same are being contested in good faith and
by appropriate proceedings or where the failure to pay would not have a
material adverse effect on the Company and its Subsidiaries taken as a whole
SECTION 4.21. Conflicting Agreements. The Company shall not,
and shall not permit any of its Subsidiaries to, enter into any agreement or
instrument that by its terms expressly (i) prohibits the Company from making
any payments on the Securities required by the terms hereof and thereof or (ii)
except in respect of a Permitted Lien, requires that the proceeds received from
the sale of any Collateral be applied to repay, redeem or otherwise retire any
Debt of any person other than the Debt represented by the Securities, except as
set forth in the Collateral Documents.
SECTION 4.22. Contingent Security Interest in Hartford
Property. The Company shall (i) take, or cause to
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be taken, as promptly as possible after April 31, 1995, all actions and make,
or cause to be made, all filings, recordings and registrations, at the
Company's expense, necessary or advisable to create a valid, perfected first
priority Lien on the Hartford Property in favor of the Trustee and (ii) comply,
with respect to the Hartford Property, with the requirements of Section 6(o) of
the Underwriting Agreement dated as of , 1995, among the Company and the
Underwriters listed on Schedule I thereto, as if such Section were set forth in
full herein, such Section being hereby incorporated by reference with respect
to the Hartford Property; provided, however, that the Company shall not be
required to undertake any such action or make any such filings, recordings or
registrations or comply with such Section if the sale by the Company to a
third-party (other than a Subsidiary of the Company) of the Hartford Property
has been completed by May 1, 1995; provided, further, however, that the Company
shall deliver to the Trustee an Officers' Certificate on or prior to May 8,
1995, certifying either that the sale of the Hartford Property has been
completed as described in the preceding proviso or that the Company has
undertaken to comply with the requirements of this Section and the date by
which the Company reasonably expects to have so complied.
ARTICLE 5
SUCCESSOR COMPANY
The Company shall not, and the Company shall not permit any
Restricted Subsidiary to, enter into any transaction or series of transactions
to consolidate, amalgamate or merge with or into any other Person (other than
the merger of a Wholly Owned Subsidiary (i) with another Wholly Owned
Subsidiary or (ii) into the Company), or directly or indirectly through its
Subsidiaries sell, convey, assign, transfer, lease or otherwise dispose of all
or substantially all its property and assets to any Person (other than to one
or more Wholly Owned Subsidiaries or to the Company) unless (i) the Person, if
the Company is a party to such transaction and is not the surviving entity (the
"Surviving Entity"), formed by such consolidation or amalgamation or into which
the Company is merged or that acquires, by sale, conveyance, assignment,
transfer, lease or other disposition, all or substantially all the properties
and assets of the Company as an entirety, shall
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be a corporation organized and validly existing under the laws of the United
States or any State thereof or the District or Columbia and shall expressly
assume (a) by a supplemental indenture executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company
pursuant to the Indenture and (b) by written instruments executed and delivered
to the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company pursuant to the other Collateral Documents; (ii) the Surviving Entity,
if any Restricted Subsidiary is a party to such transaction and is not the
Surviving Entity, shall by written instruments executed and delivered to the
Trustee, in form satisfactory to the Trustee, expressly assume all the
obligations of such Restricted Subsidiary pursuant to the Collateral Documents;
(iii) immediately before and after giving effect to such transaction or series
of transactions on a pro forma basis (and treating any indebtedness which
becomes an obligation of the Company, the Surviving Entity or any Restricted
Subsidiary as a result of such transaction or series of transactions as having
been incurred by the Company, such Surviving Entity or such Restricted
Subsidiary at the time of such transaction or series of transactions) no
Default or Event of Default shall have occurred and be continuing; (iv)
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (and treating any Indebtedness which becomes an obligation
of the Company, the Surviving Entity or any Restricted Subsidiary as a result
of such transaction or series of transactions as having been incurred by the
Company, such Surviving Entity or such Restricted Subsidiary at the time of
such transaction or series of transactions), the Company or the Surviving
Entity, as the case may be, could incur at least $1.00 of additional
Indebtedness pursuant to Section 4.03(b)(iii); (v) immediately after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating any indebtedness which becomes an obligation of the Company, the
Surviving Entity or any Restricted Subsidiary as a result of such transaction
or series of transactions as having been incurred by the Company, such
Surviving Entity or such Restricted Subsidiary at the time of such transaction
or series of transactions), the Company or the Surviving Entity, as the case
may be, shall have a Consolidated Net Worth which is not less than the
Consolidated Net Worth of the Company immediately prior to such transaction or
transactions; and (vi) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
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consolidation, amalgamation, merger or transfer and such supplemental indenture
(if any) comply with the Indenture and that the perfected first priority Lien
of the Trustee for the benefit of the Securityholders with respect to the
Collateral continues in all respects.
Upon any transaction involving the Company in which the
Company is not the Surviving Entity, such Surviving Entity shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture, but the Company in the case of a lease shall not be
released from the obligation to pay the principal of, and premium, if any, or
interest on, the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company fails to make any payment of interest on any
Security when the same shall become due and payable, and such failure
continues for a period of 30 days;
(2) the Company (i) fails to make the payment of the principal
of or premium, if any, on any Security when the same becomes due and
payable at its Stated Maturity, upon acceleration, redemption or
declaration, or otherwise or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities;
(3) the Company fails to comply with Article 5;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.12, 4.13 or 4.14 (other than a failure
to purchase Securities when required under Section 4.07 or 4.09) and
such failure continues for 30 days after the notice specified below,
or the Company fails to give the notice specified below;
(5) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other
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than those referred to in (1), (2), (3) or (4) above) and such failure
continues for a period of 60 days after the notice specified below or
the Company fails to give the notice specified below;
(6) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
is accelerated by the Holders thereof, the total amount of such
Indebtedness unpaid or accelerated exceeds $5,000,000 or its Dollar
Equivalent at the time;
(7)(A) the Company fails to comply with any of its
representations, warranties, covenants or agreements contained
or incorporated by reference in any Collateral Document (other
than the Indenture) and such failure continues beyond the
applicable grace period provided in such Collateral Document;
(B) on or after the Issue Date, other than in accordance
with the provisions of the Indenture, for any reason, other
than the satisfaction in full and discharge of all obligations
secured thereby, any Collateral Document ceases to be or is
not in full force and effect or any Lien with respect to
Collateral with a Fair Market Value that exceeds $2,000,000 in
the aggregate intended to be created by any Collateral
Document ceases to be or is not a valid and perfected first
priority Lien for more than 5 days;
(C) the occurrence of any event of default under any
Collateral Document; or
(D) on or after the Issue Date, other than in accordance
with the provisions of the Indenture, the Company asserts in
writing that any Collateral Document has ceased to be or is
not in full force and effect;
(8) any judgment or decree aggregating in excess of
$5,000,000 or its Dollar Equivalent at the time is rendered against
the Company or any Restricted Subsidiary and is not discharged and
either: (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree; or (B) there is a period of 60
days following the entry of such
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judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed; and, in the case
of either clause (A) or (B), such default continues for ten days after
the notice specified below;
(9) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(10) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
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The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (8) above is not an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event which with the giving of notice and the lapse of time would become
an Event of Default under clause (4), (5), (6) or (8) above, its status and
what action the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(9) or (10) with respect to
the Company) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in principal amount of the Securities by notice to
the Trustee (who shall promptly notify the Company), may declare the principal
of and accrued interest on all the Securities to be due and payable. Upon such
a declaration, such principal and interest shall be due and payable
immediately. The Trustee shall also notify the agent for the lenders under the
Revolving Credit Facility or any other revolving credit facility permitted
under Section 4.03 of any such declaration by the Trustee. If an Event of
Default specified in Section 6.01(9) or (10) occurs, the principal of and
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Securityholders. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
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SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law, the Indenture or
the other Collateral Documents or, subject to Section 7.01, that the Trustee
determines is unduly prejudicial to the rights of other Securityholders or
would involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
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(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of interest or principal specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid (together with interest on such unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
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 and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law
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or applicable regulations, may vote on behalf of the Holders in any election of
a trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
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 in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not apply
to a suit by the Trustee, a suit by a
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Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully refrain from doing so) shall 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 wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 6.13. Suits To Protect the Collateral. The Trustee
shall have power to institute and to maintain such proceedings as it may deem
expedient to prevent any impairment of the Collateral by any acts which may be
unlawful or in violation of this Indenture or the other Collateral Documents
and to protect its interests and the interests of the Securityholders in the
Collateral, including power to institute and maintain proceedings to restrain
the enforcement of or compliance with any governmental enactment, rule or order
that may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order would impair the Lien of this
Indenture and the other Collateral Documents or be prejudicial to the interests
of the Holders or the Trustee. The Trustee shall also have the authority to
exercise any rights or powers conferred on the Trustee under this Indenture and
under each other Collateral Document.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and (2) in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that: (1) this paragraph does not limit the effect of
paragraph (b) of this Section; (2) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and (3) the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur 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 to believe that
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repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely
on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee. The Trustee in
its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. If required by
TIA Section 313(a), as promptly as practicable after each May 15 beginning
with the May 15 following the date of this Indenture, and in any event prior to
July 15 in each year, the Trustee shall mail to each Securityholder a brief
report dated as of May 15 that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time such compensation as shall be agreed to in
writing between the Company and the Trustee for its services. The Trustee's
compensation 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 out-of-pocket expenses incurred or made by it, including costs of
collection, sale or otherwise in connection with this Indenture and the other
Collateral Documents, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses,
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disbursements and advances of the Trustee's agents, counsel, accountants and
experts and court costs. The Company shall indemnify the Trustee against any
and all loss, liability damage, claim or expense (including reasonable
attorneys' fees and expenses), including taxes (other than taxes based on the
income of the Trustee) incurred by it in connection with the acceptance or
administration of this trust and the performance of its duties hereunder. 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. The Company shall defend the claim
and the Trustee may have separate counsel and the Company shall pay the fees
and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on Securities under Article 8 or otherwise.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(9) or (10)
with respect to the Company, the expenses are intended to constitute expenses
of administration under Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 25% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate
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of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Trustee shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. No obligor
upon the Securities or Person directly controlling, controlled by or under
common control with such obligor shall serve as Trustee upon the Securities.
The Trustee shall comply with TIA Section 310(b); provided, however, that
there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of
interest or participation in other securities of the Company are outstanding if
the requirements for such exclusion set forth in TIA Section 310(b)(1) are
met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
SECTION 7.12. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Collateral may at the time be located, the Company and the Trustee
acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more persons approved by the Trustee to act as
co-trustee or co-trustee, jointly with the Trustee, of all or any part of the
Collateral, or separate trustee or separate trustees of any part of the
Collateral, and to vest in such person or persons, in such capacity and for the
benefit of the Holders, such title to the Collateral, or any part thereof, and,
subject to the other provisions of this Section 7.12, such powers, duties,
obligations, rights and trusts as the Company and the Trustee may consider
necessary or desirable
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hereunder or under any other Collateral Document. If the Company shall not
have joined in such appointment within 15 days after the receipt by it of a
request to do so, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment.
The Company hereby appoints the Trustee as its agent and attorney to act for it
under the foregoing provisions of this Section in either of such contingencies.
No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility under Section 7.10 and no notice to Holders of the appointment
of any co-trustee or separate trustee shall be required under Section 7.08.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee hereunder or under any Collateral Document
shall be conferred or imposed upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized
to act separately without the Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee
hereunder or under any Collateral Document) the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Collateral or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Company and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if
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given to each of them. Every instrument appointing any separate trustee or
co-trustee shall refer to this Indenture and, to the extent applicable, the
Collateral Documents. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture and, to the extent applicable, the Collateral
Documents, specifically including every provision hereof and thereof relating
to the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Company.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Indenture and, to the extent applicable, the Collateral
Documents, on its behalf and in its name. If any separate trustee or
co-trustee shall become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or successor trustee.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancelation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof, and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon (other than Securities replaced pursuant
to Section 2.07), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Sections
8.01(c) and 8.06, cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an
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Officers' Certificate and an Opinion of Counsel and at the cost and expense of
the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company
at any time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02 (to the extent that the failure to comply with Section 4.02 shall not
violate the TIA), 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.12, 4.13, 4.14 or
4.16 or Article 5 and the related operation of Sections 6.01(3),(4) and (5) and
the operation of Sections 6.01(6), (7), (8), (9) and (10) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Sections
6.01(3), (4), (5), (6), (7), (8), (9) and (10) (except to the extent covenants
or agreements referenced in such Sections remain applicable).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05
and 8.06 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Securities to maturity or redemption, as
the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of
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independent accountants expressing their opinion that the payments of
principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will
be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(9) or (10) with
respect to the Company occurs which is continuing at the end of the
period;
(4) no Default has occurred and is continuing on the date of
such deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(7) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from the Internal Revenue Service a
ruling or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance
had not occurred;
(8) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Securityholders will not recognize income, gain or
loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal
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income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(9) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed
for two years, and, thereafter, Securityholders entitled to the money must look
to the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 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
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Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article 8
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article 8.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders. The Company and
the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however , that the
uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the
Code;
(4) to establish or maintain the Lien of this Indenture and
the other Collateral Documents as a perfected first priority Lien of
the Trustee in respect of the Collateral, to correct or amplify the
description of any Collateral subject to the Lien of the Indenture or
the other Collateral Documents and to subject additional property or
assets to the Lien of this Indenture or the other Collateral
Documents;
(5) to add Guarantees with respect to the Securities or to
further secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
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(7) enter into any Intercreditor Agreement (as defined in the
Security and Pledge Agreement);
(8) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA; or
(9) to make any change that does not adversely affect the
rights of any Securityholder.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent
of each Securityholder affected, an amendment may not:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may or shall be
redeemed in accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) impair the right of any Securityholder to institute suit
for enforcement of any payment on or with respect to any Securities;
(7) permit the creation of any Lien on the Collateral or any
part thereof (other than the Lien of this Indenture and the other
Collateral Documents and other Permitted Liens (as defined herein on
the Issue Date)) or terminate the Lien of this Indenture and the
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other Collateral Documents as to the Collateral or any part thereof or
deprive the Securityholders of the security afforded by the Lien of
this Indenture and the other Collateral Documents or any part thereof,
except as permitted pursuant to Section 4.12 or Article 10 as in
effect on the Issue Date; or
(8) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only
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those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid
or effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such (i) amendment is authorized or permitted by this Indenture
and that all conditions precedent to the execution, delivery and performance of
such amendment have been satisfied; (ii) the Company has all necessary
corporate power and authority to execute and deliver the amendment and that the
execution, delivery and performance of such amendment has been duly authorized
by all necessary corporate action; (iii) the execution, delivery and
performance of the amendment do not conflict with, or result in the breach of
or constitute a default under any of the terms, conditions or provisions of (a)
the Indenture, (b) the Certificate of Incorporation or By-Laws of the Company,
(c) any law or regulation applicable to the Company, (d) any material order,
writ, injunction or decree of any court or governmental instrumentality
applicable to the Company or (e) any material agreement or instrument to which
the Company is subject; (iv) such amendment has been duly and validly executed
and delivered by the Company, and the Indenture together with such amendment
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance
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with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and general equitable principles; and (v) the Indenture
together with such amendment complies with the TIA.
SECTION 9.07. Payment for Consent. Neither the Company nor
any Affiliate of the Company shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
ARTICLE 10
COLLATERAL DOCUMENTS
SECTION 10.01. Collateral Documents. (a) In order to secure
the due and punctual payment of the principal of and interest on the Securities
when the same becomes due and payable, whether at Stated Maturity, upon
acceleration, optional redemption, required purchase or otherwise, in
accordance with the terms of the Securities and this Indenture, the Company has
created the Lien of this Indenture and the Collateral Documents in respect of
the Collateral in favor of the Trustee for the benefit of the Securityholders.
The Trustee and the Company hereby agree that the Trustee holds the Collateral
in trust for the benefit of the Holders pursuant to the terms hereof and of the
other Collateral Documents.
(b) The Company covenants and agrees that it has full right,
power and lawful authority to grant, bargain, sell, release, convey,
hypothecate, assign, mortgage, pledge and transfer the Collateral, in the
manner and form done, or intended to be done, in this Indenture and the other
Collateral Documents, free and clear of all Liens (other than Permitted Liens
or as permitted by the Collateral Documents, subject to the limitations
contained therein), whatsoever, and that (i) it will forever warrant and defend
the title to the same against the claims of all persons whatsoever, (ii) it
will execute, acknowledge and deliver to the Trustee such further assignments,
transfers, assurances
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or other instruments as the Trustee may require or request and (iii) it will do
or cause to be done all such acts and things as may be necessary or proper, or
as may be required by the Trustee, to assure and confirm to the Trustee the
Lien of this Indenture and the Collateral Documents in respect of the
Collateral, or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this Indenture and of
the Securities. The Company further covenants and agrees that this Indenture,
the other Collateral Documents and the actions taken hereunder and thereunder
create a perfected first priority Lien on the relevant portion of the
Collateral, subject to Permitted Liens.
(c) As amongst the Holders, the Collateral as now or
hereafter constituted shall be held for the equal and ratable benefit of the
Holders without preference, priority or distinction of any thereof over any
other by reason of difference in time of issuance, sale or otherwise, as
security for the obligations hereunder and under the other Collateral
Documents.
SECTION 10.02. General Authority. The Company hereby
irrevocably appoints the Trustee its true and lawful attorney, with full power
of substitution, in the name of the Company, the Trustee, the Holders or
otherwise, for the sole use and benefit of the Trustee and the Holders, but at
the Company's expense, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default has occurred and is continuing,
all or any of the following powers and the powers contemplated by the
Collateral Documents with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof;
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto; and
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds thereof, as fully and effectually as if the
Trustee were the absolute owner thereof;
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provided, that the Trustee shall give the Company not less than 10 days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral. The Company agrees that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the Uniform
Commercial Code and for all other purposes. Each Holder, by its acceptance of a
Security, consents and agrees to the terms of the Collateral Documents and
authorizes and directs the Trustee to enter into each of the Collateral
Documents and to perform its obligations and exercise its rights thereunder in
accordance therewith; provided, however, that, if any provision of the
Collateral Documents limits, qualifies or conflicts with the duties imposed by
the provisions of the TIA, the TIA controls.
SECTION 10.03. Recording, Deposit of Pledged Securities, etc.
(a) The Company will take or cause to be taken, at its own expense, all action
required or desirable to maintain, preserve and protect the Lien on the
Collateral granted by the Collateral Documents, including, but not limited to,
causing all financing statements, Mortgages, the Intellectual Property Security
Agreement and other instruments of further assurance, including continuation
statements covering security interests in personal property, to be promptly
recorded, registered and filed, and at all times to be kept recorded,
registered and filed, and shall execute and file such financing statements and
cause to be issued and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve and protect the
rights of the Holders and the Trustee under this Indenture and the other
Collateral Documents to all property comprising the Collateral.
The Company shall from time to time promptly pay and discharge
all mortgage and financing and continuation statement recording and filing
fees, charges and taxes relating to this Indenture and the other Collateral
Documents, any amendments thereto and any other instruments of further
assurance.
Upon the cancelation and discharge of any prior Lien, the
Company will cause all cash, Temporary Cash Investments, obligations and
securities then held by the trustee, mortgagee or other holder of such prior
Lien, which were received by such trustee, mortgagee or other holder on account
of the release or the taking by eminent domain or the purchase by a public
authority or the sale by virtue of
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a designation or order of a public authority or any other disposition of, or
insurance on, the Collateral, or any part thereof (including all proceeds of or
substitutions for any thereof), to be paid to or deposited and pledged with the
Trustee, such cash to be held and paid over or applied by the Trustee, as
provided in Article 11 hereof.
(b) As and when any Pledged Securities shall come into the
possession of the Company or any U.S. Restricted Subsidiary or under any of
their control, the Company shall forthwith deposit and pledge, or cause such
U.S. Restricted Subsidiary to deposit and pledge, the same with the Trustee,
together with such proper instruments of assignment and transfer as the Trustee
may reasonably require, which shall include express authority to the Trustee to
vote any shares of stock included therein and to cause such authority to be
recorded in the entry of transfer of such stock on the books of the corporation
issuing the same, all the foregoing to the extent provided or permitted by the
Security and Pledge Agreement. Such Pledged Securities will likewise be deemed
to be a part of and governed by the terms of the Security and Pledge Agreement.
(c) The Company shall furnish to the Trustee:
(i) at the time of execution and delivery of this Indenture,
an Opinion or Opinions of Counsel stating that (a) the Trustee has a
valid and enforceable perfected first priority Lien in the Collateral
pursuant to the Collateral Documents, and the Collateral is free and
clear of all Liens, other than Permitted Liens, and (b) (1) this
Indenture and the assignment of the Collateral intended to be made by
each Collateral Document and all other instruments of further
assurance or assignment have been properly recorded, registered, filed
and acted upon to the extent necessary to perfect the first priority
Lien intended to be created by each such Collateral Document and
reciting the details of such action or referring to prior Opinions of
Counsel in which such details are given, and stating that, as to the
perfected first priority Lien created pursuant to each such Collateral
Document, such recordings, registerings, filings and other actions are
the only recordings, registerings, filings and other actions necessary
or advisable, and further stating that all financing statements have
been executed and filed that are necessary or advisable, fully to
preserve and protect the rights of the Holders
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and the Trustee with respect to, and make valid and enforceable, the
perfected first priority Lien under this Indenture and each other
Collateral Document, and such recordings, registerings, filings and
other actions are in full force and effect; and (2) no such recording,
registering, filing or action is necessary to perfect such first
priority Lien;
(ii) with respect to each Mortgage, a policy of title
insurance insuring (or committing to insure) the Lien of such Mortgage
as a valid first mortgage Lien on the real property and fixtures
described therein in an amount not less than the Fair Market Value
thereof, which policy shall (a) be issued by a reputable title
company, (b) include such reinsurance arrangements, if any (with
provisions for direct access), as shall be customary in the same
general area, (c) have been supplemented by such endorsements or,
where such endorsements are not available at commercially reasonable
premium costs, opinion letters of reputable architects or other
reputable professionals (including endorsements or opinion letters on
matters relating to contiguity, first loss, if available, leasehold,
variable rate, usury, if available, and so-called comprehensive
coverage over covenants and restrictions, if available) and (d)
contain only such exceptions to title as shall be customary;
(iii) certified checks payable to the appropriate public
officials or title company (or checks or wire transfers to the title
company in respect of such amounts) in payment of all mortgage,
recording, documentary, intangible or similar governmental charges due
in respect of the execution, delivery or recording of such Mortgages,
together with a check or wire transfer for the title company in
payment of its premium, search and examination charges, survey costs
and any other amounts due in connection with issuance of its policies
(or commitments); and
(iv) within 30 days after each anniversary of the Issue Date,
an Opinion or Opinions of Counsel, dated as of such date, either (a)
to the effect that, in the opinion of such counsel, such action has
been taken with respect to the recordings, registerings, filings,
rerecordings, reregisterings and refilings of all financing
statements, continuation statements or other instruments of further
assurance as is necessary to
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maintain the first priority Lien of this Indenture and each of the
other Collateral Documents and reciting with respect to such perfected
first priority Lien the details of such action or referring to prior
Opinions of Counsel in which such details are given, and stating that
all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect
the rights of the Holders and the Trustee hereunder and under each of
the other Collateral Documents or (b) to the effect that, in the
opinion of such counsel, no such action is necessary to maintain such
perfected first priority Lien.
SECTION 10.04. Disposition of Collateral Without Trustee
Consent. (a) Notwithstanding the provisions of Sections 4.12, 10.05, 10.06
and 10.07, so long as no Event of Default shall have occurred and be continuing
and the Company complies with the provisions of Section 10.09, the Company may
without any consent by the Trustee:
(i) sell or otherwise dispose of any machinery, equipment,
furniture, apparatus, tools or implements, materials or supplies or
other similar property subject to the Lien of this Indenture and the
other Collateral Documents, which may have become worn or obsolete,
not exceeding in value in any one calendar year $1,000,000;
(ii) grant rights-of-way and easements over or in respect of
any real property; provided, that such grant shall not impair the
usefulness of such property in any material respect in the conduct of
the Company's business and shall not be prejudicial to the interests
of the Securityholders;
(iii) abandon, terminate, cancel, release or make alterations
in or substitutions of any leases (other than the Poway Lease),
contracts or rights-of-way subject to the Lien of this Indenture and
the other Collateral Documents; provided, that any altered or
substituted leases, contracts or rights-of-way shall forthwith,
without further action, be subject to the Lien of this Indenture and
the other Collateral Documents to the same extent as those previously
existing; provided, further, that, if the Company shall receive any
money or property in excess of the Company's expenses in connection
with such termination, cancelation, release, alteration or
substitution (other
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than any such money or property received in connection with a contract
or lease terminated, cancelled, released, altered or substituted in
the ordinary course of business) as consideration or compensation for
such termination, cancelation, release, alteration or substitution,
such money or property, if it exceeds $1,000 (in which case all of the
money and property so received and not just the portion in excess of
$1,000 shall be subject to this clause), forthwith upon its receipt by
the Company, shall be deposited with the Trustee (unless otherwise
required by a prior Permitted Lien) as Trust Monies subject to
disposition as Net Cash Proceeds as provided in Section 4.07 and
subjected to the Lien of this Indenture and the other Collateral
Documents;
(iv) surrender or modify any franchise, license or permit
subject to the Lien of this Indenture and the other Collateral
Documents which it may own or under which it may be operating;
provided, that, if, after the surrender or modification of any such
franchise, license or permit, the Company shall not be entitled, under
some other, or without any, franchise, license or permit, to conduct
its business in the territory in which it is then operating and the
Fair Market Value of such franchise, license or permit exceeds
$5,000,000, then the Board of Directors shall have determined, in its
reasonable opinion, that such territory is not material to the conduct
of the Company's business; provided, further, that, if the Company
shall be entitled to receive any money or property in excess of the
Company's expenses in connection with such surrender or modification
(other than any such money or property received in the ordinary course
of business in connection with a franchise, license or permit
surrendered or modified) as consideration or compensation for such
surrender or modification, such money or property, if it exceeds
$1,000 (in which case all the money and property so received and not
just the portion in excess of $1,000 shall be subject to this clause),
forthwith upon its receipt by the Company, shall be deposited with the
Trustee (unless otherwise required by a prior Permitted Lien) as Trust
Monies subject to disposition as provided in Section 4.07 and
subjected to the Lien of this Indenture and the other Collateral
Documents;
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(v) alter, repair, replace, change the location or position of
and add to its plants, structures, machinery, systems, equipment,
fixtures and appurtenances; provided, that no change in the location
of any such Collateral subject to the Lien of this Indenture and the
other Collateral Documents shall be made which (1) removes such
property into a jurisdiction in which any instrument required by law
to preserve the Lien of this Indenture and any other Collateral
Documents on such property, including all necessary financing
statements and continuation statements, has not been recorded,
registered or filed in the manner required by law to preserve the Lien
of this Indenture and the other Collateral Documents on such property,
(2) does not comply with the terms of this Indenture and the other
Collateral Documents or (3) otherwise impairs the Lien of the
Indenture and the other Collateral Documents;
(vi) demolish, dismantle, tear down or scrap any Collateral
(other than the Poway Lease), or abandon any thereof including any
leases (other than the Poway Lease) but excluding land or interests in
land, if such demolition, dismantling, tearing down, scrapping or
abandonment is in the best interests of the Company and the Fair
Market Value (except to the extent of the relevant Collateral being
released) and utility of the Collateral as an entirety will not
thereby be impaired;
(vii) sell or otherwise dispose of other Collateral in
insulated transactions that do not exceed $100,000 per transaction,
whether in a single transaction or a series of related transactions
which constitute a single plan of disposition, and $1,500,000 in the
aggregate; or
(viii) designate a Restricted Subsidiary as an Unrestricted
Subsidiary, in accordance with clauses (i), (ii) and (iii)(A) of
Section 4.15(a), the effect of which is to release the assets and
property of such Subsidiary from the Lien of this Indenture and the
other Collateral Documents.
(b) In the event that the Company has sold, exchanged or
otherwise disposed of or proposes to sell, exchange or otherwise dispose of any
portion of the Collateral, or designates a Restricted Subsidiary as an
Unrestricted Subsidiary as described above, which under the
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provisions of this Section may be sold, exchanged, or otherwise disposed of, or
so designated, by the Company without any consent of the Trustee, such
Collateral (or, in the case of such designation, the assets and property of
such Subsidiary comprising part of the Collateral) shall be, upon such sale,
exchange, or other disposition or designation, automatically released from the
Lien of this Indenture and the other Collateral Documents, and the Company may
request the Trustee to furnish a written disclaimer, release or quitclaim of
any interest in such Collateral under this Indenture and any of the other
Collateral Documents. If the Company so requests, the Trustee shall execute
such an instrument upon delivery to the Trustee of (i) an Officers' Certificate
by the Company reciting the sale, exchange or other disposition or designation
made or proposed to be made and describing in reasonable detail the Collateral
affected thereby, and stating that such Collateral is Collateral which by the
provisions of this Section may be sold, exchanged or otherwise disposed of or
dealt with by the Company without any release or consent of the Trustee and
(ii) where required by the TIA, an Opinion of Counsel stating that the sale,
exchange or other disposition or designation made or proposed to be made was
duly taken by the Company in conformity with a designated subsection of Section
10.04(a).
Any disposition of Collateral made in strict compliance with
the provisions of this Section 10.04 shall be deemed not to impair the Lien of
this Indenture and the other Collateral Documents in contravention of the
provisions of this Indenture.
SECTION 10.05. Disposition of Inventory and Accounts
Receivable Without Release. (a) Notwithstanding the provisions of Section
10.06, the Company may without any release or consent by the Trustee sell,
exchange or otherwise dispose of Inventory in the Ordinary Course of Business,
assign, collect, liquidate, sell, factor or otherwise dispose of Accounts
Receivable in the Ordinary Course of Business and dispose of the Proceeds
thereof in connection with the Company's business or to make other cash
payments permitted by this Indenture. Notwithstanding the foregoing and the
terms of the Security and Pledge Agreement, the Company's right to rely upon
this Section 10.05(a) for each six-month period beginning on January 1 and July
1 (a "Six-Month Period") shall be conditioned upon the Company delivering to
the Trustee, within 30 days following the end of such Six-Month Period,
<PAGE> 114
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an Officers' Certificate to the effect that all sales, exchanges or other
dispositions of Inventory and collections, liquidations, sales, factoring or
other dispositions of Accounts Receivable by the Company during such Six-Month
Period were in the Ordinary Course of Business and that all Proceeds therefrom
were used by the Company in connection with its business or to make other cash
payments permitted by this Indenture. The fair value of all sales, exchanges
or other dispositions of Inventory and collections, liquidations, sales,
factoring or other dispositions of Accounts Receivable and the use of each in
connection with the Company's business and to make cash payments permitted by
this Indenture by the Company in accordance with this Section shall not be
considered in determining whether the aggregate fair value of Collateral
released from the Lien of the Indenture in any calendar year exceeds the 10%
threshold specified in TIA Section 314(d).
(b) In the event that the Company has sold, exchanged or
otherwise disposed of or proposes to sell, exchange or other dispose of any
item of Inventory and Accounts Receivable which under the provisions of this
Section may be sold, exchanged or otherwise disposed of by the Company without
any release or consent of the Trustee, and the Company requests the Trustee to
furnish a written disclaimer, release or quitclaim of any interest in such
property under the Indenture and the other Collateral Documents, the Trustee
shall execute such an instrument upon delivery to the Trustee of (i) an
Officers' Certificate reciting the sale, exchange or other disposition made or
proposed to be made, describing in reasonable detail the property affected
thereby, and stating that such property may be sold, exchanged or otherwise
disposed of by the Company without any release or consent of the Trustee in
compliance with the provisions of this Section and (ii) an Opinion of Counsel
to the effect that the sale, exchange or other disposition made or proposed to
be made by the Company is in compliance with the provisions of this Section.
(c) Any releases of Collateral made in compliance with the
provisions of this Section shall be deemed not to impair the Lien of the
Indenture and other Collateral Documents in contravention of the provisions of
the Indenture.
SECTION 10.06. Release of Collateral with Trustee Consent.
In addition to its rights under Sections 10.04, 10.05 and 10.07, the Company
shall have the right, at any
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time and from time to time, unless an Event of Default shall have occurred and
be continuing, to sell, exchange or otherwise dispose of any of the Collateral
(other than Trust Monies, which are subject to release from the Lien of this
Indenture and the other Collateral Documents as provided under Article 11 or
upon substituting Substitute Collateral therefor as provided in Section 10.07)
(a "Release Termination"), upon compliance with the requirements and conditions
of Section 4.07, this Section and Section 10.09 and the Trustee shall release
the same from the Lien of this Indenture and any of the other Collateral
Documents upon receipt by the Trustee of a Release Notice (as defined herein)
requesting such release and describing the property to be so released;
provided, that:
(a) If the Collateral to be released has a book value of at
least $3,000,000, the Trustee is provided with a Board Resolution
requesting such release and authorizing an application to the Trustee
therefor.
(b) The security afforded by this Indenture and the other
Collateral Documents will not be impaired by such release in
contravention of the provisions of this Indenture and other Collateral
Documents, and either (i) other property is to be substituted as
Substitute Collateral in accordance with Section 10.07 or (ii) the
proceeds from the property to be released are being deposited in
accordance with Section 4.07.
(c) The Company has disposed of or will dispose of the
Collateral so to be released for a consideration representing its Fair
Market Value.
(d) No Event of Default has occurred and is continuing (or
will result therefrom).
(e) If the Collateral to be released is only a portion of a
discrete parcel of real property, following such release and the
release of the Lien of any applicable Mortgage with respect thereto,
the nonreleased mortgaged property shall have sufficient utility
services and sufficient access to public roads, rail spurs, harbors,
canals, terminals and other transportation structures for the
continued use of such mortgaged property in substantially the manner
carried on by the Company and its Subsidiaries prior to such release.
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(f) If the Collateral to be released is only a portion of a
discrete parcel of real property, following such release, the
nonreleased mortgaged property shall comply in all material respect
with applicable laws, rules, regulations and ordinances relating to
land use and building and workplace safety.
(g) If the Collateral to be released is only a portion of a
discrete parcel of real property, following such release, the Fair
Market Value of the mortgaged property (exclusive of the Fair Market
Value of the released mortgaged property) shall not be less than the
Fair Market Value of such mortgaged property prior to such release.
(h) If the Collateral to be released is only a portion of a
discrete parcel of real property, the Company shall have delivered to
the Trustee a survey depicting the real property to be released.
(i) The first priority perfected Lien pursuant to the
Collateral Documents shall be in full force and effect continuously
and uninterrupted at all times.
(j) If the Collateral so to be released is subject to a prior
Permitted Lien, there shall be delivered to the Trustee a certificate
of the trustee, mortgagee or other holder of such prior Permitted Lien
that it has received the applicable Net Cash Proceeds (except to the
extent that the assignment thereof would violate the terms thereof or
any agreement relating thereto) and has been irrevocably authorized by
the Company to pay over to the Trustee any balance of such Net Cash
Proceeds remaining after the discharge of such Indebtedness secured by
such prior Permitted Lien; and if any property other than cash,
Temporary Cash Investments or other obligations is included in the
consideration for any Collateral to be released, there shall be
delivered to the Trustee such instruments of conveyance, assignment
and transfer, if any, as may be reasonably necessary, in the Opinion
of Counsel to be given pursuant to paragraph (1), to subject to the
Lien of this Indenture and the other Collateral Documents all the
right, title and interest of the Company in and to such Collateral.
(k) If the Collateral to be released is only a portion of a
discrete parcel of real property, there
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shall be delivered to the Trustee evidence that a title company shall
have committed to issue an endorsement to the title insurance policy
relating to the nonreleased mortgaged property confirming that, after
such release, the Lien of the applicable Mortgage continues unimpaired
as a first priority perfected Lien upon the remaining mortgaged
property.
(1) An Opinion of Counsel shall be delivered to the Trustee
substantially to the effect (subject to customary exceptions) (i) that
any obligation included in the consideration for any property so to be
released and to be received by the Trustee pursuant to Section
10.06(j) is a valid and binding obligation enforceable in accordance
with its terms and is effectively pledged under the Collateral
Documents, (ii) that any Lien granted by a purchaser to secure
Purchase Money Indebtedness is a first priority purchase money Lien
and such instrument granting such Lien is enforceable in accordance
with its terms, (iii) either (x) that such instruments of conveyance,
assignment and transfer as have been or are then delivered to the
Trustee are sufficient to subject to the first priority Lien of this
Indenture and the other applicable Collateral Documents all the right,
title and interest of the Company in and to any property, other than
cash, Temporary Cash Investments and obligations, that is included in
the consideration for the Collateral so to be released and is to be
received by the Trustee pursuant to Section 10.06(j) or (y) that no
instruments of conveyance, assignment or transfer are necessary for
such purpose, (iv) that the Company has corporate power to own all
property included in the consideration for such release, (v) in case
any part of the money or obligations referred to in Section 10.06(j)
has been deposited with a trustee or other holder of a prior Permitted
Lien, that the Collateral to be so released, or a specified portion
thereof, is or immediately before such release was subject to such
prior Permitted Lien and that such deposit is required by such prior
Permitted Lien and (vi) that the Company has complied with all
conditions precedent herein and under any of the other Collateral
Documents provided for relating to the release of such Collateral.
(m) The Company shall deliver to the Trustee an Officers'
Certificate, dated not more than 30 days
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prior to the date of the application for such release, with respect to
the matters described in subsections (a) through (k); provided, that,
if the Collateral to be released has a book value of at least
$2,000,000, the matters described in subsections (b) (as to impairment
of security), (c) and (g) shall also be certified by an Independent
Appraiser who, if such property consists of securities, shall be a
nationally or internationally recognized investment banking firm.
In connection with any release, the Company shall (i) execute,
deliver and record or file and obtain such instruments as the Trustee may
reasonably require, including, without limitation, amendments to the Collateral
Documents and this Indenture, and (ii) deliver to the Trustee such evidence of
the satisfaction of the Indenture and the other Collateral Documents as the
Trustee may reasonably require.
The Company shall exercise its rights under this Section by
delivery to the Trustee of a notice (each, a "Release Notice"), which shall
refer to this Section, describe with particularity the items of property
proposed to be covered by the release and be accompanied by a counterpart of
the instruments proposed to give effect to the release fully executed and
acknowledged (if applicable) by all parties thereto other than the Trustee and
in form for execution by the Trustee. Upon such compliance, the Company shall
direct the Trustee to execute, acknowledge (if applicable) and deliver to the
Company such counterpart within 10 Business Days after receipt by the Trustee
of a Release Notice and the satisfaction of the requirements of this covenant.
In case an Event of Default shall have occurred and be
continuing, the Company, while in possession of the Collateral (other than
cash, Temporary Cash Investments, securities and other personal property held
by, or required to be deposited or pledged with, the Trustee hereunder or under
the other Collateral Documents or with the trustee, mortgagee or other holder
of a prior Permitted Lien), may do any of the things enumerated in this
Section, if the Trustee in its discretion, or the Holders of 66-2/3% in
aggregate principal amount of the Securities outstanding, by appropriate action
of such Holders, shall consent to such action, in which event any certificate
filed under this Section shall omit the statement to the effect that no Event
of Default has occurred and is continuing. This paragraph
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shall not apply, however, during the continuance of an Event of Default of the
type specified in Section 6.01(1), (2), (3), (9) or (10).
All cash or Temporary Cash Investments received by the Trustee
pursuant to this Section shall be held by the Trustee, for the benefit of the
Securityholders, as Trust Monies under Article 11 subject to application as
therein provided or as provided in Section 4.07. All purchase money and other
obligations received by the Trustee pursuant to this Section shall be held by
the Trustee for the benefit of the Holders as Collateral.
Any releases of Collateral made in strict compliance with the
provisions of this Section shall be deemed not to impair the Lien of this
Indenture and the other Collateral Documents in contravention of the provisions
of this Indenture.
SECTION 10.07. Substitute Collateral. (a) The Company may,
at its option, obtain a release of any of the Collateral (including any Trust
Monies other than Trust Monies which at such time (i) constitute Excess
Proceeds for purposes of Section 4.07 or (ii) have been deposited with the
Paying Agent in an amount sufficient to pay (A) the aggregate Change of Control
Purchase Price of all Securities or portions thereof that are to be purchased
on the Change of Control Purchase Date pursuant to Section 4.09 or (B) the
redemption price of and accrued interest on all Securities or portions thereof
to be redeemed on the redemption date in accordance with the requirements of
paragraphs 5 and 6 set forth on the reverse of the Securities) by subjecting
other property, if such substitute property has a Fair Market Value equal to or
greater than the Collateral to be released (the "Substitute Collateral") to the
perfected first priority Lien of this Indenture and the other Collateral
Documents or a similar instrument in place of and in exchange for any of the
Collateral to be released, all in accordance with this Section and Section
10.09.
(b) Substitute Collateral may be substituted for other
Substitute Collateral on the terms set forth in this Section.
(c) Unless an Event of Default shall have occurred and be
continuing, the Trustee shall release any of the Collateral from the Lien of
this Indenture and any of the other Collateral Documents and accept the
Substitute
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Collateral subject to the Lien of this Indenture and the other Collateral
Documents upon receipt thereof by the Trustee of:
(i) an application of the Company requesting such substitution
of Substitute Collateral for any of the Collateral and describing the
property to be so released and the property to be substituted
therefor;
(ii) the Board Resolutions, certificates, opinions and other
statements listed in Sections 10.06(a), (k), (l) and (m), as and to
the extent applicable, in respect of any of the Collateral to be
released;
(iii) an Officers' Certificate, dated not more than 30 days
prior to the date of the application for the substitution, and, if the
Fair Market Value of the Substitute Collateral (other than cash and
Temporary Cash Investments) is greater than $500,000, signed also by
an Independent Appraiser or, if the property to be released consists
of securities or Pledged Securities with a Fair Market Value of
greater than $500,000, by an Independent Financial Advisor, stating in
substance the Fair Market Value, in the opinion of the signers, of the
Substitute Collateral;
(iv) if the Substitute Collateral is real property:
(1) an instrument in recordable form sufficient for
the first priority Lien of this Indenture and any Mortgage to
cover the Substitute Collateral which, if the real property is
a leasehold or easement interest, shall include normal and
customary provisions with respect thereto and evidence of the
filing of all such financing documents as may be necessary to
perfect such Liens;
(2) a Mortgagee Policy of Title Insurance on the
forms then prescribed by the American Land Title Association
(or the then prevailing equivalent of such policy) insuring
that the Lien of this Indenture and any Mortgage constitutes
a direct and valid and perfected first priority mortgage Lien
on such Substitute Collateral in an aggregate amount equal to
the Fair Market Value of the Substitute Collateral, together
with an Officers' Certificate stating that any specific
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exceptions to such title insurance are Permitted Liens
and such endorsements and other opinions as are contemplated
by Section 10.03(c)(ii);
(3) an American Land Title Association survey with
respect thereto; and
(4) evidence of payment or a closing statement
indicating payments to be made by the Company of all title
premiums, search and examination charges, recording charges,
survey costs, transfer taxes and other costs and expenses,
including reasonable legal fees and disbursements of counsel
for the Trustee (and any local counsel), that may be incurred
to validly and effectively subject the Substitute Collateral
to the first priority Lien of this Indenture and any other
applicable Collateral Document to perfect such Lien; and
(v) if the Substitute Collateral is a personal property
interest:
(1) an instrument sufficient for the first priority
Lien of this Indenture and any other applicable Collateral
Document to cover the Substitute Collateral;
(2) to the extent not otherwise required by Section
10.07(c)(ii), an Opinion of Counsel (subject to customary
exceptions) stating that the Lien of this Indenture and the
other Collateral Documents constitutes a perfected first
priority Lien on such Substitute Collateral, together with an
Officers' Certificate stating that any specific exceptions to
such Lien are Permitted Liens; and
(3) evidence of payment or a closing statement
indicating payments to be made by the Company of all filing
fees, recording charges, transfer taxes and other costs and
expenses, including reasonable legal fees and disbursements of
counsel for the Trustee (and any local counsel), that may be
incurred to validly and effectively subject the Substitute
Collateral to the first priority Lien of the Indenture and any
other Collateral Document.
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SECTION 10.08. Eminent Domain and Other Governmental Takings.
If any of the Collateral be taken by eminent domain or be sold pursuant to the
exercise by the United States of America or any state, municipality or other
governmental authority of any right which it may then have to purchase, or to
designate a purchaser or to order a sale of, all or any part of the Collateral,
the Trustee shall release the property so taken or purchased, but only upon
receipt by the Trustee of the following:
(a) an Officers' Certificate stating that (i) such property
has been taken by eminent domain and the amount of the award therefor,
or that such property has been sold pursuant to a right vested in the
United States of America, any State or municipality thereof or other
governmental authority to purchase, or to designate a purchaser or
order a sale of, such property and the amount of the proceeds of such
sale, and that all conditions precedent herein provided for relating
to such release have been complied with and (ii) that the amount of
the proceeds of the property so sold is not less than the amount to
which the Company is entitled under the terms of such right to
purchase or designate a purchaser, or under the order or orders
directing such sale, as the case may be;
(b) the award for such property or the proceeds of such sale,
for the Trustee to hold as Trust Monies subject to the disposition
thereof pursuant to Section 4.07; provided, however, that, in lieu of
all or any part of such award or proceeds, the Company shall have the
right to deliver to the Trustee a certificate of the trustee,
mortgagee or other holder of a prior Lien on all or any part of the
property to be released, stating that such award or proceeds, or a
specified portion thereof, has been deposited with such trustee,
mortgagee or other holder pursuant to the requirements of such prior
Lien, in which case the balance of the award, if any, shall be
delivered to the Trustee; and
(c) an Opinion of Counsel substantially to the effect that:
(1) such property has been taken by eminent domain,
or has been sold pursuant to the exercise of a right vested in
the United States of America, any State or municipality
thereof or other
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governmental authority to purchase, or to designate a
purchaser or order a sale of, such property;
(2) in the case of any such taking by eminent domain,
the award for the property so taken has become final or, to
the best of such counsel's knowledge, no appeal is
contemplated or pending;
(3) in case, pursuant to Section 10.08(b), the award
for such property or the proceeds of such sale, or a specified
portion thereof, shall be certified to have been deposited
with the trustee, mortgagee or other holder of a prior Lien,
that the property to be released, or a specified portion
thereof, is or immediately before such taking or purchase was
subject to such prior Lien, and that such deposit is required
by such prior Lien; and
(4) that the instrument or the instruments and the
award or proceeds of such sale which have been or are
therewith delivered to and deposited with the Trustee conform
to the requirements of this Indenture and any of the other
Collateral Documents and that, upon the basis of such
application, the Trustee is permitted by the terms hereof and
of the other Collateral Documents to execute and deliver the
release requested, and that all conditions precedent herein
provided for relating to such release have been complied with.
In any proceedings for the taking or purchase or sale of any
part of the Collateral, by eminent domain or by virtue of any such right to
purchase or designate a purchaser or to order a sale, the Trustee may be
represented by counsel who may be counsel for the Company.
All cash received by the Trustee pursuant to this Section
10.08 shall be held by the Trustee as Trust Monies under Article 11 subject to
application as therein provided or as provided in Section 4.07. All purchase
money and other obligations received by the Trustee pursuant to this Section
10.08 shall be held by the Trustee as Collateral subject to application as
provided in Section 10.13.
SECTION 10.09. TIA Requirements. (a) The release of any
Collateral from the terms hereof and of any of the
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other Collateral Documents or the release of, in whole or in part, the Liens
created by any of the Collateral Documents, shall not be deemed to impair the
perfected first priority Lien of this Indenture and the other Collateral
Documents in contravention of the provisions hereof if and to the extent the
Collateral or Lien are released pursuant to the applicable Collateral Documents
and pursuant to the terms hereof. The Trustee and each of the Holders
acknowledge that a release of Collateral or Liens strictly in accordance with
the terms of the Collateral Documents and the terms hereof will not be deemed
for any purpose to be an impairment of the Liens in contravention of the terms
of this Indenture.
(b) To the extent applicable, without limitation, the Company
and each obligor on the Securities shall comply with TIA Section 314(d)
relating to the release of property or securities from the Lien of each of this
Indenture and of the other Collateral Documents. Any certificate or opinion
required by TIA Section 314(d) may be made by an officer of the Company,
except in cases which TIA Section 314(d) requires that such certificate or
opinion be made by an independent person.
SECTION 10.10. Suits to Protect the Collateral. Subject to
the provisions of the Collateral Documents, the Trustee shall have power to
institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any acts which may be unlawful
or in violation of any of the Collateral Documents, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Securityholders in the Collateral (including
power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Liens of this Indenture and the other Collateral Documents or be
prejudicial to the interests of the Securityholders or the Trustee).
SECTION 10.11. Purchaser Protected. In no event shall any
purchaser in good faith or any property purported to be released hereunder be
bound to ascertain the authority of the Trustee to execute the release or to
inquire as to the satisfaction of any conditions required by the provisions
hereof for the exercise of such authority or to
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see to the application of any consideration given by such purchaser or other
transferee; nor shall any purchaser or other transferee of any property or
rights permitted by this Article to be sold be under obligation to ascertain or
inquire into the authority of the Company to make any such sale or other
transfer.
SECTION 10.12. Powers Exercisable by Receiver or Trustee. In
case the Collateral shall be in the possession of a receiver or trustee,
lawfully appointed, the powers conferred in this Article upon the Company with
respect to the release, sale or other disposition of such property may be
exercised by such receiver or trustee, and an instrument signed by such
receiver or trustee shall be deemed the equivalent of any similar instrument of
the Company or of any officer or officers thereof required by the provisions of
this Article.
SECTION 10.13. Disposition of Obligations Received. All
obligations (including, without limitation, securities received in connection
with an Asset Disposition) received by the Trustee under this Article shall be
held by the Trustee as a part of the Collateral. Upon payment in cash or
Temporary Cash Investments by or on behalf of the Company to the Trustee of the
entire unpaid principal amount of any such obligation, to the extent not
constituting Net Cash Proceeds which at such time (i) constitute Excess
Proceeds for purposes of Section 4.07 or (ii) have been deposited with the
Paying Agent in an amount sufficient to pay (A) the aggregate Change of Control
Purchase Price of all Securities or portions thereof that are to be purchased
on the Change of Control Purchase Date pursuant to Section 4.09 or (B) the
redemption price of and accrued interest on all Securities or portions thereof
to be redeemed on the redemption date in accordance with the requirements of
Section 3.01, the Trustee shall release and transfer such obligation and any
mortgage securing the same upon receipt of any documentation that the Trustee
may reasonably require. Any cash or Temporary Cash Investments received by the
Trustee in respect of the principal of any such obligations shall be held by
the Trustee as Trust Monies under Article 11 subject to application as therein
provided and as provided in the Collateral Documents. Until the Securities are
accelerated pursuant to Section 6.02, all interest and other income on any such
obligations, when received by the Trustee, shall be paid to the Company from
time to time. If the Securities have been accelerated pursuant to Section
6.02, any such interest or other income
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not theretofore paid, when collected by the Trustee, shall be applied by the
Trustee in accordance with Section 6.10.
SECTION 10.14. Limitation on Duty of Trustee in Respect of
Collateral; Indemnification. (a) Beyond the exercise of reasonable care in
the custody thereof, the Trustee shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. The Trustee shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss
or diminution in the value of any of the Collateral, by reason of the act or
omission of any carrier, forwarding agent or other agent or bailee selected by
the Trustee in good faith.
(b) The Trustee shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Liens in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder, except to the extent such action or omission constitutes
negligence, bad faith or wilful misconduct on the part of the Trustee.
(c) In the event that the Company fails to comply with the
provisions of this Indenture or the other Collateral Documents such that the
value of any Collateral or the validity, perfection, rank or value of the Lien
hereunder or thereunder is thereby diminished or potentially diminished or put
at risk, the Trustee may, but shall not be required to, effect such compliance
on behalf of the Company, and the Company shall reimburse the Trustee for the
costs thereof on demand. All expenses of protecting, storing, insuring and
handling the Collateral, any and all excise, property, sales, and use taxes
imposed by any state, Federal or local authority on any of the Collateral, or
expenses in respect of (i) the sales or other disposition thereof, (ii) the
administration or enforcement thereof, (iii) the exercise by the Trustee of any
of the rights conferred upon it hereunder, including the preservation of the
validity, perfection, rank or value of any Lien or (iv) any Default or Event of
Default, shall be borne and paid by the Company; and if the Company fails to
promptly
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pay any portion of such expenses when due, the Trustee may, at its option, but
shall not be required to, pay the same and charge the Company's account
therefor and the Company agrees to reimburse the Trustee therefor on demand.
All sums so paid or incurred by the Trustee for any of the foregoing and any
and all other sums for which the Company may become liable hereunder and all
costs and expenses (including reasonable attorneys' fees, legal expenses and
court costs) reasonably incurred by the Trustee in enforcing or protecting the
Lien of this Indenture or the other Collateral Documents or any of its rights
or remedies under this Indenture shall, together with interest thereon until
paid at the rate applicable to the Securities, be deemed to be secured hereby
and under the other Collateral Documents.
SECTION 10.15. Release upon Termination of the Company's
Obligations. (a) In the event that this Indenture shall cease to be of
further effect pursuant to Section 8.01, the Trustee shall upon demand deliver
to the Company, on behalf of the Securityholders, a notice disclaiming,
relinquishing and releasing any and all rights it has in respect of the
Collateral and any other instruments or documents evidencing or effecting such
release that the Company may reasonably request.
(b) Any release of any portion of the Collateral made
strictly in compliance with the provisions of this Section shall not be deemed
to impair the Liens created by this Indenture and the other Collateral
Documents in contravention of the provisions of this Indenture.
ARTICLE 11
APPLICATION OF TRUST MONIES
SECTION 11.01. "Trust Monies" Defined. All cash or Temporary
Cash Equivalents received by the Trustee in accordance with the terms of this
Indenture and the other Collateral Documents:
(a) upon the release of property from the Lien of this
Indenture and any of the other Collateral Documents, including all
monies received in respect of the principal of all purchase money,
governmental and other obligations;
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(b) as compensation for, or proceeds of sale of, any part of
the Collateral taken by eminent domain or purchased by, or sold
pursuant to an order of, a governmental authority or otherwise
disposed of;
(c) as proceeds of insurance upon any part of the Collateral
(other than any liability insurance proceeds payable to the Company or
the Trustee for any loss, liability or expense incurred by it);
(d) pursuant to the provisions of Sections 1.04 and 2.01 of
any of the Mortgages;
(e) as proceeds in the lockboxes or otherwise held pursuant to
Article 8 of the Security and Pledge Agreements; or
(f) for application under this Article as elsewhere provided
in this Indenture or any other Collateral Document, or whose
disposition is not elsewhere otherwise specifically provided for
herein or in any other Collateral Document;
(all such monies being herein sometimes collectively referred to as "Trust
Monies"), shall be held by the Trustee for the benefit of the Holders as a part
of the Collateral securing the Securities and, upon any entry upon or sale of
the Collateral or any part thereof pursuant to Article 6, the Trust Monies
shall be applied in accordance with Section 6.10 hereof; but, prior to any such
entry or sale, all or any part of the Trust Monies may be withdrawn, and shall
be released, paid or applied by the Trustee, from time to time as provided in
Sections 4.07, 10.07 and 11.02 to 11.06, inclusive.
SECTION 11.02. Retirement of Securities. The Trustee shall
apply Trust Monies from time to time to the payment of the principal and
interest on any Securities, at final Maturity or to the purchase thereof
pursuant to Section 4.07 or Section 4.09, as the Company shall request, upon
receipt by the Trustee of the following:
(a) a Board Resolution directing the application pursuant to
this Section of a specified amount of Trust Monies and, in any case
any such monies are to be applied to payment, designating the
Securities so to be paid and prescribing the method of purchase, the
price or prices to be paid and the maximum principal amount
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of Securities to be purchased and any other provisions of this
Indenture governing such purchase;
(b) cash which, together with any Trust Monies then held by
the Trustee, equals or exceeds in the aggregate the maximum amount of
the accrued interest, if any, required to be paid in connection with
any such purchase, which cash shall be held by the Trustee in trust
for such purpose;
(c) an Officers' Certificate, dated not more than five days
prior to the date of the relevant application, stating that all
conditions precedent and covenants herein provided for relating to
such application of Trust Monies have been complied with; and
(d) an Opinion of Counsel stating that the documents and the
cash or Temporary Cash Investments, if any, which have been or are
therewith delivered to and deposited with the Trustee conform to the
requirements of this Indenture and that all conditions precedent
herein provided for relating to such application of Trust Monies have
been complied with.
Upon compliance with the foregoing provisions of this Section
11.02, the Trustee shall apply Trust Monies as directed and specified by such
Board Resolution up to, but not exceeding, the principal amount of the
Securities so paid plus any accrued interest required in connection with such
purchase.
A Board Resolution expressed to be irrevocable directing the
application of Trust Monies under this Section to the payment of the principal
of particular Securities shall for all purposes of this Indenture be deemed the
equivalent of the deposit of money with the Trustee in trust for such purpose.
Such Trust Monies and any cash deposited with the Trustee, pursuant to
subsection (b) of this Section for the payment of accrued interest, shall not,
after compliance with the foregoing provisions of this Section, be deemed to be
part of the Collateral or Trust Monies.
SECTION 11.03. Withdrawals of Insurance Proceeds and
Condemnation Awards. To the extent that any Trust Monies consist of either (a)
the proceeds of insurance upon any part of the Collateral or (b) any award for
or the proceeds from any of the Collateral being taken by eminent
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domain or sold pursuant to the exercise by the United States of America, any
State or municipality thereof or other governmental authority of any right
which it may then have to purchase, or to designate a purchaser or to order a
sale of any part of the Collateral, such Trust Monies may be withdrawn by the
Company and shall be paid by the Trustee upon a request by the Company to the
Trustee by the proper officer or officers of the Company to reimburse the
Company for expenditures made, or to pay costs incurred, by the Company in
connection with the repair, rebuild or replace the property destroyed, damaged
or taken, upon receipt by the Trustee of the following:
(a) An Officers' Certificate, dated not more than 30 days
prior to the date of the application for the withdrawal and payment of
such Trust Monies and signed also in the case of the following clause
(i) (as to the Fair Market Value of such repairs, rebuildings and
replacements, but only if such Fair Market Value (as set forth in such
Officers' Certificate) is at least $250,000 by an Independent
Appraiser, setting forth:
(i) that expenditures have been made, or costs
incurred, by the Company in a specified amount in connection
with certain repairs, rebuildings and replacements of the
Collateral, which shall be briefly described, and stating the
Fair Market Value thereof to the Company at the date of the
acquisition thereof by the Company;
(ii) that no part of such expenditures or costs, in
any previous or then pending application, has been or is being
made the basis for the withdrawal of any Trust Monies pursuant
to this Section;
(iii) that no part of such expenditures or costs has
been paid out of either the proceeds of insurance upon any
part of the Collateral not required to be paid to the Trustee
under Section 1.12 of any Mortgage or any award for or the
proceeds from any of the Collateral being taken not required
to be paid to the Trustee under Section 10.08, as the case may
be;
(iv) that there is no outstanding indebtedness, other
than costs for which payment is being requested, known to the
Company, after
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due inquiry, for the purchase price or construction of such
repairs, rebuildings or replacements, or for labor, wages,
materials or supplies in connection with the making thereof,
which, if unpaid, might become the basis of a vendor's,
mechanics', laborers', materialmen's, statutory or other
similar Lien upon any of such repairs, rebuildings or
replacement, which Lien might, in the opinion of the signers
of such Officers' Certificate, materially impair the security
afforded by such repairs, rebuildings or replacement;
(v) that the property to be repaired, rebuilt or
replaced is necessary or desirable in the conduct to the
Company's business;
(vi) that the Company has title to such repairs,
rebuildings and replacements that is substantially similar to
its title to the property destroyed, damaged or taken;
(vii) that no Event of Default shall have occurred
and be continuing; and
(viii) that the Company has complied with all
conditions precedent herein provided for relating to such
withdrawal and payment.
(b) An Opinion of Counsel substantially stating:
(i) that the instruments that have been or are
therewith delivered to the Trustee conform to the requirements
of this Indenture or any other Collateral Document, and that,
upon the basis of such Company request and the accompanying
documents specified in this Section, all conditions precedent
herein provided for relating to such withdrawal and payment
have been complied with, and the Trust Monies whose withdrawal
is then requested may be lawfully paid over under this
Section; and
(ii) that all the Company's right, title and interest
in and to said repairs, rebuilding or replacements, or
combination thereof, are then subject to the first priority
Lien of this
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Indenture and any of the other Collateral Documents.
Upon compliance with the foregoing provisions of this Section,
the Trustee shall on Company request pay an amount of Trust Monies of the
character aforesaid equal to the amount of the expenditures or costs stated in
the Officers' Certificate required by paragraph (i) of subsection (a) of this
Section, or the Fair Market Value to the Company of such repairs, rebuildings
and replacements stated in such Officers' Certificate (and in such Independent
Appraiser's certificate, if required by subsection (b) of this Section),
whichever is less; provided, however, that notwithstanding the above, so long
as no Event of Default or Default shall have occurred and be continuing, in the
event that any insurance proceeds or award for such property or proceeds of
such sale does not exceed $25,000 and, in the good faith estimate of the
Company, such destruction or damage resulting in such insurance proceeds or
such taking or sale resulting in such award does not detrimentally affect the
value or use of the applicable Collateral in any material respect, upon
delivery to the Trustee of an Officers' Certificate to such effect, the Trustee
shall release to the Company such insurance proceeds or award for such property
or proceeds of such sale, free of the Lien hereof and of the applicable
Collateral Documents; provided, that the Company shall take all steps necessary
to notify the condemning authority of such assignment.
SECTION 11.04. Release of Real Estate Tax Monies; Rents. (a)
To the extent that any Trust Monies consist of monies deposited by the Company
with the Trustee in respect of taxes, assessments and other items required to
be paid by the Company pursuant to Section 1.04 of the Mortgages, the Trustee
shall directly remit funds in payment thereof in accordance with the provisions
of the bills, invoices or statements therefor upon receipt by the Trustee, at
least 20 days prior to the date that such bills, invoices and statements are
deemed delinquent or any penalties assessed in accordance with their respective
terms, an Officers' Certificate setting forth, in an itemized fashion, the
specific taxes, assessments and other items and amounts owing in respect
thereof of which such funds apply, together with true copies of the respective
bills, invoices or statements therefor, and certifying the validity and
accuracy of each thereof.
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(b) To the extent that any Trust Monies consist of monies
collected by the Trustee in respect of rents, issues, income and profits
pursuant to Section 2.01 of the Mortgages, upon Company request, the Trustee
shall return such funds to the Company upon receipt by the Trustee of an
Officers' Certificate stating that no Event of Default or Default shall have
occurred and be continuing and there are no occurrences or circumstances which,
with the giving of notice or passage of time, or both, could result in the
occurrence of an Event of Default, a Default or a default under any other
Indebtedness of the Company.
SECTION 11.05. Powers Exercisable Notwithstanding Event of
Default. In case an Event of Default shall have occurred and shall be
continuing, the Company, while in possession of the Collateral (other than
cash, Temporary Cash Investments, securities and other personal property held
by, or required to be deposited or pledged with, the Trustee hereunder or under
the other Collateral Documents or with the trustee, mortgage or other holder of
a prior Lien), may do any of the things enumerated in Sections 11.02, 11.03 and
11.04 if the Trustee in its discretion, or the Holders of a majority in
aggregate principal amount of the Securities outstanding, by appropriate action
of such Holders, shall consent to such action, in which event any certificate
filed under any of such Sections shall omit the statement to the effect that no
Event of Default has occurred and is continuing. This Section shall not apply,
however, during the continuance of an Event of Default of the type specified in
Section 6.01(1) or (2).
SECTION 11.06. Powers Exercisable by Trustee or Receiver. In
case the Collateral (other than any cash, Temporary Cash Investments,
securities and other personal property held by, or required to be deposited or
pledged with, the Trustee hereunder or under the other Collateral Documents or
with the trustee, mortgagee or other holder of a prior Permitted Lien) shall be
in the possession of a receiver or trustee lawfully appointed, the powers
hereinbefore in this Article 11 conferred upon the Company with respect to the
withdrawal or application of Trust Monies may be exercised by such receiver or
trustee, in which case a certificate signed by such receiver or trustee shall
be deemed the equivalent of any Officers' Certificate required by this Article
11. If the Trustee shall be in possession of any of the Collateral hereunder
or under any of the other Collateral Documents, such powers may be exercised by
the Trustee in its discretion.
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SECTION 11.07. Disposition of Securities Retired. All
Securities received by the Trustee and for whose purchase Trust Monies are
applied under this Article 11 may, but shall not be required to, be promptly
canceled by the Trustee and returned to the Company.
SECTION 11.08. Investment of Trust Monies. All or any part
of any Trust Monies held by the Trustee hereunder (except such as may be held
for the account of any particular Securities) shall from time to time be
invested or reinvested by the Trustee pursuant to the specific written
direction of the Company (so long as no Event of Default has occurred and is
continuing) in any Temporary Cash Investments. Unless an Event of Default
occurs and is continuing, any interest in such Temporary Cash Investments (in
excess of any accrued interest paid at the time of purchase) which may be
received by the Trustee shall be forthwith paid to the Company. Such Temporary
Cash Investments shall be held by the Trustee as a part of the Collateral,
subject to the same provisions hereof as the cash used by it to purchase such
Temporary Cash Investments.
The Trustee shall not be liable or responsible for any loss
resulting from such investments or sales except only for its own negligent
action, its own negligent failure to act or its own wilful misconduct in
complying with this Section.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the TIA, such imposed duties or incorporated provision shall control.
SECTION 12.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
<PAGE> 135
126
if to the Company:
Anacomp, Inc.,
11550 North Meridian Street
Carmel, IN 46032
Attention of Gary Bilsland
Assistant Treasurer
if to the Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, NY 10286
Attention of Corporate Trust
Trustee Administration
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 Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears
on the registration books of the Registrar and shall be sufficiently given if
so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
<PAGE> 136
127
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee 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
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 12.06. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 12.07. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to
be open in the State of New York. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
<PAGE> 137
128
SECTION 12.08. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09. No Recourse Against Others. A director,
officer, employee or stockHolder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 12.10. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.11. Multiple 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. One signed copy is enough
to prove this Indenture.
SECTION 12.12. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be
<PAGE> 138
129
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
SECTION 12.13. Severability. In case any provision in this
Indenture or in the Securities 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.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
Anacomp, Inc.
by
------------------------
Name:
Title:
The Bank of New York,
as Trustee,
by
------------------------
Name:
Title:
<PAGE> 139
Exhibit A
[FORM OF FACE OF SECURITY]
$
CUSIP NO.
% Senior Secured Note due 2002
ANACOMP, INC., an Indiana corporation, promises to pay to
, or registered assigns, the principal sum of Dollars
on , 2002.
Interest Payment Dates: and
.
Record Dates: and
.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
ANACOMP, INC.
[Seal] by
-------------------------
Chairman of the Board and
Chief Executive Officer
-------------------------
[Secretary]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
----------------------
Authorized Signatory
<PAGE> 140
2
[FORM OF REVERSE SIDE OF SECURITY]
% Senior Secured Note due 2002
1. Interest
ANACOMP, INC., an Indiana corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semiannually on and of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from
,1995. 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 at
the rate borne by the Securities plus 1% per annum, and it shall pay interest
on overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the or next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint
and change any Paying
<PAGE> 141
3
Agent, Registrar or co-registrar without notice. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. Indenture; Collateral Documents
The Company issued the Securities under an Indenture dated as of
, 1995 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are secured obligations of the Company limited to
$225,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). The Indenture imposes certain limitations on the Company and the
Restricted Subsidiaries, including, subject to certain exceptions, the
Incurrence of Indebtedness, the payment of dividends on, and redemption of, the
Capital Stock of the Company and certain of its Subsidiaries, the redemption of
certain Subordinated Obligations of the Company and certain of its
Subsidiaries, the sale by the Company and certain of its Subsidiaries of assets
and certain Subsidiary stock, transactions with Affiliates, Liens on the
Collateral securing the Securities, Sale/Leaseback Transactions by the Company
and certain of its Subsidiaries and consolidations and mergers and transfer of
all or substantially all the Company's and certain of its Subsidiaries' assets.
In addition, the Indenture limits the ability of the Company and certain of its
Subsidiaries to restrict distributions and dividends from such Subsidiaries.
As provided in the Indenture, the Securities are secured by the
Lien of the Indenture and the other Collateral Documents in respect of the
Collateral. Each Securityholder, by accepting a Security, shall be bound by
and entitled to the benefits of the Collateral Documents, as the same may be
amended from time to time pursuant to the provisions thereof and of the
Indenture. The Securities and
<PAGE> 142
4
each Securityholders' rights thereunder are subject to the terms of the
Intercreditor Agreement dated as of April __, 1995, among The First National
Bank of Chicago, as agent on behalf of the lenders under the Revolving Credit
Facility, and the Trustee, or any Replacement Intercreditor Agreement (as
defined in the Security and Pledge Agreement).
5. Optional Redemption
The Securities may not be redeemed prior to __________, 2000. On
and after that date, the Company may redeem the Securities in whole at any time
or in part from time to time at a redemption price of ____% of the principal
amount thereof, plus accrued and unpaid interest (if any) to the date of
redemption subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date until and
including _________, 2001, and thereafter at 100%.
6. Mandatory Redemption
On each of December __, 2000, and December ___, 2001, the Company
shall redeem $37,500,000 principal amount of Securities at a redemption price
of 100% of the principal amount, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant date to receive
interest due on the related interest payment date). The Company may receive a
credit against the principal amount of the Securities required to be redeemed
pursuant to this paragraph equal to the principal amount (excluding premium) of
any Securities that the Company has acquired or redeemed other than pursuant to
this paragraph and has delivered to the Trustee for cancelation. The Company
may receive the credit only once for any Security.
7. Notice of Redemption
Notice of redemption will be mailed at least 45 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
<PAGE> 143
5
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
Under certain circumstances, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to par plus accrued interest to the
date of repurchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date) from
the Excess Proceeds of Asset Dispositions as provided in, and subject to the
terms of, the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer of or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
<PAGE> 144
6
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, to comply with Article 5 of the Indenture,
to establish or maintain the Lien of the Indenture and the other Collateral
Documents as a perfected first priority Lien of the Trustee in respect of the
Collateral, to correct or amplify the description of the Collateral subject to
the Lien of the Indenture or the other Collateral Documents, to subject
additional property or assets to the Lien of the Indenture or the other
Collateral Documents, to provide for uncertificated Securities in addition to
or in place of certificated Securities, to add Guarantees with respect to the
Securities, to add additional covenants or surrender rights and powers
conferred on the Company, to comply with any request of the SEC in connection
with qualifying the
<PAGE> 145
7
Indenture under the Act or to make any change that does not adversely affect
the rights of any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph
5 of the Securities, upon acceleration or otherwise, or failure by the Company
to redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations
(including failure to pay within any grace period after final maturity) of
other Indebtedness of the Company if the amount accelerated (or so unpaid)
exceeds $5,000,000 at the time; (v) certain events of bankruptcy or insolvency
with respect to the Company and any Restricted Subsidiary; and (vi) certain
judgments or decrees for the payment of money in excess of $5,000,000. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable immediately. Certain events of bankruptcy or insolvency
are Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securi-
<PAGE> 146
8
ties and may otherwise deal with and collect obligations owed to it by the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (=
Uniform Gift to Minors Act).
<PAGE> 147
9
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. GOVERNING LAW
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY-HOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
ANACOMP, INC.
11550 NORTH MERIDIAN STREET
CARMEL, IN 46032
ATTENTION OF CORPORATE COMMUNICATIONS
________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
<PAGE> 148
10
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
-------------------------------------------------------------------------------
Date: Your Signature:
---------------- ----------------------------------------
(Sign exactly as your name appears on the other side of this Security)
-------------------------------------------------------------------------------
<PAGE> 149
11
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED
BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.09 OF THE INDENTURE, CHECK THE
BOX:
/ /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS
SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.09 OF THE
INDENTURE, STATE THE AMOUNT: $
----------------------
DATE: YOUR SIGNATURE:
------------------ ---------------------------------
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:
------------------------------------------------------
(SIGNATURES MUST BE GUARANTEED BY AN
"ELIGIBLE GUARANTOR INSTITUTION" MEETING
THE REQUIREMENTS OF THE REGISTRAR, WHICH
REQUIREMENTS INCLUDE MEMBERSHIP OR
PARTICIPATION IN THE SECURITY TRANSFER
AGENT MEDALLION PROGRAM ("STAMP") OR SUCH
OTHER "SIGNATURE GUARANTEE PROGRAM" AS
MAY BE DETERMINED BY THE REGISTRAR IN
ADDITION TO, OR IN SUBSTITUTION FOR,
STAMP, ALL IN ACCORDANCE WITH THE
SECURITIES EXCHANGE ACT OF 1934.)
<PAGE> 150
SCHEDULE I TO INDENTURE
EXISTING LIENS
<PAGE> 151
SCHEDULE II TO INDENTURE
U.S. RESTRICTED SUBSIDIARIES
1. STROMBERG DATAGRAPHIX
INTERNATIONAL CORP.
2. FLORIDA AAC CORPORATION
3. KALVAR MICROFILM, INC.
4. ANACOMP CALIFORNIA
5. XIDEX DEVELOPMENT COMPANY
6. SUN FLEX INDUSTRIES OF PUERTO RICO, INC.
<PAGE> 152
SCHEDULE III TO INDENTURE
JURISDICTIONS FOR UCC FILINGS
DEBTOR/GRANTOR NAMES JURISDICTIONS
1. ANACOMP, INC.
2. STROMBERG DATAGRAPHIX
INTERNATIONAL CORP.
3. FLORIDA AAC CORPORATION
4. KALVAR MICROFILM, INC.
5. ANACOMP CALIFORNIA
6. XIDEX DEVELOPMENT COMPANY
7. SUN FLEX INDUSTRIES OF PUERTO RICO, INC.
<PAGE> 153
SCHEDULE IV TO INDENTURE
JURISDICTIONS FOR REAL PROPERTY FILINGS AND RECORDINGS
<PAGE> 1
Exhibit 4.2
SECURITY AND PLEDGE AGREEMENT dated as of
, 1995, among ANACOMP, INC., an Indiana corporation
(the "Company Grantor"), THE U.S. RESTRICTED
SUBSIDIARIES LISTED ON SCHEDULE I, ANY OTHER U.S.
RESTRICTED SUBSIDIARIES AS MAY FROM TIME TO TIME
BECOME PARTIES HERETO PURSUANT TO SECTION 4.08 (each
U.S. Restricted Subsidiary and each such other U.S.
Restricted Subsidiary being a "Subsidiary Grantor"
and, together with the Company Grantor, the
"Grantors"), and The Bank of New York, a New York
banking corporation, as trustee (the "Trustee") under
the indenture dated as of the date hereof (as
amended, supplemented or modified from time to time,
the "Indenture") relating to the Company Grantor's
% Senior Secured Notes due 2002 (the "Notes").
In order to secure the performance of the Obligations, the
parties hereto are entering into this Agreement regarding the terms and
conditions of the Grantors' grant of the Security Interest in the Collateral to
the Trustee for the benefit of the Noteholders.
NOW, THEREFORE, in consideration of the premises and the other
benefits to the Grantors and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1
Definitions
SECTION 1.01. Terms Defined in the Indenture. Capitalized
terms used herein (including in the preamble hereto) and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture.
<PAGE> 2
2
SECTION 1.02. The following terms, as used herein (including
in the preamble hereto), shall have the following meanings:
"Agreement" means this Security and Pledge Agreement, as the
same may from time to time be amended, supplemented or modified in
accordance with its terms and the terms of the Indenture.
"Cash Collateral Account" means the account established
pursuant to Section 6.03.
"Collateral" means, for purposes of this Agreement, any and
all personal property of each of the Grantors, whether now owned or
hereafter acquired, including, without limitation, any and all (i)
Documents, (ii) Equipment (including Fixtures), (iii) General
Intangibles, including, without limitation, claims of such Grantor for
damages arising out of or for breach of or a default under any
contract and the right of such Grantor to perform or to compel
performance under any contract and to exercise all remedies
thereunder, (iv) Pledged Securities, (v) Accounts Receivable, (vi)
Inventory, (vii) Proceeds, (viii) all other goods and personal
property of such Grantor, whether tangible or intangible or whether
now owned or hereafter acquired, by such Grantor and wherever located
and (ix) cash, obligations and any other amounts held from time to
time in the Cash Collateral Account.
"Copyright License" means any agreement, now or hereafter in
effect, granting any right to any Person under any Copyright now or
hereafter owned by any of the Grantors or which any of the Grantors
otherwise has the right to license, or granting any right to any of
the Grantors under any Copyright now or hereafter owned by any Person,
and all rights of any of the Grantors under any such agreement.
"Copyrights" means all the following: (i) all copyright
rights in any work (including, without limitation, computer programs,
software, including, without limitation, all source code and object
code, development documentation, programming tools, drawings,
specifications and data) subject to the copyright laws of the United
States or any other country or jurisdiction, whether as author,
assignee, transferee,
<PAGE> 3
3
licensee or otherwise, and (ii) all registrations and applications for
registration of any such copyright in the United States or any other
country or jurisdiction, including, without limitation, registrations,
recordings, supplemental registrations and pending applications for
registration in the United States Copyright Office.
"Documents" has the meaning given such term under the Uniform
Commercial Code, and, in any event includes, without limitation, all
instruments, files, records, ledger sheets and documents, whether now
owned or hereafter acquired, covering or relating to any of the other
Collateral, including, without limitation, customer lists, credit
files, computer programs, printouts and other computer materials and
records.
"Equipment" has the meaning given such term under the Uniform
Commercial Code, and, in any event includes, without limitation, all
machinery, equipment, furnishings, vehicles, computers and other
electronic data-processing and office equipment, whether now owned or
hereafter acquired, by any Grantor and any and all additions,
substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto. The term
"Equipment" shall include Fixtures.
"Fixtures" means all items of equipment, in all its forms,
wherever located, whether now or hereafter owned or acquired, of any
Grantor and all parts thereof or accessions thereto that are now or
hereafter owned by any Grantor that become so related to particular
real estate that an interest in such items of such equipment arises
under any real estate law applicable thereto.
"General Intangibles" has the meaning given such term under
the Uniform Commercial Code, and, in any event includes, without
limitation, manuals, blueprints, know-how, warranties and records in
connection with the Equipment; all information, customer lists,
identification of suppliers, data, plans, blueprints, specification
designs, drawings, recorded knowledge, surveys, engineering reports,
test reports, manuals, materials, standards, catalogs, research data,
computer and automatic machinery
<PAGE> 4
4
software and programs and the like pertaining to operations by any
Grantor; all information relating to sales of products now or
hereafter manufactured by any Grantor; all accounting information
pertaining to any Grantor's operations or any of the Equipment, any
other items set forth in this definition and all media in which or on
which any of the information or knowledge or data or records relating
to such operations or any of such Equipment or any other items set
forth in this definition may be recorded or stored and all computer
programs used for the compilation or printout of such information,
knowledge, records or data; all licenses, consents, permits,
variances, certifications and approvals of governmental authorities
now or hereafter held by any Grantor pertaining to operations now or
hereafter conducted by any Grantor; all choses in action and causes of
action; and all other intangible personal property of any Grantor of
every kind and nature now owned or hereafter acquired by any Grantor,
including, without limitation, corporate or other business records,
indemnification claims, contract rights (including, without
limitation, all rights of any Grantor under any of the contracts
listed on Schedule II), goodwill, registrations, franchises, tax
refund claims and any letter of credit, guarantee, claim or security
interest.
"Intellectual Property" has the meaning given such term under
the Uniform Commercial Code, and, in any event includes, without
limitation, any and all Patents, Trademarks, Licenses, Copyrights,
mask works, designs, trade secrets, technology, inventions,
discoveries and improvements, technical information, confidential and
proprietary information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records and all other intellectual
property rights, whether or not subject to statutory registration or
protection.
"License" means any Patent License, Trademark License,
Copyright License or other license or sub-license.
"Noteholders" means the holders, from time to time, of the
Notes.
"Obligations" means the Indenture Obligations.
<PAGE> 5
5
"Patent License" means any agreement, now or hereafter in
effect, granting to any Person any right to make, use or sell any
invention under any Patent, now or hereafter owned or licensable by
any of the Grantors, or granting to any of the Grantors any right to
make, use or sell any invention under any Patent, now or hereafter
owned by any Person, and all rights of any of the Grantors under any
such agreement.
"Patents" means all the following: (i) all letters patent of
the United States or any other country or jurisdiction, all
registrations and recordings thereof, and all applications for letters
patent of the United States or any other country or jurisdiction,
including, without limitation, registrations, recordings and pending
applications in the United States Patent and Trademark Office or any
similar offices in any other country or jurisdiction; and (ii) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein,
including, without limitation, all the foregoing items listed in
Schedule III.
"Perfection Certificate" means the Perfection Certificate
substantially in the form of Exhibit A.
"Pledged Securities" means (a) all the shares of Capital Stock
of the Subsidiary Grantors, (b) all the shares of Capital Stock,
subject to Section 5.01(d), of the Foreign Restricted Subsidiaries
owned directly by a Grantor, except to the extent, according to an
Opinion of Counsel, that the pledge of the Capital Stock of a Foreign
Restricted Subsidiary is restricted by the foreign law in which such
Foreign Restricted Subsidiary is incorporated and (c) all the
promissory notes issued or payable to the Grantors or their order, all
such shares and notes being listed on Schedule IV, and shall also
include:
(i) the certificates and instruments representing the
Pledged Securities and any interest of any Grantor in the
entries on the books of any financial intermediary pertaining
to the Pledged Securities, and all principal, interest,
premiums, dividends, cash, options, warrants, rights,
instruments and other property or proceeds from time to time
received, receivable
<PAGE> 6
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or otherwise distributed with respect to or in exchange
for or upon the conversion of any or all the Pledged
Securities (except as otherwise set forth in Section 5.02);
(ii) (1) all additional shares of Capital Stock
issued by any Subsidiary Grantor and (2) all additional shares
of Capital Stock, subject to Section 5.01(d), issued by any
Foreign Restricted Subsidiary (collectively, "Additional
Shares"), to the extent such Additional Shares are acquired by
any Grantor in any manner, and the certificates representing
such Additional Shares and any interest of any Grantor in the
entries on the books of any financial intermediary pertaining
to such Additional Shares, and all dividends, cash, options,
warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise
distributed with respect to or in exchange for any of or all
such Additional Shares (except as otherwise set forth in
Section 5.02);
(iii) (1) all shares of Capital Stock of any Person
which, subsequent to the date of this Agreement, becomes, as a
result of any occurrence, a Subsidiary Grantor (including,
without limitation, as a result of designation as such
pursuant to Section 4.15 of the Indenture) and (2) all shares
of Capital Stock, subject to Section 5.01(d), of any Person
which, subsequent to the date of this Agreement, becomes, as a
result of any occurrence, a Foreign Restricted Subsidiary
(including, without limitation, as a result of designation as
such pursuant to Section 4.15 of the Indenture) (collectively,
"Acquired Shares"), to the extent such Acquired Shares are
acquired by any Grantor in any manner, and the certificates
representing such Acquired Shares and any interest of any
Grantor in the entries on the books of any financial
intermediary pertaining to such Acquired Shares, and all
dividends, cash, options, warrants, rights, instruments and
other property or proceeds from time to time received,
receivable or otherwise distributed with respect to or in
exchange for any of or all such Acquired Shares (except as
otherwise set forth in Section 5.02);
<PAGE> 7
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(iv) all additional promissory notes issued or
payable to any Grantor or its order, including, without
limitation, intercompany notes (collectively, "Additional
Notes"), to the extent such Additional Notes are acquired by
any Grantor in any manner, and the certificates and
instruments representing such Additional Notes and any
interest of any Grantor in the entries on the books of any
financial intermediary pertaining to such Additional Notes,
and all payments of principal, interest, premium, cash,
options, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed with respect to or in exchange for or upon the
conversion of any or all such Additional Notes (except as
otherwise set forth in Section 5.02);
(v) subject to Section 5.02, all rights and
privileges of each Grantor with respect to all the foregoing;
and
(vi) subject to Section 5.02, all Proceeds of any of
the foregoing;
provided, that in no case shall Pledged Securities include to the
extent required by applicable law, directors' qualifying shares.
"Potential Payment Event of Default" means any default in the
payment of principal, premium or interest when due and payable under
the Notes that, after notice or lapse of time or both, would
constitute an Event of Default if such payment was not made within the
applicable grace or cure period.
"Proceeds" has the meaning given such term under the Uniform
Commercial Code and, in any event, includes, without limitation, (a)
any consideration from the sale, exchange or other disposition of any
asset or property that constitutes Collateral (regardless of the form
such consideration takes and including, without limitation, all funds
and other items of value paid, deposited or credited to or held in the
Lockboxes (as defined in the Revolving Credit Agreement as the same
may be amended, modified or supplemented from time to time or in any
credit agreement that replaces, refunds, renews, repays,
<PAGE> 8
8
refinances or extends such Revolving Credit Agreement) or in the
Lockboxes (as defined herein)), (b) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable from time to time
with respect to any of the Collateral, (c) any and all payments (in
any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental
authority), (d) any and all amounts received upon any collection,
exchange, transfer, sale or other disposition (whether such
disposition is voluntary or involuntary) of any of the Collateral and
any property into which any of the Collateral is converted, whether
cash or noncash proceeds, including, without limitation, all rights to
payment, including returned premiums, with respect to any insurance
relating thereto, and (e) any and all other products of, or any rents,
profits, income or other amounts from time to time paid or payable
under or in connection with any of the Collateral, including, without
limitation, any claim of any of the Grantors against any Person for
(and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past,
present or future infringement of any Patent now or hereafter owned by
any of the Grantors or owned by any other Person but with respect to
which any of the Grantors now or hereafter has the right to sue and
recover for its own account damages for infringement or dilution, (ii)
past, present or future infringement or dilution of any Trademark now
or hereafter owned by any of the Grantors or owned by any other Person
but with respect to which any of the Grantors now or hereafter has the
right to sue and recover for its own account damages for infringement
or dilution or injury to the goodwill associated with or symbolized by
any Trademark now or hereafter owned by any of the Grantors, (iii)
past, present or future breach of any License and (iv) past, present
or future infringement of any Copyright now or hereafter owned by
either Grantor or owned by any other Person but with respect to which
any of the Grantors now or hereafter has the right to sue and recover
for its own account damages for infringement or dilution.
<PAGE> 9
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"Properties" means the real property owned or leased by any of
the Grantors at the locations listed on Schedule V.
"Related Tangible Personal Property" means, with respect to
any Intellectual Property, tangible personal property now owned or
hereafter acquired by any of the Grantors in which such Intellectual
Property is embodied, such as hard copies of computer code and related
documentation and copies of computer code and related documentation,
stored in any medium, including, without limitation, on disk or tape.
"Trademark License" means any agreement, now or hereafter in
effect, granting to any Person any right to use any Trademark now or
hereafter owned or licensable by any of the Grantors, or granting to
any Grantor any right to use any Trademark now or hereafter owned by
any Person, and all rights of any Grantor under any such agreement.
"Trademarks" means all the following: (i) all trademarks,
service marks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs, all other names and
slogans embodying business or product goodwill (or both) and general
intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith,
including, without limitation, registrations and registration
applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country
or jurisdiction or any political subdivision thereof, and all
extensions or renewals thereof, (ii) all goodwill associated therewith
or symbolized thereby and (iii) all other assets, rights and interests
that uniquely reflect or embody such goodwill, including, without
limitation, all the foregoing items listed on Schedule VI.
<PAGE> 10
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ARTICLE 2
Grant of Security Interest
SECTION 2.01. Security Interest. As security for the payment
and performance of the Obligations, each of the Grantors hereby bargains,
sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and
transfers to the Trustee, its successors and assigns, for the ratable benefit
of the Noteholders, and hereby grants to the Trustee, its successors and its
assigns, for the ratable benefit of the Noteholders, a security interest in and
a lien on all such Grantor's right, title and interest in, to and under the
Collateral, whether now owned and held or hereafter acquired (collectively, the
"Security Interest").
SECTION 2.02. No Release. Nothing set forth in this
Agreement shall relieve any of the Grantors from the performance of any term,
covenant, condition or agreement on such Grantor's part to be performed or
observed under or in respect of any of the Collateral or from any liability to
any Person under or in respect of any of the Collateral or impose any
obligation on the Trustee or any Noteholder to perform or observe any such
term, covenant, condition or agreement on any Grantor's part to be so performed
or observed or impose any liability on the Trustee or any Noteholder for any
act or omission on the part of such Grantor relating thereto or for any breach
of any representation or warranty on the part of such Grantor contained in any
Collateral Document or in respect of the Collateral or made in connection
therewith.
ARTICLE 3
Representations and Warranties
Each Grantor represents and warrants to and with the Trustee
and each Noteholder that:
SECTION 3.01. Title and Authority. The Grantors collectively
have good and valid rights in and title to the Collateral with respect to which
it has purported to grant a Security Interest hereunder and has full power and
authority to grant to the Trustee the Security Interest in such Collateral
pursuant hereto and to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other
<PAGE> 11
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Person other than any consent or approval that has been obtained.
SECTION 3.02. Filings. The Perfection Certificate has been
duly prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform
Commercial Code financing statements or other appropriate filings, recordings,
registrations or other actions containing a description of the Collateral have
been delivered for filing in each governmental, regulatory or other office
specified in Schedule III to the Indenture, which are all the filings,
recordings, registrations and other actions that are necessary or advisable to
publish notice of the, to perfect, preserve and protect the validity of the,
and to establish a valid and perfected, security interest in favor of the
Trustee (for the ratable benefit of the Noteholders) in respect of all
Collateral [(other than Fixtures, except Fixtures appurtenant to the
Properties)] in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its States, territories and possessions or any other country or
jurisdiction, and no further or subsequent filing, refiling, recording,
rerecording, registration, reregistration or other action is necessary in any
such jurisdiction, except as provided under applicable law with respect to the
filing of continuation or similar statements.
SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a valid and enforceable security interest in all the
Collateral securing the payment and performance of the Obligations and (b)
subject to the filing of all of the filings described in Section 3.02, a
perfected security interest in all Collateral [(other than Fixtures, except
Fixtures appurtenant to the Properties)] in which a security interest may be
perfected by filing, recording, registering or taking other action with respect
to a financing statement or analogous document in the United States (or any
political subdivision thereof) and its States, territories and possessions
pursuant to the Uniform Commercial Code or other applicable law in such
jurisdictions or any other country or jurisdiction. The Security Interest is
and shall be prior to any other Lien on any of the Collateral, other than
Permitted Liens.
SECTION 3.04. Absence of Other Liens. The Collateral is
owned by the Grantors free and clear of any
<PAGE> 12
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Lien, except Permitted Liens. Other than as otherwise contemplated hereby or
by the Intellectual Property Security Agreement, the Grantors have not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code of any jurisdiction or any other applicable
laws covering any Collateral or (b) any assignment in which the Grantors assign
any Collateral or any security agreement or similar instrument covering any
Collateral with any Federal, state or foreign governmental or regulatory
authority, body or agency, which financing statement or analogous document,
assignment, security agreement or similar instrument is still in effect.
SECTION 3.05. Pledged Securities. With respect to the
Pledged Securities:
(a) the shares of Capital Stock constituting Pledged
Securities represent that percentage as set forth on Schedule IV of
the issued and outstanding shares of each class of the Capital Stock
of the issuer with respect thereto; and the Pledged Securities
represent all the Capital Stock and promissory notes, subject to
Section 5.01(d), owned by, or issued or payable to, as the case may
be, the Grantors;
(b) except for the Security Interest intended to be created
hereunder, each Grantor listed as an owner on Schedule IV of Pledged
Securities (i) is and will at all times continue to be the direct
owner, beneficially and of record, of such Pledged Securities, (ii)
holds the same free and clear of all Liens (other than Permitted
Liens) and (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or
other Lien on (other than Permitted Liens), the Pledged Securities,
other than pursuant hereto or the other Collateral Documents, and each
Grantor, subject to Section 5.02, will cause any and all Pledged
Securities, whether for value paid by such Grantor or otherwise, to be
forthwith deposited with the Trustee and pledged or assigned
hereunder;
(c) each Grantor (i) has the power and authority to pledge its
Pledged Securities in the manner hereby done or contemplated and (ii)
will defend its title or interest thereto or therein against any and
all Liens (other than Permitted Liens), however arising, of all
Persons whomsoever;
<PAGE> 13
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(d) no consent of any other Person (including stockholders or
creditors of each Grantor) and no consent or approval of any
governmental or regulatory authority, body or agency or any securities
exchange was or is necessary to the validity of the pledge effected
hereby;
(e) all the Pledged Securities listed on Schedule IV have been
duly authorized and validly issued and, to the extent the Pledged
Securities are shares of Capital Stock, are fully paid and
nonassessable and all other Pledged Securities will be, when pledged
hereunder, duly authorized and validly issued and, to the extent the
Pledged Securities are shares of Capital Stock, fully paid and
nonassessable;
(f) all information set forth herein relating to the Pledged
Securities is accurate and complete in all respects as of the date
hereof; and
(g) the pledge of the Pledged Securities pursuant to this
Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board or any successor thereto as of the date hereof.
SECTION 3.06. Accounts Receivable. The names of the
obligors, amounts owing, due dates and other information with respect to the
Accounts Receivable are and shall be correctly stated in all material respects
in all records of the Company Grantor relating thereto and in all invoices and
reports with respect thereto furnished to the Trustee by the Company Grantor
from time to time.
SECTION 3.07. Lockboxes. The lockboxes and related accounts
identified on Schedule VII are the only lockboxes and lockbox or similar
accounts (collectively, the "Lockboxes") to which as of the date hereof the
Company Grantor has directed that payments in respect of Accounts Receivable
be made by Accounts Receivable debtors.
ARTICLE 4
Covenants
Each of the Grantors covenants and agrees from and after the
date of this Agreement and until the Obligations
<PAGE> 14
14
are paid in full or the Company complies with the provisions of Sections 8.01
and 8.02 of the Indenture, as follows:
SECTION 4.01. Further Documentation, Pledge of Instruments.
(i) Each of the Grantors agrees that at any time and from
time to time, at the expense of such Grantor, such Grantor shall
promptly and duly execute and deliver and effect all further
instruments and documents and take all further action that may be
necessary or advisable in order to perfect, preserve and protect and
assure the first priority Security Interest granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its
rights and remedies hereunder with respect to any Collateral,
including, without limitation, the payment of any fees and taxes
required in connection with the execution and delivery of this
Agreement, the granting of the Security Interest and compliance with
any terms hereof and the filing of any Uniform Commercial Code
financing or continuation statements or other appropriate filings,
recordings or registrations, including all refilings, recordings and
reregistrations, containing a description of the Collateral in each
governmental, regulatory or other appropriate office in the United
States (or any political subdivision thereof) and its States,
territories and possessions and any other country or jurisdiction. If
any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall (to the extent not
previously pledged and delivered pursuant to this Agreement) be
immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent. Without
limiting the generality of the foregoing, each of the Grantors shall:
(1) at any reasonable time requested by the Trustee, at the expense of
the Grantors, allow the Trustee, or any Person reasonably designated
by the Trustee, to inspect the Collateral, all evidence and records
related thereto (and to make extracts and copies from such records)
and the premises upon which any of the Collateral is located, discuss
such Grantor's affairs with the appropriate officers of such Grantor
and its independent accountants and verify under reasonable procedures
the validity, amount,
<PAGE> 15
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quality, quantity, value, condition and status of or any other matter
relating to the Collateral; and (2) at the Trustee's request, appear
in and defend any action or proceeding that may affect such Grantor's
right, title and interest in and to, or the Trustee's Security
Interest in and to, any of the Collateral.
(ii) Each of the Grantors hereby authorizes the Trustee to
file one or more financing or continuation statements or other
documents, and amendments, supplements and other modifications
thereto, relative to all or any part of the Collateral without the
signature of such Grantor, naming such Grantor as debtor and the
Trustee as secured party.
(iii) Each of the Grantors will promptly prepare and furnish
to the Trustee at any time and from time to time duly certified
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Trustee may reasonably request.
SECTION 4.02. Notices Regarding Collateral. Each of the
Grantors shall advise the Trustee promptly of (i) any Lien (other than
Permitted Liens) or claim of a Lien made or asserted against any of the
Collateral, (ii) any material adverse change in the condition of the Collateral
taken as a whole, (iii) the occurrence of any other event that could have an
adverse affect on the Collateral taken as a whole or on the Security Interest
created hereunder, (iv) any change in its corporate structure or identity and
(v) any change in, addition to or deletion from any corporate or business name
used by such Grantor in the conduct of its businesses or in the ownership of
its properties and assets (including, without limitation, any trade name and
any name used by such Grantor for billing purposes) and, with respect to any
change in any business name used by such Grantor, such Grantor shall have taken
all action reasonably satisfactory to the Trustee to maintain the perfection,
priority and proof of the Security Interest intended to be created hereunder.
SECTION 4.03. Compliance with Laws. Each of the Grantors
shall comply with all applicable laws, rules, regulations and orders of any
governmental or regulatory authority, body or agency applicable to it or any of
its property, business, operations or transactions, a breach of which would
have a material adverse effect on the business,
<PAGE> 16
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properties, operations or financial condition of the Company and its
Subsidiaries taken as a whole.
SECTION 4.04. Maintenance of Records. Each of the Grantors
shall keep and maintain at its own cost and expense satisfactory, accurate and
complete records of the Collateral, including, without limitation, a record of
all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. Each of the Grantors will
appropriately mark its books and records pertaining to the Collateral to
evidence this Agreement and the Security Interest granted hereby.
SECTION 4.05. Protection of Security. Each of the Grantors
shall, at its own cost and expense, take any and all actions necessary to
defend title to the Collateral against all persons and to defend the Security
Interest of the Trustee in the Collateral and the priority thereof against any
Lien not expressly permitted under the Indenture.
SECTION 4.06. Location of Offices. Each of the Grantors
shall keep its chief executive offices, its principal place of business and the
office where it keeps its evidence and records concerning the Collateral (i) at
the location thereof specified in Schedule VIII or (ii) at such new location as
any of the Grantors may establish; provided, that, in the case of clause (ii),
(a) such Grantor shall have given to the Trustee not less than three days'
prior written notice of its intention to change such location, clearly
describing such new location (which shall be in the continental United States
of America), providing such other information in connection therewith as the
Trustee may request and providing the Trustee with a revised Schedule VIII
reflecting such new location and (b) with respect to such new location, such
Grantor shall have taken all action satisfactory to the Trustee to maintain the
perfection, priority and proof of the Security Interest to be created
hereunder. Each of the Grantors shall hold and preserve such evidence and
records and shall permit representatives of the Trustee at any time during
normal business hours upon reasonable notice to inspect and make abstracts from
such evidence and records, each of the Grantors agreeing to render to the
Trustee, at such Grantor's cost and expense, all clerical and other assistance
as may be reasonably required with regard thereto.
<PAGE> 17
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SECTION 4.07. Covenants Regarding Collateral Consisting of
Intellectual Property. (a) Each Grantor shall not do, nor shall it permit,
any act, or omit to do any act, whereby any Patent material to the conduct of
such Grantor's business may become invalidated or dedicated to the public.
(b) Each Grantor (either itself or through its licensees or
its sublicensees) shall, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for no-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such
Trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law and (iv) not knowingly use or knowingly permit the use of such
Trademark in violation of any other Person's rights or for the manner of so
doing.
(c) Each Grantor (either itself or through licensees) shall,
for each work covered by a Copyright material to the conduct of such Grantor's
business, continue to publish, reproduce, display, adopt and distribute the
work with appropriate copyright notice as necessary and sufficient to establish
and preserve its maximum rights under applicable copyright laws.
(d) Each Grantor shall notify the Trustee immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country or jurisdiction)
regarding such Grantor's ownership of any Patent, Trademark or Copyright
material to the conduct of its business, or its right to register the same or
maintain the same.
(e) If any Grantor, either itself or through any agent,
employee, licensee or designee, files an application for any Patent, Trademark
or Copyright (or for the registration of any patent, Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political
<PAGE> 18
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subdivision of the United States or in any other country or jurisdiction or any
political subdivision thereof, it shall promptly notify the Trustee of such
filing, and, upon request of the Trustee, execute and deliver any and all
agreements, instruments, documents and papers as the Trustee may reasonably
request to evidence the Trustee's Security Interest in such Patent, Trademark
or Copyright, and each Grantor hereby appoints the Trustee as its
attorney-in-fact to execute and file such agreements, instruments, documents or
papers for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor shall take all necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or
jurisdiction or any political subdivision thereof, to maintain and pursue each
application relating to the Patents, Trademarks or Copyrights that is material
to the conduct of such Grantor's business (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of such Grantor's
business, including, without limitation, timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment of
maintenance fees, and, if appropriate under the circumstances (as determined in
the exercise of the good business judgment of such Grantor), to initiate
opposition, interference and cancelation proceedings against third parties.
(g) Following and during the continuance of an Event of
Default, each Grantor shall obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all the Grantors' right, title and interest thereunder
to the Trustee or its designee.
SECTION 4.08. Subsidiary Grantors. If, at any time or from
time to time, the Company Grantor or any Subsidiary of the Company creates,
forms or acquires, in any manner, directly or indirectly, a U.S. Restricted
Subsidiary (including, without limitation, as a result of designation of such
pursuant to Section 4.15 of the Indenture), the Company Grantor shall,
simultaneous with such creation, formation or acquisition, cause such U.S.
Restricted
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Subsidiary to become a party hereto by causing such U.S. Restricted Subsidiary
to execute and deliver to the Trustee a supplement to this Agreement in the
form of Exhibit B. Attached to such supplement shall be cumulatively updated
Schedules in the form of Schedules I through VII. If, at any time or from time
to time, any Subsidiary Grantor ceases to be a Restricted Subsidiary in a
transaction permitted under the Indenture (including, without limitation, by
designation as an Unrestricted Subsidiary pursuant to Section 4.15 of the
Indenture), such Subsidiary Grantor shall, simultaneously therewith, cease to
be a party hereto, and the Trustee shall promptly release the Security Interest
created hereunder and under the other Collateral Documents and take all other
actions reasonably requested by the Company Grantor, at the expense of the
Company Grantor, to evidence such release, including, without limitation,
executing appropriate Uniform Commercial Code termination statements in any
jurisdiction and delivering the same to the Company Grantor for filing and
delivering to such Subsidiary Grantor any Collateral in its possession which is
an asset or property of such Subsidiary Grantor. The Company shall update
Schedule VII from time to time to identify any Lockboxes in addition to those
identified on Schedule VII on the date hereof to which the Company Grantor has
directed that payments in respect of Accounts Receivable be made by Accounts
Receivable debtors.
SECTION 4.09. Administration of Receivables; Lockboxes. The
Company shall service and administer the Accounts Receivables, collect payments
due under the Accounts Receivables and charge off any uncollectible Accounts
Receivables, in each case in accordance with customary and ordinary practice
for similarly situated manufacturing companies. The Company shall update
Schedule VII from time to time to identify any Lockboxes in addition to those
identified on Schedule VII on the date hereof to which the Company Grantor has
directed that payments in respect of Accounts Receivable be made by Accounts
Receivable debtors.
SECTION 4.10. Maintenance of Inventory. The Company Grantor
shall do all things necessary to maintain, preserve, protect and keep the
Inventory in good repair and working and saleable condition as shall be
consistent with past practice.
ARTICLE 5
Pledged Securities
SECTION 5.01. Delivery of Pledged Securities. (a) All
Pledged Securities, including, without limitation, all certificates,
instruments or other property representing, evidencing or comprising Pledged
Securities, shall be delivered to and held by or on behalf of the Trustee, at
such office as designated by the Trustee in the City of New York on the date
hereof, and shall be
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accompanied by duly executed stock powers or other instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Trustee.
The Trustee shall have the right to appoint one or more sub-agents for the
purpose of retaining physical possession of the Pledged Securities at such
office as designated by such sub-agent in the City of New York. The Pledged
Securities shall be held (in the discretion of the Trustee) in the name of the
appropriate Grantor, endorsed or assigned in blank in favor of the Trustee, or
endorsed to or assigned in favor of the Trustee or any nominee or nominees of
the Trustee or a sub-agent appointed by the Trustee. Each Grantor shall
promptly give to the Trustee copies of any notice or other communications
received by it with respect to Pledged Securities registered in the name of
such Grantor. The Trustee shall have the right at any time to exchange
certificates or instruments representing or evidencing the Pledged Securities
for certificates or instruments of smaller or larger denominations. Any
securities, including, without limitation, all Additional Shares, Acquired
Shares, Additional Notes and certificates, instruments or other property
evidencing, representing or comprising Pledged Securities, not in existence or
becoming Pledged Securities subsequent to the date of this Agreement
(collectively, "New Pledged Securities") shall be promptly, upon so existing or
becoming Pledged Securities, delivered to and held by or on behalf of the
Trustee, at the office referred to above, and shall be accompanied by duly
executed stock powers or other instruments of transfer or assignment in blank
and by such other instruments and documents as the Trustee may reasonably
request, all in form and substance satisfactory to the Trustee. Any Grantor
acquiring New Pledged Securities shall, upon so acquiring such New Pledged
Securities, promptly execute and deliver a supplement to this Agreement in the
form of Exhibit C and complete and fully update Schedule IV showing
cumulatively all Pledged Securities. Each Grantor shall cause any Indebtedness
owed to such Grantor by any Person (including, without limitation, by any other
Grantor) in an amount exceeding $ to be evidenced by a duly executed
promissory note that is pledged and delivered to the Trustee pursuant to the
terms hereof.
(b) If an issuer of Pledged Securities is incorporated in any
country or jurisdiction which does not permit the use of certificates to
evidence equity ownership, then the appropriate Grantor shall, to the extent
permitted by applicable law, record such pledge on the stock register
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of the issuer of such Pledged Securities, execute any customary stock pledge
forms or other documents necessary to complete the pledge and give the Trustee
the right to transfer the Pledged Securities under the terms hereof and provide
to the Trustee an Opinion of Counsel, in form and substance satisfactory to it,
confirming such pledge.
(c) Any or all Pledged Securities held by or for the benefit
of the Trustee hereunder may, if an Event of Default has occurred and is
continuing, without prior notice, be registered in the name of the Trustee or
its nominee, and the Trustee or its nominee may at any time thereafter, without
notice, exercise all voting and corporate rights arising under or in connection
with any of the Pledged Securities and exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining to any of the Pledged Securities as if the Trustee were the absolute
owner thereof, including, without limitation, the right to exchange, at its
discretion, any of and all the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other readjustment of any
issuer of any of such Pledged Securities or upon the exercise by any such
issuer or the Trustee of any right, privilege or option pertaining to any of
the Pledged Securities and, in connection therewith, to deposit and deliver any
of and all the Pledged Securities with any committee, depositary, transfer
agent, registrar or other designated agency on such terms and conditions as the
Trustee may determine, all without liability except to account for property
actually received by it, but the Trustee shall have no duty to the Grantors to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing or for the manner of
so doing.
(d) Notwithstanding the other provisions hereof, the shares
of Capital Stock issued by any Foreign Restricted Subsidiary and owned by any
Grantor that shall comprise Pledged Securities hereunder shall be limited to
the lesser of: (i) 65% of the total voting power of shares of such Capital
Stock entitled to vote in the election of directors, managers or trustees of
such Foreign Restricted Subsidiary; and (ii) the percentage of the shares of
such Capital Stock equal to the maximum percentage of such shares that can be
pledged to the Trustee by such Grantor without constituting an investment of
earnings in United States property under Section 956 (or any successor
provision) of the Code that would trigger an increase in the gross income of
any Grantor
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or any other Subsidiary of the Grantor pursuant to Section 951 (or any
successor provision) of the Code.
(e) The Trustee may (but is under no obligation to) do
whatever in its reasonable judgment may be necessary or advisable for the
purpose of preserving or extending the corporate existence of any corporation
whose shares of Capital Stock are included as Pledged Securities, except with
respect to (i) any Subsidiary of the Company Grantor which is merged into the
Company Grantor and (ii) any Wholly Owned Subsidiary which is merged into any
other Wholly Owned Subsidiary, in each case in compliance with the provisions
of the Indenture and the other Collateral Documents; provided, that the Trustee
shall be under no duty to take any action in respect thereof nor shall it incur
any liability for its failure to take any such action. Upon a written request
from the Company Grantor to the Trustee stating that a Grantor has no shares of
Capital Stock for the purpose of keeping a Subsidiary under its control, other
than shares constituting Pledged Securities, the Trustee shall transfer or
permit such Grantor to transfer shares of Capital Stock as may be necessary to
qualify the requisite number of persons to act as directors of or in any other
official relation to the issuer of such shares. In every such case the Trustee
may make such arrangements as it shall deem necessary for the protection of the
Security Interest intended to be created hereunder in respect of the shares of
Capital Stock so transferred. While such shares remain so transferred they
shall not be deemed to be Pledged Securities, but when such shares are no
longer needed for such qualification purposes they shall immediately be
redeposited and repledged and thereupon again become Pledged Securities.
SECTION 5.02. Voting Rights; Dividends; etc. (a) As long as
no Event of Default or, with respect to paragraph (ii) only, Potential Payment
Event of Default, shall have occurred and be continuing:
(i) the applicable Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Pledged
Securities or any part thereof for any purpose not inconsistent with
the terms of this Agreement and the other Collateral Documents;
provided, however, that no vote shall be cast or consent, waiver or
ratification given or action taken that would (a) directly or
indirectly impair the value of the Collateral, (b) be inconsistent
with or violate
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any provision of this Agreement, the Indenture or the other Collateral
Documents, (c) approve any merger or consolidation with or any sale of
substantially all or all the property and assets of the issuer of any
of the Pledged Securities, except as otherwise permitted under, or not
prohibited by, the terms of this Agreement or the Indenture, or (d)
materially and adversely affect the rights inuring to a holder of
Pledged Securities or the rights and remedies of the Trustee or the
Noteholders under any Collateral Document or the ability of the
Trustee or the Noteholders to exercise the same;
(ii) the applicable Grantor shall be entitled to receive and
retain, and to utilize free and clear of the Security Interest
intended to be created hereunder or the Lien of any other Collateral
Document, any and all cash dividends, principal and interest paid with
respect to any of the Pledged Securities, to the extent and only to
the extent such payments are permitted by, and otherwise made in
accordance with, the terms and conditions of the Collateral Documents;
provided, however, that any and all:
(1) dividends, principal and interest paid or
payable) other than in cash (with respect to, and instruments
and other property (other than cash) received, receivable or
otherwise distributed with respect to, or in exchange for, or
upon conversion of, any Pledged Securities;
(2) dividends, principal and interest paid or payable
in cash with respect to any such Pledged Securities in
connection with a partial or total liquidation or dissolution
or, except in the case of such a dividend or other
distribution payable by a Wholly Owned Subsidiary, in
connection with a reduction of capital, capital surplus or
paid-in surplus; and
(3) all other distributions, paid or payable with
respect to any Pledged Securities, whether paid or payable in
cash or otherwise, whether resulting from a subdivision,
combination or reclassification of the Capital Stock of the
issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or on redemption
thereof, or as a result
<PAGE> 24
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of any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise;
shall be forthwith delivered to the Trustee to hold as Collateral,
subject to the Security Interest intended to be created hereunder or
the Lien of any other Collateral Document and, if received by any
Grantor, received in trust for the benefit of the Trustee, segregated
from the other property or funds of such Grantor and forthwith
delivered to the Trustee as Collateral in the same form as so received
(with any necessary endorsement);
(iii) in order to permit the applicable Grantor to exercise
the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) and to receive the dividends, principal and interest
which it is authorized to receive and retain pursuant to paragraph
(ii), the Trustee shall, upon written request of the Company Grantor,
execute and deliver (or cause to be executed and delivered) to such
Grantor all such proxies, dividend payment orders, powers of attorney
and other instruments as such Grantor may reasonably request for such
purposes as shall be specified in such Company Grantor request. Until
actually paid, all rights to any such dividends, principal and
interest shall remain subject to the Security Interest intended to be
created hereunder and the Lien of the other Collateral Documents.
(b) Following the occurrence and during the continuance of an
Event of Default or, with respect to paragraph (ii) only, a Potential Payment
Event of Default:
(i) unless the Trustee shall have otherwise notified the
Company, all rights of the applicable Grantor to exercise the voting
and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 5.02(a)(i) shall without further action
cease, and all such rights shall thereupon without further action
become vested in the Trustee who shall thereupon have the sole right
to exercise such rights during the continuance of such Event of
Default;
(ii) all rights of the applicable Grantor to receive the
dividends, principal and interest which it would otherwise be entitled
to receive and retain
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pursuant to Section 5.02(a)(ii) shall without further action cease,
and all such rights shall thereupon without further action become
vested in the Trustee who shall thereupon have the sole right to
receive and hold as Collateral such dividends, principal and interest
during the continuance of such Potential Payment Event of Default or
Event of Default; and
(iii) in order to permit the Trustee to exercise the voting
and other consensual rights which it may be entitled to exercise
pursuant to Section 5.02(b)(i), and to receive all dividends,
principal, premium and interest) which it may be entitled to receive
under Section 5.02(b)(ii), the applicable Grantor shall execute and
deliver to the Trustee all such proxies, dividend payment orders,
powers of attorney and other instruments as the Trustee may request.
(c) All dividends, principal and interest which are received
by any Grantor contrary to or in violation of the provisions of Section
5.02(b)(ii) shall be received in trust for the benefit of the Trustee,
segregated from the other property or funds of such Grantor and forthwith paid
over to the Trustee as Collateral in the same form as received by such Grantor
(with any necessary endorsement).
(d) With the consent of the applicable Grantor, the Trustee
may join in any plan of voluntary or involuntary reorganization or readjustment
or rearrangement in respect of any issuer of Pledged Securities and may accept
or authorize the acceptance of new securities issued in exchange therefor under
any such plan. If an Event of Default shall have occurred and be continuing,
the Trustee shall be entitled to take such steps without the consent of such
Grantor. Any new securities so issued shall be deposited and pledged with the
Trustee under this Agreement. If the Trustee does not join in such plan of
reorganization or readjustment or rearrangement, unless otherwise provided by
applicable law, the Trustee shall receive any monies accruing on or apportioned
to such Pledged Securities and such monies shall be held as Trust Monies and
paid over or applied by the Trustee as provided in the Indenture and the other
Collateral Documents.
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(e) Nothing in this Agreement shall prevent:
(i) the renewal or extension, without impairment of the
Security Interest intended to be created hereunder and the Lien of any
other Collateral Document, at the same or at a lower or higher rate of
interest, of any of the obligations or indebtedness of any corporation
included in the Pledged Securities; or
(ii) the issue in substitution for any such obligations or
indebtedness constituting Pledged Securities of other obligations or
indebtedness of such corporation for equivalent amounts and of
substantially equal or superior rank as to security, if any;
provided, however, in the case of clause (i) or (ii), that every such
obligation or indebtedness as so renewed or extended shall continue to be
subject to the Security Interest intended to be created hereunder and the Lien
of any other Collateral Document.
ARTICLE 6
The Trustee
SECTION 6.01. Trustee's Appointment as Attorney-in-Fact.
Each of the Grantors hereby irrevocably constitutes and appoints the Trustee
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of each of the Grantors and in the name of the Grantors or in
its own name, from time to time in the Trustee's discretion following the
occurrence and during the continuance of an Event of Default, for the purpose
of carrying out the terms of this Agreement and the other Collateral Documents,
to take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and the other Collateral Documents and, without limiting the
generality of the foregoing, hereby gives the Trustee the power and right, on
behalf of each of the Grantors, without prior notice to or assent by the
Grantors, upon the Trustee's good faith determination that such action is
reasonably necessary or advisable to perfect, preserve and protect the Security
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Interest intended to be created hereunder and the Lien of any other Collateral
Document, to do the following:
(i) following the occurrence and during the continuance of an
Event of Default or, with respect to the rights granted under Article
5 with respect to the Pledged Securities, a Potential Payment Event of
Default, to ask for, demand, collect, receive and give acquittances
and receipts for, settle and compromise any and all monies due and to
become due under or by virtue of any of the Collateral and, in the
name of the applicable Grantor or its own name or otherwise, to take
possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under
or by virtue of any of the Collateral and to file any claim or to take
any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Trustee for the purpose of
collecting any and all such monies due under or by virtue of any of
the Collateral whenever payable;
(ii) to pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral other than as the same may be
permitted by the Collateral Documents, to effect any repairs or
maintenance on the Collateral or to effect any insurance required by
the terms of this Agreement or any other Collateral Document, and to
pay all or any part of the costs thereof, including, without
limitation, premiums therefor; provided, that each Grantor agrees to
reimburse the Trustee on demand for any payment made or any reasonable
expense incurred by the Trustee pursuant to the foregoing
authorization; provided, further, that the foregoing shall not be
interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Trustee or any Noteholder to cure or
perform, any covenants or other promises of such Grantor with respect
to taxes or Liens and maintenance and repairs as set forth herein or
in any other Collateral Document; and
(iii) on the occurrence and during the continuance of an Event
of Default or, with respect to the rights granted under Article 5 with
respect to the Pledged Securities, a Potential Payment Event of
Default, (1) to direct any Person liable for any payment under or by
virtue of any of the Collateral to make payment of any and all monies,
amounts and other obligations
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due and to become due thereunder directly to the Trustee or as the
Trustee shall direct; (2) to receive payment of and receipt for any
and all monies, amounts and other obligations due and to become due at
any time in respect of or arising out of any Collateral; (3) to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices relating to the Collateral; (4) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
part thereof and to enforce any other right in respect of any
Collateral; (5) to defend any suit, action or proceeding brought
against any Grantor with respect to any Collateral if such Grantor
fails to do so and such failure may have a materially adverse effect
on the rights of the Trustee or the Noteholders hereunder or under any
Collateral Document or on the value of the Collateral; (6) to settle,
compromise or adjust any suit, action or proceeding described in
clauses (4) and (5) and, in connection therewith, to give such
discharges or releases as the Trustee may deem appropriate; (7) to
communicate with present or future or prospective suppliers, customers
or other persons associated with or related to the business of each of
the Grantors; and (8) to the extent permitted by law, generally to
sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Trustee were the absolute owner thereof for all purposes,
and to do, at the Trustee's option and the Grantors' expense, at any
time, or from time to time, all acts and things that the Trustee deems
necessary to protect, preserve, perfect or realize upon the Collateral
and the Security Interest, in order to effect the intent of this
Agreement and the other Collateral Documents, all as fully and
effectively as each of the Grantors might do.
Notwithstanding the provisions of this Section, nothing contained in this
Section shall be construed as requiring or obligating the Trustee to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Trustee, or to present or file any claim or notice, or
to take any action with respect to the Collateral or any part thereof or the
monies due or to become due in respect thereof or any property covered thereby.
The Trustee shall be accountable only for amounts actually
<PAGE> 29
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received as a result of the exercise of the powers granted to it herein, and
neither the Trustee nor any of its officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for its own wilful misconduct, negligence or bad faith. It is
understood and agreed that the appointment of the Trustee as the agent and
attorney-in-fact of each Grantor for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in
no event relieve the Grantor of any of its obligations hereunder or under the
other Collateral Documents with respect to the Collateral or any part thereof
or impose any obligation on the Trustee to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Trustee of any other or further right that it may have on the
date of this Agreement or hereafter, whether hereunder, under any other
Collateral Document, by law or otherwise. Any sale pursuant to the provisions
of this Section shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other jurisdictions.
Each of the Grantors hereby ratifies and confirms all that
said attorney shall lawfully do or cause to be done by virtue hereof.
SECTION 6.02. Release and Substitution of Collateral. No
Collateral shall be released from the Security Interest intended to be created
hereunder and no assets or property of any kind or nature whatsoever, real,
personal or mixed (including Fixtures), whether tangible or intangible, shall
be substituted for any of the Collateral, except that the Trustee shall so
release or accept substitutions of Collateral in accordance with the provisions
of the Indenture, which provisions are hereby incorporated herein by reference
as if fully set forth herein.
SECTION 6.03. Cash Collateral Account. The Trustee will
establish a cash collateral account (the "Cash Collateral Account") to hold all
Trust Monies received by it from time to time pursuant to the terms of the
Indenture and the other Collateral Documents. The Trust Monies on deposit in
the Cash Collateral Account shall be invested, withdrawn, used and otherwise
managed as provided in this Agreement and the Indenture.
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SECTION 6.04. Indemnification of Trustee. Each of the
Grantors hereby jointly and severally agrees to indemnify the Trustee for, and
hold it harmless against, any and all claims, demands, expenses (including but
not limited to reasonable compensation, disbursements and expenses of the
Trustee's agents, experts and counsel), losses, obligations, damages,
penalties, actions, judgments, suits, costs, liabilities or disbursements of
any kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Trustee in its capacity as such in any way relating to or arising
out of or in connection with the acceptance and administration of this
Agreement, the Indenture, the other Collateral Documents, the Obligations, the
Notes or any other documents contemplated by or referred to herein or therein
or any of its rights and duties hereunder under any other Collateral Document
or the transactions contemplated hereby or thereby or the enforcement of any of
the terms hereof or thereof or of any such other document or otherwise arising
or relating in any manner to the pledges and Security Interests contemplated
hereunder and under the Indenture and the other Collateral Documents, except to
the extent such claims, demands, expenses, losses, obligations, damages,
penalties, actions, judgments, suits, costs, liabilities or disbursements have
resulted from the wilful misconduct, negligence or bad faith of the Trustee.
Each of the Grantors hereby jointly and severally agrees to pay, and to save
the Trustee harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other taxes
that may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Agreement.
ARTICLE 7
Remedies
SECTION 7.01. Remedies; Rights Upon Default. (a) Following
the occurrence and during the continuance of an Event of Default:
(i) all payments received by the Grantors under or in
connection with any of the Collateral shall be held by such Grantor in
trust for the Trustee for the benefit of the Noteholders, shall be
segregated from other property and funds of the Grantors and shall
forthwith upon receipt by any of the Grantors be paid over to the
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Trustee as Collateral, in the same form as received by such Grantor
(with any necessary endorsements);
(ii) any and all such payments so received by the Trustee
(whether from the Grantors or otherwise) shall be held by the Trustee
and applied by it in the manner provided in the Indenture;
(iii) each Grantor shall deliver each item of Collateral to
the Trustee on demand; and the Trustee shall have the right to seize
and take possession (and temporary possession of any non-Collateral in
connection with any such repossession, with the right to store, at the
Grantors' expense and risk, such non-Collateral), with or without
legal process and with or without prior notice or demand for
performance, of any Collateral and the evidence and records pertaining
to the Collateral (including, without limitation, customer lists,
correspondence with present or future or prospective suppliers or
customers, advertising materials, credit files, computer tapes,
programs, printouts and all other computer materials, records and
electronic data processing software) and may enter, without liability
for trespass, the premises where they, or any of them, are located for
the purpose of effecting such possession or removal; the Trustee shall
not be liable to such Grantor for any damage suffered by such Grantor
by reason of such entry or seizure unless it results from the
Trustee's wilful misconduct, negligence or bad faith; and each of the
Grantors hereby agrees jointly and severally to indemnify and hold
harmless the Trustee from and against any and all claim, expense or
liability that it may incur to any Person by reason of such entry or
seizure except to the extent resulting from the Trustee's wilful
misconduct, negligence or bad faith; and
(iv) the Trustee may hire and maintain on any of the Grantors'
premises a custodian or independent contractor selected by the Trustee
who shall have full authority to do all lawful acts necessary to
protect the Trustee's interest and to report to the Trustee thereon.
Each of the Grantors hereby agrees to cooperate with any such
Person and to do whatever the Trustee may reasonably request to preserve the
Collateral.
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(b) Following the occurrence and during the continuance
of any Event of Default, the Trustee may exercise, in addition to all other
rights and remedies granted in this Agreement and in any other Collateral
Document, all rights and remedies of a secured party after default under the
Uniform Commercial Code or any other applicable law in the applicable
jurisdiction. Without limiting the generality of the foregoing, each of the
Grantors expressly agrees that in any such event the Trustee may, without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or on such Grantor or any other Person, all and each of which demands,
advertisements and notices are (to the fullest extent permitted by applicable
law) hereby expressly waived, forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof and may forthwith sell, lease,
assign, give option or options to purchase, or sell or otherwise dispose of and
deliver, the Collateral (or contract to do so), or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange or broker's
board or at any of the Trustee's offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as the Trustee may deem commercially reasonable, irrespective
of the affect of any such sales on the market price of the Collateral. The
Trustee or any Noteholder shall have the right on any such public sale or sales
and, to the extent permitted by law, on any such private sale or sales to
purchase the whole or any part of such Collateral so sold. Each purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of any of the Grantors. Each of the Grantors further agrees
to assemble, at the Trustee's request in connection with any such sale, the
Collateral and make it available to the Trustee at places that the Trustee
selects, whether at such Grantor's premises or elsewhere. The Trustee shall
apply the proceeds of any such collection, recovery, receipt, appropriation,
realization or sale in the manner provided in the Indenture. Upon any sale of
the Collateral by the Trustee (including pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of the Trustee or of the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Trustee
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or such officer or be answerable in any way for the misapplication thereof.
To the extent permitted by applicable law, each of the
Grantors waives all claims, damages and demands against the Trustee or any
Noteholder arising out of the repossession, retention or sale of the
Collateral. Each of the Grantors agrees that the Trustee need not give more
than 10 days' notice (which notice shall be deemed given when mailed) of the
time and place of any public sale or of the time after which a private sale may
take place and that such notice is reasonable notification, as provided in
Section 9.504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions. No notification need be
given to such Grantor if it has signed, after default, a statement renouncing
or modifying any right to notification of sale or other intended disposition.
Such notice, in the case of a public sale, shall state the time and place for
such sale and, in the case of a sale at a broker's board or on a securities
exchange, shall state the board or exchange at which such sale is to be made
and the day on which the Collateral, or portion thereof, will first be offered
for sale at such board or exchange. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Trustee may fix and state in the notice (if any) of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one lot as
an entirety or in separate parcels, as the Trustee may (in its sole and
absolute discretion) determine. The Trustee shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Trustee
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. In case any sale of
all or any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Trustee until the sale price is paid
by the purchaser or purchasers thereof, but the Trustee shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. Each of the Grantors shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral applied to the Obligations pursuant to the Indenture are
insufficient to pay in full in cash all Obligations and each of the Grantors
also shall be
<PAGE> 34
34
liable for the reasonable fees and expenses of any attorneys employed by the
Trustee and Noteholders to collect any such deficiency. For purposes hereof,
(a) a written agreement to purchase the Collateral or any portion thereof shall
be treated as a sale thereof, (b) the Trustee shall be free to carry out such
sale pursuant to such agreement and (c) any Grantor shall not be entitled to
the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Trustee shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein
conferred upon it, the Trustee may proceed by a suit or suits at law or in
equity to foreclose upon the Collateral and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section shall be deemed
to conform to the commercially reasonable standards as provided in Section
9.504(3) of the Uniform Commercial Code as in effect in the State of New York
or its equivalent in other jurisdictions.
(c) To the fullest extent that it may lawfully do so,
each of the Grantors agrees that it will not at any time insist upon, plead or
in any manner whatsoever claim or take the benefit or advantage of any
appraisal, valuation, stay, extension or redemption laws, or any law permitting
it to direct the order in which the Collateral or any part thereof shall be
sold, now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance or enforcement of this Agreement or the
Obligations and hereby expressly waives all benefit or advantage of any such
laws and covenants and that it will not hinder, delay or impede the execution
of any power granted or delegated to the Trustee in this Agreement or any other
Collateral Document but will suffer and permit the execution of every such
power as though no such laws were in force.
SECTION 7.02. Private Sales. (a) Each of the Grantors
recognizes that the Trustee may be unable to effect a public sale of any part
of or all the Collateral by reason of certain prohibitions contained in the
Securities Act and the rules and regulations thereunder and applicable state
securities or "blue sky" laws. The Trustee is hereby authorized at any one or
more private sales (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree,
among
<PAGE> 35
35
other things, to acquire such Collateral for their own account for investment
and not with a view to the distribution or resale thereof. Each of the
Grantors acknowledges and agrees that any such private sale may result in
proceeds and other terms less favorable to the seller than if such sale were a
public sale without such restrictions (including, without limitation, a public
offering made pursuant to a registration under the Securities Act) and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Trustee
shall be under no obligation to engage in public sales or delay a sale of any
of the Collateral for the period of time necessary to permit any issuer thereof
to register such Collateral for public sale under the Securities Act or under
applicable state securities laws, even if such issuer would agree to do so;
provided, however, in the event that the Trustee determines that it is
advisable to register under or otherwise comply in any way with the Securities
Act or any similar Federal or state law, or if such registration or compliance
is required with respect to all or any part of the Collateral prior to the sale
thereof by the Trustee, such Grantor shall use its best efforts to cause such
registration to be effectively made and shall cause the issuer of any Pledged
Securities to enter into an underwriting agreement containing customary
provisions, including, without limitation, customary indemnification
provisions, and to make any and all other customary arrangements to facilitate
the public offering of the Collateral through the registration of such
Collateral in accordance with the Securities Act at the expense of such
Grantor, and shall reimburse the Trustee and the Noteholders for any and all
expense incurred by any of them, including, without limitation, reasonable
attorneys' and accountants' fees and expenses, printing fees and filing fees in
connection therewith.
(b) Each of the Grantors recognizes that, by reason of
certain prohibitions contained in law, rules, regulations or orders of any
foreign government or regulatory authority, agency or body, the Trustee may be
compelled, with respect to any sale of all or any part of the Collateral, to
limit purchasers to those who meet the requirements of such foreign government
or regulatory authority, agency or body. Each of the Grantors acknowledges
that any such sales may be at prices and on terms less favorable to the Trustee
than those obtainable through a public sale without such restrictions, and,
<PAGE> 36
36
notwithstanding such circumstances, agrees that any such restricted sale shall
be deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales.
(c) Each of the Grantors further agrees to do or cause to
be done all such other acts and things as may be reasonably necessary to make
such sale or sales of any portion of or all the Collateral valid and binding
and in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators, regulators
or governmental bodies, authorities or agencies having jurisdiction over any
such sale or sales, all at such Grantor's expense. Such Grantor shall and
shall cause each issuer of any Pledged Securities to be sold hereunder from
time to time to furnish to the Trustee all such information as the Trustee may
request in order to determine the number of shares, notes and other instruments
included in the Collateral which may be sold by the Trustee as exempt
transactions under the Securities Act and the rules and regulations thereunder,
as the same are from time to time in effect.
(d) Each of the Grantors agrees that a breach of any of
the covenants contained in this Article will cause irreparable injury to the
Trustee and the Noteholders, that the Trustee and the Noteholders have no
adequate remedy at law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Article shall be specifically
enforceable against each of the Grantors, and, to the extent that it may
lawfully do so, each of the Grantors hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred.
SECTION 7.03. Authorization to Issuers. Each Grantor hereby
authorizes and instructs, and shall cause, each issuer of any Pledged
Securities to comply with any written instruction received by such issuer from
the Trustee that states that a Potential Payment Event of Default or an Event
of Default has occurred and is continuing and that is otherwise in accordance
with the terms of this Agreement, without any other or further instructions
from such Grantor, and such Grantor agrees that such issuers shall be fully
protected in so complying.
SECTION 7.04. Grant of License to Use Intellectual Property.
For the purpose of enabling the
<PAGE> 37
37
Trustee to exercise rights and remedies under this Article at such time as the
Trustee shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to the Trustee (solely in its capacity as Trustee) an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Grantors) to use, license or sub-license (in each
case to the fullest extent of the Grantors' rights to do so) any of the
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Grantor, and wherever the same may be located, including, without
limitation, in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof. The use of such license by the
Trustee shall be exercised, at the option of the Trustee, upon the occurrence
and during the continuation of an Event of Default; provided, however, that any
license, sub-license or other transaction entered into by the Trustee in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
SECTION 7.05. Intercreditor Agreement. The Company shall
have the right to cause the Trustee to execute and deliver a replacement
intercreditor agreement (a "Replacement Intercreditor Agreement") to the
Intercreditor Agreement dated as of the date hereof among The First National
Bank of Chicago, as agent for the lenders under the Revolving Credit Facility,
and the Trustee (the "Original Intercreditor Agreement") or to any Replacement
Intercreditor Agreement (the Intercreditor Agreement and any Replacement
Intercreditor Agreement being herein collectively referred to as the
"Intercreditor Agreement") with any entity acting as collateral agent (a
"Refinancing Agent") for any lender or group of lenders that refinance, refund,
renew, replace, repay or extend all or any portion of the obligations under the
Revolving Credit Facility or any other revolving credit facility permitted
under the Indenture, no later than six months after the satisfaction in full of
such obligations and the termination of all commitments thereunder (a
"Refinancing"); provided, however, (i) such Refinancing shall not violate the
terms of the Indenture, (ii) the Refinancing Agent is to have a security
interest in all or a portion of the Working Capital Collateral, and the
Replacement Intercreditor Agreement only covers such common collateral, and
(iii) the Trustee shall have received at least 15 days prior notice of such
Refinancing and shall have received at least 5 days prior to executing the
Replacement Intercreditor Agreement a copy of the Replacement Intercreditor
Agreement. The Replacement Intercreditor Agreement shall be on the same terms
and conditions as the Original Intercreditor Agreement.
ARTICLE 8
Lockboxes; Proceeds; Collection of Accounts Receivable
SECTION 8.01. Contingency of Article 8. This Article shall
only apply to the extent an Intercreditor Agreement shall not be in effect with
respect to all or any portion of the Accounts Receivable. All references to
Accounts Receivable under this Article shall be Accounts Receivable that are
not so subject to an Intercreditor Agreement.
SECTION 8.02. Lockboxes. The Company shall, for the benefit
of the Trustee, at all times maintain one or more Lockboxes with such banks
("Lockbox Banks") as have entered into lockbox agreements with the agent under
the Revolving Credit Agreement or any revolving credit facility permitted under
Section 4.03 of the Indenture and the Company Grantor. The Company Grantor
shall direct all obligors on all Accounts Receivable to make payments in
respect thereof to a Lockbox. The Company Grantor shall immediately deposit in
a Lockbox all cash payments made for Inventory or in respect of Accounts
Receivable in the identical form in which such payment was made, whether by
cash or check. The Company Grantor, and any of its Affiliates, employees,
agents or other Persons acting for or in concert with the Company Grantor,
shall, acting for the
<PAGE> 38
38
benefit of and as agent for the Trustee, receive, as the sole and exclusive
property of the Noteholders (subject to the right of the Company Grantor to
excess proceeds pursuant to Section 8.03 and Section 6.10 of the Indenture),
any monies, checks, notes, drafts or any other payments relating to or proceeds
of Accounts Receivable or other Collateral which come into the possession or
under the control of the Company Grantor or any of its Affiliates, employees,
agents or other Persons acting for or in concert with the Company Grantor, and
immediately upon receipt thereof, the Company Grantor or such Persons shall
deposit the same or cause the same to be deposited, in kind, in a Lockbox.
SECTION 8.03. Directed Funds. From and after the date upon
which a Default or Potential Payment Event of Default has occurred, the Trustee
shall direct the Lockbox Banks to forward to the Trustee all amounts from time
to time deposited in the Lockboxes. The Trustee shall promptly apply such
funds as set forth in Section 6.10 of the Indenture.
SECTION 8.04. Collection of Accounts Receivable. The Trustee
may at any time when a Default or a Potential Payment Event of Default has
occurred and is continuing in its sole discretion upon written notice to the
Company Grantor, elect to require that the Accounts Receivable be paid directly
to the Trustee. In such event, the Company Grantor shall, and shall permit the
Trustee to, promptly notify the account debtors or obligors under the Accounts
Receivable of the Trustee's interest therein and direct such account debtors or
obligors to make payment of all amounts then or thereafter due under the
Accounts Receivable directly to the Trustee. Upon receipt of any such notice
from the Trustee, the Company Grantor shall thereafter hold in trust for the
Trustee all amounts and proceeds received by it with respect to the Accounts
Receivable and other Collateral and immediately and at all times thereafter
deliver to the Trustee all such amounts and proceeds in the same form as so
received, whether by cash, check, draft or otherwise, with any necessary
endorsements. The Agent shall hold and apply funds so received as provided by
the terms of Sections 8.06 and 8.07.
SECTION 8.05. Special Collateral Account. Subject to Section
8.03, the Trustee may require all cash proceeds received by the Trustee under
this Article to be deposited in a special interest-bearing cash collateral
account with the Trustee and held there as
<PAGE> 39
39
security for the Obligations. Prior to a Default or Potential Payment Event of
Default, the Company Grantor, upon advance written notice to the Trustee, may
direct investment of the collected balances in such cash collateral account to
the extent such investments are Permitted Investments; provided, however, upon
the occurrence and during the continuance of a Default or Potential Payment
Event of Default, the Company Grantor shall have no control whatsoever over
such cash collateral account or the investment thereof. The Trustee shall
apply the collected balances as set forth in Article 11 of the Indenture.
SECTION 8.06. Application of Proceeds. Subject to Section
8.03, the proceeds maintained in the Lockboxes shall be applied by the Trustee
pursuant to the terms of Article 11 of the Indenture.
ARTICLE 9
Miscellaneous
SECTION 9.01. Notices. Except as otherwise specified herein,
all notices, requests, demands or other communications to or on the Grantors or
the Trustee (a) shall be in writing and (b) shall be given or made, if to (1)
any Grantor, 11550 North Meridian Street, Carmel, Indiana 40632, Attention:
Gary Bilsland, and (2) the Trustee, at The Bank of New York, 101 Barclay
Street, 21 West, New York, New York 10286, Attention: Corporate Trust Trustee
Administration; or at such other address as any of such party may hereafter
specify to each of the other parties in writing, and (unless otherwise
specified herein) shall be deemed delivered upon receipt, if delivered by hand,
or five Business Days after mailing, and all mailed notices shall be by first-
class mail, postage prepaid.
SECTION 9.02. Severability. In the event any one or more of
the provisions contained in this Agreement or in any other Collateral Document
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the
<PAGE> 40
40
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.03. No Waiver; Remedies Not Exclusive. (a) The
Trustee shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing signed by the Trustee, and then only to the extent therein
set forth. A waiver of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising, on the part of the Trustee, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of the Trustee hereunder and under the other Collateral Documents are
cumulative and are not exclusive of any rights or remedies that it would
otherwise have. The rights and remedies hereunder provided may be exercised
singly or concurrently, from time to time as often as may be deemed expedient
by the Trustee. No right or remedy conferred upon or reserved to the Trustee
by this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right and remedy shall be cumulative and shall be in
addition to every other right and remedy given under this Agreement or now or
hereafter existing at law or in equity.
(b) In the event the Trustee shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case the Grantors and the
Trustee shall, to the extent permitted by applicable law, be restored to their
respective former positions and rights hereunder with respect to the
Collateral, and all rights, remedies and powers of the Trustee shall continue
as if no such preceding had been instituted.
SECTION 9.04. Amendments, Etc. This Agreement may not be
amended, supplemented or modified except in accordance with the terms of the
Indenture; provided, that
<PAGE> 41
41
this Agreement may be amended, supplemented and modified in connection with the
addition or deletion of Subsidiary Grantors as parties hereto as provided in
Section 4.08 and in connection with the pledging of additional Collateral by
any Grantor as provided in Section 5.01(a); provided, further, that no
amendment, supplement or modification described in the previous proviso of this
sentence shall adversely affect the interests of the Noteholders.
SECTION 9.05. Termination. Upon payment in full in cash of
all the Obligations or upon compliance by the Company Grantor with the
provisions of Sections 8.01 and 8.02 of the Indenture, this Agreement shall
terminate and the Trustee shall reassign and redeliver to each of the Grantors
all their respective Collateral hereunder which has not been sold, disposed of,
retained or applied by the Trustee in accordance with the terms hereof or of
any other Collateral Document. Such reassignment and redelivery shall be
without warranty by or recourse to the Trustee and shall be at the expense of
the Grantors. At such time, this Agreement shall no longer constitute a Lien
upon any of the Collateral and the Trustee shall execute and deliver to the
Grantors, at the Grantors' expense, all Uniform Commercial Code termination
statements and similar documents that the Grantors shall reasonably request to
evidence such termination or release. Any execution and delivery of
termination statements or documents pursuant to this Section shall be without
recourse to or warranty by the Trustee. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned, upon the
insolvency, bankruptcy or reorganization of any Grantor, or otherwise, all as
though such payment had not been made and, if applicable, this Agreement had
never been terminated.
SECTION 9.06. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAW
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN PROVIDED WHICH SHALL BE VALID UNDER
THE LAWS OF THE JURISDICTION WHERE PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALL
BE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY HEREOF UNDER THE LAW OF THE
STATE OF NEW YORK.
SECTION 9.07. Consent to Jurisdiction and Service of Process.
(a) Each Grantor hereby irrevocably and
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42
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of the United States
of America sitting in the City of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Collateral Documents, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Trustee may otherwise have to bring any action or proceeding relating to
this Agreement or the other Collateral Documents against any Grantor or its
properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Collateral Documents in any New York State or Federal court of the United
States of America sitting in the City of New York, or any appellate court from
any thereof. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each of the Grantors designates and appoints [ ],
or such other Person as may hereafter be selected by such Grantor irrevocably
agreeing in writing to so serve, as its agent to receive on its behalf service
of all process in any such proceedings in any such court, such service being
hereby acknowledged by each of the Grantors to be effective and binding service
in every respect. A copy of any such process so served shall be mailed by
registered mail to the Company Grantor at the address set forth in Section
9.01, except that unless otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of service of process. If any
agent appointed by any Grantor refuses to accept service, such Grantor hereby
agrees that service upon it by mail shall constitute sufficient notice.
Nothing herein shall affect
<PAGE> 43
43
the right to serve process in any other manner permitted by law or shall limit
the right of the Trustee to bring proceedings against any of the Grantors in
the courts of any other jurisdiction.
SECTION 9.08. Waiver of Hearing. To the extent it may
lawfully do so, each of the Grantors expressly waives any constitutional or
other right to a judicial hearing prior to the time the Trustee takes
possession or disposes of the Collateral as provided in Article 7.
SECTION 9.09. Conflicts with TIA; Indenture. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Agreement by any of the provisions of
the TIA, such required provision shall control. If any provision hereof
conflicts with any provision of the Indenture, the provision set forth in the
Indenture shall control.
SECTION 9.10. Survival of Obligations. All obligations set
forth in Sections 2.02, 6.04 and 9.14 shall survive the execution, delivery and
termination of this Agreement and all other Collateral Documents and the
payment in full in cash of all Obligations or the compliance by the Company
with the provisions of Sections 9.01 and 9.02 of the Indenture.
SECTION 9.11. Successors and Assigns. Subject to Section
9.15, whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of each Grantor that
are contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 9.12. Counterparts. This Agreement may be executed
in any number of separate counterparts, and all of the said counterparts taken
together shall be deemed to constitute one and the same instrument.
SECTION 9.13. Descriptive Headings. The captions in this
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof.
SECTION 9.14. Expenses. The Grantors agree to pay to the
Trustee, from time to time, upon demand, all reasonable fees, costs and
expenses of the Trustee
<PAGE> 44
44
(including, without limitation, the reasonable expenses, fees and disbursements
of its counsel, experts and agents) incurred by the Trustee or arising in
connection with (a) the preparation, execution, delivery, administration,
modification, amendment or termination of this Agreement or the enforcement of
any of the provisions hereof, (b) the custody or preservation and protection
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (c) the preservation, protection, defense, exercise or enforcement
of any of the rights of the Trustee hereunder and in and to the Collateral or
(d) the failure by any of the Grantors to perform or observe any of the
provisions hereof. When the Trustee incurs expenses or renders services after
an Event of Default specified in the Indenture occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 9.15. Continuing Security Interest: Transfer of
Notes. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until all Obligations
are indefeasibly paid in full or the Company Grantor complies with the
provisions of Sections 9.01 and 9.02 of the Indenture, (b) be binding upon each
of the Grantors and each of their successors and assigns and (c) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of the Trustee, and each Noteholder, and each of their respective successors,
transferees and assigns; no other Person (including, without limitation, any
other creditor of any of the Grantors) shall have any interest herein or any
right or benefit with respect hereto. Without limiting the generality of
clause (c), the Trustee may assign or otherwise transfer any Indebtedness held
by it secured by this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Person herein or otherwise. Neither this Agreement nor any interest
herein or in the Collateral, or any part thereof, except as otherwise permitted
by any of the Collateral Documents, may be assigned by any of the Grantors;
provided, however, that this Agreement may be assigned by the Company Grantor
to any Person that shall become the obligor under the Indenture in compliance
with the Indenture if such person executes and delivers an amendment hereto
whereby it expressly assumes all obligations of the Company Grantor hereunder
as if it were an original party hereto. This Agreement shall be deemed to be
automatically assigned by the Trustee to any
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45
Person who succeeds to the Trustee in accordance with the Indenture and such
assignee shall have all rights and powers of, and act as, the Trustee
hereunder.
SECTION 9.16. Security Interest Absolute. All rights of the
Trustee, the Security Interest intended to be created hereunder and all
obligations of each of the Grantors hereunder shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Obligations,
the Notes, the Indenture or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Obligations, the Notes, the Indenture or any other agreement or
instrument relating thereto;
(c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Obligations; or
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any of the Grantors (other
than the indefeasible payment in full of the Obligations).
SECTION 9.17. Further Assurances. Each Grantor agrees to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Trustee may at any
time reasonably request in connection with the administration and enforcement
of this Agreement or with respect to the Collateral or any part thereof or in
order better to assure and confirm unto the Trustee its rights and remedies
hereunder.
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SECTION 9.18. Rules of Construction. The rules of
construction specified in Section 1.04 of the Indenture shall be applicable to
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and become effective by their respective duly
authorized officers.
Attest: Anacomp, Inc., as Company Grantor
By: By:
----------------------------------- ------------------------------
Name:
Title:
Attest: Stromberg DatagraphiX
International Corp., as a
Subsidiary Grantor
By: By:
---------------------------------- ------------------------------
Name:
Title:
Attest: Florida AAC Corporation, as a
Subsidiary Grantor
By: By:
---------------------------------- -------------------------------
Name:
Title:
Attest: Klavar Microfilm, Inc., as a
Subsidiary Grantor
By: By:
---------------------------------- ------------------------------
Name:
Title:
<PAGE> 47
47
Attest: Anacomp California, as a
Subsidiary Grantor
By: By:
---------------------------------- -----------------------------
Name:
Title:
Attest: Xidex Development Company, as a
Subsidiary Grantor
By: By:
---------------------------------- -----------------------------
Name:
Title:
Attest: Sun-Flex Industries of Puerto
Rico, Inc., as a Subsidiary
Grantor
By: By:
---------------------------------- -----------------------------
Name:
Title:
Attest: The Bank of New York, as Trustee
By: By:
---------------------------------- -----------------------------
Name:
Title:
<PAGE> 48
Exhibit A to the
Security and Pledge Agreement
PERFECTION CERTIFICATE
Reference is made to the Security and Pledge Agreement dated
as of , 1995 (as the same may be amended, supplemented or modified
from time to time, the "Security and Pledge Agreement"), among Anacomp, Inc.
(the "Company Grantor"), the U.S. Restricted Subsidiaries referred to therein,
such other U.S. Restricted Subsidiaries as may from time to time become parties
thereto pursuant to Section 4.08 thereof (each a "Subsidiary Grantor" and,
together with the Company Grantor, the "Grantors") and The Bank of New York, as
Trustee.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security and Pledge
Agreement.
The undersigned, an Officer and the chief legal officer of the
Company Grantor, hereby certify to the Trustee as follows:
1. Names. (a) The exact corporate name of each Grantor
under the Collateral Documents, as such name appears in its respective
certificate of incorporation, is set forth on Schedule 1.
(b) Set forth on Schedule 1 is each other corporate name each
Grantor has had since its organization, together with the date of the relevant
change.
(c) Except as set forth on Schedule 1, no Grantor has changed
its identity or corporate structure in any way within the past five years.
Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of corporate organization. If any such change has occurred,
included in Schedule 1 is the information required by items 1 and 2 of this
Perfection Certificate as to each acquiree or constituent party to such merger,
consolidation or acquisition.
(d) Set forth on Schedule 1 is a list of all other names
(including trade names or similar appellations) used by each Grantor or any of
its divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past five
years.
<PAGE> 49
2
(e) Set forth on Schedule 1 is the Federal Taxpayer
Identification Number of each Grantor.
2. Current Locations. (a) The chief executive office of
each Grantor is located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all
locations where such Grantor maintains any evidence or records relating to any
Collateral (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all
the places of business of such Grantor not identified in paragraph (a) or (b):
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all
the locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the
names and addresses of all Persons other than the Grantors that have possession
of any of the Collateral:
Name of
Grantor Person Mailing Address County State
<PAGE> 50
3
3. File Search Reports. Attached as Schedule 3A are true
copies of file search reports dated no more than 30 days prior to the date of
this Perfection Certificate from the Uniform Commercial Code filing offices
where filings are to be made as required by the Security and Pledge Agreement.
Attached hereto as Schedule 3B is a true copy of each financing statement or
other filing identified in such file search reports.
IN WITNESS WHEREOF, we have hereunto set our hands this day of
, 1995.
Anacomp, Inc.
By:
-------------------------
Name:
Title:
By:
--------------------------
Name:
Title: General Counsel
<PAGE> 51
Schedule 1 to
Perfection Certificate
Item 1(a):
Item 1(b):
Item 1(d):
Item 1(e):
Name Federal Taxpayer Identification
<PAGE> 52
Schedule 3A to
Perfection Certificate
UCC File Search Reports
<PAGE> 53
Schedule 3B to
Perfection Certificate
Financing Statements
Identified in UCC File Search Reports
<PAGE> 54
Exhibit B to the
Security and Pledge Agreement
SUPPLEMENT NO. dated as of ,
, to the Security and Pledge Agreement dated
as of , 1995 (as the same may be amended,
supplemented or modified from time to time,
the "Security and Pledge Agreement"), among
Anacomp, Inc. (the "Company Grantor"), the
U.S. Restricted Subsidiaries referred to
therein, such other U.S. Restricted
Subsidiaries as may from time to time become
parties thereto pursuant to Section 4.08
thereof and The Bank of New York, as Trustee.
A. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Security and
Pledge Agreement.
B. Pursuant to Section 4.08 of the Security and Pledge
Agreement, each U.S. Restricted Subsidiary that was not in existence or not
such a U.S. Restricted Subsidiary on the date of the Security and Pledge
Agreement is required to become a party to the Security and Pledge Agreement as
a Subsidiary Grantor upon becoming a U.S. Restricted Subsidiary. Section 4.08
of the Security and Pledge Agreement provides that any such additional U.S.
Restricted Subsidiaries shall become Subsidiary Grantors under the Security and
Pledge Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned U.S. Restricted Subsidiary (the "New U.S.
Restricted Subsidiary") is executing this Supplement in accordance with the
requirements of the Security and Pledge Agreement to become a Grantor under the
Security and Pledge Agreement.
Accordingly, the Trustee and the New U.S. Restricted
Subsidiary agree as follows:
SECTION 1. In accordance with Section 4.08 of the Security
and Pledge Agreement, the New U.S. Restricted Subsidiary by its signature below
becomes a Subsidiary Grantor under the Security and Pledge Agreement with the
same force and effect as if originally named therein as a Subsidiary Grantor,
and the New U.S. Restricted Subsidiary hereby (a) agrees to all the terms and
provisions of the Security and Pledge Agreement applicable to it as a Grantor
thereunder, (b) represents and warrants that the representations and warranties
made by it as a Grantor
<PAGE> 55
2
thereunder are true and correct on and as of the date hereof and (c) attaches
cumulatively updated Schedules in the form of Schedules I through VII to the
Security and Pledge Agreement. Each reference to a "Grantor" in the Security
and Pledge Agreement shall be deemed to include the New U.S. Restricted
Subsidiary. The Security and Pledge Agreement is hereby incorporated herein by
reference.
SECTION 2. The New U.S. Restricted Subsidiary represents and
warrants to the Trustee that this Supplement has been duly authorized, executed
and delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or equitable principles relating to or limiting creditors'
rights generally.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Supplement
shall become effective when the Trustee shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the New U.S.
Restricted Subsidiary and the Trustee.
SECTION 4. Except as expressly supplemented hereby, the
Security and Pledge Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT ANY
REMEDIES HEREIN PROVIDED WHICH SHALL BE VALID UNDER THE LAWS OF THE
JURISDICTION WHERE PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALL BE TAKEN SHALL
NOT BE AFFECTED BY ANY INVALIDITY HEREOF UNDER THE LAW OF THE STATE OF NEW
YORK.
SECTION 6. In the event any one or more of the provisions
contained in this Supplement should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby (it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision
<PAGE> 56
3
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in Section 8.01 of the Security and Pledge
Agreement. All communications and notices hereunder to the New U.S. Restricted
Subsidiary shall be given to it at the address set forth under its signature
below.
IN WITNESS WHEREOF, the New U.S. Restricted Subsidiary and the
Trustee have duly executed this Supplement to the Security and Pledge Agreement
as of the day and year first above written.
[NAME OF NEW U.S. RESTRICTED
SUBSIDIARY],
by
---------------------------
Name:
Title:
Address:
---------------
---------------
---------------
The Bank of New York, as
Trustee,
by
--------------------------------
Name:
Title:
<PAGE> 57
Exhibit C to the
Security and Pledge Agreement
SUPPLEMENT NO. dated as of ,
, to the Security and Pledge Agreement dated as
of, 1995 (as the same may be amended, supplemented
or modified from time to time, the "Security and
Pledge Agreement"), among Anacomp, Inc. (the
"Company Grantor"), the U.S. Restricted
Subsidiaries referred to therein, such other U.S.
Restricted Subsidiaries as may from time to time
become parties thereto pursuant to Section 4.08
thereof and The Bank of New York, as Trustee.
A. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Security and
Pledge Agreement.
B. Pursuant to Section 5.01(a) of the Security and Pledge
Agreement, each Grantor thereunder is required to deliver thereunder any
securities not in existence or becoming Pledged Securities subsequent to the
date the Security and Pledge Agreement was initially executed promptly upon
such securities so existing or becoming Pledged Securities. Section 5.01(a) of
the Security and Pledge Agreement provides that each Grantor (as applicable,
the "Acquiring Grantor") that acquires any such Pledged Securities shall
execute and deliver an instrument in the form of this Supplement and complete
and fully update Schedule IV to the Security and Pledge Agreement showing
cumulatively all Pledged Securities.
Accordingly, the Trustee and the Acquiring Grantor agree as
follows:
SECTION 1. In accordance with Section 5.01(a) of the Security
and Pledge Agreement, the Acquiring Grantor by its signature below pledges the
securities listed in Schedule I to this Supplement to the Trustee with the same
force and effect as if originally pledged to the Trustee under the Security and
Pledge Agreement, and the Acquiring Grantor hereby (a) agrees that all the
terms and provisions of the Security and Pledge Agreement applicable to Pledged
Securities shall be fully applicable to such securities, (b) represents and
warrants that the representations and warranties made by it as a Grantor
thereunder are true and correct on and as of the date hereof and (c) attaches a
fully updated Schedule IV to the Security and Pledge Agreement showing
cumulatively all Pledged Securities. The
<PAGE> 58
2
Security and Pledge Agreement is hereby incorporated herein by reference.
SECTION 2. The Acquiring Grantor represents and warrants to
the Trustee that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or equitable principles relating to or limiting creditors'
rights generally.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Supplement
shall become effective when the Trustee shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the Acquiring
Grantor and the Trustee.
SECTION 4. Except as expressly supplemented hereby, the
Security and Pledge Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY REMEDIES HEREIN PROVIDED WHICH SHALL BE VALID UNDER
THE LAWS OF THE JURISDICTION WHERE PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALL
BE TAKEN SHALL NOT BE AFFECTED BY ANY INVALIDITY HEREOF UNDER THE LAW OF THE
STATE OF NEW YORK.
SECTION 6. In the event any one or more of the provisions
contained in this Supplement should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby (it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or
<PAGE> 59
3
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
IN WITNESS WHEREOF, the Acquiring Grantor and the Trustee have
duly executed this Supplement to the Security and Pledge Agreement as of the
day and year first above written.
[NAME OF ACQUIRING GRANTOR],
by
----------------------------
Name:
Title:
The Bank of New York, as Trustee,
by
----------------------------
Name:
Title:
<PAGE> 60
Schedule I to Supplement No.
to Security and Pledge Agreement
NEW PLEDGED SECURITIES
<TABLE>
<CAPTION>
Pledged Shares
--------------
Percentage
Class Stock Number Ownership Percentage
of Certificate Par of (Direct or Pledge to
Owner Issuer Stock No(s). Value shares Indirect) Trustee
----- ------ ----- ----------- ----- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Pledged Notes
-------------
Original Principal Final
Holder Obligor Amount of Note Date of Note Maturity Date
------ ------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 61
Schedule I to
Security and Pledge Agreement
GRANTOR NAMES
COMPANY GRANTOR:
Anacomp, Inc.
SUBSIDIARY GRANTORS:
Stromberg DatagraphiX International Corp.
Florida AAC Corporation
Kalvar Microfilm, Inc.
Anacomp California
Xidex Development Company
Sun-Flex Industries of Puerto Rico, Inc.
<PAGE> 62
Schedule II to
Security and Pledge Agreement
CONTRACTS
1. Amended and Restated Supply Agreement dated as of September 25, 1993,
between the Company Grantor and Hanny Magnetics Limited.
2. Supply and License Agreement dated as of November 15, 1993, between
the Company and Roger Software Distribution S.A.
3. All current and future Equipment Lease Agreements entered into by any
Grantor whereby such Grantor leases equipment to a third party
pursuant to the terms of the Company Grantor's Form Equipment Lease
Agreement.
4. All current and future Micrographics Maintenance Agreements entered
into by any Grantor whereby such Grantor agrees to service and
maintain a third party's micrographics equipment pursuant to the terms
of the Company Grantor's Form Maintenance Agreement.
5. Employment Agreement between the Company and Louis P. Ferrero,
effective October 1, 1992.
<PAGE> 63
Schedule III to
Security and Pledge Agreement
[UNITED STATES] PATENTS
<TABLE>
<CAPTION>
Patent No. Issued Title Inventor(s)
---------- ------ ----- -----------
<S> <C> <C> <C>
</TABLE>
<PAGE> 64
Schedule IV to
Security and Pledge Agreement
PLEDGED SECURITIES
<TABLE>
<CAPTION>
Pledged Shares
--------------
Percentage
Class Stock Number Ownership Percentage
of Certificate Par of (Direct or Pledge to
Owner Issuer Stock No(s). Value shares Indirect) Trustee
----- ------ ----- ----------- ----- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Pledged Notes
-------------
Original Principal Final
Holder Obligor Amount of Note Date of Note Maturity Date
------ ------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 65
Schedule V to
Security and Pledge Agreement
LOCATIONS OF REAL PROPERTY
[List by fee owned and leased categories alphabetically with
state, county and city or township and address]
<PAGE> 66
Schedule VI to
Security and Pledge Agreement
UNITED STATES TRADEMARK REGISTRATIONS AND
TRADEMARK APPLICATIONS
Registrations:
<TABLE>
<CAPTION>
Patents
-------
Mark Reg. No. Issue Date
---- -------- ----------
<S> <C> <C>
</TABLE>
<PAGE> 67
Schedule VII to
Security and Pledge Agreement
LOCKBOX ACCOUNTS
Agreement Pursuant to Which
Lockbox Account # Lockbox Relates
----------------- ---------------------------
<PAGE> 68
Schedule VIII to
Security and Pledge Agreement
LOCATIONS OF CHIEF EXECUTIVE OFFICE,
PRINCIPAL PLACE OF BUSINESS AND
EVIDENCE AND RECORDS CONCERNING THE COLLATERAL
CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS AND OTHER LOCATIONS WHERE EVIDENCE AND
RECORDS CONCERNING THE COLLATERAL
GRANTOR ARE KEPT
------- -----------------------------------------------
Anacomp, Inc. One Buckhead Plaza
3060 Peachtree Road, N.W.
Suite 1700
Atlanta, GA 30305
11550 North Meridian Street
P.O. Box 40888
Indianapolis, IN 46240
[List other locations, including for other
Grantors]
<PAGE> 1
EXHIBIT 4.3.
_________________________________________________________________
ANACOMP, INC.
AND
STATE STREET BANK AND TRUST COMPANY, TRUSTEE
Form of Amended and Restated Indenture
Dated as of March 13, 1995
$224,900,000 Fully Accreted Value
($215,904,000 Aggregate Principal Amount) of
15% Senior Subordinated Notes Due 2000
_________________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture
TIA Section Section
----------- -------
<S> <C> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05; 4.06; 11.02
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
Section 316(a) (last sentence) . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
--------------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . 21
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount . . . . . . . . . 23
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.09. Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.13. Home Office Payment Agreements . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.14. Legends; Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . 30
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.03. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.04. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries 37
SECTION 4.05. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.06. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.07. Maintenance of Consolidated Net Worth . . . . . . . . . . . . . . . . . . . 39
SECTION 4.08. Limitation on Indebtedness and Restricted Capital Stock . . . . . . . . . . 41
SECTION 4.09. Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.10. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Transactions With Shareholders and Affiliates . . . . . . . . . . . . . . . 47
SECTION 4.12. Restrictions on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.13. Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.14. Prohibition Against Becoming an Investment Company . . . . . . . . . . . . 48
SECTION 4.15. Maintenance of Properties, etc. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.16. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.17. Limitation on Certain Senior Indebtedness . . . . . . . . . . . . . . . . . 51
SECTION 4.18. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.19. Limitation on Asset Sales and Sales of Subsidiary Stock . . . . . . . . . . 53
SECTION 4.20. Limitation on Material Acquisitions . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.21. Restrictions on Certain Repurchases of Securities . . . . . . . . . . . . . 57
SECTION 4.22. Application of Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.23. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.24. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 4.25. "Ownership Change" for Tax Purposes . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
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<PAGE> 6
ARTICLE 5
SUCCESSOR CORPORATION
<TABLE>
<S> <C> <C>
SECTION 5.01. When Company or Subsidiary May Merge, etc. . . . . . . . . . . . . . . . . 64
SECTION 5.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.06. Limitation on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.07. Rights of Holders To Receive Payment . . . . . . . . . . . . . . . . . . . 72
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . 73
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.09. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . 80
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . 80
SECTION 8.02. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.03. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.04. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 9
SUBORDINATION
SECTION 9.01. Securities Subordinated to Senior Indebtedness . . . . . . . . . . . . . . 82
SECTION 9.02. No Payment on Securities in Certain Circumstances . . . . . . . . . . . . . 84
SECTION 9.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Company . . . 85
SECTION 9.04. Securityholders To Be Subrogated to Rights of Holders of
Senior Indebtedness 87
SECTION 9.05. Obligations of the Company Unconditional . . . . . . . . . . . . . . . . . 87
SECTION 9.06. Trustee and Paying Agent Entitled To Assume Payments Not
Prohibited in Absence of Notice 88
SECTION 9.07. Application by Trustee of Monies Deposited With It . . . . . . . . . . . . 88
SECTION 9.08. Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness 88
SECTION 9.09. Securityholders Authorize Trustee To Effectuate
Subordination of Securities 89
SECTION 9.10. Right of Trustee and Paying Agent To Hold Senior Indebtedness . . . . . . . 89
SECTION 9.11. Article 9 Not To Prevent Events of Default . . . . . . . . . . . . . . . . 89
SECTION 9.12. No Fiduciary Duty Created to Holders of Senior Indebtedness . . . . . . . . 90
</TABLE>
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<PAGE> 8
ARTICLE 10
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<TABLE>
<S> <C>
SECTION 10.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.03. Compliance With Trust Indenture Act . . . . . . . . . . . . . . . . . . . 93
SECTION 10.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . 93
SECTION 10.05. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . 94
SECTION 10.06. Trustee May Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . 94
SECTION 10.07 Conditions to Application of Indenture . . . . . . . . . . . . . . . . . 94
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 11.03. Communications by Holders With Other Holders . . . . . . . . . . . . . . 96
SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . 96
SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . 96
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . 97
SECTION 11.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.08. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . 97
SECTION 11.09. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.11. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.12. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.13. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.14. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>
SCHEDULE 1 -- List of Certain Assets
EXHIBIT A -- Form of Security
-------------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE> 9
AMENDED AND RESTATED INDENTURE dated as of March 13, 1995 between
ANACOMP, INC., an Indiana corporation (the "Company") and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts banking corporation (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company and Trustee have heretofore executed a certain
indenture dated as of October 24, 1990, as amended by the First Supplemental
Indenture dated as of March 22, 1993 (the "Original Indenture"), providing for
the issuance of up to $224,900,000 Fully Accreted Value ($215,904,000 Aggregate
Principal Amount) of 15% Senior Subordinated Notes due 2000 (the "Securities"),
all of which have previously been issued;
WHEREAS, Article 10 of the Original Indenture provides, among other
things, that the Company and the Trustee may from time to time amend the
Original Indenture with the consent of Holders (such term and all other
capitalized terms used but not defined herein shall have the meanings assigned
to them in this Amended and Restated Indenture) of at least 66 2/3% in
aggregate principal amount of the Securities then outstanding for the purpose
of amending certain provisions of the Indenture;
WHEREAS, the Company desires to amend and restate the Original
Indenture;
WHEREAS, the Holders of at least 66 2/3% of the Securities have
consented to the Original Indenture being amended and restated hereby;
WHEREAS, pursuant to Section 11.04 of the Indenture the Company has
furnished the Trustee with an Opinion of Counsel and an Officer's Certificate,
each complying with the requirements of Section 11.05 of the Original
Indenture, stating that all conditions precedent provided for in the Original
Indenture with respect to the entering into of this Amended and Restated
Indenture have been complied with; and
WHEREAS, all things necessary to make this Amended and Restated
Indenture a valid and effective agreement of the Company and the Trustee and a
valid and effective amendment and restatement of the Original Indenture have
been done;
NOW, THEREFORE, the parties hereto hereby agree as follows each for the
benefit of the other and for the equal and ratable benefit of the Holders of
the Company's 15% Senior Subordinated Notes Due 2000:
<PAGE> 10
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquisition Indebtedness" means (i) Indebtedness incurred or assumed
by the Company or any of its Subsidiaries in connection with a Material
Acquisition or (ii) Indebtedness of a person existing at the time such person
becomes a Subsidiary of the Company or any of its Subsidiaries, including,
without limitation, Indebtedness incurred by such person in connection with, or
in anticipation of, such person becoming a Subsidiary of the Company or any of
its Subsidiaries.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" having meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar of the
Securities. See Section 2.03.
"Asset Sale" means, with respect to any person, any sale, transfer or
other disposition (including, without limitation, by way of merger,
consolidation, Sale Leaseback Transaction or granting of a capitalized lease or
other lease substantially similar to an installment sale transaction), in a
single transaction or group of related transactions, by such person or any of
its Subsidiaries to any person of (i) all or any of the Capital Stock or other
ownership interest of any of such person's Subsidiaries, (ii) all or
substantially all of the assets of any division or line of business of such
person or any of its Subsidiaries or (iii) any assets of such person or any of
its Subsidiaries outside of the ordinary course of business of such person or
such Subsidiary; provided, however, that Asset Sale shall not include (A) the
sale, transfer or other disposition (in a single transaction or group of
related transactions) of any assets or Capital Stock or other ownership
interest by any Wholly Owned Subsidiary of such person to such person or
another Wholly Owned Subsidiary of such person, (B) any Majority Capital Stock
Sale, (C) the sale, transfer or other disposition of any assets of such person
and its Subsidiaries held for sale as so classified in the financial statements
of such person as of the Initial Issuance Date, (D) the creation, incurrence or
assumption of any Lien not prohibited by Section 4.12, (E) any sales of assets
in the ordinary course of business of such person or its Subsidiaries, (F) any
of the transactions governed by Article 5 hereof (provided that the Company and
such transaction comply with the terms of Article 5), or (G) any plan of
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liquidation governed by Section 4.16 (provided that the Company and such plan
of liquidation comply with the terms of Section 4.16).
"Bank Agent" means The First National Bank of Chicago, the
Representative for the Revolving Credit Facility.
"Bankruptcy Law" has the meaning provided in Section 6.01.
"Banks" means the financial institutions named as lenders in the
Revolving Credit Facility.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" of any person means any and all shares, interests,
participations or other equivalents (however designated) of, or rights,
warrants or options to purchase, corporate stock or any other equity interest
(including, without limitation, any Restricted Capital Stock) of or in such
person. Indebtedness which is convertible into equity securities shall not be
deemed to constitute Capital Stock.
"Capital Expenditures" of any person for any period means all
expenditures of such person during such period which would be classified as
"capital expenditures" in accordance with generally accepted accounting
principles.
"Capitalized Lease Obligations" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such obligations determined in accordance with such
principles.
"Cash Equivalents" means (i) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States government or any agency thereof, (ii) certificates of deposit,
eurodollar time deposits, overnight bank deposits and bankers' acceptances
having maturities of 180 days or less from the date of acquisition and issued
by any Bank the long-term debt of which is rated at least BBB by Standard &
Poor's Ratings Group or Baa3 by Moody's Investors Service, Inc., or by any
other commercial bank the long-term debt of which is rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.,
(iii) commercial paper (A) issued by any domestic commercial bank having
capital and surplus in excess of $200,000,000 and (B) rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc., or
carrying an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing ratings of investments,
having a maturity of one year or less from the date of acquisition, and (iv)
repurchase agreements with a term not exceeding seven days entered into with
any commercial bank meeting the requirements
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<PAGE> 12
specified in clauses (ii) and (iii)(A) above with respect to securities of the
type described in clause (i) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any person or related group for purposes of
Section 13(d) of the Securities Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture); (ii) the shareholders of the Company shall approve any plan
or proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture); (iii) any
person or Group, together with any Affiliates thereof, shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the beneficial owner (within the meaning of Rule
13d-3 under the Securities Exchange Act), directly or indirectly, of securities
of the Company representing at least a majority of the Voting Stock of the
Company; or (iv) a majority of the members of the Board of Directors shall not
constitute Continuing Directors.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral Documents" has the meaning provided therefor in the Senior
Note Indenture.
"Common Stock" means the Company's common shares, par value $.01 per
share.
"Company" means Anacomp, Inc., the party named as such in this
Indenture, until a successor replaces it pursuant to and in compliance with the
terms of this Indenture, and thereafter means such successor.
"Consolidated Amortization Expense" of any person for any period means
the amortization expense of such person and its Subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Cash Flow Coverage Ratio" means, with respect to any
person, for any period, determined on a consolidated basis in accordance with
generally accepted accounting principles, the ratio of: (A) the sum of (i)
Consolidated Net Income of such person for such period (less any Preferred
Stock Dividends of such person for such period paid in cash), plus (ii)
Consolidated Depreciation Expense and Consolidated Amortization Expense of such
person for such period (in each case, to the extent deducted in calculating
such Consolidated Net Income), to (B) the sum of (i) Capital Expenditures made
by such person and its Subsidiaries during such period and (ii) all scheduled
principal payments of any Indebtedness of such person and its Subsidiaries
(whether or not made) for such period;
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<PAGE> 13
provided that for purposes of the above calculations, Capital Expenditures for
any period shall be deemed to equal the greater of (i) actual Capital
Expenditures of such person and its Subsidiaries for such period and (ii)
$20,000,000.
"Consolidated Depreciation Expense" of any person for any period means
the depreciation expense of such person and its Subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Net Income" of any person for any period means the net
income (or loss) of any person and its Subsidiaries (before deducting any
payment of any Preferred Stock Dividends) determined on a consolidated basis in
accordance with generally accepted accounting principles for such period taken
as a single accounting period; provided that there is excluded (i) any
extraordinary gains of such person or its Subsidiaries (including on sales of
property or assets or repurchases of debt securities outside the ordinary
course of business), except that any extraordinary gains realized in connection
with the tax treatment of such person's net operating loss carryforwards shall
be included in such person's Consolidated Net Income, (ii) the net income (or
loss) of any person (other than a Subsidiary of such person) in which any other
person (other than such person or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to such person or any of its Subsidiaries by such
other person during such period, (iii) except to the extent includible pursuant
to the foregoing clause (ii), the net income (or loss) of any person acquired
prior to the date it becomes a Subsidiary of such person or is merged into or
consolidated with such person or any of its Subsidiaries or that person's
assets are acquired by such person or any of its Subsidiaries, (iv) the net
income of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary and (v) any net income of such person or its
Subsidiaries realized as a result of any change in accounting treatment, other
than any such change required by generally accepted accounting principles;
provided, further, that the net income of any Subsidiary of such person which
is incorporated in a jurisdiction other than the United States or a State
thereof shall be included after taking account of repatriation taxes, if any,
that are or would be applicable to the distribution of such net income by such
Subsidiary, without regard to whether such repatriation taxes have been paid or
accounted for.
"Consolidated Net Tangible Assets" means, with respect to any person at
any date, determined on a consolidated basis in accordance with generally
accepted accounting principles, the sum of (i) Funded Indebtedness of such
person and its Subsidiaries at such date and (ii) Consolidated Tangible Net
Worth of such person and its Subsidiaries at such date.
"Consolidated Net Worth" means, with respect to any person at any date,
the shareholders' equity of such person and its Subsidiaries at such date
determined on a consolidated basis in accordance with generally accepted
accounting principles, plus (without
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<PAGE> 14
duplication) (i) in the case of the Company, the aggregate liquidation
preference of the outstanding Convertible Preferred Stock and (ii) the sum of
the proceeds received after the Initial Issuance Date from the sale of any
series of preferred stock of such person or its Subsidiaries which is not
Restricted Capital Stock; provided that there shall be excluded from the
calculation of Consolidated Net Worth: (A) the effects of any non-recurring
gains (other than those realized in connection with net operating loss
carryovers) and (B) any changes resulting solely from currency translation
adjustments (excluding translation adjustments that occur as a result of
non-current charges reflected in the Consolidated Net Income of such person).
"Consolidated Tangible Net Worth" means, with respect to any person at
any date, the Consolidated Net Worth of such person at such date, determined on
a consolidated basis in accordance with generally accepted accounting
principles, less the intangible assets of such person and its Subsidiaries at
such date. For purposes of this calculation, intangible assets include (i) all
revaluations or other write-ups in book value of assets (other than from
foreign currency translations) subsequent to the Initial Issuance Date, (ii)
all unamortized debt discounts and expenses, unamortized deferred charges
(excluding deferred income taxes), goodwill, patents, trademarks and other
intangible items and (iii) treasury stock (to the extent not already deducted
from shareholders' equity).
"Contingent Obligation" of any person means any direct or indirect
liability, contingent or otherwise, of such person with respect to any
Indebtedness of another person, if the purpose or intent of such person in
incurring the Contingent Obligation is to provide assurance to the obligee of
such Indebtedness that such Indebtedness will be paid or discharged, or that
any agreement relating thereto will be complied with, or that any holder of
such Indebtedness will be protected (in whole or in part) against loss in
respect thereof; provided that "Contingent Obligation" shall not include
endorsements of instruments for collection or deposit in the ordinary course of
business or indemnities granted in the normal course of business.
"Contingently Issuable Guarantees" means any guarantees of the
Company's obligations under the Securities and this Indenture issuable pursuant
to Section 4.24.
"Continuing Director" means, at any time, (i) any member of the Board
of Directors who was a director of the Company at the Initial Issuance Date and
(ii) any person who becomes a member of the Board of Directors if such person
was appointed or nominated for election to the Board of Directors by a majority
of the Continuing Directors.
"Convertible Preferred Stock" means the $25,000,000 Aggregate
Liquidation Preference Cumulative Convertible Redeemable Exchangeable Preferred
Shares, Series 1 due 2002 of the Company.
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<PAGE> 15
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of this Indenture is located at Two
International Place, 4th Floor, Boston Massachusetts 02110.
"Currency Agreement" means any foreign currency contract, currency swap
agreement or other similar agreement designed to protect the Company or any of
its Subsidiaries against fluctuations in currency values.
"Current Assets" means, with respect to any person at any date, the
total consolidated current assets of such person and its consolidated
Subsidiaries at such date which would, in accordance with generally accepted
accounting principles, be classified as current assets after deducting adequate
reserves in each case where a reserve is proper in accordance with generally
accepted accounting principles; provided, however, that in determining "Current
Assets" the following shall be excluded: (a) cash and Cash Equivalents, (b)
life insurance policies of which neither such person nor any of its
Subsidiaries is a beneficiary, and (c) investments (other than Permitted
Investments, as defined in the Senior Note Indenture as in effect on the
Refinancing Date) to the extent they are properly classified as current assets.
"Current Liabilities" means, with respect to any person at any date,
the total consolidated current liabilities of such person and its consolidated
Subsidiaries at such date, determined in accordance with generally accepted
accounting principles, including (a) all Indebtedness other than Funded
Indebtedness of such person and its consolidated Subsidiaries and (b) all other
items (including taxes accrued as estimated) that would in accordance with
generally accepted accounting principles be included as current liabilities of
such person and its consolidated Subsidiaries except for amounts required to be
paid or prepaid by such person or its consolidated Subsidiaries with respect to
any Funded Indebtedness within one year after the date of determination.
"Custodian" has the meaning provided in Section 6.01.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Environmental Law" means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment relating to the regulation and protection of human health,
safety, the environment and natural resources (including, without limitation,
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation), and any transfer of
ownership notification statutes such as the New Jersey Environmental Cleanup
Responsibility Act (N.J. State. Ann. 13:1K-6 et seq.) and the Connecticut
Industrial Transfer Law of 1985 (Conn. Gen.
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Stat. Section 22a-134 et seq.), and the regulations promulgated pursuant
thereto. Environmental Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C.
Section 1801 et seq.) the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) and the
Safe Drinking Water Act (42 U.S.C. Section 300 et seq.), each as supplemented
from time to time.
"Environmental Liabilities and Costs" means, as to any person, all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, expert and consulting fees, and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred or
reserved against as a result of any claim or demand by any other person,
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute, including without limitation any thereof arising
under any Environmental Law or any permit, approval, authorization, license,
variance, permission, order or agreement with any Governmental Authority or
other person, and which in each case relate to any environmental, health or
safety condition, or a release or discharge of contaminants or threatened
release thereof, and result from the past, present or future operations of such
person or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Debentures" means the 8.25% Convertible Senior Subordinated
Debentures of the Company, if any, issued upon exchange for the Convertible
Preferred Stock in accordance with the First Addendum to the Restated Articles
of Incorporation of the Company, which securities rank pari passu in right of
payment with the Securities.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's length free market transaction, for
cash, between a willing and able seller and a willing and able buyer, neither
of whom is under undue pressure or compulsion to complete the transaction.
Fair Market Value shall be determined by the Board of Directors acting in good
faith and shall be evidenced by a certified resolution of the Board of
Directors delivered to the Trustee.
"Foreign Currency Borrowing" means any borrowings pursuant to Foreign
Currency Credit Agreements.
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"Foreign Currency Credit Agreement" means any foreign currency
revolving credit agreement executed by one or more Foreign Subsidiaries to
establish any foreign currency revolving credit facilities at any time and from
time to time on or after the Refinancing Date.
"Foreign Currency Loan" means any foreign currency loans made by
foreign currency lenders pursuant to any Foreign Currency Credit Agreement.
"Foreign Subsidiary" means any Subsidiary of the Company which is
incorporated under the laws of a jurisdiction other than the District of
Columbia or any state, territory or possession of the United States of America.
"Free Cash Flow" means, with respect to any person for any period, as
determined on a consolidated basis in accordance with generally accepted
accounting principles, the amount by which (A) the sum of (i) Consolidated Net
Income of such person for such period, less Preferred Stock Dividends of such
person for such period paid in cash, (ii) Consolidated Depreciation Expense,
Consolidated Amortization Expense and other non-cash charges of such person and
its Subsidiaries for such period (to the extent included in the computation of
such Consolidated Net Income) and (iii) Net Cash Proceeds from Asset Sales
received by such person and its subsidiaries during such period applied to the
repayment of Indebtedness under the Senior Credit Agreements exceeds (B) the
sum of (i) any increase (or less any decrease) in the Working Capital
(excluding cash and marketable securities) of such person and its Subsidiaries
at the end of such period from the Working Capital (excluding cash and
marketable securities) of such person and its Subsidiaries at the beginning of
such period, (ii) Capital Expenditures made by such person and its Subsidiaries
during such period up to the amount permitted under the Senior Credit
Agreements as in effect on the Refinancing Date, (iii) any non-cash credits of
such person and its Subsidiaries for such period (to the extent included in, or
to the extent not netted against non-cash charges included in, the computation
of Consolidated Net Income of such person for such period), and (iv) the actual
amortization payments made by such person and its Subsidiaries under the Senior
Credit Agreements during such period.
"Fully Accreted Value" means $1,000 per each $960 of stated principal
amount of the Securities.
"Funded Indebtedness" of any person means all Indebtedness of such
person which matures more than one year from the date of determination or
Indebtedness that is renewable or extendible, at the option of the debtor, to a
date more than one year from such date, including, with respect to the Company,
Indebtedness incurred pursuant to the Revolving Credit Facility (and any
refinancings thereof).
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"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" of any person means, at any date, any of the following
(without duplication): (a) all obligations, unconditional or contingent, of
such person for borrowed money or evidenced by bonds, debentures, notes or
other similar instruments (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured); (b) all obligations of such person to pay
the deferred purchase price of property or services, except accounts payable
and accrued liabilities arising in the ordinary course of business that are not
overdue by more than 90 days or that are being contested in good faith; (c) all
indebtedness of such person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), and all other indebtedness of such person, whether or not for
borrowed money, with respect to which such person has become directly or
indirectly liable and which represents or has been incurred to finance the
purchase price (or a portion thereof) of any property or services or business
acquired by such person, whether by purchase, consolidation, merger or
otherwise; (d) all Capitalized Lease Obligations of such person; (e) all
Indebtedness secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and general intangibles)
owned by such person, even though such person has not assumed or become liable
for the payment of such Indebtedness; (f) all Contingent Obligations of such
person; (g) obligations in respect of Currency Agreements and Interest Swap
Obligations; and (h) Indebtedness in connection with Sale Leaseback
Transactions; and the amount thereof shall be the outstanding balance of any
such unconditional obligations as described in (a) through (h) and the maximum
liability of any such Contingent Obligations at such date.
"Indenture" means this Amended and Restated Indenture, as amended,
supplemented or modified from time to time in compliance with the terms hereof.
"Independent Financial Advisor" means a nationally recognized
investment banking firm that (i) ranked in the top ten (as determined by the
Security Industry Association, Inc. or a similar securities information data
company) as lead manager for primary debt security offerings in the year ending
prior to the year in which it is called upon to give independent financial
advice to the Company as described herein, (ii) does not (and whose directors,
officers, employees and Affiliates do not) have a material direct or indirect
financial interest in the Company or any of its Affiliates, (iii) from the
beginning of the year ending prior to the year in which it is called upon to
give independent financial advice to the
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<PAGE> 19
Company as described herein, and at the time it is so called upon to give
independent financial advice to the Company, is not (and none of whose
directors, officers, employees or Affiliates is), a promoter, director or
officer of the Company or any of its Affiliates or an underwriter or placement
agent with respect to any securities of the Company or any of its Affiliates,
and (iv) does not provide any advice or opinions to the Company or any of its
Affiliates except as an Independent Financial Advisor.
"Initial Issuance Date" means October 29, 1990.
"Interest Expense" of any person for any period means the aggregate
amount of interest in respect of Indebtedness (including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing) and all but the principal component of rentals
in respect of Capitalized Lease Obligations, paid, accrued or scheduled to be
paid or accrued by such person during such period, all as determined in
accordance with generally accepted accounting principles, including to the
extent not otherwise included therein, (i) amortization of all debt discount
and expense, (ii) imputed interest and (iii) capitalized interest expense.
"Interest Swap Obligations" means the obligations of any person
pursuant to any interest rate swap agreement, interest rate collar agreement or
other similar bona fide interest rate hedging agreement or arrangement designed
to protect such person or any of its Subsidiaries against fluctuation in
interest rates.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in New York, New York or Boston, Massachusetts are not required to
be open.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
including, but not limited to, any Environmental Lien, security interest or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever intended to assure payment of any Indebtedness or
other obligation, including, without limitation, any conditional sale or other
title retention agreement, the interest of a lessor under a Capitalized Lease
Obligation, any financing lease having substantially the same economic effect
as of the foregoing, and the filing, under the Uniform Commercial Code or
comparable law of any jurisdiction, of any financing statement naming the owner
of the asset to which such Lien relates as debtor.
"Majority Capital Stock Sale" means, with respect to any person, any
sale, transfer, exchange or other disposition (including, without limitation,
by way of merger or consolidation), in a single transaction or a group of
related transactions, by such person or any of its Subsidiaries to any person
other than such person, its Subsidiaries or its corporate parent of fifty
percent (50%) or more of the Capital Stock or other ownership interest of any
of such person's Subsidiaries; provided, however, that Majority Capital Stock
Sale shall not include (A) any of the transactions governed by Article 5
(provided that the Company and such
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<PAGE> 20
transaction comply with the terms of Article 5) or (B) any plan of liquidation
governed by Section 4.16 (provided that the Company and such plan of
liquidation comply with the terms of Section 4.16).
"Market Value" of a share of Common Stock means, at any date, the
average of the daily closing prices for a share of Common Stock for the 20
consecutive trading day period ending two trading days prior to such date. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange or in the National Market System of the
National Association of Securities Dealers Automated Quotation System, Inc.
("NASDAQ") on which or to which the shares of Common Stock are listed or
admitted to trading, or, if not listed or admitted to trading, the average of
the closing bid and asked prices of the Common Stock in the over-the-counter
market as reported by NASDAQ or any comparable system, or if the Common Stock
is not listed on NASDAQ or a comparable system, the average of the closing bid
and asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Board of Directors
of the Company acting in good faith. In the absence of one or more such
quotations, Market Value shall be determined by the Board of Directors of the
Company acting in good faith, on the basis of such quotations and other
information as they consider, in their reasonable judgment, appropriate.
"Material Acquisition" means, with respect to any person, any merger,
consolidation, acquisition or lease of assets, acquisition of securities or
other business combination or acquisition, or any two or more such transactions
that are part of a common plan (pursuant to a related set of agreements) to
acquire a business or group of related businesses, if the assets and/or
securities thus acquired in the aggregate would constitute a Significant
Subsidiary of such person (if such business, assets and/or securities were
organized in the corporate form) immediately preceding such transaction.
"Net Cash Proceeds" means, with respect to any Asset Sale or Majority
Capital Stock Sale, as the case may be, the proceeds thereof in the form of
cash, including payments in respect of deferred payment obligations when
received in the form of cash (except to the extent that such obligations are
financed or sold with recourse to such person or any of its Subsidiaries;
provided that when such obligation no longer has recourse to such person or any
of its Subsidiaries, the cash payments received in respect thereof shall
constitute Net Cash Proceeds), net of: (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of counsel and
investment bankers but excluding fees and expenses payable to an Affiliate of
the Company or any of its Subsidiaries) directly related to such Asset Sale or
Majority Capital Stock Sale; (ii) provisions for all taxes payable as a direct
result of such Asset Sale or Majority Capital Stock Sale; (iii) payments made
to retire Indebtedness where payment of such Indebtedness is required in
connection with such Asset Sale or Majority Capital Stock Sale (other than
payments required to be made on Indebtedness under the Senior Credit Agreements
or the Securities pursuant to the terms thereof or hereof);
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<PAGE> 21
and (iv) appropriate amounts to be provided by such person or any of its
Subsidiaries, as the case may be, as a reserve, in accordance with generally
accepted accounting principles, against any liabilities directly associated
with such Asset Sale or Majority Capital Stock Sale, and retained by such
person or any of its Subsidiaries, as the case may be, after such Asset Sale or
Majority Capital Stock 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 or Majority Capital Stock Sale, as the case may be; provided,
however, that to the extent any such amount set aside as a reserve is
subsequently decreased or discontinued as a reserve, other than by reason of
payment of the respective liability represented thereby, such amounts shall
constitute Net Cash Proceeds. For the purposes of this definition, "Net Cash
Proceeds" shall be deemed to include, without limitation, any award of
compensation for any asset, property or related group thereof taken by
condemnation or eminent domain and insurance proceeds for the loss of or damage
to such asset, property or group thereof if such award or proceeds equals or
exceeds $1,000,000 (in the case of any one asset or property or related group)
or $5,000,000 in the aggregate and within 60 days after the receipt thereof,
replacement of any such asset, property or group thereof with substantially
similar assets or properties or repair of such asset, property or group
thereof, has not commenced (provided that in the event that at any time such
replacement or repair is abandoned or is otherwise discontinued or is not
diligently pursued, the then-remaining award or proceeds, as the case may be,
shall constitute Net Cash Proceeds at such time).
"Net Proceeds" means, with respect to any transaction, to which the
Company or any of its Subsidiaries is a party, the proceeds therefrom whether
in the form of cash, securities or other property or assets, net of: (i)
brokerage commissions and other reasonable fees and expenses (including fees
and expenses of counsel and investment bankers but excluding fees and expenses
payable to an Affiliate of the Company or any of its Subsidiaries) directly
related to such transaction; (ii) provisions for all taxes payable as a direct
result of such transaction; and (iii) appropriate amounts to be provided by
such person or any of its Subsidiaries, as the case may be, as a reserve, in
accordance with generally accepted accounting principles, against any
liabilities directly associated with such transaction, and retained by such
person or any of its Subsidiaries, as the case may be, after such transaction.
"9% Debentures" means the Company's 9% Convertible Subordinated
Debentures due January 15, 1996.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Secretary or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company.
See Sections 11.04 and 11.05.
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<PAGE> 22
"Original Indenture" means the indenture, dated as of October 24, 1990,
between the Company and the Trustee, as amended by the First Supplemental
Indenture, dated as of March 22, 1993.
"144A Trading System" means the Portal Market of the National
Association of Securities Dealers, Inc. or such other trading system approved
by the SEC for secondary trading of unregistered securities in transactions
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Rule 144A promulgated thereunder.
"144A Trading System Security" means a security designated by a 144A
Trading System as eligible to trade thereon.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company. See Sections 11.04 and 11.05.
"Paying Agent" has the meaning provided in Section 2.03, except that
for the purposes of Articles 3 and 8 and Sections 4.07, 4.08, 4.16, 4.18, 4.19
and 4.22 the Paying Agent shall not be the Company or any Subsidiary of the
Company.
"Permitted Liens" means with respect to any person: (i) pledges or
deposits by such person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness) or
leases to which such person is a party, or deposits to secure public or
statutory obligations of such person or deposits of cash or United States
government bonds to secure surety or appeal bonds to which such person is a
party, or deposits as security for contested taxes or import duties or for the
payment of rent; (ii) Liens imposed by law on property which do not materially
detract from the value of such property or assets or materially impair the use
thereof in the operation of the business of such person, such as carriers',
warehousemen's and mechanics' liens which were incurred in the ordinary course
of business or other Liens arising out of judgments or awards against such
person (A) with respect to which such person shall then in good faith be
prosecuting appeal or other proceedings for review or (B) which in the
aggregate do not exceed $1,000,000; provided that such Liens shall be Permitted
Liens only to the extent that appropriate liabilities relating thereto have
been recorded on the books and records of such person; (iii) Liens for property
taxes not yet subject to penalties for nonpayment or which are being contested
in good faith and by appropriate proceedings; provided that such Liens shall be
Permitted Liens only to the extent that appropriate liabilities, if any,
relating thereto have been recorded on the books and records of such person;
(iv) Liens in favor of issuers of surety bonds issued pursuant to the request
of and for the account of such person in the ordinary course of its business
(other than Liens on Capital Stock of Subsidiaries); (v) minor survey
exceptions, minor encumbrances, easements or reservations of, or rights of
others for, rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions as to
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<PAGE> 23
the use of real properties; (vi) Liens existing on the Initial Issuance Date
(other than Liens upon Capital Stock of Subsidiaries of such person, except as
permitted by clause (vii)); (vii) Liens securing Senior Indebtedness; (viii)
the Lien created by Sections 7.07 and 8.01 or arising as contemplated by
Section 4.12 (provided the Company complies with the terms of such Section
4.12) or Section 4.23; (ix) Liens to secure any extension, renewal or
replacement (or successive extensions, renewals or replacements) as a whole, or
in part, of any Indebtedness secured by any Lien referred to in the foregoing
clause (vi), (vii) or (viii); provided that (except in the case of any Lien
referred to in clause (vii)) (A) such extended, renewed or replacement Lien
shall be limited to all or a part of the same property that secured the Lien
extended, renewed or replaced (plus improvements on such property) and (B) the
principal or stated amount of the Indebtedness secured by such Lien at such
time is not increased; (x) Liens relating to the purchase by such person or its
foreign subsidiaries, in connection with a bona fide foreign currency hedging
program, of futures or forwards contracts on margin, to the extent that the
aggregate exposure of such person and its Subsidiaries under such Liens is
limited in an amount equal to U.S. $1,000,000; (xi) Liens relating to
Capitalized Lease Obligations of such person and its Subsidiaries which
Capitalized Lease Obligations are existing as of the date hereof; (xii) Liens
on assets of any foreign Subsidiary securing Indebtedness of such foreign
Subsidiary permitted by Section 4.08(d)(iii); (xiii) Liens relating to Purchase
Money Lien Obligations incurred in the ordinary course of business; provided
that the aggregate amount of Indebtedness secured by Liens permitted by this
clause (xiii) shall not exceed $10,000,000; and provided, further, that the
incurrence of any such Indebtedness is permitted by Section 4.08 hereof; (xiv)
Liens on assets of any Subsidiary securing Indebtedness of such Subsidiary
permitted by Section 4.08(d)(i); and (xv) Liens (including extensions and
renewals thereof) upon real or tangible personal property acquired by such
person after the Initial Issuance Date; provided that, in the case of a Lien
referred to in clause (xv), (A) any such Lien is created solely for the purpose
of securing Indebtedness representing, or incurred to finance, refinance or
refund, the cost (including the cost of construction) of the item of property
subject thereto, (B) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of the lesser of such cost or the Fair Market Value
of such property at the time such Lien was created, (C) such Lien does not
extend to or cover any property other than such item of property and any
improvements on such item and (D) the incurrence of such Indebtedness is
permitted by Section 4.08.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Preferred Stock Dividends" with respect to any person for any period
means the aggregate dividends and other distributions on or in respect of or to
the holders of any preferred stock of such person or its Subsidiaries paid
during such period.
"Principal" of a debt security means the stated principal of the
security, plus, where appropriate, the premium, if any, thereon.
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<PAGE> 24
"Purchase Agreement" means that certain Securities Purchase/Exchange
Agreement relating to, among other things, the Securities dated as of October
24, 1990, by and among the Company and the purchasers named on the execution
pages thereof, as amended, modified or supplemented from time to time in
compliance with the terms thereof.
"Purchase Money Lien Obligation" means Indebtedness secured by a
purchase money mortgage, pledge or other Lien upon any property acquired by a
person to effect the acquisition of such property, including, without
limitation, any industrial development bonds incurred in connection with the
acquisition of properties, related letters of credit and Liens securing such
letters of credit; provided that (i) no such mortgage, pledge, or Lien shall
(A) extend to or cover any other property or (B) secure Indebtedness in excess
of the lesser of the cost of the property subject to such mortgage, pledge, or
lien or the Fair Market Value of such property at the time such mortgage,
pledge or lien is created, and (ii) the term "Purchase Money Lien Obligation"
shall not include any Capitalized Lease Obligation.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed by the Company for such redemption pursuant to
this Indenture and the Securities.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Refinancing Date" means _______________, 1995.
"Registered Exchange Offer" has the meaning provided therefor in the
Registration Rights Agreement.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means that certain Registration Rights
Agreement relating to, among other things, the Securities dated as of October
24, 1990, by and among the Company and the purchasers named on the execution
pages thereof, as amended, modified or supplemented from time to time in
compliance with the terms thereof.
"Representative" means (i) with respect to the Banks , the Bank Agent,
(ii) with respect to the Senior Notes, the Senior Note Trustee and (iii) with
respect to any other issue of Senior Indebtedness, (A) the indenture trustee or
(B) any other trustee, agent or representative for all the holders or lenders
of such issue of any Senior Indebtedness appointed by or with the consent of
such holders or lenders.
"Restricted Capital Stock" means (i) any preferred stock now in
existence or hereafter issued by any Subsidiary of the Company, (ii) any
Capital Stock now in existence or hereafter issued by the Company or any
Subsidiary which by its terms is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option
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<PAGE> 25
of the holder thereof, including upon the occurrence of specified events, in
whole or in part, on or prior to the final maturity of the Securities, or (iii)
any Capital Stock which is convertible into or exchangeable for any stock
described in clause (i) or (ii) above.
"Restricted Investments" means, with respect to any person, any
advances or loans to, or investments (by way of transfers of property,
contributions to capital, acquisitions of stock, securities or evidences of
indebtedness, or otherwise) in, or guarantees on behalf of, any other person;
except that the following shall not be deemed a Restricted Investment by the
Company or any of its Subsidiaries: (A) advances or loans by any Subsidiary of
the Company to, or investments by any Subsidiary of the Company in, the Company
or any Wholly Owned Subsidiary of the Company; (B) the acquisition by the
Company or any of its Subsidiaries of receivables owing to it, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms (provided that such provision does not
prevent the Company or any Subsidiary from offering such concessionary trade
terms as management deems reasonable in the circumstances); (C) investments by
the Company and its Subsidiaries in cash and Cash Equivalents; (D) Interest
Swap Obligations between the Company and its Affiliate or any Subsidiaries of
the Company and their respective Affiliates; provided that such Interest Swap
Obligations are entered into in the ordinary course of business on a basis no
less favorable to the Company or such Subsidiary as would be obtained in a
comparable arm's length transaction with a person which is not an Affiliate;
and (E) loans or advances by the Company to or guarantees by the Company on
behalf of employees of the Company, which loans, advances or guarantees are
made in the ordinary course of business in connection with employee salary and
benefit arrangements unanimously approved by disinterested members of the
Company's Board of Directors sufficient to constitute a quorum thereof.
"Restricted Securities" means the Securities, except that Securities
shall cease to be Restricted Securities when (i) they have been registered
under the Securities Act, the registration statement in connection therewith
has been declared effective and they have been disposed of pursuant to such
effective registration statement, or (ii) they have been disposed of pursuant
to Rule 144 (or any similar provision then in force) under the Securities Act.
"Revolving Credit Agreement" means collectively, all the agreements
pursuant to which the Revolving Credit Facility was established.
"Revolving Credit Facility" has the meaning provided therefor in the
Senior Note Indenture.
"Rights" has the meaning specified in the Rights Agreement.
"Rights Agreement" means the Rights Agreement dated as of February 4,
1990 between the Company and Manufacturers Hanover Trust Company.
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<PAGE> 26
"Sale Leaseback Transaction" means any transaction between the Company
or any Subsidiary thereof and any other person providing for the sale or
transfer by the Company or such Subsidiary of all or any substantial portion of
any property or asset (whether real, personal or mixed) to such person with the
intention of taking back a lease of such property.
"SEC" means the Securities and Exchange Commission.
"Securities" means the 15% Senior Subordinated Notes due 2000 of the
Company, and any of them, as amended or supplemented from time to time in
accordance with the Indenture, that are issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and the rules and regulations of the SEC promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"Senior Credit Agreements" means, collectively, the Senior Note
Indenture, Senior Notes, the Revolving Credit Agreement, and the Collateral
Documents.
"Senior Creditors" means, collectively, the Banks and the Senior Note
Purchasers.
"Senior Notes" means, (i) up to $225,000,000 aggregate principal amount
of Senior Notes due 2002 of the Company issued pursuant to the Senior Note
Indenture and any Senior Notes issued upon the transfer therefor or
substitution thereof as the same may be amended, modified supplemented or
extended from time to time (provided that the term "Senior Notes" shall not
include any amendment, modification, extension thereof, or supplement thereto,
to the extent such amendment, modification, extension or supplement increases
or permits any increase in the principal amount outstanding or to be
outstanding thereunder not permitted under the terms of Section 4.08(b)(ii)
("Non-Permitted Increases"), and in the event any such Non-Permitted Increases
are provided for in such amendment, supplement, modification or extension, the
term "Senior Notes" shall thereafter mean the Senior Notes as in effect prior
thereto without giving effect to such Non-Permitted Increases), and (ii) for
all purposes hereunder other than Section 4.08(b)(ii), any refunding,
refinancing or subsequent refinancing thereof, in whole or in part, permitted
under Section 4.08(b)(ii) (which refunding or refinancing Indebtedness
constitutes Senior Indebtedness), as the same may be amended, modified,
supplemented or extended (subject to the limitations of Section 4.08(b)(ii) as
if the provisions thereof applied to such Indebtedness).
"Senior Note Indenture" means the indenture dated as of the Refinancing
Date between the Company and The Bank of New York, as trustee, as the same may
be amended, supplemented or modified in accordance with its terms.
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"Senior Note Purchasers" means the purchasers of the Senior Notes as of
the Refinancing Date and any permitted subsequent holders thereof.
"Senior Note Trustee" means The Bank of New York, the trustee for the
Senior Notes.
"Senior Refinancing" means the issuance by the Company of the Senior
Notes and the establishment of the Revolving Credit Facility.
"Senior Repayment Date" means the first day on which all Indebtedness
evidenced by the Senior Credit Agreements (other than any refinancing or
replacement of the Revolving Credit Facility) shall have been repaid in full.
"Significant Subsidiary" of any person means any Subsidiary of such
person which would be a "significant subsidiary" of such person as defined in
clause (2) of the definition of such term in Rule 1.02(v) of Regulation S-X
promulgated under the Securities Act.
"Subordinated Indebtedness" means (i) the 13-7/8% Debentures, and (ii)
any Indebtedness (whether outstanding on the Initial Issuance Date or hereafter
created) which, pursuant to the terms of the instrument creating or evidencing
the same is subordinate in right of payment to the Securities, to which
Indebtedness the Securities shall be senior in right of payment.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by one or more Subsidiaries of such person or by such person
and one or more Subsidiaries thereof or (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries thereof or such
person and one or more Subsidiaries thereof, directly or indirectly, at the
date of determination thereof has at least a majority ownership interest or the
power to elect or direct the election of a majority of the board of directors
or other governing body of such person.
"13-7/8% Debentures" means the Company's 13-7/8% Convertible
Subordinated Debentures due January 15, 2002.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code
Section Section 77aaa-77bbbb) as in effect on the date of this Indenture,
except as provided in Section 10.03.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
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"Trustee" means the party named as such in this Indenture until a
successor replaces such party in accordance with the provisions of this
Indenture, and thereafter means such successor.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.01(1).
"Voting Stock" means, with respect to any person, Capital Stock of any
class or classes if the holders of such Capital Stock are ordinarily, in the
absence of contingencies, entitled to vote for the election of the directors
(or other persons performing similar functions) of such person even though the
right so to vote has been suspended by the happening of such a contingency.
"Warrant Agreement" means the Warrant Agreement dated as of October 24,
1990 between the Company and Manufacturers Hanover Trust Company, as warrant
agent, as the same may be amended, supplemented or modified in accordance with
its terms.
"Warrant Shares" and "Warrants" each have the meaning provided therefor
in the Warrant Agreement.
"Wholly Owned Subsidiary" of any person shall mean any Subsidiary of
such person of which all of the outstanding shares of Capital Stock (other than
directors' qualifying shares, if required by law) are owned directly by such
person or a Wholly Owned Subsidiary of such person; provided that Electronic
Data Preparation Corporation ("EDP") shall constitute a Wholly Owned Subsidiary
of the Company for all purposes hereunder, so long as the Company or a Wholly
Owned Subsidiary thereof (other than EDP) owns, directly or indirectly, at
least 98% of the outstanding shares of Capital Stock of EDP.
"Working Capital" means, for any person at any date, as determined on a
consolidated basis in accordance with generally accepted accounting principles,
the amount by which the Current Assets of such person and its Subsidiaries at
such date exceeds the Current Liabilities of such person and its Subsidiaries
at such date.
<TABLE>
<CAPTION>
SECTION 1.02. Other Definitions.
Term Defined in Section
---- ------------------
<S> <C>
"Acceleration Date" 6.02
"Application Date" 4.19
"Asset Sale Offer" 4.19
"Asset Sale Offer Amount" 4.19
"Asset Sale Purchase Date" 4.19
"Bankruptcy Law" 6.01
</TABLE>
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<PAGE> 29
<TABLE>
<S> <C>
"Change of Control Date" 4.18
"Change of Control Offer" 4.18
"Change of Control Payment Date" 4.18
"Custodian" 6.01
"Default Rate" 4.01
"Electronic Data" 4.03
"Event of Default" 6.01
"Florida AAC" 4.03
"4.08 Offer" 4.08
"4.08 Payment Date" 4.08
"Free Cash Flow Offer" 4.22
"Free Cash Flow Offer Amount" 4.22
"Guarantee Agreements" 5.01
"Group" 1.01
"Incur" 4.08
"Minimum Amount" 4.07
"Offer" 4.07
"Offer Amount" 4.07
"Ownership Change" 4.25
"Payment" 9.02
"Period" 4.22
"Prepayment Date" 4.22
"Purchase Date" 4.07
"Replacement Revolver" 4.23
"Security Interest Agreements" 5.01
"Senior Indebtedness" 9.01
"Stock Application Date" 4.19
"Stock Sale Offer" 4.19
"Stock Sale Offer Amount" 4.19
"Stock Sale Purchase Date" 4.19
"Subsidiary Security Interest Agreements" 5.01
"Trigger Date" 4.03
</TABLE>
SECTION 1.03. 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:
"Commission" means the SEC;
"indenture securities" means the Securities;
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"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles in the United States as in effect on the date
hereof as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) 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.
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ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form set forth in Exhibit A, which is
incorporated in and forms a part of this Indenture; except that if the Trustee
receives an Opinion of Counsel, upon which the Trustee is expressly authorized
to rely, which opinion is reasonably satisfactory to the Company, to the effect
that the legend which appears as the first paragraph of such Exhibit A is no
longer required, such legend may be deleted from such form of the Securities.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them and its execution
shall constitute conclusive evidence of its approval. Each Security shall be
dated the date of its authentication.
All calculations of interest payable on the Securities shall be
based on a 360-day year and the actual number of days elapsed.
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.
One Officer shall sign the Securities for the Company by facsimile
or manual signature.
If a person whose signature is on a Security as an Officer was an
Officer at the time of execution and no longer holds that office at the time
the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until a Trust Officer of the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver to the Company or at its
order Securities for original issue in the aggregate principal amount of up to
$215,904,000 ($224,900,000 Fully Accreted Value), upon a written order of the
Company signed by an Officer of the Company. The order shall specify the
amount of Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $215,904,000 ($224,900,000
fully Accreted Value), except as provided in Section 2.07.
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The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $960 principal amount ($1,000 Fully
Accreted Value) and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-Registrars and one
or more additional Paying Agents. The term "Paying Agents" includes any
additional Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Paying Agent not a party to this Indenture. 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
Agent and any change in the address of such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company or a Subsidiary of the Company may act as Registrar and/or
Paying Agent except that, for purposes of Articles 3 and 8 and Sections 4.07,
4.08, 4.16, 4.18, 4.19 and 4.22, neither the Company nor any Subsidiary of the
Company shall act as Paying Agent.
SECTION 2.04. Paying Agent To Hold Money in Trust.
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 Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest (including the portion of Fully Accreted
Value consisting of interest) on the Securities (whether such money has been
paid to it by the Company or any other obligor on the Securities), and shall
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary of the
Company acts as Paying Agent, it shall segregate the money and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to
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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.
SECTION 2.05. Securityholder Lists.
The Registrar shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each semiannual interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders (including such a list as of each regular record
date for the payment of interest).
Until such time as no outstanding Securities are Restricted
Securities, the Trustee shall maintain a list of Securities, if any, which are
not Restricted Securities.
SECTION 2.06. Transfer and Exchange.
Subject to Section 2.14, when Securities 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 (and an equal Fully Accreted Value)
of Securities of other authorized denominations, the Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfer and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require from the transferring or
exchanging Securityholder payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges
pursuant to (i) Section 2.10, 3.06 or 10.05 or (ii) to the extent such exchange
relates to any unpurchased part of the Security surrendered in an offer,
Sections 4.07, 4.08, 4.18, 4.19 or 4.22).
The Registrar need not register the transfer or exchange of (a) any
Securities selected for redemption in whole or in part, except for the
unredeemed portion thereof, or (b) any Securities for a period of 15 days
before a selection of Securities to be redeemed.
For so long as the Securities are not registered under the
Securities Act, the Registrar shall not be required to register the transfer of
a Security until the Trustee has been directed to do so by the Company and has
been advised by the Company that an Opinion of
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<PAGE> 34
Counsel acceptable to the Company has been received by the Company (which
counsel may be an employee of the Securityholder) to the effect that the
transfer of such Security is exempt from registration under the Securities Act
or such registration is not required.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, the applicant for a substituted Security shall furnish
a letter of indemnification or indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Security is replaced. The Company
may charge such Holder for its expenses in replacing a Security. Every
replacement Security shall be an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities that have
been authenticated by the Trustee, except for those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company
or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or a Subsidiary of the
Company) holds, on a redemption date or maturity date, money sufficient to pay
all Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue unless
and until, pursuant to Article 9, the Paying Agent is unable to make payments
on the Securities to the Holders thereof.
SECTION 2.09. Voting Securities.
In determining whether the Holders of the required principal amount
of outstanding Securities have given any request, demand, authorization,
direction or notice or concurred in any amendment, supplement, waiver or
consent or taken any other action hereunder, Securities owned by the Company or
any of its Subsidiaries, any other obligor upon the Securities or any
controlled Affiliate of the Company or any of its Subsidiaries or such other
obligor, shall be disregarded and deemed not to be outstanding, except that for
the
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<PAGE> 35
purposes of determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, amendment,
supplement, waiver, consent or action, only Securities which the Trustee knows
are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation and, unless otherwise instructed by the
Company, the Trustee shall destroy cancelled Securities and deliver a
certificate of destruction to the Company. The Company may not issue new
Securities to replace Securities it has paid or delivered to the Trustee for
cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest, plus, to the extent permitted by law, any
interest payable on the defaulted interest at the Default Rate, to the persons
who are Securityholders on a subsequent special record date. Such record date
shall be the tenth day next preceding the date fixed by the Company for the
payment of defaulted interest, whether or not such preceding tenth day is a
Business Day. At least 15 days before the special record date, the Company
shall mail to each Securityholder and the Trustee a notice that states the
special record date, the payment date (which shall be a Business Day) and the
amount of defaulted interest to be paid. Notwithstanding the foregoing, any
interest which is paid prior to the expiration of the 15-day or 30-day period,
as the case may be, set forth in Section 6.01(1), shall be paid to Holders of
Securities as of the record date for the interest payment date for which
interest has not been paid.
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<PAGE> 36
SECTION 2.13. Home Office Payment Agreements.
Payments of interest on, and all or any portion of the principal
of, any Security which is not a Restricted Security shall be made by check to
the Holder mailed to the address of such Holder (as of the applicable regular
or special record date for any such interest payment). Notwithstanding any
provisions of this Indenture and of the Securities to the contrary, such
principal and interest payments on a Restricted Security (other than the final
payment of Fully Accreted Value of and premium, if any, with respect thereto,
if the Trustee or the Company shall have requested surrender of such Restricted
Security at least 15 days prior to such payment) shall be made by the Trustee
directly to the Holder of such Restricted Security (net of any customary and
reasonable wire transfer charges imposed by the Trustee) by federal funds wire
transfer without surrender or presentation thereof to the Trustee if the Holder
has filed an agreement with the Trustee (with a copy to the Company) providing
that (i) such payment will be so made and (ii) such Holder (or the person for
whom such Holder is a nominee) will, before selling, transferring or otherwise
disposing of any such Restricted Security, make a notation thereon, or submit
the same to the Trustee for notation thereon, of the date to which interest has
been paid thereon and the amount of all redemptions previously made thereon, or
surrender the same to the Trustee in exchange for a Restricted Security or
Restricted Securities aggregating the same principal amount (and same Fully
Accreted Value) as the unredeemed principal amount (and Fully Accreted Value)
of the Restricted Securities surrendered. The final payment of the Fully
Accreted Value of, and premium, if any, with respect to a Security may be made
only upon presentment of such Security to the Trustee or Paying Agent. The
Trustee shall not incur any liability, and the Company will indemnify and save
the Trustee harmless against any loss, damage, liability or expense (including
reasonable attorneys' fees) resulting from any act or omission to act on the
part of the Company or any such Holder in connection with any such agreement or
which the Trustee may incur as a result of making any payment in accordance
with any such agreement.
SECTION 2.14. Legends; Restrictions on Transfer.
(a) Until such time as the Company and the Trustee have been
provided with an opinion of counsel of recognized standing in securities law
(including in-house or special counsel), which shall be reasonably satisfactory
in form and substance to the Company, to the effect that the Securities are no
longer Restricted Securities, all Securities issued hereunder shall bear the
following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY BE
REOFFERED AND SOLD ONLY IF SO REGISTERED OR PURSUANT TO ANY EXEMPTION
FROM SUCH REGISTRATION."
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provided, however, that if the Company and the Trustee have been provided with
documentation, as reasonably required by the Company and the Trustee, to
evidence that a Security has been designated a 144A Trading System Security and
shall be trading on the applicable 144A Trading System, then so long as such
Security is so eligible and trading on such system, such legend shall, at the
request of the Holder and upon presentation of such Security, be removed
therefrom; provided, further, that when such Security shall no longer be
eligible as a 144A Trading System Security or traded on a 144A Trading System,
such legend shall be reinstated until removed as provided in the first clause
of this sentence.
(b) Prior to any transfer of any Security required to bear the
legend set forth in Section 2.14(a), in whole or in part (other than pursuant
to an effective registration statement under the Securities Act or a sale or
other disposition made pursuant to Rule 144 (or any successor rule) promulgated
under such Act or any sale on a 144A Trading System; provided that with respect
to a sale on a 144A Trading System, prior to any subsequent transfer or sale
outside of such 144A Trading System, such Holder shall notify the Company and
arrange for the above legend to be reinstated on such Security (to the extent
such legend was removed pursuant to paragraph (a) above)), the Securityholder
thereof shall furnish, at the expense of such Securityholder, to the Company
and the Trustee an opinion of counsel of recognized standing in securities law
(including in-house or special counsel) which shall be reasonably satisfactory
in form and substance to the Company, to the effect that such transfer would
not be in violation of the Securities Act.
(c) Each Security issued hereunder shall bear the following
legend:
"FOR PURPOSES OF SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED: (i) THE ISSUE DATE OF THIS SECURITY IS OCTOBER 29, 1990; (ii)
THE YIELD TO MATURITY IS 15.808%; (iii) THE ORIGINAL ISSUE DISCOUNT
PER $1,000 FULLY ACCRETED VALUE IS $40; AND (iv) THE APPROXIMATE
METHOD HAS BEEN USED TO DETERMINE YIELD FOR THE ACCRUAL PERIOD
BEGINNING OCTOBER 29, 1990 AND ENDING NOVEMBER 1, 1990 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT PER $1,000 FULLY ACCRETED VALUE ALLOCABLE
TO THE ACCRUAL PERIOD BEGINNING OCTOBER 29, 1990 AND ENDING NOVEMBER
1, 1990 IS $1.69."
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ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem all or any of the Securities
pursuant to the optional redemption provisions of this Article 3 and paragraph
4 of the Securities, it shall notify the Trustee by an Officers' Certificate at
least 45 days before the redemption date (unless a shorter notice shall be
satisfactory to the Trustee) of the redemption date and the principal amount of
Securities to be redeemed.
If the Company elects to reduce the principal amount of Securities
required to be redeemed as permitted pursuant to the mandatory redemption
provisions of this Article 3 and paragraph 4 of the Securities, it shall notify
the Trustee of the amount of the reduction and the basis for it. If the
Company elects, and is permitted by the terms hereof, to credit against any
such redemption Securities not previously delivered to the Trustee for
cancellation, it shall deliver such Securities with the notice.
If the Registrar is not the Trustee, the Company shall,
concurrently with each notice of redemption, cause the Registrar to deliver to
the Trustee a certificate (upon which the Trustee may rely) setting forth the
amounts of and identifying Restricted Securities held by any Holder.
SECTION 3.02. Selection of Securities To Be Redeemed.
If fewer than all of the Securities are to be redeemed, the Trustee
shall allocate the total principal amount to be redeemed pro rata between
Restricted Securities held by the Securityholders and the remaining Securities,
based upon the outstanding principal amount of Securities which are Restricted
Securities held by the Securityholders and the remaining Securities. The
Restricted Securities (or portions thereof in integral multiples of $960
principal amount ($1,000 Fully Accreted Value)) held by the Securityholders to
be redeemed shall be selected pro rata (or as nearly pro rata as practicable)
and the remaining Securities to be redeemed shall be selected in a fair and
reasonable manner chosen at the discretion of the Trustee.
The Trustee shall make the selection from the Securities
outstanding, subject to redemption and not previously called for redemption.
Securities in denominations of $960 principal amount ($1,000 Fully Accreted
Value) may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $960 principal amount ($1,000 Fully Accreted Value) or any
integral multiple thereof) of the principal of Securities that have
denominations
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<PAGE> 39
larger than $960 principal amount ($1,000 Fully Accreted Value). Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
The Trustee shall promptly notify the Company of the Securities or
portions thereof selected for redemption.
SECTION 3.03. Notice of Redemption.
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 Securities are to be redeemed at its address as it appears in the
Securities register maintained by the Registrar.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities 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 upon surrender to the Paying Agent of the Securities;
(6) the paragraph of the Securities pursuant to which
Securities are being redeemed; and
(7) if any Security is being redeemed in part, the portion
of the principal amount (equal to $960 ($1,000 Fully Accreted Value)
or any integral multiple thereof) of such Security to be redeemed and
that, on and after the redemption date, upon surrender of such
Security, a new Security or Securities in principal amount (and Fully
Accreted Value) equal to the principal amount (and Fully Accreted
Value) of the unredeemed portion thereof will be issued.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, and deposit of the redemption
price with the Paying Agent has been made as provided in Section 3.05,
Securities called for redemption become due and payable on the redemption date
and at the redemption price and shall cease to bear interest from and after the
redemption date (unless the Company shall default in the payment of the
redemption price or accrued interest). Upon surrender to the Paying Agent,
such Securities shall be paid at the redemption price, plus (without
duplicating interest included in Fully Accreted Value) accrued interest to the
redemption date.
SECTION 3.05. Deposit of Redemption Price.
On or prior to each redemption date, the Company shall deposit with
the Paying Agent in immediately available funds money sufficient to pay the
redemption price of and (without duplicating interest included in Fully
Accreted Value) accrued interest on all Securities to be redeemed on that date
other than Securities or portions thereof called for redemption on that date
which have been delivered by the Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder a new Security in
principal amount (and Fully Accreted Value) equal to the principal amount (and
Fully Accreted Value) of the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of the Securities and interest
thereon (including interest comprised of the excess of Fully Accreted Value
over the principal amount) on the dates and in the manner provided in the
Securities and this Indenture. An installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent
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(other than the Company, any Subsidiary or an Affiliate of the Company) holds
on that date money designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest (including (i) interest comprised of the excess of
Fully Accreted Value over the principal amount and (ii) any post petition
interest in any proceeding under any Bankruptcy Law) in each case, to the
extent lawful, at the rate per annum borne by the Securities plus (only until
such time as at least 30% of the aggregate principal amount of the Securities
are no longer Restricted Securities) 1% (the "Default Rate"). The Company
shall notify the Trustee in writing when the time period referred to in the
foregoing parenthetical is applicable.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain an office or agency where Securities 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
Securities 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 as set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the Corporate Trust Office
of the Trustee located in Boston, Massachusetts as such office of the Company
in accordance with Section 2.03 hereof.
SECTION 4.03. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Subsidiary of
the Company to, directly or indirectly, (1) declare or pay any dividend or make
any distribution on or with respect to any Capital Stock of the Company or any
Subsidiary of the Company (other than dividends or distributions payable on
Capital Stock of any Wholly Owned Subsidiary of the Company), (2) make any
Restricted Investments, (3) purchase, redeem, defease or otherwise acquire or
retire for value (including by way of business combination or otherwise) any
Capital Stock of the Company or any Subsidiary of the Company (other than a
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Wholly Owned Subsidiary of the Company) or (4) purchase, redeem, defease or
otherwise acquire or retire for value (other than for Capital Stock which is
not Restricted Capital Stock) prior to its scheduled maturity date any
Indebtedness which is not Senior Indebtedness under the terms of this Indenture
and has the same or longer scheduled maturity than the Securities, or amend the
terms of any such Indebtedness so as to accomplish the same result
(collectively, "Restricted Payments"), if at the time of such Restricted
Payment or after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing, (ii) the Consolidated Net Worth of the
Company as of the last day of its preceding fiscal quarter for which financial
information is publicly available is less than or equal to zero or (iii) the
aggregate amount expended for such Restricted Payments subsequent to the end of
the Company's first fiscal quarter that the Company reports a Consolidated Net
Worth greater than zero (the "Trigger Date") (the amount expended for such
purposes, if other than in cash, shall be the Fair Market Value of such
property as determined by the Board of Directors in good faith, whose
determination shall be conclusive (in the absence of manifest error or fraud on
the part of the Board of Directors) and evidenced by a certified resolution of
the Board of Directors filed with the Trustee) would equal or exceed the sum
of:
(A) 25% of the Consolidated Net Income (or if Consolidated Net
Income shall be a deficit, minus 100% of such deficit) of the Company
accrued for the period commencing on the day immediately following the
Trigger Date through and including the last day of the fiscal quarter
for which financial information is publicly available (taken as a
single accounting period); and
(B) the sum of (i) the aggregate Net Proceeds, including the Fair
Market Value of property other than cash (as determined by the Board
of Directors in good faith, whose determination shall be conclusive
(in the absence of manifest error or fraud on the part of the Board of
Directors) and evidenced by a certified resolution of the Board of
Directors filed with the Trustee), received by the Company from the
issue or sale after the Trigger Date of its Capital Stock (other than
(W) Capital Stock issued upon conversion or exercise of the
Convertible Preferred Stock, the Exchange Debentures or the Warrants,
(X) Restricted Capital Stock (provided that the proceeds from the
issuance of such Restricted Capital Stock may be included only when
and to the extent that shares of such Restricted Capital Stock are
subsequently converted into or exchanged for other shares of Capital
Stock which do not constitute Restricted Capital Stock), (Y) Capital
Stock issued to a Subsidiary or other controlled Affiliate of the
Company and (Z) Capital Stock which, by its terms, is convertible into
or exchangeable for securities other than Capital Stock of the Company
which is not Restricted Capital Stock) and (ii) the aggregate Net
Proceeds, including the Fair Market Value of property other than cash
(as determined by the Board of Directors in good faith, whose
determination shall be conclusive (in the absence of manifest error or
fraud on the part of the Board
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of Directors) and evidenced by a certified resolution of the Board of
Directors filed with the Trustee) received by the Company from the
issue and sale after the Trigger Date of Indebtedness (other than the
Exchange Debentures that has been converted into Capital Stock (other
than Restricted Capital Stock) of the Company.
(b) Notwithstanding the foregoing provisions of this Section
4.03, if, immediately after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing, the restrictions of such Section
4.03(a) will not prohibit the following actions by the Company or any of its
Subsidiaries: (A) the acquisition or retirement of Capital Stock of the Company
or any Subsidiary thereof solely in exchange for, or through the application of
Net Proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company or other controlled Affiliate of the Company) of,
other shares of Capital Stock of the Company (other than Restricted Capital
Stock) or warrants (other than the Warrants) or rights to purchase shares of
Capital Stock of the Company (other than Restricted Capital Stock); (B) the
declaration and payment by the Company of dividends or distributions in its
Capital Stock (other than Restricted Capital Stock); (C) the payment of any
dividend within 60 days after the declaration thereof, if, at the date of
declaration, such dividend complied with the provisions of Sections 4.03(a) and
(d); (D) the declaration and payment by the Company of dividends on the
Convertible Preferred Stock at a rate not in excess of the rate provided in the
Company's Restated Articles of Incorporation as in effect on the Initial
Issuance Date with respect to such stock; (E) the redemption by the Company of
the Rights (provided that payments made for redemption thereof shall not exceed
$60,000 in the aggregate); (F) Restricted Investments by the Company in joint
ventures (provided that the business and property which is the subject of such
joint ventures is in the same or substantially similar line or lines of
business as one or more of the lines of business in which the Company or any of
its Subsidiaries is engaged on the Initial Issuance Date); (G) declaration and
payment by the Company of dividends on any preferred stock issued by the
Company after the Initial Issuance Date; or (H) the optional redemption by the
Company of Securities pursuant to the provisions of this Indenture and the
Securities; provided, however, that the aggregate amount of Restricted Payments
made pursuant to clauses (F) and (G) shall not exceed $10,000,000; and
provided, further, that the amount of Restricted Payments made pursuant to
clauses (C), (D), (E), (F) and (G) shall be included in any computation of the
amount of Restricted Payments made pursuant to Section 4.03(a)(iii).
(c) Notwithstanding the foregoing provisions of this Section
4.03, the restrictions contained in Section 4.03(a) and (b) will not prohibit:
(1) the exchange by the Company of the Convertible Preferred Stock for Exchange
Debentures (such exchange being subject to the requirements of Section 4.08);
(2) the conversion by the Company of Convertible Preferred Stock or Exchange
Debentures into other shares of Capital Stock (other than Restricted Capital
Stock); (3) payment of cash by the Company in lieu of issuing fractional shares
of Common Stock pursuant to the Warrant Agreement as in effect in the
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Initial Issuance Date; (4) redemptions and repurchases by the Company of
Securities pursuant to the mandatory redemption provisions of paragraph 4(b) of
the Securities and Sections 4.07, 4.08, 4.16, 4.18, 4.19 and 4.22 hereof; or
(5) the repurchase of the Securities pursuant to a Registered Exchange Offer.
(d) Notwithstanding anything to the contrary in the foregoing
provisions of this Section 4.03, the Company shall not declare or pay any cash
dividends on or make any cash distribution on or with respect to any of its
Common Stock or purchase, redeem, defease or otherwise acquire for value
(including by way of business combination or otherwise) any of its Common Stock
at any time (i) prior to the later to occur of (A) the Trigger Date and (B) the
consummation of the first Free Cash Flow Offer with respect to the Securities
or (ii) during any fiscal quarter of the Company if the Company's Consolidated
Net Worth at the end of the next preceding fiscal quarter was less than or
equal to zero.
(e) Notwithstanding anything to the contrary contained in this
Indenture, the Company will not, and will not permit any of its Subsidiaries
to, repay any Indebtedness of the Company to its Subsidiary, Florida AAC
Corporation, a Florida corporation, or any successor thereto or assign thereof
(collectively, "Florida AAC") or to its Subsidiary, Electronic Data Processing
Corporation, a Florida corporation, or any successor thereto or assign thereof
(collectively, "Electronic Data"), unless prior thereto the Company shall have
(i) caused Florida AAC or Electronic Data, as the case may be, to issue a
Contingently Issuable Guarantee in accordance with Section 4.24(b) hereof, or
(ii) received approval of such repayment in writing from the Holders of a
majority in principal amount of the Securities then outstanding; provided that
the provisions of this Section 4.03(e) shall not prohibit any such repayment of
Indebtedness to Florida AAC to the extent that the proceeds of such repayment
are used, directly or indirectly, to make payments of principal of or interest
on the 9% Debentures.
(f) Notwithstanding anything to the contrary contained in this
Indenture, provided that, immediately after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing, the Company (or any
Subsidiary of the Company) may apply the proceeds derived from the Senior
Refinancing during Fiscal Year 1995 to redeem up to $10,500,000 of 9%
Debentures, repurchase up to $3,500,000 of Subordinated Indebtedness and/or
securities and redeem 13-7/8% Debentures; provided, further, that with respect
to the 13-7/8% Debentures, to the extent that an amount less than $50,000,000
fully accreted value of the Securities is tendered in connection with the
Senior Refinancing, the Company may only apply the difference between
$50,000,000 and such lesser amount to redeem the 13-7/8% Debentures.
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SECTION 4.04. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary of the
Company to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of such
Subsidiary to (i) pay dividends or make any other distributions on any Capital
Stock of such Subsidiary to its parent, make any distributions on any other
interest or participation in, or measured by, its profits, owned by the Company
or any of its Subsidiaries, or pay any Indebtedness owed to the Company or any
of its Subsidiaries, (ii) make any loans or advances to the Company or any
Subsidiary of the Company, (iii) pay any Indebtedness owed to the Company or a
Subsidiary of the Company or (iv) transfer any of its property or assets to the
Company or any Subsidiary of the Company, except, in each such case, for such
encumbrances or restrictions existing under or by reasons of (a) applicable
law, (b) any instrument governing Indebtedness of a person acquired by the
Company or any Subsidiary of the Company at the time of such acquisition, which
Indebtedness was not incurred in connection with or in contemplation of such
acquisition and which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person, or
the property or assets of the person, so acquired, (c) the Senior Credit
Agreements, all as in effect on the Refinancing Date, (d) this Indenture, and
(e) the indenture pursuant to which the Exchange Debentures may be issued, as
in effect on the Initial Issuance Date.
SECTION 4.05. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 45 days
after the end of each fiscal quarter of the Company and within 90 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal quarter or fiscal year has been made under the supervision of
the signing Officers with a view to determining whether any Default or Event of
Default exists or has occurred under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his knowledge,
after due inquiry, there is no Default or Event of Default (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he may have knowledge, after due inquiry, and what action the
Company is taking or proposes to take with respect thereto) and that to the
best of his knowledge, after due inquiry, no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest on the Securities are prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto. Prior to the earlier of the date on which the Shelf
Registration (as referred to and defined in the Registration Rights Agreement)
is declared effective or any of the Securities are no longer Restricted
Securities, the Company shall also mail such Officers' Certificate to the
Holders simultaneously with delivering such notice to the Trustee.
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(b) The Company will, so long as any of the Securities are
outstanding, deliver to the Trustee, prompt written notice of (but in no event
later than five Business Days after the Company obtains knowledge thereof) any
Default or Event of Default or an Officers' Certificate specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto. Prior to the earlier of the date on which the Shelf
Registration (as referred to and defined in the Registration Rights Agreement)
is declared effective or any of the Securities are no longer Restricted
Securities, the Company shall also mail such notice to the Holders
simultaneously with delivering such notice to the Trustee; provided that the
Company shall cause the Trustee to continue to mail such notice to any Holder
on the Initial Issuance Date who continues to be a Holder promptly after the
time such notice is delivered to the Trustee.
SECTION 4.06. SEC Reports.
(a) The Company shall file with the Trustee, within 10 days after
it files them with the SEC, and shall cause the Trustee to mail to the Holders
at their last registered address promptly thereafter, copies of the annual
reports and of the other information, documents, and reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Sections 13 or 15(d) of the Securities Exchange Act. If the Company is not
subject to the requirements of such Sections 13 or 15(d) of the Securities
Exchange Act, the Company shall file with the Trustee and shall mail to the
Holders at their last registered address, within 15 days after it would have
been required to file such information with the SEC if the Company had been so
subject, financial statements, including any notes thereto and with respect to
annual reports, an auditors' report by an accounting firm of established
national reputation, and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations", both comparable to that which the Company
would have been required to include in such annual reports, information,
documents or other reports if the Company was subject to the requirements of
such Section 13 or 15(d) of the Securities Exchange Act. The Company shall
also comply with the provisions of TIA Section 314(a).
(b) So long as any of the Securities remain outstanding, the
Company shall cause an annual report to shareholders and each quarterly or
other financial report furnished by it to shareholders to be filed with the
Trustee and mailed to the Holders at their addresses appearing in the register
of Securities maintained by the Registrar at the time of such mailing or
furnishing to shareholders. If the Company is not required to furnish annual
or quarterly reports to its shareholders pursuant to the Securities Exchange
Act, the Company shall cause its financial statements, including any notes
thereto and with respect to annual reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations", to
be so mailed to the Holders and the Trustee within 90 days after the end of
each of the Company's fiscal years and within 45 days after the end of each of
the first three quarters of each fiscal year.
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SECTION 4.07. Maintenance of Consolidated Net Worth.
If the Company's Consolidated Net Worth at the end of each of any
two consecutive fiscal quarters of the Company is less than the applicable
Minimum Amount (as defined below), then the Company shall make an offer (the
"Offer") to purchase on the last day of the fiscal quarter of the Company next
following such second fiscal quarter (any such date being referred to herein as
a "Purchase Date"), 10% aggregate principal amount of Securities originally
issued (or such lesser amount as may be outstanding at the time, if less than
10% of the aggregate principal amount of Securities originally issued are then
outstanding) (the "Offer Amount") on the Purchase Date at a purchase price
equal to 100% of the Fully Accreted Value of the Securities plus (without
duplicating interest included in Fully Accreted Value) accrued interest thereon
to the Purchase Date; provided, however, that if such second fiscal quarter is
the last quarter of the Company's fiscal year, the Purchase Date shall be 15
days after the last day of the fiscal quarter next following such second fiscal
quarter. The term "Minimum Amount" means Consolidated Net Worth of the Company
equalling the following amounts: (i) $10,000,000 for the period from September
30, 1994 through and including September 29, 1996; and (ii) $85,000,000 for the
period from September 30, 1996 and thereafter. The Company may only credit
against its obligation to offer to repurchase Securities on any Purchase Date
the Fully Accreted Value of Securities optionally redeemed by the Company (to
the extent then permitted by paragraph 4(a) of the Securities) during the
fiscal quarter of the Company including such Purchase Date and the immediately
preceding fiscal quarter and surrendered to the Trustee for cancellation and
not previously used as a credit against any obligation to redeem Securities
pursuant to paragraph 4(b) thereof or to offer to purchase Securities pursuant
to this Section 4.07 or Section 4.19 or 4.22 hereof. In no event shall the
failure to meet the Consolidated Net Worth stated above at the end of any
fiscal quarter be counted toward more than one such Offer.
The Company shall provide the Trustee with notice of the Offer at
least 45 days, or such shorter period as to which the Trustee shall consent,
before any such Purchase Date and at least 10 Business Days before the notice
of any Offer is mailed to Holders in accordance with the next paragraph.
Notice of an Offer shall be mailed by the Company not less than 30
days nor more than 60 days before the Purchase Date to the Holders of all
Securities at their last registered address with a copy to the Trustee. The
Offer shall remain open from the time of mailing until a date no more than
three Business Days before the Purchase Date, but in any event such Offer shall
remain open for at least 20 Business Days. The notice shall be accompanied by
a copy of the information regarding the Company required to be contained in a
Quarterly Report on Form 10-Q for the second fiscal quarter of the Company
referred to above if such second fiscal quarter of the Company is one of the
Company's first three fiscal quarters (or comparable information to that
required to be contained in a Quarterly Report on Form 10-Q if no such Form
10-Q is required to be filed). If such second fiscal quarter is the Company's
last fiscal quarter, a copy of the information required to be contained in an
Annual
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Report to Shareholders pursuant to Rule 14a-3 under the Securities Exchange Act
(or comparable information to that required to be contained in an Annual Report
if no such Annual Report is required to be filed) for the fiscal year ending
with such second fiscal quarter of the Company shall either accompany the
notice or be delivered to all Holders not less than 30 days before the Purchase
Date. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Offer. The notice,
which shall govern the terms of the Offer, shall state:
(1) that the Offer is being made pursuant to this Section 4.07;
(2) the Offer Amount, the purchase price and the Purchase Date;
(3) that any Security not surrendered or accepted for payment
will continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Offer
shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased pursuant
to an Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Company at the address specified in the
notice at least 5 Business Days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election if
the Company receives, not later than three Business Days prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have the Security purchased;
(7) that if the principal amount of all Securities surrendered
pursuant to the Offer is in excess of the Offer Amount, the Company
shall purchase Securities on a pro rata basis (with such reasonable
and equitable adjustments as may be deemed appropriate by the Company
so that only Securities in denominations of $960 principal amount
($1,000 Fully Accreted Value) or integral multiples thereof shall be
acquired); and
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount (and Fully
Accreted Value) to the principal amount (and Fully Accreted Value) of
the unpurchased portion of the Securities surrendered.
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Before a Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof surrendered pursuant to the Offer (on a pro rata
basis (with such reasonable and equitable adjustments as may be deemed
appropriate by the Company) if Securities in excess of the Offer Amount are
tendered), (ii) deposit with the Paying Agent immediately available funds
sufficient to pay the purchase price of all Securities or portions thereof so
accepted and (iii) deliver to the Trustee at least two Business Days prior to
the Purchase Date Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly deliver to Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount (and Fully Accreted Value) to the principal amount (and
Fully Accreted Value) of any unpurchased portion of the Security surrendered.
Any Securities not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company will publicly announce the results
of the Offer on the Purchase Date. For purposes of this Section 4.07, the
Trustee shall act as the Paying Agent.
SECTION 4.08. Limitation on Indebtedness and Restricted Capital
Stock.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to,
contingently or otherwise (collectively, "incur"), any Indebtedness or
Restricted Capital Stock, except that the Company may incur Indebtedness and
Restricted Capital Stock if, immediately after giving effect thereto, the
Company's Consolidated Cash Flow Coverage Ratio for the twelve-month period
ending on the last day of the first full fiscal quarter immediately preceding
the date such additional Indebtedness or Restricted Capital Stock is incurred
would have been at least 1.50 to 1.00. Notwithstanding the foregoing, the
Company shall not incur any Indebtedness or Restricted Capital Stock hereunder
at any time if, immediately after giving effect to such incurrence, its
Consolidated Cash Flow Coverage Ratio would be less than 2.50 to 1.00, unless
prior to the incurrence of such Indebtedness, the Company shall (i) repay in
full all Indebtedness under the Revolving Credit Facility and the Senior Notes
or obtain the consent from the requisite Banks and Senior Note Purchasers to
permit the repurchase of the Securities pursuant to the following clause (ii),
and (ii) make and consummate an offer described in Section 4.08(e) (a "4.08
Offer") to purchase all of the outstanding Securities at a purchase price equal
to 100% of the Fully Accreted Value thereof plus (without duplicating interest
included in Fully Accreted Value) accrued interest thereon to the date of
purchase; provided that the Company shall first comply with the covenant in the
preceding clause (i) before it shall be required to repurchase the Securities
pursuant to the 4.08 Offer (it being understood and agreed by the Company that
any failure by the Company to comply with such clause (i) or to make the 4.08
Offer shall constitute a Default and any failure by the Company to purchase the
Securities pursuant to the 4.08 Offer shall constitute an Event of Default).
After the Company has consummated one
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4.08 Offer, no further 4.08 Offers shall be required in connection with any
incurrence of Indebtedness or Restricted Capital Stock hereunder. For the
purposes of this Section 4.08, the Company's Consolidated Cash Flow Coverage
Ratio shall be calculated (A) as if such Indebtedness had been incurred on the
first day of the applicable twelve-month period, (B) with respect to refundings
or refinancings, on a pro forma basis utilizing the interest rate borne by the
new Indebtedness rather than that borne by the Indebtedness to be refunded or
refinanced, (C) with respect to acquisitions by the Company or any of its
Subsidiaries, on a pro forma basis which assumes such acquisition occurred on
the first day of the applicable twelve-month period, (D) with respect to Asset
Sales by the Company or any of its Subsidiaries, on a pro forma basis which
assumes such Asset Sales occurred on the first day of the applicable
twelve-month period and (E) with respect to Acquisition Indebtedness, on a pro
forma basis which assumes that repayment of such Acquisition Indebtedness will
be amortized on a straight-line basis.
(b) Notwithstanding the limitations of Section 4.08(a) hereof and
without compliance with its provisions, the Company or its Subsidiaries may
incur the following Indebtedness or Restricted Capital Stock to the extent set
forth below:
(i) the Securities and all other obligations and liabilities of
athe Company under this Indenture;
(ii) the Senior Notes in an aggregate principal amount not to
exceed $225,000,000, less, at any specified date, an amount equal to
actual repayments of such Indebtedness prior to such date, in each
case regardless of any subsequent increase in amounts available for
borrowing pursuant to any amendment or modification of, or supplement
to, the Senior Notes or the Senior Note Indenture after the
Refinancing Date and the other obligations and liabilities of the
Company in favor of the Senior Note Purchasers under the Senior Credit
Agreements; provided that the Senior Notes may be refunded or
refinanced only to the extent permitted by Section 4.08(a) or clause
(iv) of this Section 4.08(b) (it being understood that any amendment,
consent, waiver, modification or extension of or supplement to the
Senior Notes or the Senior Note Indenture does not constitute a
refinancing subject to the restrictions of Section 4.08(a) or clause
(iv) of this Section 4.08(b), so long as such action shall not permit
an increase in the amount of borrowings at the time outstanding under
the Senior Notes);
(iii) Indebtedness under the Revolving Credit Facility in an
aggregate principal amount not to exceed $70,000,000 to be borrowed by
the Company under the Revolving Credit Facility (including letters of
credit which may be issued thereunder), less the amount of any
permanent reductions of the loan commitments actually made under the
Revolving Credit Facility, regardless of any subsequent increase in
such loan commitments pursuant to any amendment
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or modification thereof or supplement thereto (provided that if any
reduction of the loan commitments thereunder scheduled or required to
be made pursuant thereto is waived by the Banks prior to the reduction,
the amount of Indebtedness permitted pursuant to this clause (iii)
shall not be reduced by the amount so waived) and the other obligations
and liabilities of the Company in favor of the Banks under the Senior
Credit Agreements; provided that any amounts borrowed and repaid under
such Revolving Credit Facility may be reborrowed by the Company in
accordance with the terms of the Revolving Credit Facility Agreement
except to the extent of any permanent reductions in loan commitments
referred to above; provided, further, that any borrowings under the
Revolving Credit Facility may be refunded or refinanced only to the
extent permitted by Section 4.08(a) or clause (iv) of this Section
4.08(b) (it being understood that any amendment, consent, waiver,
modification or extension of or supplement to the Revolving Credit
Facility does not constitute a refinancing subject to the restrictions
of Section 4.08(a) or clause (iv) of this Section 4.08(b), so long as
such action shall not permit an increase in the amount of borrowings at
the time outstanding or available for borrowing under the Revolving
Credit Facility);
(iv) Indebtedness of the Company, to the extent the net proceeds
of which are applied to repay, to refund or to refinance (A) the
Securities in whole, (B) the Exchange Debentures, in whole or in part,
(C) borrowings under the Revolving Credit Facility, (D) the Senior
Notes or (E) borrowings under any Foreign Currency Credit Agreement, in
each case, in a principal amount not to exceed the principal amount so
repaid, refunded or refinanced (except such additional amounts as
permitted by clause (v) hereof and Section 4.08(a)); provided that in
the case of subclause (B), such Indebtedness is subordinated to Senior
Indebtedness of the Company to at least the same extent as the
Securities; provided, further, that in the case of subclauses (C) and
(D), the material terms of such Indebtedness are no less favorable to
the Holders than the terms of the Senior Credit Agreements as in effect
on the Refinancing Date including no increase in principal amount
(except for additional amounts permitted by clause (v) hereof and
Section 4.08(a));
(v) additional Indebtedness and/or Restricted Capital Stock not
to exceed $25,000,000 in the aggregate principal amount and/or
liquidation preference at any time outstanding;
(vi) Indebtedness of the Company under Interest Swap Obligations
to the extent permitted under Section 4.03 of the Senior Note
Indenture as in effect on the Refinancing Date; and
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(vii) Indebtedness of the Company and its Foreign Subsidiaries
under the Foreign Currency Credit Agreement in an aggregate principal
amount not to exceed $30,000,000 (subject to upward adjustment for
currency fluctuations).
(c) Notwithstanding any of the provisions of Sections 4.08(a) and
(b), no Indebtedness incurred by the Company shall constitute Senior
Indebtedness except, to the extent included in the definition of "Senior
Indebtedness" contained in Section 9.01 hereof, Indebtedness permitted to be
incurred by the Company pursuant to Sections 4.08(b)(ii), (iii), (v), (vi), and
(vii) and clauses (C), (D), and (E) of Section 4.08(b)(iv); provided that such
Indebtedness shall not constitute Senior Indebtedness (1) if such Indebtedness
shall, by its terms, be subordinated in right of payment to any other
Indebtedness of the Company and (2) unless the Company shall have certified to
the Trustee with an Officers' Certificate at the time of incurrence of any
Indebtedness under Section 4.08(b)(v) or clause (C), (D), or (E) of Section
4.08(b)(iv) that such Indebtedness constitutes Senior Indebtedness of the
Company. The Company will not incur, or agree or attempt to incur, any Senior
Indebtedness which, in its reasonable judgment, is not fully and adequately
secured at the time of incurrence, and the Company will not agree to cause or
cause any Senior Indebtedness to become, in its reasonable judgment, other than
fully and adequately secured. For the purpose of this Indenture, all
Indebtedness incurred under Section 4.08 (b)(ii) or (iii) or clause (C) or (D)
of Section 4.08 (b)(iv) is deemed to be fully and adequately secured at all
times.
(d) Notwithstanding the provisions of Section 4.08(a), the
Company may permit any of its Subsidiaries to incur the following Indebtedness
or Restricted Capital Stock to the extent set forth below:
(i) Indebtedness of a Subsidiary of the Company to the Company or
to a Wholly Owned Subsidiary of the Company;
(ii) Indebtedness of a Subsidiary of the Company secured by
Permitted Liens; provided that after giving effect to the incurrence
of such Indebtedness, the Company's Consolidated Cash Flow Coverage
Ratio for the twelve-month period ending on the first full fiscal
quarter immediately preceding the date of incurrence would have been
at least 1.50 to 1.00;
(iii) Indebtedness and/or Restricted Capital Stock of foreign
Subsidiaries of the Company not otherwise permitted by Section 4.08(b)
or this Section 4.08(d) in an aggregate principal amount and/or
liquidation preference not to exceed $5,000,000;
(iv) Indebtedness and/or Restricted Capital Stock of any person
incurred prior to the date such person became a Subsidiary of the
Company (and not in contemplation of or in connection with such person
becoming a Subsidiary of the Company) and any refinancing, renewal or
extension thereof
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in an aggregate principal amount or liquidation preference, as the
case may be, not to exceed the lesser of (a) the total principal
amount or liquidation preference, as the case may be, of such
Indebtedness and/or Restricted Capital Stock outstanding on the date
such person became a Subsidiary or (b) the total principal amount or
liquidation preference, as the case may be, outstanding at the time of
refinancing, renewing or extending; provided that neither the Company
nor any other Subsidiary of the Company is directly or contingently
liable with respect to such Indebtedness and/or Restricted Capital
Stock; and provided, further, that immediately after giving effect to
the incurrence of such Indebtedness and/or Restricted Capital Stock,
the Company's Consolidated Cash Flow Ratio for the twelve-month period
ending on the first full fiscal quarter immediately preceding the date
such person became a Subsidiary of the Company would have been at
least 1.50 to 1.00;
(v) the Contingently Issuable Guarantees, to the extent used
pursuant to Section 4.24; and
(vi) guarantees of the Company's obligations under the Senior
Credit Agreements.
(e) Notice of the 4.08 Offer shall be mailed by the Company to
the Holders of all Securities at their last registered address with a copy to
the Trustee and shall be accompanied by a copy of the information regarding the
Company required to be contained in a Quarterly Report on Form 10-Q for the
most recently completed fiscal quarter if such fiscal quarter of the Company is
one of the Company's first three fiscal quarters (or comparable information to
that required to be contained in a Quarterly Report on Form 10-Q if no such
Form 10-Q is required to be filed). If such fiscal quarter is the Company's
last fiscal quarter, a copy of the information required to be contained in an
Annual Report to Shareholders pursuant to Rule 14a-3 under the Securities
Exchange Act (or comparable information to that required to be contained in an
Annual Report if no such Annual Report is required to be filed) for the fiscal
year ending with such fiscal quarter of the Company shall either accompany the
notice or be delivered to all Holders not less than 10 days before the 4.08
Payment Date (as defined below). The notice shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
4.08 Offer. The notice, which shall govern the terms of the 4.08 Offer, shall
state:
(1) that the 4.08 Offer is being made pursuant to this Section
4.08 and that all Securities tendered for repurchase will be accepted
for payment;
(2) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such notice
is mailed (the "4.08 Payment Date");
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(3) that any Security not surrendered or accepted for payment
will continue to accrue interest;
(4) that any Security accepted for payment pursuant to the 4.08
Offer shall cease to accrue interest after the 4.08 Payment Date;
(5) that Holders electing to have a Security purchased pursuant
to the 4.08 Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase n on the reverse of
the Security completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the 4.08 Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than one Business Day prior to
the 4.08 Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Security the Holder delivered for purchase and a statement that
such Holder is withdrawing its election to have the Security
purchased; and
(7) that Holders whose Securities are tendered for purchase in
part only will be issued new Securities equal in principal amount (and
Fully Accreted Value) to the principal amount (and Fully Accreted
Value) of the unpurchased portion of the Securities surrendered.
On the 4.08 Payment Date, the Company shall (i) accept for payment
Securities or portions thereof tendered pursuant to the 4.08 Offer, (ii)
deposit with the Paying Agent immediately available funds sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered for payment by
the Company. The Paying Agent shall promptly deliver to Holders of Securities
so accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount (and Fully Accreted Value) to the principal amount
(and Fully Accreted Value) of any unpurchased portion of the Security
surrendered. The Company will publicly announce the results of the 4.08 Offer
on or as soon as practicable after the 4.08 Payment Date. For purposes of this
Section 4.08, the Trustee shall act as the Paying Agent. After one 4.08 Offer
has been consummated, the Company shall have no further obligation hereunder to
make a 4.08 Offer.
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SECTION 4.09. Intentionally Deleted.
SECTION 4.10. 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, which would prohibit or forgive the Company from paying
all or any portion of the principal of and/or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance 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.
SECTION 4.11. Transactions With Shareholders and Affiliates.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction or
series of transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder of 5% or more of any class of Capital Stock of the company or with any
Affiliate (other than the Company or any of its Wholly Owned Subsidiaries) of
the Company or any such holder, on terms that are less favorable to the Company
or the Subsidiary of the Company, as the case may be, than those which might be
obtained at the time from persons who are not such a holder or Affiliate;
provided that any determination made pursuant to this Section 4.11 shall be
made by (A) the unanimous approval of the Directors (other than any Directors
designated by the holders of Warrants pursuant to the Warrant Agreement)
present at a meeting of the Board of Directors at which a quorum is present or
(B) the unanimous written consent of all Directors (other than such Directors
so designated by the holders of Warrants), as the case may be, acting in good
faith, whose determination shall be conclusive and evidenced by a certified
resolution of the Board of Directors delivered to the Trustee; provided,
further, that no member of the Board of Directors affiliated with any such
holder or affiliated with any such Affiliate (other than by virtue of being a
member of the Company's Board of Directors) shall vote on the transactions in
which such holder or Affiliate is a participant. In addition, if the Fair
Market Value of any such proposed transaction or series of transactions exceeds
$25,000,000, such proposed transaction or series of transactions shall be
approved by the Holders of a majority of the aggregate principal amount of
Securities then outstanding; provided that such approval from Holders of
Securities shall not be required in connection with (i) any loans or advances
to or guarantees on behalf of Affiliates of the Company who are employees of
the Company and which loans, advances or guarantees are made in the ordinary
course of business in connection
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with employee salary and benefit arrangements unanimously approved by
disinterested members of the Company's Board of Directors sufficient to
constitute a quorum thereof, or (ii) to the extent otherwise permitted by this
Indenture, any Restricted Investments by the Company in joint ventures which
are in the same or substantially similar line or lines of business as one or
more of the lines of business in which the Company or any of its Subsidiaries
is engaged on the Initial Issuance Date.
SECTION 4.12. Restrictions on Liens.
The Company will not, and will not permit any of its Subsidiaries
to, create or, with respect to any Lien arising after the Initial Issuance
Date, suffer to exist any Liens upon any assets of the Company or any
Subsidiary of the Company, including any shares of Capital Stock of any
Subsidiary of the Company, unless the Company or such Subsidiary shall secure
all payments hereunder and under the Securities on an equal and ratable basis
with the obligation so secured until such time as such obligation is no longer
secured by a Lien; provided, however, that this Section 4.12 shall not apply to
any Permitted Liens.
SECTION 4.13. Conflicting Agreements.
The Company will not, and will not permit any Subsidiary of the
Company to, enter into any agreement or instrument, other than (A) the Senior
Credit Agreements, and (B) documentation relating to other Senior Indebtedness
as in effect on the Refinancing Date, that by its terms expressly prohibits
the Company from (i) redeeming the Securities in accordance with the redemption
provisions of the Securities, (ii) making any Offer, 4.08 Offer, Change of
Control Offer, Asset Sale Offer, Stock Sale Offer or Free Cash Flow Offer
pursuant to Section 4.07, 4.08, 4.18 or 4.19 or 4.22, as the case may be, or
(iii) causing any of the Company's Significant Subsidiaries to issue any
Contingently Issuable Guarantees pursuant to Section 4.24. Notwithstanding any
provision in this Indenture or in any agreement permitted by this Section 4.13
to the contrary, the failure of the Company to make any Offer, 4.08 Offer,
Change of Control Offer, Asset Sale Offer, Stock Sale Offer or Free Cash Flow
Offer, or to cause any of the Company's Significant Subsidiaries to issue any
Contingently Issuable Guarantee pursuant to Section 4.24 or to fulfill its
obligations with respect to any such offer or issuance or under said Sections
in accordance with the terms thereof will constitute a Default.
SECTION 4.14. Prohibition Against Becoming an Investment Company.
The Company will not, and will not permit any Subsidiary of the
Company to, conduct its business or take any action so as to (i) require
registration of the Company or any Subsidiary of the Company as an investment
company under the Investment Company Act of 1940, as amended, or (ii) subject
the Company or any Subsidiary of the Company to
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regulation as an investment company under the Investment Company Act of 1940,
as amended, pursuant to an order of the SEC which remains unstayed and in
effect for 60 days.
SECTION 4.15. Maintenance of Properties, etc.
The Company will, and will cause each of its Subsidiaries to,
maintain its properties and assets in normal working order and condition and
make all necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, ordinary wear and tear excepted, all as in the reasonable
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 4.15 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the reasonable judgment of
the Company or such Subsidiary, desirable in the conduct of its business, and
if, in the good faith determination of the Board of Directors, the anticipated
effect of such discontinuance is not adverse in any material respect to the
Securityholders.
The Company will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers such insurance as may be
required by law and such other insurance (or self-insurance), to such extent
and against such hazards and liabilities, as it in good faith determines is
customarily maintained by companies similarly situated with like properties.
The Company will, and will cause each of its Subsidiaries to, keep
true and accurate books of records and accounts in which correct and complete
entries will be made with respect to all of its business transactions in
accordance with sound business practices, and reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with generally accepted accounting principles.
The Company will, and will cause each of its Subsidiaries to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights and franchises, except to the extent permitted by
this Indenture and except in such cases where the Board of Directors determines
in good faith that failure to do so would not have a material adverse effect on
the business, earnings, properties, assets, financial condition, results of
operation or prospects of the Company and its Subsidiaries taken as a whole.
The Company will, and will cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, noncompliance with which would be reasonably likely to
(1) materially adversely affect the business, earnings, properties, assets,
financial condition, results of operation or prospects of the Company and its
Subsidiaries taken as a whole or (2) be adverse to the interests of the Holders
in any material respect.
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The Company will, and will cause each of its Subsidiaries to, pay
prior to delinquency (1) all taxes, assessments and governmental levies which
if not paid would be reasonably likely to have a material adverse effect on the
business, earnings, properties, assets, financial condition, results of
operations or prospects of the Company and its Subsidiaries taken as a whole,
and (2) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon the property of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and, with respect to clause (1) above only,
for which an adequate reserve has been established.
SECTION 4.16. Liquidation.
The Board of Directors or the shareholders of the Company may not
adopt a plan of liquidation which provides for, contemplates or the
effectuation of which is preceded by (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company otherwise
than pursuant to and in compliance with the terms of Article 5 of this
Indenture and (ii) the distribution of all or substantially all of the proceeds
of such sale, lease, conveyance or other disposition and of the remaining
assets of the Company, unless the Company shall, in connection with the
adoption of such plan and prior to making any liquidating distributions or
accounting pursuant to such plan, make provisions for the satisfaction of the
Company's obligations hereunder and under the Securities as to the payment of
principal and interest (including interest comprised of the excess of Fully
Accreted Value over the principal amount). The Company shall be deemed to make
provision for such payments only if: (A) the Company delivers in trust to the
Trustee or Paying Agent (other than the Company or one of its Subsidiaries)
money or U.S. Government Obligations maturing as to principal and interest in
such amounts and at such times as are sufficient without consideration of any
reinvestment of such interest to pays when due, the principal of and interest
(including interest comprised of the excess of Fully Accreted Value over the
principal amount) on the Securities and also delivers to the Trustee an Opinion
of Counsel to the effect that Holders of the Securities will not recognize
income, gain or loss for Federal income tax purposes under then applicable
Federal income tax laws as a result of such action and will be subject to
Federal income tax on the same amount and in the same manner and at the same
time as would have been the case if such action had not been taken; or (B)
there is an express assumption of the due and punctual payment of the Company's
obligations hereunder and under the Securities and the performance and
observance of all covenants and conditions to be performed by the Company
hereunder, by the execution and delivery of a supplemental indenture in form
satisfactory to the trustee by a person which acquires or will acquire (other
than pursuant to a lease) a portion of the assets of the Company, and which
person meets the requirements of clauses (1), (3) and (4) of Section 5.01;
provided, however, that the Company shall not make any liquidating distribution
or accounting until after the Company shall have certified to the Trustee with
an Officers' Certificate at least five days prior to the making of
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any liquidating distribution or accounting that it has complied with the
provisions of this Section 4.16 and that no Default or Event of Default then
exists or would occur as a result of any such liquidating distribution or
accounting. In the case of clause (A) above, the Trustee or Paying Agent shall
hold in trust such money or U.S. Government Obligations deposited with it
pursuant to this Section 4.16, and shall apply the deposited money and the
money from U.S. Government Obligations in accordance with this Indenture to
the payment of principal of and interest (including interest comprised of the
excess of Fully Accreted Value over the principal amount) on the Securities.
Money so held in trust, to the extent allocated for the payment of the
Securities, shall not be subject to the provisions of Article 9 of this
Indenture.
SECTION 4.17. Limitation on Certain Senior Indebtedness.
The Company will not, and will not permit any Subsidiary of the
Company to, incur, directly or indirectly, any Indebtedness which, by its
terms, is both (i) subordinate in right of payment to any Senior Indebtedness
and (ii) senior in right of payment to the Securities.
SECTION 4.18. Change of Control.
(a) Upon the occurrence of a Change of Control (the "Change of
Control Date") and prior to the mailing of the notice to Holders provided for
in Section 4.18(b) below but in any event within 30 days following the Change
of Control Date, the Company hereby covenants to (i) repay in full all
Indebtedness under the Revolving Credit Facility and the Senior Notes or (ii)
obtain the consent from the requisite Banks and Senior Note Purchasers to
permit the repurchase of the Securities pursuant to this Section 4.18. The
Company shall first comply with the covenant in the preceding sentence before
it shall be required to repurchase the Securities pursuant to this Section
4.18; however, any failure by the Company to comply with such preceding
sentence or to make the Change of Control Offer shall constitute a Default and
any failure by the Company to purchase the Securities pursuant to a Change of
Control Offer shall constitute an Event of Default. Each Securityholder shall
have the right to require the repurchase of such Holder's Securities pursuant
to the offer described in the next paragraph (the "Change of Control Offer") at
a purchase price equal to 101% of the Fully Accreted Value of the Securities
plus (without duplicating interest included in Fully Accreted Value) accrued
interest thereon to the date of purchase.
(b) Notice of a Change of Control Offer shall be mailed by the
Company not more than 35 days following a Change of Control Date to the Holders
of all Securities at their last registered address with a copy to the Trustee.
The notice shall describe the Change of Control and shall be accompanied by a
copy of the information regarding the Company required to be contained in a
Quarterly Report on Form 10-Q for the most recently completed fiscal quarter if
such fiscal quarter of the Company is one of the Company's first three fiscal
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quarters (or comparable information to that required to be contained in a
Quarterly Report on Form 10-Q if no such Form 10-Q is required to be filed).
If such fiscal quarter is the Company's last fiscal quarter, a copy of the
information required to be contained in an Annual Report to Shareholders
pursuant to Rule 14a-3 under the Securities Exchange Act (or comparable
information to that required to be contained in an Annual Report if no such
Annual Report is required to be filed) for the fiscal year ending with such
fiscal quarter of the Company shall either accompany the notice or be delivered
to all Holders not less than 10 days before the Change of Control Payment Date
(as defined below). The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Change of
Control Offer. The notice, which shall govern the terms of the Change of
Control Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.18 and that all Securities tendered for repurchase will
be accepted for payment;
(2) the purchase price and the purchase date which shall be no
earlier than 30 days nor later than 40 days from the date such notice
is mailed (the "Change of Control Payment Date");
(3) that any Security not surrendered or accepted for payment
will continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant
to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than one Business Day prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder delivered for purchase and
a statement that such Holder is withdrawing its election to have the
Security purchased; and
(7) that Holders whose Securities are tendered for purchase in
part only will be issued new Securities equal in principal amount (and
Fully Accreted Value) to the principal amount (and Fully Accreted
Value) of the unpurchased portion of the Securities surrendered.
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On the Change of Control Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent immediately available funds
sufficient to pay the purchase price of all Securities or portions thereof so
tendered and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof tendered
for payment by the Company. The Paying Agent shall promptly deliver to Holders
of Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to such Holders a
new Security equal in principal amount (and Fully Accreted Value) to the
principal amount (and Fully Accreted Value) of any unpurchased portion of the
Security surrendered. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 4.18, the Trustee shall act
as the Paying Agent.
SECTION 4.19. Limitation on Asset Sales and Sales of Subsidiary Stock.
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate any Asset Sale if, after giving effect to the
proposed Asset Sale, the Fair Market Value of all such Asset Sales consummated
by the Company and its Subsidiaries during any fiscal year would exceed 10% of
the Company's Consolidated Net Tangible Assets as of the first day of such
fiscal year; provided, however, that notwithstanding the foregoing, the Company
may, or may cause its Subsidiaries to, consummate any Asset Sale so long as (i)
such Asset Sale is for Fair Market Value, (ii) at least 85% of the Net Proceeds
therefrom consist of cash, and (iii) subject to Section 4.19(c) below, the Net
Cash Proceeds of such Asset Sale are applied as follows: (A) within 180 days of
receipt thereof (such 180th day, the "Application Date"), the Company may apply
all or a portion of such Net Cash Proceeds to the repayment of Indebtedness
outstanding under the Revolving Credit Facility and/or the Senior Notes or the
reinvestment (whether by acquisition of an existing business or expansion,
including, without limitation, capital expenditures) in one or more of the
lines of business in which the Company or any of its Subsidiaries are engaged
on the Initial Issuance Date, or any combination thereof, and (B) to the extent
any or all of such Net Cash Proceeds are not applied as set forth above in
clause (A), the Company shall apply all remaining Net Cash Proceeds of such
Asset Sale (the "Asset Sale Offer Amount") to an offer to purchase (an "Asset
Sale Offer") Securities on the first Business Day occurring 40 days after the
Application Date (the "Asset Sale Purchase Date") at a purchase price equal to
101% of the Fully Accreted Value of the Securities plus (without duplicating
interest included in Fully Accreted Value) accrued interest thereon to the
Asset Sale Purchase Date; provided, further, that, notwithstanding the
foregoing, the Company may consummate any Asset Sale with respect to (x) assets
held for sale on the financial statements of the Company as of the Initial
Issuance Date or (y) assets listed on Schedule 1 hereto, so long as the
requirements of clause (iii) of the preceding proviso are met.
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Notice of an Asset Sale Offer shall be mailed by the Company within
10 days of the Application Date to the Holders of all Securities at their last
registered address with a copy to the Trustee and shall comply with Section
4.19(d) below. The Asset Sale Offer shall remain open from the time of mailing
until a date no more than three Business Days before the Asset Sale Purchase
Date, but in any event such Asset Sale Offer shall remain open for at least 20
Business Days.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate any Majority Capital Stock Sale unless (i) such
Majority Capital Stock Sale is for Fair Market Value, (ii) at least 85% of the
Net Proceeds therefrom consist of cash, (iii) subject to Section 4.19(c) below,
the Net Cash Proceeds of such Majority Capital Stock Sale are applied as
follows: (A) within 180 days of receipt thereof (such 180th day, the "Stock
Application Date"), the Company may apply all or a portion of such Net Cash
Proceeds to the repayment of Indebtedness outstanding under the Revolving
Credit Facility and/or the Senior Notes and (B) to the extent any or all of
such Net Cash Proceeds are not applied as set forth above in clause (A), the
Company shall apply all remaining Net Cash Proceeds of such Majority Capital
Stock Sale (the "Stock Sale Offer Amount") to an offer to purchase (the "Stock
Sale Offer") Securities on the first Business Day occurring 40 days after the
Stock Application Date (the "Stock Sale Purchase Date") at a purchase price
equal to 101% of the Fully Accreted Value of the Securities plus (without
duplicating interest included in Fully Accreted Value) accrued interest thereon
to the Stock Sale Purchase Date.
Notice of a Stock Sale Offer shall be mailed by the Company within
10 days of the Stock Application Date to the Holders of all Securities at their
last registered address with a copy to the Trustee and shall comply with
Section 4.19(d) below. The Stock Sale Offer shall remain open from the time of
mailing until a date no more than three Business Days before the Stock Sale
Purchase Date, but in any event such Stock Sale Offer shall remain open for at
least 20 Business Days.
(c) Notwithstanding the foregoing, the Company shall not be
required to make an Asset Sale Offer or a Stock Sale Offer until such time as
the aggregate amount of Net Cash Proceeds from Asset Sales and Majority Stock
Sales required to be so applied to the purchase of Securities pursuant to
Sections 4.19(a) and (b) exceeds $5,000,000, and then the total amount of such
Net Cash Proceeds shall be required to be applied to an Asset Sale Offer (if
the most recent transaction consummated was an Asset Sale) or to a Stock Sale
Offer (if the most recent transaction consummated was a Majority Capital Stock
Sale).
(d) The notice of an Asset Sale Offer or Stock Sale Offer shall
be accompanied by a copy of the information regarding the Company required to
be contained in a Quarterly Report on Form 10-Q for the most recently completed
fiscal quarter of the Company if such fiscal quarter of the Company is one of
the Company's first three fiscal quarters (or comparable information to that
required to be contained in a Quarterly Report on Form 10-Q if no such Form
10-Q is required to be filed). If such fiscal quarter is the
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Company's last fiscal quarter, a copy of the information required to be
contained in an Annual Report to Shareholders pursuant to Rule 14a-3 under the
Securities Exchange Act (or comparable information to that required to be
contained in an Annual Report if no such Annual Report is required to be filed)
for the fiscal year ending with such fiscal quarter of the Company shall either
accompany the notice or be delivered to all Holders not less than 10 days
before the Asset Sale Purchase Date or the Stock Sale Purchase Date, as the
case may be. The notice shall contain all instructions and materials necessary
to enable such Holders to tender Securities pursuant to the Asset Sale Offer or
the Stock Sale Offer, as the case may be. The notice, which shall govern the
terms of the Asset Sale Offer or the Stock Sale Offer, as the case may be,
shall state:
(1) that the Asset Sale Offer or the Stock Sale Offer, as the
case may be, is being made pursuant to this Section 4.19;
(2) the Asset Sale Offer Amount or the Stock Sale Offer Amount,
as the case may be, the purchase price and the Asset Sale Purchase
Date or the Stock Sale Purchase Date, as the case may be;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Asset
Sale Offer or the Stock Sale Offer, as the case may be, shall cease to
accrue interest after the Asset Sale Purchase Date or the Stock Sale
Purchase Date, as the case may be;
(5) that Holders electing to have a Security purchased pursuant
to an Asset Sale Offer or the Stock Sale Offer, as the case may be,
will be required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Security
completed, to the Company at the address specified in the notice at
least 5 Business Days before the Asset Sale Purchase Date or the Stock
Sale Purchase Date, as the case may be;
(6) that Holders will be entitled to withdraw their election if
the Company receives, not later than three Business Days prior to the
Asset Sale Purchase Date or the Stock Sale Purchase Date, as the case
may be, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have the Security purchased;
(7) that if the Fully Accreted Value of the Securities
surrendered pursuant to the Asset Sale Offer or the Stock Sale Offer,
as the case may be, is in excess of the Asset Sale Offer Amount or the
Stock Sale Offer Amount, as the case may be, the Company shall
purchase Securities on a pro rata basis (with such reasonable and
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equitable adjustments as may be deemed appropriate by the Company so
that only Securities in denominations of $960 principal amount ($1,000
Fully Accreted Value) or integral multiples thereof shall be
acquired); and
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount (and Fully
Accreted Value) to the principal amount (and Fully Accreted Value) of
the unpurchased portion of the Securities surrendered.
Before any Asset Sale Purchase Date or the Stock Sale Purchase
Date, the Company shall (i) accept for payment Securities or portions thereof
surrendered pursuant to the Asset Sale Offer or the Stock Sale Offer, as the
case may be (on a pro rata basis (with such reasonable and equitable
adjustments as may be deemed appropriate by the Company) if Securities in
excess of the Asset Sale Offer Amount or the Stock Sale Offer Amount, as the
case may be, are tendered), (ii) deposit with the Paying Agent immediately
available funds sufficient to pay the purchase price of all Securities or
portions thereof so accepted and (iii) deliver to the Trustee at least two
Business Days prior to the Asset Sale Purchase Date or the Stock Sale Purchase
Date, as the case may be, Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly deliver to Holders of Securities
so accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount (and Fully Accreted Value) to the principal amount
(and Fully Accreted Value) of any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Asset Sale Offer or the Stock Sale Offer, as the
case may be, on the Asset Sale Purchase Date or the Stock Sale Purchase Date,
as the case may be. For purposes of this Section 4.19, the Trustee shall act
as the Paying Agent.
The Company may only credit against its obligation to offer to
repurchase Securities pursuant to this Section 4.19 the Fully Accreted Value of
Securities optionally redeemed by the Company (to the extent then permitted by
paragraph 4(a) of the Securities) subsequent to the date of the Asset Sale or
Majority Capital Stock Sale, as the case may be, giving rise to such Asset Sale
Offer or the Stock Sale Offer and surrendered for cancellation and not
previously used as a credit against any obligation to redeem Securities
pursuant to paragraph 4(b) thereof or to offer to purchase Securities pursuant
to this Section 4.19 or Section 4.22 hereof. In no event shall any Net Cash
Proceeds that are applied to an Asset Sale Offer or the Stock Sale Offer be
required to be applied to more than one Asset Sale Offer or Stock Sale Offer.
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SECTION 4.20. Limitation on Material Acquisitions.
The Company will not, and will not permit any of its Subsidiaries
to, make a Material Acquisition unless:
(a) no Default or Event of Default exists at the time of or after
giving effect to such Material Acquisition;
(b) after giving effect to such Material Acquisition (on a pro
forma basis, as if such Material Acquisition and any related financing
transactions had occurred at the beginning of the twelve-month period
ending on the last day of the first full fiscal quarter immediately
preceding the date of such Material Acquisition), the Company would be
permitted to incur $1.00 of additional Indebtedness pursuant to
Section 4.08(a) hereof; and
(c) the business or property which is the subject of such
Material Acquisition is in the same or substantially similar line or
lines of business as one or more of the lines of business in which the
Company or any of its Subsidiaries is engaged on the Initial Issuance
Date.
The Company shall deliver to the Trustee, prior to the consummation
of any proposed Material Acquisition, an Officers' Certificate describing such
proposed transaction in reasonable detail and stating that the proposed
transaction complies with the requirements of this Section 4.20.
SECTION 4.21. Restrictions on Certain Repurchases of Securities.
The Company will not, directly or indirectly or through an
Affiliate, repurchase or make any offer to repurchase Securities in any
privately negotiated transaction, unless the Company shall have offered to
repurchase Securities, on a pro rata basis, from all Holders at the same time
and upon the same terms; provided that the foregoing restrictions shall not
apply to purchases of Securities made in the open market. If the Company shall
repurchase any Securities (other than through purchases in the open market ),
such Securities shall thereafter be cancelled and no new Securities shall be
issued in substitution therefor.
SECTION 4.22. Application of Free Cash Flow.
(a) Subject to Section 4.22(c) below, if the Company has Free
Cash Flow for any period of two consecutive fiscal quarters (a "Period")
commencing with the Period beginning immediately after the repayment in full of
all Indebtedness under the Senior Notes and at the end of such period any
borrowings under the Revolving Credit Facility are outstanding, then the
Company shall apply, within 55 days of the last day of each Period (in
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the case of any Period which does not end on the last day of the Company's
fiscal year) or 100 days of the last day of each Period (in the case of any
Period ending on the last day of the Company's fiscal year) (such 55th or 100th
day, the "Revolving Credit Facility Prepayment Date") an amount equal to 50% of
the Company's Free Cash Flow for such Period to the repayment of all
outstanding amounts under the Revolving Credit Facility.
(b) If the Company has Free Cash Flow for any Period commencing
with the Period beginning immediately after the earlier to occur of (i) the
later of the repayment in full of all Indebtedness under the Senior Notes or
(ii) receipt of a consent from the requisite Senior Creditors referred to in
Section 4.22(c) below, the Company shall apply within 60 days of the last day
of each Period (such 60th day, the "Prepayment Date") an amount equal to 50% of
the Company's Free Cash Flow for such Period (the "Free Cash Flow Offer
Amount") to an offer to purchase (the "Free Cash Flow Offer") Securities at a
purchase price equal to 100% of the Fully Accreted Value of the Securities plus
(without duplicating interest included in Fully Accreted Value) accrued
interest thereon to the Prepayment Date.
Notice of the Free Cash Flow Offer shall be mailed by the Company
at least 30 days but no more than 60 days before the Prepayment Date to the
Holders of all Securities at their last registered address with a copy to the
Trustee and shall comply with Section 4.22(d). The Free Cash Flow Offer shall
remain open from the time of mailing until a date no more than three Business
Days before the Prepayment Date, but in any event such Free Cash Flow Offer
shall remain open for at least 20 Business Days.
(c) Notwithstanding anything to the contrary herein, if the
requisite Senior Creditors shall consent to the repurchase of Securities
pursuant to Section 4.22(b) without the Company's first repaying all
Indebtedness in full under the Senior Notes, (a) the Company shall not be
obligated to repay the outstanding Indebtedness under the Senior Notes and,
pursuant to Section 4.22(a), the Revolving Credit Facility and (b) the first
Prepayment Date shall be within 60 days after the granting of such consent by
the requisite Senior Creditors.
(d) The notice of Free Cash Flow Offer shall be accompanied by a
copy of the information regarding the Company required to be contained in a
Quarterly Report on Form 10-Q for the most recently completed fiscal quarter of
the Company if such fiscal quarter of the Company is one of the Company's first
three fiscal quarters (or comparable information to that required to be
contained in a Quarterly Report on Form 10-Q if no such Form 10-Q is required
to be filed). If such fiscal quarter is the Company's last fiscal quarter, a
copy of the information required to be contained in an Annual Report to
Shareholders pursuant to Rule 14a-3 under the Securities Exchange Act (or
comparable information to that required to be contained in an Annual Report if
no such Annual Report is required to be filed), for the fiscal year ending with
such fiscal quarter of the Company shall either accompany the notice or be
delivered to all Holders not less than 10 days before the Prepayment Date. The
notice, which shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Free Cash Flow Offer, shall
state:
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(1) that the Free Cash Flow Offer is being made pursuant to this
Section 4.22;
(2) the Free Cash Flow Offer Amount, the purchase price and the
Prepayment Date;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Free
Cash Flow Offer shall cease to accrue interest after the Prepayment
Date;
(5) that Holders electing to have a Security purchased pursuant
to a Free Cash Flow Offer will be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Company at the address
specified in the notice at least 5 Business Days before the Prepayment
Date;
(6) that Holders will be entitled to withdraw their election if
the Company receives, not later than three Business Days prior to the
Prepayment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have the Security purchased;
(7) that if the Fully Accreted Value of the Securities
surrendered pursuant to the Free Cash Flow Offer is in excess of the
Free Cash Flow Offer Amount, the Company shall purchase Securities on a
pro rata basis (with such reasonable and equitable adjustments as may
be deemed appropriate by the Company so that only Securities in
denominations of $960 principal amount ($1,000 Fully Accreted Value)
or integral multiples thereof shall be acquired); and
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount (and Fully
Accreted Value) to the principal amount (and Fully Accreted Value) of
the unpurchased portion of the Securities surrendered.
Before any Prepayment Date, the Company shall (i) accept for
payment Securities or portions thereof surrendered pursuant to the Free Cash
Flow Offer (on a pro rata basis (with such reasonable and equitable adjustments
as may be deemed appropriate by the Company) if Securities in excess of the
Free Cash Flow Offer Amount are tendered), (ii) deposit with the Paying Agent
immediately available funds sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver to the Trustee at
least two Business Days prior to the Prepayment Date Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Company.
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The Paying Agent shall promptly deliver to Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount (and Fully Accreted Value) to the principal amount (and
Fully Accreted Value) of any unpurchased portion of the Security surrendered.
Any Securities not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company will publicly announce the results
of the Free Cash Flow Offer on the Prepayment Date. For purposes of this
Section 4.22, the Trustee shall act as the Paying Agent.
The Company may only credit against its obligation to offer to
repurchase Securities pursuant to this Section 4.22 the Fully Accreted Value of
Securities optionally redeemed by the Company (to the extent then permitted by
paragraph 4(a) of the Securities) subsequent to the last day of the Period with
respect to which a Free Cash Flow Offer is being made and surrendered for
cancellation and not previously used as a credit against any obligation to
redeem Securities pursuant to paragraph 4(a) thereof or to offer to purchase
Securities pursuant to this Section 4.22 or Section 4.07 or 4.19 hereof. In no
event shall any Free Cash Flow from any period that is applied to a Free Cash
Flow Offer be required to be applied to more than one Free Cash Flow Offer.
SECTION 4.23. Security Interest.
(a) Upon the Senior Repayment Date, the Company will promptly
take or cause to be taken all action required or necessary (i) to secure the
Securities and the Contingently Issuable Guarantees, if any, in the same manner
and with the same collateral (and priority therein) as set forth in the
Collateral Documents as in effect from time to time (provided, however, that to
the extent that (i) the Lien under the Collateral Documents was at any time
released in full with respect to any collateral and (ii) at the Senior
Repayment Date, such collateral continues to be owned by the Company or any of
its Subsidiaries or any guarantor of the Contingently Issuable Guarantees, if
any, as the case may be, then, subject to the following proviso, such released
collateral shall be included in the assets to secure the Securities or the
Contingently Issuable Guarantees, if any, hereunder; provided, further, that
the Company shall not be required to secure the Securities with (y) an amount
of the Capital Stock of any of the Company's foreign Subsidiaries in excess of
65% of such foreign Subsidiary's Capital Stock at any time or (z) any assets of
the Company and its Subsidiaries necessary to secure and securing any
Indebtedness refinancing or replacing the Revolving Credit Facility (a
"Replacement Revolver")), and (ii) to maintain, preserve and protect such
security interest granted to the Holders, including, but not limited to,
causing all financing statements, continuation statements, mortgages and other
instruments of further assurance to be promptly executed, recorded, registered
and filed, all in such manner and in such places as may be required by law to
preserve and protect the rights of the Holders and the security interest
granted thereby. The Company covenants that, notwithstanding the foregoing, at
any time that its Board of Directors shall have determined in its reasonable
judgment that any
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Replacement Revolver is not necessary for the operation of the Company's
business, the Company will satisfy its obligations under and terminate any
existing Replacement Revolver and cause its obligations under the Securities to
be secured with any assets referred to in clause (z) above.
(b) At the time of taking any action under this Section 4.23 and
annually thereafter, the Company shall furnish the Trustee with an Opinion of
Counsel required pursuant to Section 3.14(b) of the TIA.
SECTION 4.24. Guarantee.
(a) If, at any time at or after the Initial Issuance Date, (i)
any Significant Subsidiary of the Company shall enter into a guarantee of any
of the Company's obligations under its Senior Indebtedness, (ii) any guarantor
of such obligations shall become a Significant Subsidiary of the Company, or
(iii) the Company makes any repayment of Indebtedness to Florida AAC or
Electronic Data pursuant to clause (i) of Section 4.03(e), then the Company
will promptly take, and cause such Significant Subsidiary (or Florida MC or
Electronic Data, as the case may be) to take, all action required or necessary
to issue for the benefit of the Holders a guarantee by such Significant
Subsidiary (or Florida MC or Electronic Data, as the case may be) of the
Company's obligations hereunder and under the Securities, which guarantee will
be (A) an unconditional guarantee of payment in full of such obligations and
(B) subordinated to any guarantees by such Significant Subsidiary (or Florida
AAC or Electronic Data, as the case may be) of the Company's obligations to the
holders of Senior Indebtedness to the same extent as the Securities are
subordinated in right of payment to Senior Indebtedness pursuant to Article 9
hereof.
(b) In the event that any Contingently Issuable Guarantees become
issuable pursuant to this Section 4.24, the Company will cause the issuer
thereof to agree to agree for the benefit of the Holders to be directly bound,
pursuant to a supplemental indenture hereto, by the provisions of Sections
4.03, 4.04, 4.05(b), 4.08(a) and (d), 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.19,
4.20, 4.23 and 5.01 as they relate to Subsidiaries of the Company.
SECTION 4.25. "Ownership Change" for Tax Purposes.
(a) Except as otherwise provided in Section 4.25(b) below, (i)
the Company shall not issue, sell, or otherwise transfer (or permit any
domestic Subsidiary to issue, sell, or otherwise transfer) any Capital Stock or
engage in any reorganization or other transaction if such issuance, sale,
transfer, reorganization or other transaction would cause the Company to
undergo an Ownership Change (as hereinafter defined) on the date of such
issuance, sale, transfer, reorganization, or other transaction; and (ii) the
Company shall not issue, sell, or otherwise transfer (or permit any domestic
Subsidiary to issue, sell, or otherwise transfer) any Capital Stock, nor shall
the Company permit any domestic Subsidiary to engage in any
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reorganization or other transaction, if such issuance, sale, transfer,
reorganization or other transaction would result in an Ownership Change with
respect to one or more Loss Subsidiaries or cause one or more Loss Subsidiaries
(as hereinafter defined) to cease to be members of the Company Group (as
hereinafter defined) other than by reason of a liquidation or merger into
another member of the Company Group pursuant to a transaction described in
section 381(a) of the Code; provided, however, that this clause (ii) shall not
apply if either (A) the aggregate amount of Subsidiary Losses (as hereinafter
defined) allocable to the departing Loss Subsidiaries does not exceed
$1,000,000, or (B) both (1) the issuance, sale, transfer, reorganization or
other transaction causing the departure of one or more Loss Subsidiaries will
result in cash proceeds that will be used to pay part of the outstanding
principal of Indebtedness under the Senior Credit Agreements or the Securities,
and (2) the amount of such principal payment equals or exceeds the product of
the maximum marginal federal income tax rate applicable to regular corporations
for the taxable year in which the departure will occur times the amount of
Subsidiary Losses allocable to the departing Loss Subsidiaries.
(b) Notwithstanding the foregoing, Section 4.25(a) shall not
apply to (i) any issuance of shares of Common Stock of the Company (A) that
previously have been acquired by the Company upon exercise of its right of
first refusal under the restricted stock bonus plan currently in existence, (B)
upon an exercise of an option that was issued under the terms of the Company's
stock option or employee stock purchase plans, whether existing or hereafter
adopted, (C) pursuant to any presently existing obligation of the Company
(including, but not limited to, obligations under the Company's presently
existing employee stock purchase plan, presently existing warrants to purchase
Capital Stock, and presently existing agreements to which the Company is a
party, but not including any agreement or obligation created hereunder or
simultaneously herewith), or (D) pursuant to the Warrants; (ii) any issuance of
shares of Common Stock of the Company under its restricted stock bonus plan
(excluding any issuance in clause (i)(A) of this paragraph) or any grant of
options to purchase Common Stock of the Company under the terms of the
Company's stock option or employee stock purchase plans, whether currently
existing or hereafter adopted, unless the aggregate number of shares of Common
Stock previously issued under the Company's restricted stock bonus plan plus
the aggregate number of shares of Common Stock subject to options previously
granted under such plans during that portion of the fiscal year of the Company
ending on the date of the proposed issuance exceeds 1,000,000 shares; or (ii)
any issuance, sale or other transfer of Capital Stock or any reorganization or
other transaction if: (A) the excess of (1) the Existing Losses on the date of
the proposed transaction over (2) the Unrealized Built-in Gain (as hereinafter
defined) of the Company Group on such date, does not exceed $25,000,000; (B)
the aggregate principal amount of Indebtedness outstanding under the Senior
Credit Agreements on the date of the proposed transaction does not exceed
$50,000,000; (C) an Ownership Change would result in a Section 382 Limitation
(as hereinafter defined) that exceeds the lesser of (1) $40,000,000 or (2) 20%
of the excess of the Existing Losses on the date of the proposed transaction
over the Unrealized Built-in Gain of the Company Group; (D) the Holders of a
majority in outstanding principal amount of the Securities ("Majority Holders")
consent in writing to such issuance,
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sale, or other transfer of Capital Stock; or (E) the Board of Directors of the
Company shall have determined, in its reasonable good faith judgment, that the
inability of the Company Group to utilize any net operating losses as a result
of such issuance, sale, transfer, reorganization or other transaction will not
(1) have a material adverse effect on the Company or (2) be materially adverse
to the interests of the Holders.
(c) As used in this Section 4.25, (i) "Company Group" means the
affiliated group of corporations (as defined in section 1504(a) of the Code) of
which the Company is the common parent; (ii) "Existing Losses" means the
consolidated net operating loss carryovers (as defined in Treasury Regulation
Section 1.1502-21(b)(1)), and including, without limitation, any net operating
loss carryover of a Loss Subsidiary incurred during a separate return
limitation year as defined in Treasury Regulation Section 1.1502-l(f) of such
Loss Subsidiary) of the Company Group on October 1, 1990, which, as of the date
of a proposed transaction requiring a determination pursuant to clause (iv) of
Section 4.25(b), are available to offset taxable income of one or more members
of the Company Group, with the amount of such Existing Losses being determined
by assuming that the taxable year of the Company Group closes on the date of
such proposed transaction; (iii) "Loss Subsidiary" means a domestic Subsidiary
of the Company which, upon ceasing to be a member of the Company Group, would,
under applicable Treasury Regulations, be allocated and apportioned all or part
of those Existing Losses of the Company Group (if any) that are available to
offset taxable income of the Company Group at the time the determination is
required to be made; (iv) "Subsidiary Losses" means that amount (if any) of
Existing Losses that would be allocable and apportionable, under applicable
Treasury Regulations, to the so departing Loss Subsidiaries (determined by
assuming that the taxable year of the Company Group terminates on the date of
the determination), reduced by the amount (if any) of such Existing Losses that
will be reattributed to the common parent of the Company Group in connection
with the departure of the Loss Subsidiaries pursuant to applicable Treasury
Regulations; (v) "Ownership Change" means an ownership change within the
meaning of section 382(g) of the Code and the Treasury Regulations issued
thereunder; (vi) "Unrealized Built-in Gain" means the lesser of (A) 34% of the
book value of any inventory held by one or more members of the Company Group at
the time of the proposed transaction, or (B) the amount of any net unrealized
built-in gain with respect to the Company (or, if the determination of net
unrealized built-in gain is made on a consolidated basis, the Company Group),
as determined pursuant to section 382(h)(3) of the Code and the Treasury
Regulations issued thereunder; and (vii) "section 382 Limitation" means either
(A) an annual section 382 limitation (as defined in section 382(b)(1) of the
Code) applicable to the Company Group as a consequence of an Ownership Change
on the date of the proposed transaction under scrutiny, or (B) if such annual
limitation is not required to be determined on a consolidated basis, the sum of
the amount of all such limitations applicable to all members of the Company
Group as a consequence of an Ownership Change on the date of the proposed
transaction under scrutiny; provided, however, that if a determination of the
section 382 Limitation is required to be made before the issuance of sufficient
guidance from the United States Internal Revenue Service or United States
Treasury Department as to the
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computation of the annual section 382 limitation applicable to consolidated
groups, it shall be assumed that such limitation is required to be computed on
a consolidated basis.
(d) The initial determination of whether an Ownership Change will
occur hereunder shall be made by the Company, in the exercise of its reasonable
judgment. However, if a determination (as defined in section 1313(a) of the
Code) or other non-appealable determination by the United States Internal
Revenue Service or a court of competent jurisdiction is later made that an
issuance, sale or other transfer of Capital Stock, or a reorganization or other
transaction, has resulted in an Ownership Change with respect to the Company,
and if such Ownership Change is not permitted under the preceding terms and
provisions of this Section 4.25, then such Ownership Change shall constitute a
violation of this Section 4.25.
(e) No later than 10 days after an issuance, sale, transfer,
reorganization or other transact on (other than an issuance, sale, transfer,
reorganization, or other transaction described in clause (i), (ii), (iii) or
(iv)(B) of Section 4.25(b)) that might result in a departure from the Company
Group of, or Ownership Change with respect to, a Loss Subsidiary or in an
Ownership Change with respect to the Company (any such issuance, sale,
transfer, reorganization or other transaction being hereinafter referred to in
this paragraph as a "Determination Event"), the Company shall notify the
Trustee and the Holders of its initial determination with respect to such
Determination Event, as required by Section 4.25(d), which notification need
not be in writing. However, within 10 days after delivery to the Company of
the written request of the Trustee or of the Holders of a Majority in
outstanding principal amount of the Securities (which written request shall be
made within 10 days after the Company's notification to the Trustee and the
Holders), the Company shall provide the requesting party or parties with a
written description of its initial determination with respect to the
Determination Event or Determination Events described in the request. Such
written description of the Company's initial determination shall set forth, in
reasonable detail, (i) all of the relevant facts and circumstances surrounding
each such Determination Event, (ii) all of the calculations undertaken by the
Company in arriving at the conclusion reached by the Company with respect to
each such Determination Event, and (iii) a discussion of the relevant legal
authorities relied on by the Company in arriving at its conclusion.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When Company or Subsidiary May Merge, etc.
The Company will not, and will not permit any of its Subsidiaries
to, in a single transaction or a series of related transactions, consolidate
with or merge with or into or sell,
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assign, transfer or lease all or substantially all of its properties and assets
as an entirety to any person, unless:
(1) the Company or such Subsidiary, as the case may be, shall be
the continuing person, or the person (if other than the Company or
Subsidiary) formed by such consolidation or into which the Company or
Subsidiary is merged or to which the properties and assets of the
Company or Subsidiary substantially as an entirety are transferred (A)
shall be a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia and (B)
in the case of any transaction involving the Company, shall expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations
of the Company under the Securities and this Indenture and shall
expressly assume all the obligations of the Company under the Purchase
Agreement, the Warrant Agreement, the Registration Rights Agreement,
any agreements entered into by the Company to effectuate the
provisions of Sections 4.12 and/or 4.23 (the "Security Interest
Agreements"), and any agreements entered into by the Company to
effectuate the provisions of Section 4.24 hereof (the "Guarantee
Agreements") and (C) in the case of any transaction involving a
Subsidiary of the Company, any agreements entered into by such
Subsidiary to effectuate the terms of Section 4.12 and/or 4.23 hereof
(the "Subsidiary Security Interest Agreements") and any Contingently
Issuable Guarantees issued by it;
(2) immediately before and immediately after giving effect to
such transaction, no Event of Default and no Default shall have
occurred and be continuing;
(3) immediately after giving effect to such transaction the
Consolidated Tangible Net Worth of the surviving entity (in the case
of such a transaction involving the Company) or of the Company (in the
case of such a transaction involving a Subsidiary) is no less than the
Company's Consolidated Tangible Net Worth immediately before such
transaction;
(4) immediately after giving effect to such transaction, the
surviving entity (in the case of such a transaction involving the
Company) or the Company (in the case of such a transaction involving a
Subsidiary) shall have the ability to incur, under the provisions of
Section 4.08(a) hereof, at least $1 of Indebtedness; and
(5) the Company shall deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, transfer or lease, and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with Section 5.01 and that all
conditions precedent in the Indenture relating to such transaction
have been satisfied.
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Notwithstanding the foregoing, (i) any Subsidiary of the Company
with a Consolidated Net Worth greater than zero may consolidate with, merge
into or transfer all or substantially all of its properties and assets to the
Company; (provided that in connection with such transactions, no consideration
(other than common stock in the surviving or transferee corporation, as the
case may be) shall be issued or distributed to the stockholders of the
Company), and (ii) any Subsidiary of the Company may consolidate with, merge
into or transfer all or substantially all of its properties and assets to any
Wholly Owned Subsidiary or Subsidiaries of the Company.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer 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 corporation had been
named as the Company herein.
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Securities (other than interest included in Fully Accreted Value) when
the same becomes due and payable and the default continues for a period
of 15 days whether or not such payment shall be prohibited by the
provisions of Article 9 hereof; provided, however, that if (i) this
Indenture has been qualified under the TIA and (ii) at least 50% of the
aggregate principal amount of the Securities are no longer Restricted
Securities, then a default in the payment of interest shall not
constitute an Event of Default until and unless said default
continues for a period of 30 days;
(2) the Company defaults in the payment of the Fully Accreted
Value of or premium, if any, with respect to any Security when the
same becomes due and payable at maturity, upon redemption, in
connection with any Offer, 4.08 Offer, Change of Control Offer, Asset
Sale Offer, Stock Sale Offer or Free Cash Flow Offer pursuant to
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Section 4.07, 4.08, 4.18, 4.19 or 4.22, respectively, or otherwise,
whether or not such payment shall be prohibited by the provisions of
Article 9 hereof;
(3) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed or
performed in Section 4.03, 4.07, 4.08, 4.18, 4.19, 4.20, 4.21, 4.22,
4.23, 4.24 or 5.01 of this Indenture; provided that to the extent such
failure of the Company relates only to the procedures of making an
offer to purchase Securities pursuant to Section 4.07, 4.08, 4.18, 4.19
or 4.22, such failure is reasonably likely to have a material adverse
effect on the Holders;
(4) the Company fails to observe or perform any of its other
covenants, conditions or agreements on the part of the Company to be
observed or performed pursuant to the terms of this Indenture or the
Securities and the failure to observe or perform continues for the
period and after the notice specified below;
(5) (i) the Company or any Subsidiary of the Company fails to pay
when due principal of or interest on Indebtedness of the Company or
such Subsidiary of the Company with an aggregate principal amount of
$5,000,000 or more or (ii) there occurs a default or defaults on
Indebtedness of the Company or any Subsidiary of the Company, which
results in the acceleration of the maturity of Indebtedness with an
aggregate principal amount of $5,000,000 or more;
(6) the Company or any Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding for relief as
a debtor under any Bankruptcy Law,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) applies for, consents to or acquiesces in the
appointment of or taking of possession by a Custodian of it or
for all or substantially all of their respective property,
(D) makes a general assignment for the benefit of its
creditors,
(E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it,
(F) admits in writing its inability to pay its debts as
they become due, or
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(G) takes any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing;
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary of
the Company, in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Subsidiary
of the Company, or for all or substantially all of its properties,
or
(C) orders the liquidation of the Company or any Subsidiary
of the Company;
and in each case the order or decree remains unstayed and in effect
for 60 days;
(8) final judgments for the payment of money, which judgments in
the aggregate exceed $5,000,000 not adequately covered by insurance,
reserved against or bonded for by a responsible bonding authority
having a Consolidated Net Worth of at least $25,000,000, shall be
rendered against the Company or any Subsidiary of the Company by a
court of competent jurisdiction and shall remain undischarged for a
period (during which execution shall not be effectively stayed) of 60
days after the date on which any period for appeal has expired and all
rights of appeal have been denied;
(9) the Company fails to comply in any material respect with any
of its agreements or covenants in the Security Interest Agreements or
the Guarantee Agreements, or any Subsidiary of the Company fails to
comply in any material respect with any of its covenants or agreements
in any Contingently Issuable Guarantee issued to the Holders pursuant
to the terms of Section 4.24 or any Subsidiary Security Interest
Agreement.
(10) (A) the Company fails to comply in any material respect with
any of its agreements or covenants in the Purchase Agreement or the
Registration Rights Agreement, (B) any persons nominated for election
to the Company's Board of Directors at the direction of holders of the
Warrants pursuant to Section 12(b) of the Warrant Agreement shall not
be elected at any meeting of shareholders for the election of
directors, or (C) any of the Company's representations and warranties
contained in the Purchase Agreement shall not have been true and
correct in all material respects at the time made; provided, however,
that if (i) this Indenture has been qualified under the TIA and (ii)
at least 50% of the aggregate principal amount of the Securities are
no longer Restricted Securities then this clause (10) shall be of no
further force and effect; or
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(11) the Company or any of its Subsidiaries shall (A) fail to
comply in any material respect with any Environmental Law, or (B)
enter into or otherwise become subject to any consent, settlement
decree, agreement or other arrangement with a Government Authority, or
any judgment, order or decree shall be entered against the Company or
any of its Subsidiaries, based on or arising out of any violation of
any Environmental Law, and the resulting cost or liability of any of
the foregoing to the Company or any of its Subsidiaries reasonably
could be expected to have (individually or in the aggregate) a
material adverse effect on the condition (financial or otherwise),
operations, businesses or properties of the Company and its
Subsidiaries taken as a whole.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A Default under clause (4), (9) or (10) is not an Event of Default
until the trustee notifies the Company in writing, or the Holders of at least
25% in aggregate principal amount of the outstanding Securities notify the
Company and the Trustee in writing of the Default, and the Company does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default". Such notice shall be given by the Trustee if so requested
in writing by the Holders of at least 25% in aggregate principal amount of the
outstanding Securities. When a Default under any of the above clauses is cured
within such 30-day period, it ceases.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee
shall not be charged with knowledge of any Default or Event of Default unless
written notice thereof setting forth the nature of such Default or Event of
Default shall have been given or delivered to a Trust Officer at the Corporate
Trust Office of the Trustee by the Company, the Paying Agent, any Holder or an
agent of any Holder.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default with respect
only to the Company or any Significant Subsidiary specified in clause (6) or
(7) of Section 6.01) occurs and is continuing, the Trustee may, by written
notice to the Company and the Bank Agent, or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities may, by written notice
to the Company, the Trustee, the Senior Note Trustee and the Bank Agent, and
the Trustee shall, upon the written request of such Holders, declare the Fully
Accreted Value of and other accrued interest on all the Securities then
outstanding (if not then due and payable) to be due and payable on the earlier
of (i) the date on which an acceleration of the maturity of the Indebtedness
outstanding under the Revolving Credit Facility or the Senior Notes occurs or
(ii) five days after receipt of such notice by the Senior Note Trustee and the
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Bank Agent (the "Acceleration Date"). After any such declaration, all unpaid
Fully Accreted Value of and other accrued interest on all the Securities to the
Acceleration Date shall become and be due and payable on the Acceleration Date;
provided, however, that if an Event of Default is cured prior to the
Acceleration Date, the acceleration shall be deemed rescinded and have no
further force or effect.
In addition, in the case of an Event of Default under clause (5) of
Section 6.01, if the acceleration of the Indebtedness giving rise to such Event
of Default is waived or rescinded, as the case may be, in an amount sufficient
to reduce such accelerated Indebtedness below the requisite monetary amount set
forth in such clause (5) in accordance with the terms thereof within 30 days
after the event which gave rise to a Default under such clause (5), then the
acceleration pursuant to such clause (5) shall be deemed rescinded and have no
further force and effect, and such Event of Default shall thereby be cured. If
an Event of Default specified in clause (6) or (7) of Section 6.01 occurs with
respect to the Company or any Significant Subsidiary, all unpaid Fully Accreted
Value of and other accrued interest on the Securities 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 Securityholder. In the case of any
Event of Default pursuant to the provisions of Section 6.01 occurring by reason
of any willful action or omission by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if such action which resulted in the Event of Default would not have
occurred, such premium shall also become and be immediately due and payable to
the extent permitted by law. Upon payment of such Fully Accreted Value and
other interest, any interest payable on overdue payments of Fully Accreted
Value or other interest hereunder, and all other obligations under this
Indenture or the Securities, including its obligations under Section 7.07, all
of the Company's obligations under the Securities and this Indenture shall
terminate.
The Holders of 66 2/3% in the aggregate principal amount of the
Securities then outstanding by written notice to the Trustee and the Company
may rescind an acceleration if (i) all existing Events of Default, other than
the non-payment of the Fully Accreted Value of the Securities which has become
due solely by such declaration of acceleration, have been cured or waived, (ii)
to the extent the payment of such interest is lawful, interest on overdue Fully
Accreted Value and overdue installments of other interest, which has become due
otherwise than by such declaration of acceleration, has been paid, (iii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, (iv) all payments then due to the Trustee and any
predecessor Trustee under Section 7.07 have been made and (v) in the event of
the cure or waiver of a Default under clause (5) of Section 6.01, the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that
such Default has been cured or waived. Anything herein contained to the
contrary notwithstanding, in the event of any acceleration pursuant to this
Section 6.02, the Company shall not be obligated to pay any premium which it
would have had to pay if it had then elected to redeem the Securities
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pursuant to the terms of the Securities, except as provided in the first
paragraph of this Section 6.02.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing and the Holders are
entitled to payment as a result of acceleration, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal or interest (including interest comprised of the excess of Fully
Accreted Value over the principal amount on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject only to the provisions of Sections 6.07 and 10.02 hereof,
the Holders of 66 2/3% in aggregate principal amount of the outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except a Default in payment of Fully Accreted
Value, premium, if any, or other interest on any Security as specified in
clauses (1) and (2) of Section 6.01. When a Default or Event of Default is
waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
Subject to the Trustee's rights under Section 7.01(d), the Holders
of a majority in aggregate principal amount of the outstanding Securities 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, however, that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture;
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the rights of any Holder not taking
part in such direction;
(3) the Trustee shall have the right to decline to follow any
such direction if the Trustee, being advised by counsel, determines
that the action so directed may not
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lawfully be taken or if a Trust Officer in good faith shall determine
that the proceedings so directed would involve it in personal
liability; or
(4) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.06. Limitation on Remedies.
Except as provided in Section 6.02 or 6.07 of this Indenture, a
Securityholder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of
the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of 25% in aggregate
principal amount of the outstanding Securities do not give the Trustee
a direction which, in the opinion of the Trustee, is inconsistent with
the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Subject only to the provisions of Section 6.02 and Article 9
hereof, notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of and interest (including
interest comprised of the excess of Fully Accreted Value over the principal
amount) on the Security, on or after the respective due dates expressed in the
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
the Holder.
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SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of Fully Accreted Value, premium,
if any, or other interest specified in clause (1), (2) or (3) 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 for the whole amount of
Fully Accreted Value, premium, if any, and other accrued interest remaining
unpaid, together with, to the extent that payment of such interest is lawful,
interest on overdue Fully Accreted Value and premium, if any, and interest on
overdue installments of other interest, in each case at the Default Rate 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, and take such other actions including participation as a member,
official or otherwise of any committee of creditors, as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Securityholders allowed in any
judicial proceeding relative to the Company (or any other obligor upon the
Securities), its creditors or its property and shall be entitled and empowered
to collect and receive any monies or other property payable or deliverable on
any such claims and to distribute the same, and any Custodian in any such
judicial proceedings is hereby authorized by each Securityholder 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 Securityholders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agent and counsel, and any other amounts due
the Trustee under Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
first: to the Trustee and any predecessor Trustee for amounts due
under Section 7.07;
second: to holders of Senior Indebtedness of the Company to the
extent required by Article 9;
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third: to Securityholders for amounts due and unpaid on the
Securities for Fully Accreted Value, premium, if any, and other
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for Fully
Accreted Value, premium, if any, and other interest, respectively; and
fourth: to the Company 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 Securityholders 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 in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in aggregate
principal amount of the outstanding Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
its own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions, which by any provision of this Indenture are required to
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be furnished to the Trustee, and conforming to the requirements of
this Indenture; however, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) 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 unless it receives indemnity satisfactory to it for the
repayment of such funds or against such risk or liability.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) 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.
(g) 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,
note 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 on reasonable prior notice to the Company
to examine the books, records and premises of the Company, personally or by
agent or attorney during the Company's normal business hours; provided that the
Trustee shall, and shall cause its agents to, hold in confidence all such
information except to the extent disclosure may be required by law and except
to the extent that the Trustee, in its sole judgment, may determine that such
disclosure is consistent with its obligations hereunder.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) the Trustee may rely on any document reasonably believed by
it to be genuine and to have been signed or presented by the proper
person; the Trustee need not investigate any fact or matter stated in
the document;
(b) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 11.05 hereof; 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;
(c) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care;
(d) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers; provided that the Trustee's conduct does
not constitute gross negligence; and
(e) the Trustee may consult with counsel of its own choosing and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. The
Trustee, in its individual capacity, shall be entitled to all of the rights and
privileges otherwise contained in this Indenture with respect to any
Indebtedness which is senior to the Indebtedness created by this Indenture
which the Trustee may, at any time, hold, irrespective of the time of the
acquisition or disposition of the Senior Indebtedness, to the same extent as
any other holder of Senior Indebtedness would be entitled pursuant to the terms
of this Indenture, and no other section of this Indenture is to be construed to
deprive the Trustee, in its individual capacity, of any rights which it might
have as a holder of such Senior Indebtedness which, but for the fact that the
Trustee is serving as Trustee hereunder, would be senior to the Indebtedness
created hereby. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The recitals contained herein and in the Securities, except the
certificates of authentication and any such recitals relating to the Trustee,
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representation as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default or Event of Default within 90 days after the Trustee has
knowledge of such Default or Event of Default. Except in the case of a Default
or an Event of Default in payment on any Security, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 1 beginning with the May 1 following
the date on which this Indenture becomes subject to the TIA, the Trustee shall
mail to each Securityholder a report dated as of such May 1 that complies with
TIA Section 313(a). The Trustee also shall comply with VIA S 313(b), if this
Indenture becomes subject to the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and, commencing at the time this Indenture is
qualified under the TIA, filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any national securities exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation 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 it, except any such disbursement, expense or
advance as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel.
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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 the Trustee's part, in connection with the administration of this
trust and its duties hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Trustee shall notify
the Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee except money or property held in trust to pay
principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(6), (7) or (8), the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any lien
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Eight of this
Indenture and/or the termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and the appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section. The Trustee may resign
by so notifying the Company in writing. The Holders of a majority in aggregate
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee with the
Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
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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 aggregate principal amount of the outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately thereafter,
subject to the lien provided in Section 7.07, the retiring Trustee shall
transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If any Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates 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 without any further act
shall be the successor Trustee, to the extent such corporation or association
complies with Section 7.10.
SECTION 7.10. Eligibility; Disqualification.
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 $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or
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certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA
Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
Subject to the terms of any Senior Indebtedness, the Company may
terminate its obligations under the Securities, this Indenture, the Guarantee
Agreements and the Security Interest Agreements, other than those obligations
referred to in the immediately succeeding paragraph, and any Subsidiary of the
Company obligated under outstanding Contingently Issuable Guarantees or any
Subsidiary Security Interest Agreement, may terminate its obligations
thereunder, if:
(1)(a) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment money or securities
has theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.03) have been delivered to the
Trustee for cancellation; or
(b)(i) the Securities mature within six months or all of them are
to be called for redemption within six months under arrangements
satisfactory to the Trustee for giving notice of redemption, and
(ii) the Company irrevocably deposits or causes to be
deposited with the Trustee, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust
funds in trust solely for the benefit of the Holders for that purpose,
money or direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the
payment of which guarantee or obligation the full faith and credit of
the United States is pledged ("U.S. Government Obligations"), maturing
as to principal and interest in such amounts and at such times as are
sufficient without consideration of any reinvestment of such interest,
to pay principal of and interest (including interest comprised of the
excess of Fully
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Accreted Value over the principal amount) on the outstanding
Securities to maturity or redemption as the case may be; 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
said principal and interest with respect to the Securities; and
(2) the Company pays or causes to be paid all sums then payable
by the Company hereunder and under the Securities; and
(3) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.02, 4.10, 7.07, 7.08, 8.03
and 8.04 and Article V hereof (other than clauses (3) and (4) of Section 5.01)
shall survive until the Securities are no longer outstanding. Thereafter, the
Company's obligations in Sections 7.07, 8.03 and 8.04 shall survive.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
The Company will pay any taxes or other expenses incurred by any
trust created pursuant to this Article 8.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, and shall
apply the deposited money and the money from U.S. Government Obligations in
accordance with this Indenture to the payment of principal of and interest
(including interest comprised of the excess of Fully Accreted Value over the
principal amount) on the Securities. Money so held in trust, to the extent
allocated for the payment of the Securities, shall not be subject to the
provisions of Article 9 of this Indenture.
SECTION 8.03. Repayment to Company.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess money or U.S. Government
Obligations 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 or interest (including interest comprised of the excess of Fully
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Accreted Value over the principal amount) that remains unclaimed for two years;
provided, however, that the Company shall, if requested by the Trustee or such
Paying Agent, give the Trustee or such Paying Agent appropriate indemnification
against any and all liability which may be incurred by it by reason of such
payment; and provided, further, that the Trustee or such Paying Agent before
being required to make any payment may, at the expense of the Company, cause to
be published once in a newspaper of general circulation in the City of New York
or mail to each Holder entitled to such money 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, Securityholders entitled to such money must look to the Company for
payment as general creditors unless an applicable law designates another
person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 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, the Securities, the Guarantee
Agreements and the Security Interest Agreements, and the obligations of any
Subsidiary of the Company under any Contingently Issuable Guarantees and any
Subsidiary Security Interest Agreements, shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.01 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; provided, however, that if the
Company has made any payment of principal of or interest (including interest
comprised of the excess of Fully Accreted Value over the principal amount) any
Securities because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
SUBORDINATION
SECTION 9.01. Securities Subordinated to Senior Indebtedness.
The Company, for itself and its successors, and each Holder, by its
acceptance of Securities, agrees that, notwithstanding anything to the contrary
in Sections 6.01 and 6.02 hereof, the payment of the principal of, interest on
or any other amounts due on the Securities is subordinated in right of payment,
to the extent and in the manner provided in this Article 9,
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to the prior payment in full of all Senior Indebtedness. Each Holder by its
acceptance of the Securities authorizes and directs the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate, as
between the holders of Senior Indebtedness and such Holder, the subordination
provided in this Article 9.
"Senior Indebtedness" means the principal of, interest (including,
without limitation, interest at the contract rate relating to such Senior
Indebtedness accruing after any proceeding or event referred to in clauses (6)
and (7) of Section 6.01) on or any other amounts due with respect to any
Indebtedness of the Company (other than, with respect to each of the
Securities, any of the other Securities), whether outstanding on the date of
this Indenture or thereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals, extensions
or refundings of, or amendment, modifications or supplements to, Indebtedness
of the kind described in this clause) (i) incurred under or in respect of the
Revolving Credit Facility (including, without limitation, any liability of the
Company in respect of guarantees and letters of credit issued thereunder) and
the Senior Notes, (ii) incurred in accordance with the provisions of Section
4.08 which by its terms is senior in right of payment to the Securities and
(iii) under Interest Swap Obligations in respect of any Senior Indebtedness.
Notwithstanding anything to the contrary in the foregoing, however, Senior
Indebtedness shall not include (a) Indebtedness or amounts owed for goods or
materials purchased in the ordinary course of business, for compensation to
employees, or for services, (b) Indebtedness of the Company to a Subsidiary or
Affiliate of the Company, (c) the Exchange Debentures, (d) Subordinated
Indebtedness, (e) Indebtedness existing prior to the Initial Issuance Date, (f)
Indebtedness incurred in violation of Section 4.08 hereof and (g) Indebtedness
which is not fully and adequately secured by any assets or properties of the
Company; provided that Senior Indebtedness shall not cease to be fully and
adequately secured merely because of the occurrence of an unforeseen diminution
in the value of the collateral securing such Senior Indebtedness. For the
purpose of this definition and the provisions of this Indenture, (i)
Indebtedness outstanding under the Senior Credit Agreements (including any
refinancing thereof with respect to which an Officers' Certificate referred to
in clause (ii) below has been delivered (it being understood that any
amendment, consent, waiver, modification, supplement, or extension of the
Senior Credit Agreements does not constitute a refinancing so long as such
action shall not permit an increase in the amounts outstanding or available for
borrowing under the Revolving Credit Facility or an increase in the aggregate
principal amount of the Senior Notes) is acknowledged to be fully and
adequately secured at all times and (ii) any Indebtedness with respect to which
the Company has, at the time of the incurrence of such Indebtedness, delivered
an Officers' Certificate (which Officers' Certificate shall be conclusive,
final and binding on the Holders and the Trustee and upon which the holder of
such Senior Indebtedness shall be entitled to rely) to the Trustee certifying
such Indebtedness as being fully and adequately secured at the time of
incurrence and which is, by its terms, Senior Indebtedness, shall constitute
Senior Indebtedness.
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The expressions "prior payment in full," "payment in full" and
"paid in full" and any other similar term or phrase when used in this Article 9
with respect to Senior Indebtedness shall mean the payment in full of such
Senior Indebtedness in cash or provision for such payment in cash or otherwise
in a manner satisfactory to the holders of the Senior Indebtedness.
This Article 9 shall constitute a continuing offer to all persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder
and they and/or each of them may enforce such provisions to the extent and in
the manner provided herein.
SECTION 9.02. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment (in cash, property, securities,
by set-off or otherwise) shall be made or agreed to be made on account of the
principal of, premium (if any) or interest on the Securities, or in respect of
any redemption, retirement, purchase or other acquisition of any of the
Securities, and no Holder of any Security shall be entitled to receive any such
payment (any of the foregoing payments or actions being referred to in this
Section 9.02 as a "Payment"), on or after the occurrence of any default in the
payment of principal or interest then due and payable in respect of any Senior
Indebtedness (either at maturity, upon redemption, by acceleration or
otherwise), unless and until such default has been waived or cured or all
amounts then due and payable for principal of and interest on all Senior
Indebtedness shall have been paid in full or provision therefor in cash, in
Cash Equivalents, or in accordance with the terms of such Senior Indebtedness
and the agreements, if any, under which such Senior Indebtedness was issued or
created, shall have been made.
(b) The Company may not make any Payment if:
(1) a default or event of default under any agreement governing
Senior Indebtedness (other than a default or event of default relating
to payment of principal or interest, either at maturity, upon
redemption, by declaration or otherwise) has occurred and is
continuing that permits the holders of such Senior Indebtedness to
accelerate its maturity (whether or not such acceleration has
occurred); and
(2) the Company or the Trustee receives a notice of such default
or event of default from (i) the holders of a majority of the
outstanding principal amount of Indebtedness under the Senior Credit
Agreements or (ii) any Representative of such holders; provided,
however, that only one such notice shall be given effect within any
period of 360 consecutive days; provided, further, that no more than
one notice may be given with respect to any continuing default or
event of default.
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Notwithstanding the provisions of this Section 9.02(b), the Company may make
Payments on the Securities when:
(A) all defaults and events of default referred to in such
notice are cured or waived; or
(B) 179 days pass after such notice is given, with respect
to such defaults and/or events of default
so long as this Article 9 (including, without limitation, Section 9.02(a))
otherwise permits a Payment at that time.
(c) In the event that notwithstanding the provisions of this
Section 9.02 the Company shall make any Payment to the Trustee or any Holder of
the Securities on account of the principal of or interest on the Securities
after receiving notice (as aforesaid) of the happening of a default or event of
default on Senior Indebtedness, then, unless and until such default or event of
default shall have been cured or waived or shall have ceased to exist either
due to the passage of time as aforesaid in Section 9.02(b)(2)(B) or otherwise,
such payment (subject to the provisions of Sections 9.06 and 9.07) shall be
held by the Trustee or such Holder, in trust for the benefit of, and, subject
to Sections 9.06 and 9.07, shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness (pro rata as to each of such holders on the
basis of the respective amounts of Senior Indebtedness then in default held by
them) or their Representative, if any, as their respective interests may
appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
default in the payment of principal of or interest on any Senior Indebtedness
or a default which results in the acceleration of such Senior Indebtedness
under any Senior Indebtedness or under any agreement pursuant to which Senior
Indebtedness has been issued.
SECTION 9.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.
Upon any distribution or payment of assets or securities of the
Company upon any dissolution, winding up, liquidation or reorganization of the
Company of any kind or character (whether voluntary or involuntary, in
bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full (or to have such payment duly provided for)
of the principal thereof and
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interest due thereon and other amounts due in connection therewith before the
Holders are entitled to receive any payment or distribution of any assets
(other than (i) securities of the Company, as reorganized, the payment of which
is subordinated, at least to the extent provided in this Article 9 with respect
to the Securities, to the payment of all indebtedness in the nature of Senior
Indebtedness or (ii) Capital Stock of the Company) on account of the principal
of or interest on the Securities;
(b) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
Holders or the Trustee on behalf of the Holders would be entitled except for
the provisions of this Article 9, including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Securities, shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of Senior
Indebtedness or their Representative, if any (pro rata as to each such holder,
Representative or trustee on the basis of the respective amounts of unpaid
Senior Indebtedness held or represented by each), to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid except that
Holders of the Securities shall be entitled to receive securities that are
subordinated to Senior Indebtedness to at least the same degree as the
Securities; and
(c) in the event that notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Securities, shall be received by the Trustee or the Holders or any Paying Agent
(or, if the Company is acting as its own Paying Agent, money for any such
payment or distribution shall be segregated or held in trust) on account of
principal of or interest on the Securities before all Senior Indebtedness is
paid in full, such payment or distribution (subject to the provisions of
Sections 9.06 and 9.07) shall be received and held in trust for and shall be
paid forthwith over and delivered to the holders of the Senior Indebtedness
remaining unpaid or unprovided for or their Representative, if any (pro rata as
to each of such holders on the basis of the respective amounts of Senior
Indebtedness held by them), for application to the payment of such Senior
Indebtedness until all such Senior Indebtedness shall have been paid in full,
after giving effect to any concurrent payment or distribution or provision
therefor to or for the holders of such Senior Indebtedness, except that Holders
of the Securities shall be entitled to receive securities that are subordinated
to Senior Indebtedness to at least the same extent as the Securities.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or any
assignment for the benefit of the Company's creditors.
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SECTION 9.04. Securityholders To Be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness pursuant
to this Article 9, the Holders of Securities shall be subrogated equally and
ratably to the rights of the holders of Senior Indebtedness to receive payments
or distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
Senior Indebtedness by or on behalf of the Company or by or on behalf of the
Holders by virtue of this Article 9 which otherwise would have been made to the
Holders shall, as among the Company, its creditors other than holders of the
Senior Indebtedness and the Holders, be deemed to be payment by the Company to
or on account of the Senior Indebtedness, it being understood that the
provisions of this Article 9 are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders
of Senior Indebtedness, on the other hand.
SECTION 9.05. Obligations of the Company Unconditional.
Nothing contained in this Article 9 or elsewhere in this Indenture
or in any Security is intended to or shall impair, as among the Company, its
creditors other than holders of the Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the Fully Accreted Value of and other interest (including, to the
extent lawful, any interest on overdue installments of interest) on the
Securities 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 Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holders from exercising all remedies otherwise permitted by applicable law upon
Default under this Indenture, subject to the rights, if any, under this Article
9 of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Article 9, the
Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation,
reorganization or similar proceedings are pending, or a certificate of the
liquidating trustee or agent or other person making any distribution to the
Trustee or to the Holders, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of 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 9.
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SECTION 9.06. Trustee and Paying Agent Entitled To Assume Payments
Not Prohibited in Absence of Notice.
The Trustee and Paying Agent shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee or the Paying Agent or the taking of any other
action under this Article 9 by the Trustee unless and until the Trustee or the
Paying Agent shall have received written notice thereof from the Company or
from one or more holders of Senior Indebtedness or from any Representative
there for and, prior to the receipt of any such written notice, the Trustee and
Paying Agent, subject to the provisions of Sections 7.01 and 7.02, shall be
entitled in all respects conclusively to assume that no such facts exist.
SECTION 9.07. Application by Trustee of Monies Deposited With It.
Subject to Article 8 and Section 4.16, any deposit of monies by the
Company with the Trustee or any Paying Agent (whether or not in trust) for the
payment of the principal of or interest on any Securities shall be subject to
the provisions of Sections 9.01, 9.02, 9.03 and 9.04, except that, prior to the
date on which by the terms of this Indenture any such monies may become payable
for any purpose (including, without limitation, the payment of either the Fully
Accreted Value of or the other interest on any Security), the Trustee shall not
have received with respect to such monies the notice provided for in Section
9.06, then the Trustee or the Paying Agent shall have full power and authority
to receive such monies and to apply the same to the purpose for which they were
received. This Section shall be construed solely for the benefit of the
Trustee and Paying Agent and nothing herein shall be construed to relieve any
Holders from the duties imposed upon them under Section 9.03(c) with respect to
monies received in violation of the provisions of this Article 9. The
foregoing shall not apply if the Company acts as its own Paying Agent.
SECTION 9.08. Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided herein shall 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 which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties
to the Indenture or the Holders. No provision in any supplemental indenture
which modifies this Article 9 or otherwise affects the superior position
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of the holders of the Senior Indebtedness shall be effective against the
holders of the Senior Indebtedness who have not consented thereto.
SECTION 9.09. Securityholders Authorize Trustee To Effectuate
Subordination of Securities.
Each Holder by its acceptance of Securities authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 9 and to protect the rights of the Holders pursuant to this Indenture
and appoints the Trustee its attorney-in-fact for such purpose, 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 any
other similar remedy or otherwise) tending towards liquidation of the business
and assets of the Company, the immediate filing of a claim for the unpaid
balance of its Securities in the form required in said proceedings and causing
said claim to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then the holders of
Senior Indebtedness are hereby authorized to file an appropriate claim for and
on behalf of the Holders. In the event of any such proceeding, until the
Senior Indebtedness is paid in full in accordance with Section 9.03 (or
adequate provision made for such payment), without the consent of the holders
of a majority in aggregate principal amount outstanding of Senior Indebtedness,
no Holder shall waive, settle or compromise any such claim or claims relating
to the Securities that such Holder now or hereafter may have against the
Company.
SECTION 9.10. Right of Trustee and Paying Agent To Hold Senior
Indebtedness.
The Trustee and the Paying Agent, in their individual capacities,
shall be entitled to all of the rights set forth in this Article 9 in respect
of any Senior Indebtedness at any time held by either of them to the same
extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee or the Paying Agent of any
of its rights as such holder.
SECTION 9.11. Article 9 Not To Prevent Events of Default.
The failure to make a payment on account of Fully Accreted Value of
or other interest (including any interest on overdue installments of interest
and defaulted interest) on the Securities by reason of any provision of this
Article 9 shall not be construed as preventing the occurrence of an Event of
Default under Section 6.01.
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SECTION 9.12. No Fiduciary Duty Created to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness by virtue of the provisions of this Article 9.
ARTICLE 10
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may amend or supplement this Indenture or the
Securities without prior notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or in consistency;
provided that such amendment or supplement does not adversely affect
the rights of any Securityholder;
(2) to comply with Section 5.02;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided that the Trustee consents
to such amendment;
(4) to comply with any requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA, as
contemplated by Section 10.03 or otherwise;
(5) to provide for the issuance to the Holders of new public
securities substantially identical to the Securities pursuant to a
Registered Exchange Offer in accordance with the Registration Rights
Agreement and to make any and all other changes herein to the extent
necessary in connection with such Registered Exchange Offer, except to
the extent any such change would be reasonably likely to materially
adversely affect the Holders;
(6) to add provisions to this Indenture, and to take such other
further actions reasonably necessary, to effectuate the security
interests in favor of the Securityholders contemplated by Sections
4.12 and 4.23;
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(7) to add provisions to this Indenture, and to take such other
further actions reasonably necessary, to effectuate the Contingently
Issuable Guarantees in favor of the Securityholders contemplated by
Section 4.24; or
(8) to make any change that does not adversely affect the legal
rights of any Securityholder hereunder.
SECTION 10.02. With Consent of Holders.
Subject to Sections 6.07 and without notice to the Securityholders,
the Company, when authorized by resolution of its Board of Directors, and the
Trustee may amend this Indenture (including Sections 4.07, 4.08, 4.19 and 4.22)
or the Securities with the written consent of the Holders of 66 2/3% in
aggregate principal amount of the Securities then outstanding, and the Holders
of 66 2/3% in aggregate principal amount of the Securities then outstanding by
written notice to the Trustee may waive future compliance by the Company with
any provision of this Indenture or the Securities; provided, however, that any
modification of or amendment to or waiver of future compliance with Section
4.03 shall only require the written consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding.
Notwithstanding the foregoing provisions of this Section 10.02,
without the consent of each Securityholder affected, an amendment or waiver,
including a waiver pursuant to Section 6.04, may not:
(a) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment or waiver;
(b) reduce the rates of or change the times for scheduled
payments of interest on any Security or modify the manner of
calculation of interest on any Security;
(c) reduce the principal or Fully Accreted Value of or change the
fixed maturity of any Security or alter the provisions with respect to
optional or mandatory redemption pursuant to the terms of the
Securities (including any provisions regarding a Change of Control
Offer pursuant to Section 4.18, but not including any provisions
regarding an Offer, a 4.08 Offer, an Asset Sale Offer or Stock Sale
Offer, or a Free Cash Offer pursuant to Section 4.07, 4.08, 4.19 or
4.22 respectively);
(d) waive a default in the payment of the Fully Accreted Value
of, premium, if any, or other interest on or redemption payment under
the Securities with respect to any Security, except as provided for in
Section 6.02;
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<PAGE> 100
(e) make any Security payable in money or property other than
that stated in the Security;
(f) make any change in this Section 10.02 or Section 6.04 or 6.07;
(g) modify the provisions of Article 9 hereof in any manner
adverse to the Holders; or
(h) make the Fully Accreted Value of, premium, if any, or other
interest on any Security payable with anything or in any manner other
than as provided for in the Indenture and the Securities as in effect
on the Initial Issuance Date.
It shall not be necessary for the consent of the Holders under this
Section 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 or waiver under this Section becomes effective,
the Company shall mail to the Holders of each Security affected thereby a
notice briefly describing the amendment or waiver. 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. Except as
otherwise provided in this Section, the Holders of a majority in aggregate
principal amount of the Securities then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities.
After an amendment, supplement or waiver under this Section 10.02
or Section 10.04 becomes effective, it shall bind every Securityholder unless
it makes a change described in any of the clauses (a) through (h) of this
Section 10.02, in which case, the amendment, supplement or waiver shall bind
only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security.
The Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Indenture or the Securities unless each Holder (irrespective of the amount of
Securities then owned by it) shall be informed thereof by the Company and shall
be afforded the opportunity of considering the same for a period of not less
than 5 Business Days and shall be supplied by the Company with a brief
statement regarding the reasons for any such proposed waiver or amendment, a
copy of the proposed waiver or amendment and such other information as such
Holder shall reasonably request regarding such amendment or waiver to enable it
to make an informed decision with respect thereto. Executed or true and
correct copies of any waiver or amendment effected pursuant to the provisions
of this Section 10.02 will be delivered by the Company to each Holder of
outstanding
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<PAGE> 101
Securities within 30 days following the date on which the same are executed and
delivered by the Holder or Holders of the requisite percentage of outstanding
Securities. The Company will not, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fees or otherwise, to any Holder as consideration for or as an inducement to
the entering into by any Holder of any waiver or amendment of any of the terms
and provisions of this Indenture unless such remuneration is offered, on the
same terms, ratably, to all Holders of the Securities then outstanding who
enter into any such waiver or amendment. The Company will not be obligated to
compensate Holders of Securities who do not consent to any waiver or amendment
within the period prescribed by the Company, even though a waiver or amendment
(other than a waiver or amendment referred to in any of clauses (a) through (h)
of the second paragraph of this Section 10.02), if approved by the Holders of
the requisite principal amount of Securities in accordance with the foregoing
provisions of this Section 10.02, would be binding on them.
Nothing in this Section 10.02 shall be construed to limit the
ability of a Holder to amend or modify, with the Trustee's consent, any of the
terms of the Security held by such Holder in a manner which does not adversely
affect any other Securityholder or any holder of any Senior Indebtedness.
SECTION 10.03. Compliance With Trust Indenture Act.
Every amendment of or supplement to this Indenture or the
Securities shall be set forth in a supplemental indenture that complies with
the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
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
Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
the amendment, supplement or waiver becomes effective.
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 unless consents from Holders of the aggregate principal amount of
Securities required hereunder for such amendment, supplement or waiver shall
also have been given and not revoked in such 90 day period.
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<PAGE> 102
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder and the Trustee may place
an appropriate notation on any Security thereafter authenticated.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms.
SECTION 10.06. Trustee May 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 10 is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 10.07 Conditions to Application of Indenture.
The terms of this Indenture shall be applicable to the Securities
as and from the date that the Company delivers a certification to the Trustee
to the effect that the Senior Refinancing has been consummated. All the terms
of the Original Indenture shall be applicable to the Securities until such date
without reference to any amendment or supplement contained in this Indenture.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is or would be required to be included in this
Indenture by the TIA if this Indenture were qualified thereunder, the provision
required by the TIA shall control.
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<PAGE> 103
SECTION 11.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by first class mail addressed as
follows:
If to the Company:
Anacomp, Inc.
11550 North Meridian Street
P.O. Box 40888
Indianapolis, Indiana 46240
Attention: Chairman
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Michael C. Ryan, Esq.
If to the Trustee:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Office
If to the Senior Note Trustee or to the Bank Agent, at its address
initially specified in the Senior Note Indenture and the Revolving Credit
Agreement, respectively, or such other address as may be specified to the
Company from time to time by the Senior Note Trustee and/or the Bank Agent.
The Company shall promptly notify the Trustee of any such new address.
The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Except as specified in TIA Section 313(c) with respect to notices
to be sent to the persons specified therein, any notice or communication mailed
to a Securityholder shall be mailed to him at his address as it appears on the
Securities register maintained by the Registrar and shall be sufficiently given
to him if so mailed within the time prescribed. Copies of any such
communication or notice to a Holder shall also be mailed to the Trustee.
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<PAGE> 104
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given
only when received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders With Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other person
shall have the protection of TIA Section 312(c).
SECTION 11.04. 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 (included, but not limited to, actions
under Section 5.01), the Company shall furnish to the Trustee:
(1) 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
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of 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;
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<PAGE> 105
(4) a statement as to whether or not, in the opinion of 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; and
(5) such additional information as the Trustee may reasonably
request.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Paying Agent or Registrar may make reasonable rules
for its functions.
SECTION 11.07. Governing Law.
The laws of the State of New York shall govern this Indenture and
the Securities without regard to principles of conflicts of law. The Trustee,
the Company and the Securityholders 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 Securities. Nothing herein shall affect the
right of the Company, the Trustee or any Holder of Securities to serve process
in any other jurisdiction.
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 Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. No Recourse Against Others.
A director, officer, employee or stockholder, as such of the
Company shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability.
SECTION 11.10. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
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<PAGE> 106
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.
SECTION 11.12. Separability.
In case any provision in this Indenture or in the Securities 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, and a Holder shall have no claim therefor against any party hereto.
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 or provisions hereof.
SECTION 11.14. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
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<PAGE> 107
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
ANACOMP, INC.
By:
-----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, TRUSTEE
By:
-----------------------------------------
Name:
Title:
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<PAGE> 108
SCHEDULE 1
Certain Assets
1. Inventory in the ordinary course of business;
2. Real estate located at 5100 Patrick Henry Boulevard, Santa Clara,
California; and
3. The 3480 Tape Cartridge Manufacturing Operations of the Company and
its Subsidiaries.
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<PAGE> 1
Exhibit 4.4
Recording requested by and
when recorded mail to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Gary R. Eisenman, Esq.
[This space for
recorder's use only]
================================================================================
FIRST DEED OF TRUST, ASSIGNMENT OF RENTS AND PROFITS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
ANACOMP, INC.
Trustor,
TO
[ ],
as Trustee
and
THE BANK OF NEW YORK,
as Beneficiary
Relating to Premises in
Graham, Texas
$225,000,000
Dated as of: , 1995
================================================================================
<PAGE> 2
FIRST DEED OF TRUST,
ASSIGNMENT OF RENTS AND PROFITS,
SECURITY AGREEMENT AND FIXTURE FILING
This FIRST DEED OF TRUST, ASSIGNMENT OF RENTS AND PROFITS,
SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") dated as of ,
1995, is made by ANACOMP, INC. ("Trustor"), an Indiana corporation having an
office and mailing address at One Buckhead Plaza, 3060 Peachtree Road, N.W.
30305, as mortgagor, assignor and debtor, in favor of
("Trustee") and THE BANK OF NEW YORK, a New York banking corporation, having an
office and mailing address at 101 Barclay Street, 21 West, New York, New York
10286, solely in its capacity as trustee pursuant to the Indenture (as
hereinafter defined) (together with any successors or assigns in such capacity,
"Beneficiary"). All capitalized terms not defined herein shall have the
meanings ascribed to them in the Indenture (as defined in Recital 2 below).
R E C I T A L S:
1. Trustor is the owner in fee simple absolute of the
Premises (as hereinafter defined).
2. Trustor and Beneficiary, as trustee (together with any
successors and assigns in such capacity), have entered into a certain indenture
(as amended from time to time, the "Indenture") dated the date hereof, pursuant
to which Trustor has issued Senior Secured Notes due [insert month and day]
2002 (the "Notes") in the aggregate principal amount of $225,000,000.
3. Simultaneously with the execution and delivery of this
Deed of Trust, Trustor and Beneficiary have entered into a certain Security and
Pledge Agreement, dated the date hereof, pursuant to which Trustor has granted
to Beneficiary a security interest in certain personal property to secure the
obligations of Trustor in respect of the Notes and the Indenture along with
certain other Collateral Documents which also provide security for the
obligations of Trustor as aforesaid.
4. This Deed of Trust is given by Trustor to Secure the
Indenture Obligations which include, but are not limited to, the obligations of
Trustor to pay principal of, and premium, if any, and interest on, the Notes
when due and
<PAGE> 3
2
payable, and all other amounts due or to become due under or in connection with
the Indenture, the Notes, the Security and Pledge Agreement and any other
Collateral Document or hereunder, the performance of all other obligations of
Trustor to Beneficiary and the Holders (collectively, the "Obligations").
GRANT TO TRUSTEE:
For valuable consideration and as security for the payment and
performance of the Obligations, Trustor does hereby grant, sell, convey,
transfer and assign unto Trustee, IN TRUST, with power of sale and right of
entry and possession, and create a security interest in and first priority
mortgage lien upon, all Trustor's right, title and interest, if any, in and to
the following property whether now owned or held or hereafter acquired
(collectively, "Trust Property"):
A. The fee simple estate in the land described in Schedule A,
together with any and all easements, rights-ofway, sidewalks, gores of land,
streets, ways, alleys, passages, passageways, sewer rights, waters, water
courses, water rights and powers, air, light and other rights, estates, titles,
interests, privileges, liberties, servitudes, licenses, tenements,
hereditaments and appurtenances whatsoever, in any way belonging, relating or
appertaining thereto, or any part thereof, or which hereafter shall in any way
belong, relate or be appurtenant thereto, and all reversions, remainders,
income, rents, issues, revenues and profits thereof (collectively, the "Land");
B. The buildings, structures and other improvements and any
and all alterations now or hereafter located or erected on the Land, including,
without limitation, attachments, walks and ways (collectively, the
"Improvements"; together with the Land, the "Premises");
C. Any and all permits, certificates, approvals and
authorizations, however characterized, issued or in any way furnished, whether
necessary or not for the operation and use of the Premises, including, without
limitation, building permits, certificates of occupancy, environmental
certificates, industrial permits or licenses and certificates of operation
(collectively, "Permits"), other than any Permits that by their terms may not
be mortgaged,
<PAGE> 4
3
pledged or transferred, or expire or are cancelled upon any mortgage, pledge or
transfer thereof;
D. All machinery, apparatus, equipment, fittings, fixtures,
improvements and articles of personal property of every kind and nature
whatsoever now or hereafter attached or affixed to the Premises or used in
connection with the use, enjoyment and operation of the Premises or the
maintenance or preservation thereof, including, without limitation, all
manufacturing equipment, tools, utility systems, fire sprinkler and alarm
systems, HVAC equipment, boiler, electronic data processing, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, window cleaning, maintenance or other systems or equipment, lobby and
all other indoor or outdoor furniture, appliances or supplies, and all other
articles used or useful in connection with the use, operation, maintenance or
repair of any part of the Premises including, without limitation, the rights of
Trustor as lessee to any of the foregoing under any capital lease or
installment sale which may be permitted under the Indenture, which shall, to
the fullest extent permitted under applicable law, be deemed conclusively to be
real property and conveyed by this Deed of Trust (collectively, "Equipment")
(certain of the above-described goods are to become fixtures on the Premises);
E. Trustor's interest, as landlord, franchisor, licensor or
grantor, in all leases of space, franchise agreements, leases, occupancy or
concession agreements (collectively, "Leases"; each, a "Lease") now existing or
hereafter entered into relating in any manner to the Premises or Equipment and
any and all amendments, modifications, supplements and renewals of Leases,
whether now in effect or hereafter coming into effect, including, without
limitation, all rents, additional rents, cash or securities deposited
thereunder to secure performance of the lessee's, franchisee's, licensee's or
obligee's obligations thereunder, revenues, earnings, profits and income,
advance rental payments, payments incident to assignment, sublease or surrender
of a Lease, claims for forfeited deposits and claims for damages, now due or
hereafter to become due, with respect to any Lease;
F. All drawings, plans, specifications, file materials,
operating and maintenance records, catalogues, tenant lists, correspondences,
advertising materials, operating manuals, warranties, guaranties, appraisals,
studies and data relating to the Premises or the Equipment
<PAGE> 5
4
or the construction of any Alteration or the maintenance of any Permit ("Plans
and Warranties");
G. All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation or other awards or payments
with respect thereto, including interest thereon, together with any and all
monies now or hereafter on deposit for the payment of real estate taxes,
assessments or common area charges levied against the Premises, unearned
premiums on policies of insurance maintained by Trustor; and
H. All right, title and interest of the Trustor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of and all additions and appurtenances to, the Land, the Improvements,
Equipment, Permits, Plans and Warranties and the Leases hereinafter acquired by
or released to Trustor or constructed, assembled or placed by Trustor on the
Land, or the Improvements, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without any
further mortgage, deed of trust, conveyance, assignment or other act by
Trustor, shall become subject to the lien of this Deed of Trust as fully and
completely, and with the same effect, as though now owned by Trustor and
specifically described herein;
TO HAVE AND TO HOLD the Trust Property and the rights and
privileged hereby mortgaged or intended to be, unto Trustee and Trustee's
successors and assigns for the benefit of the Beneficiary, for the purpose of
securing payment and performance of the Obligations, in each and every case
subject to the terms, conditions and provisions of this Deed of Trust and the
Indenture, IN TRUST, upon the terms herein set forth for the benefit and
security of the Beneficiary.
<PAGE> 6
5
C O V E N A N T S :
Trustor warrants, represents and covenants as follows:
ARTICLE 1
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF TRUSTOR
SECTION 1.01. Payment and Performance. Trustor shall
promptly pay and perform all the Obligations in strict accordance with the
terms of the Obligations.
SECTION 1.02. Good Title; Priority. (a) Trustor represents
and warrants that:
(i) it has good and marketable title to an indefeasible fee
simple estate in the Premises, and good title to the other Trust
Property subject to no mortgage, deed of trust, pledge, security
interest, encumbrance, lien, lease, license, easement, assignment,
collateral assignment or charge of any kind, including, without
limitation, any conditional sale or other title retention agreement or
lease in the nature thereof, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code of the
state in which the Premises are located or any similar statute or any
subordination arrangement in favor of any party other than Beneficiary
(collectively, "Current Liens"), except for the Permitted Liens which
are as set forth on Schedule B; and
(ii) this Deed of Trust creates and constitutes a valid and
enforceable first priority Deed of Trust on the real property of the
Trust Property, and, to the extent any of the Trust Property consists
of personalty, a security interest in the Trust Property prior to
Current Liens, other than Permitted Liens (but not to extensions,
amendments or supplements of any Permitted Lien that increases the
amount or value of such Permitted Lien or causes additional Trust
Property to become subject to such Permitted Lien), that are known to
the Trustor or that can be perfected by the filing of financing
statements, mortgages or the making of other similar filings or by the
possession of such personalty, and Trustor does now and will forever
<PAGE> 7
6
warrant to Beneficiary and all its successors and assigns such title
and the validity and priority of the Lien hereby created and evidenced
against the claims of all Persons and parties whomsoever.
(b) Except as permitted by the Indenture, Trustor shall keep
in effect all material rights and appurtenances to or that constitute a part
of, and Permits that relate to, the Trust Property.
SECTION 1.03. Further Documentation To Assure Lien; Fees and
Expenses. (a) Trustor shall, at the sole cost and expense of Trustor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Beneficiary shall from time to time reasonably request, which may
be necessary in the reasonable judgment of Beneficiary from time to time to
assure, perfect, convey, assign, transfer and confirm unto Beneficiary, the
property and rights hereby conveyed or assigned, or which Trustor hereunder or
under the Indenture may be bound to convey or assign to Beneficiary or which
may facilitate the performance of the terms of this Deed of Trust, or the
filing, registering or recording of this Deed of Trust.
(b) Trustor shall pay all filing, registration or recording
fees and taxes, whether now in existence or later imposed, and all expenses
incident to the execution, delivery, recordation, perfection and continued
perfection of this Deed of Trust, any mortgage instrument supplemental hereto,
any security instrument with respect to the Personal Property (as hereinafter
defined), any Uniform Commercial Code financing statements and continuation
statements, and any instrument of further assurance required by Beneficiary to
be filed, registered or recorded pursuant to this Deed of Trust.
SECTION 1.04. Payment of Taxes, Insurance Premiums,
Assessments; Compliance with Law and Insurance Requirements. (a) Unless
contested in accordance with the provisions of subsection 1.04(d), Trustor
shall pay and discharge, from time to time when the same shall become due, all
real estate and other taxes, special assessments, levies, permits, inspection
and license fees, all premiums for insurance, all utility charges, including
water and sewer rents and charges, and all other public charges, imposed upon
or assessed against the Trust Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Trust Property, including,
without limita-
<PAGE> 8
7
tion, those arising in respect of the occupancy, use or possession thereof.
(b) From and after the occurrence of an Event of Default (as
hereinafter defined), Trustor shall deposit with Beneficiary, on the first day
of each month, an amount reasonably estimated by Beneficiary to be equal to
onetwelfth (1/12th) of the annual taxes, assessments and other items required
to be discharged by Trustor under subsection 1.04(a). Such amounts shall be
held by Beneficiary as Trust Monies and applied to the payment when due of the
Obligations in respect of which such amounts were deposited. If the amounts so
paid to Beneficiary under this subsection prove insufficient to pay the amounts
required to be discharged by Trustor, then upon demand Trustor will pay to
Beneficiary such additional amounts. In the event that the Notes become
immediately due and payable upon maturity or acceleration, Beneficiary may
apply all or any part of the sums held pursuant to this subsection to payment
and performance of the Obligations in accordance with Article 11 of the
Indenture.
(c) Trustor currently has and shall maintain in full force
and effect all material Permits now or hereafter required by any federal,
state, municipal or local government or quasi-governmental agency or authority
(each of the foregoing, an "Authority") to operate or use and occupy the
Premises and the Equipment, in each case, for its intended uses. Unless
contested in accordance with the provisions of subsection 1.04(d), Trustor
shall comply promptly in all respects with all requirements set forth in the
Permits and all requirements of any law, ordinance, rule, regulation or
requirement of any Authority related to all or any part of the Trust Property
or the condition, use or occupancy of all or any part thereof or any recorded
deed of restriction, declaration, covenant running with the land or otherwise,
now or hereafter in force except in such cases where such noncompliance would
not have a material adverse effect on the condition, use, operation or value of
the relevant Trust Property. Trustor shall not initiate or consent to any
change in the zoning or any other permitted use classification of the Land
which could reasonably be expected to have an adverse effect on the Lien of
this Deed of Trust or the value of the Premises without the written consent of
Beneficiary.
(d) Trustor may at its own expense contest the amount or
applicability of any of the obligations described in subsections 1.04(a) and
1.04(c) by appropriate legal
<PAGE> 9
8
proceedings, prosecution of which operates to prevent the collection thereof
and the sale or forfeiture of the Trust Property or any part thereof to satisfy
the same; provided, however, that in connection with such contest, Trustor
shall have made provision for the payment of such contested amount on
Trustor's books if and to the extent required by generally accepted accounting
principles or, if deemed necessary in the reasonable opinion of Beneficiary,
deposited with Beneficiary a sum sufficient to pay and discharge such
obligation and Beneficiary's estimate of all interest and penalties related
thereto. Notwithstanding the foregoing provisions of this subsection, (i) no
contest of any such obligations may be pursued by Trustor if such contest would
expose Beneficiary or any holder of a Note to any criminal liability or, unless
Trustor shall have furnished a bond or other security therefor reasonably
satisfactory to Beneficiary, any additional civil liability for failure to
comply with such obligations and (ii) if at any time payment of any obligation
imposed upon Trustor by this Section shall become necessary to prevent the
delivery of a tax deed conveying the Trust Property or any portion thereof
because of nonpayment, Trustor shall pay the same in sufficient time to prevent
the delivery of such tax deed.
(e) Trustor shall not in its use and occupancy of the
Premises or the Equipment (including, without limitation, in the making of any
Alteration) take any action that could reasonably be expected to be the basis
for termination, revocation or denial of any insurance coverage required to be
maintained under this Deed of Trust or the Indenture or that could reasonably
be expected to be the basis for a defense to any claim under any insurance
policy maintained in respect of the Premises or the Equipment and Trustor shall
otherwise comply in all material respects with the requirements of the
insurance maintained in respect of the Premises or the Equipment.
(f) Trustor shall, immediately upon receipt of any written
notice regarding any failure by Trustor to pay, discharge or comply with any of
the obligations described in subsection 1.04(a), 1.04(b) or 1.04(e), furnish a
copy of such notice to Beneficiary.
SECTION 1.05. Payment of Certain Taxes. If the United
States, the state in which the Land is located or any political subdivision
thereof shall levy, assess or charge any tax, imposition or assessment upon
this Deed of Trust, the Indenture or any other document relating to the
Obligations or the interest of Beneficiary in any of the
<PAGE> 10
9
Trust Property (other than income, franchise or similar taxes imposed on
Beneficiary, or the holders of any Notes), Trustor shall pay all such taxes,
assessments and impositions to, for, or on account of Beneficiary when due and
payable and shall furnish to Beneficiary proof of such payment.
SECTION 1.06. Required Insurance Policies. (a) Trustor
shall maintain in full force the insurance coverages in respect of the Trust
Property required by Section 4.18 of the Indenture.
(b) All insurance policies in respect of the coverages
required hereunder shall be in amounts at least sufficient to prevent
coinsurance liability and all losses thereunder shall be payable to
Beneficiary, as sole loss payee, pursuant to a standard noncontributory New
York mortgagee endorsement or local equivalent. Trustor hereby agrees to
promptly endorse over to Beneficiary any losses made payable to Trustor. Each
policy of insurance required under this Section shall provide that it may not
be cancelled or otherwise terminated without at least thirty days' prior
written notice to Beneficiary and shall permit Beneficiary to pay any premium
therefor within ten days after receipt of any notice stating that such premium
has not been paid when due. The policy or policies of such insurance or
certificates of insurance evidencing the required coverages shall be delivered
to Beneficiary.
(c) On or prior to the expiration of any insurance policy
required hereunder to be obtained by Trustor, Trustor shall provide evidence of
a one year renewal of such policy.
(d) Trustor shall not purchase separate insurance policies
concurrent in form or contributing in the event of loss with those policies
required to be maintained under this Section, unless Beneficiary is included
thereon as a named insured and, if applicable, with loss payable to Beneficiary
under a standard endorsement of the character described in subsection 1.06(b)
and the policy evidencing such insurance otherwise complies with the
requirements of
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subsection 1.06(b). Trustor shall immediately notify Beneficiary whenever any
such separate insurance policy is obtained and shall promptly deliver to
Beneficiary the policy or certificate evidencing such insurance.
SECTION 1.07. Failure To Make Certain Payments. If Trustor
shall fail to perform any of the covenants contained in this Deed of Trust,
including, without limitation, Trustor's covenants to pay the premiums in
respect of all required insurance coverages and such failure shall continue
after any applicable notice and grace period, Beneficiary may, but shall not be
obligated to, and shall have no liability whatsoever for its failure to, make
advances to perform such covenant on Trustor's behalf, and all sums so advanced
shall be immediately due and payable by Trustor and shall bear interest at a
rate which shall equal the highest interest rate then applicable under the
Indenture (the "Default Rate"). Neither the provisions of this Section nor any
action taken by Beneficiary pursuant to the provisions of this Section shall
prevent any such failure to observe any covenant contained in this Deed of
Trust from constituting a Default or an Event of Default.
SECTION 1.08. Inspection. Trustor shall permit
representatives of Beneficiary and its accountants and attorneys to visit and
inspect the Premises at such times as may be reasonably requested by
Beneficiary upon prior notice to Trustor.
SECTION 1.09. Use and Configuration; Maintenance of
Improvements. (a) Trustor represents and warrants that: (i) the Premises are
served by all utilities required or necessary for the current use thereof; (ii)
all streets necessary to serve the Premises are substantially completed and
serviceable and have been dedicated and accepted as such by each governmental
authority having jurisdiction and (iii) Trustor has access to the Premises from
public roads or by way of recorded easements sufficient to allow Trustor to
conduct its business at the Premises as conducted presently.
(b) Trustor shall, at all times, maintain the Trust Property
in good working order, condition and repair (ordinary wear and tear excepted)
and shall not commit any waste on or with respect to the Trust Property that
has the effect of reducing the value of the Trust Property. Trustor (i) shall
not alter the occupancy of the Premises or use of all or any part of the
Premises or Equipment without the prior written consent of Beneficiary if such
alteration
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could reasonably be expected to reduce materially the value of the Trust
Property, and (ii) shall do all other acts which from the character or use of
the Premises or Equipment reasonably may be necessary or appropriate to comply
with the terms hereof and of the Indenture. Except as otherwise provided in
Article 10 or 11 of the Indenture or in the Security and Pledge Agreement, the
Premises shall not be demolished nor shall any Equipment be removed without the
prior written consent of Beneficiary.
SECTION 1.10. Trustor's Obligations with Respect to Leases.
(a) If, in accordance with the provisions of Section 1.11, Trustor shall be
permitted to enter into any Leases or any Leases exist on the date hereof,
Trustor shall not, except as otherwise provided in Article 10 of the Indenture,
(i) execute any assignment of any Lease or of the rents or any part thereof
from the Trust Property other than the assignment herein to Beneficiary or as
otherwise permitted under Section 1.11; (ii) accept any prepayments of any
installment of rents or other amounts to become due under any Lease for a
period exceeding one month; or (iii) enter into or modify any Lease in any
fashion which will impair the value of the Trust Property or the security
provided by this Deed of Trust without the prior written consent of
Beneficiary.
(b) Trustee shall furnish to Beneficiary, within thirty days
after each request by Beneficiary to do so, a written statement in respect of
any of or all the Leases setting forth the space occupied, if any, the portion
of the Trust Property demised thereby, the rentals or other amounts payable
thereunder and such other information as Beneficiary may reasonably request (to
the extent reasonably available to Trustor).
SECTION 1.11. Transfer Restrictions. Except to the extent
permitted by the Indenture, Trustor may not, without the prior written consent
of Beneficiary, further mortgage, encumber, pledge, hypothecate, sell, convey,
lease, sublease or assign all or any part of, or interest in, the Trust
Property or suffer any of the foregoing to occur by operation of law or
otherwise after the date hereof.
SECTION 1.12. Destruction, Condemnation. (a) If there shall
occur any damage to, or loss or destruction of, the Trust Property or any part
of thereof (each, a "Destruction") in an amount exceeding $50,000, Trustor
shall promptly send to Beneficiary a notice setting forth the
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nature and extent of such Destruction. The proceeds of any insurance that are
payable in respect of any such Destruction are hereby assigned and shall be
paid to Beneficiary to be held as Trust Monies subject to the terms of the
Indenture, to the extent the same are not paid directly to Beneficiary pursuant
to the terms of any insurance policy required hereby.
(b) If there shall occur any taking of the Trust Property or
any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Trust Property or any part thereof,
by any governmental authority, civil or military (each, a "Taking") with
respect to Trust Property that has a fair value exceeding $50,000, Trustor
shall immediately notify Beneficiary upon receiving notice of such Taking or
commencement of proceedings therefor. Any proceeds, award or payment in
respect of any Taking are hereby assigned and shall be paid to Beneficiary to
be held as Trust Monies subject to the terms of the Indenture. Trustor shall
take all steps necessary to notify the condemning authority of such assignment.
SECTION 1.13. Hazardous Material. (a) The following terms
shall have the following meanings when used in this Section:
(1) "Environmental and Safety Laws" means any and all
applicable current and future treaties, laws, regulations, enforceable
requirements, binding determinations, orders, decrees, judgments,
injunctions, permits, approvals, authorizations, licenses,
permissions, notices or binding agreements issued, promulgated or
entered by any governmental authority relating to the environment,
employee health or safety as it pertains to the use or handling of, or
exposure to, Hazardous Substances, to preservation or reclamation of
natural resources, or to the management, release or threatened release
of contaminants or noxious odors, including the Hazardous Materials
Transportation Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("CERCLA"), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976 and Hazardous and Solid Waste Amendments of 1984, the Federal
Water Pollution Control Act, as amended by the Clean Water Act of
1977, the Clean Air
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Act of 1970, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1970, as amended, the Emergency
Planning and Community Right-to-Know Act of 1986, the Safe Drinking
Water Act of 1974, as amended, and any similar or implementing state
law, and all amendments or regulations promulgated thereunder;
(2) "Environmental Claim" means any written notice of any
governmental authority alleging potential liability for damage to the
environment or by any person alleging potential liability for personal
injury (including sickness, disease or death), in either case,
resulting from or based upon (a) the presence or Release (including
intentional and unintentional, negligent and nonnegligent, sudden or
nonsudden, accidental or nonaccidental leaks or spills) of any
Hazardous Substance at, in or from the property, whether or not owned
or leased by the Trustor or any of its subsidiaries or (b) any other
circumstances forming the basis of any violation, or alleged
violation, or any Environmental and Safety Law;
(3) "Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, material or waste, including
petroleum, its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of the
foregoing characteristics, including, without limitation,
polychlorinated biphenyls, asbestos or asbestos-containing material,
and any substance, waste or material regulated under Environmental and
Safety Laws; and
(4) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching,
emanation or migration in, into, onto or through the environment
(including ambient air, surface water, groundwater, land surface,
subsurface strata or workplace), including the movement or any
contaminant through or in the air, soil, surface water or groundwater.
(b) Trustor represents and warrants that: (i) it has
obtained all permits which are required with respect to the ownership and
operation of its business at the Trust Property under Environmental and Safety
Laws, except for such permits the lack of which could not have a material
adverse effect on the business or operations of Trustor;
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(ii) it is in compliance in all material respects with all terms and conditions
of all such permits as they relate to the Premises, and is also in compliance
in all respects with Environmental and Safety Laws, except for any
non-compliance which could not have a material adverse effect on the business
or operations of the Trustor; (iii) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice or violation,
investigation, proceeding, notice of demand letter pending or, to the best of
its knowledge, threatened against it or any subsidiary under the Environmental
and Safety Laws relating to the Premises which could result in a fine, penalty
or other cost or expense which Trustor, after inquiry, reasonably expects could
give rise to a material adverse effect on the business or operations of
Trustor; (iv) there are no present events, conditions, circumstances,
activities, practices, incidents or actions which may interfere with or prevent
compliance with the Environmental and Safety Laws relating to the Premises, or
which may give rise to any material common law or legal liability, or otherwise
form the basis of any Environmental Claim, based on or related to a Release or
threatened Release of any Hazardous Substance, except for such Release or
threatened Release that could not give rise to a material adverse effect on the
business or operations of Trustor; and (v) to the best knowledge of Trustor
there have been no past events, conditions, circumstances, activities,
practices, incidents or actions which may interfere with or prevent compliance
with the Environmental and Safety Laws relating to the Premises, or which may
give rise to any material common law or legal liability, or otherwise form the
basis of any Environmental Claim, based on or related to a Release or
threatened Release of any Hazardous Substance, except for such Release or
threatened Release that could not give rise to a material adverse effect on the
business or operations of Trustor.
(c) Trustor shall: (i) comply with any and all present and
future Environmental and Safety Laws relating to the Premises; (ii) pay when
required the cost of any Environmental Claim required by any Environmental and
Safety Law or by any order, regulation, consent decree or similar agreement or
instrument and keep the Trust Property free of any Lien imposed pursuant to any
Environmental and Safety Law; and (iii) not Release any Hazardous Substances
on, under or from the Trust Property in violation of any Environmental and
Safety Law. In the event Trustor fails to comply with the covenants in the
preceding sentence in a manner which Trustor, after inquiry, reasonably expects
could give rise to a material adverse effect on the business
<PAGE> 16
15
or operations of Trustor, Beneficiary may, in addition to any other remedies
set forth herein, but shall not be obligated to, as trustee for and at
Trustor's sole cost and expense cause any necessary remediation, removal,
response or corrective action relating to Hazardous Substances to be taken.
Any costs or expenses incurred by Beneficiary for such purpose shall be
immediately due and payable by Trustor. Trustor shall provide to Beneficiary a
license to remove any Hazardous Substances located on any Trust Property.
Beneficiary shall have the right, but shall not be obligated, at any time
during the continuance of an Event of Default, at the sole cost and expense of
Trustor, to conduct an environmental audit of the Trust Property by such
Persons or firms appointed by Beneficiary; and Trustor shall cooperate in all
respects in the conduct of such environmental audit, including, without
limitation, by providing access to the Trust Property and to all records
relating thereto. Trustor shall indemnify and hold Beneficiary harmless from
and against all loss, cost, damage or expense (including, without limitation,
reasonable attorneys' fees and expenses) that Beneficiary may sustain by reason
of the assertion against Beneficiary by any party of any Environmental Claim
relating to such Hazardous Substances or actions taken with respect thereto as
authorized hereunder.
SECTION 1.14. Asbestos. After the date hereof, Trustor shall
not install nor permit to be installed in the Trust Property friable asbestos
or any asbestos-containing material (collectively, "ACM") except in compliance
with all applicable federal, state or local laws or regulations or orders
respecting such material except such ACM the presence of which Trustor, after
inquiry, reasonably expects could not give rise to a material adverse effect on
the business or operations of Trustor. With respect to any ACM currently
present in the Trust Property, Trustor shall comply with all federal, state or
local laws, regulations or orders applicable to ACM located on the Premises,
all at Trustor's sole cost and expense. If Trustor shall fail so to comply
with such laws or regulations and Mortgagor, after inquiry, reasonably expects
that such failure could give rise to a material adverse effect on the business
or operations of the Trustor, Beneficiary may, but shall not be obligated to,
in addition to any other remedies set forth herein, take whatever steps it
deems necessary or appropriate to comply with applicable law, regulations or
orders. Any costs or expenses incurred by Beneficiary for such purpose shall
be immediately due and payable by Trustor and bear interest at the Default
Rate. Trustor shall provide to Beneficiary and
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its agents and employees access to the Trust Property and hereby specifically
grants to Beneficiary a license to remove such ACM if Trustor fails to do so
and removal is required under any law as provided for above; provided, however,
that nothing contained herein shall obligate Beneficiary to exercise any rights
under such license. Trustor shall indemnify and hold Beneficiary harmless from
and against all loss, cost, damage and expense (including, without limitation,
reasonable attorneys' fees and expenses) that Beneficiary may sustain, as a
result of the presence of any ACV, and any removal thereof or compliance with
any applicable laws, regulations or orders.
ARTICLE 2
ASSIGNMENT OF RENTS AND PROFITS;
SECURITY AGREEMENT; FIXTURE FILING
SECTION 2.01. Assignment of Leases, Rents, Issues and
Profits. (a) For valuable consideration, Trustor hereby irrevocably grants,
transfers and assigns to Beneficiary, and grants to Beneficiary a security
interest in, all Trustor's right, title and interest whether now existing or
hereafter acquired, in the Leases, including, without limitation, the right,
power and authority to collect the rents, issues, income and profits of the
Trust Property. The assignment set forth in the foregoing sentence shall be
absolute.
(b) Notwithstanding the provisions of subsection 2.01(a),
Trustor shall have the right, so long as no Event of Default shall have
occurred and be continuing, to collect and retain all rents, issues and profits
relating to the Trust Property as the same become due and payable. Upon the
occurrence and continuance of any Event of Default, Beneficiary may at any time
without notice, either in Person, by agent, or by a receiver to be appointed by
a court, and without regard to the adequacy of any security for the
Obligations, to the extent not prohibited by applicable law, (i) enter upon and
take possession of the Premises and Equipment or any part thereof, and (ii) in
its own name sue for or otherwise collect such rents, issues and profits,
including those past due and unpaid and hold any such collections as Trust
Monies, to be applied, less costs and expenses of operation and collection
(including, without limitation, reasonable attorneys' fees and expenses), in
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accordance with the provisions of Article 11 of the Indenture.
(c) To the extent not prohibited by applicable law,
Beneficiary's right to collect the rents, issues and profits upon default by
Trustor pursuant to this Section is in no manner conditional upon Beneficiary
first taking possession of the Premises. Should Beneficiary enter and take
possession of the Premises, or collect the rents, issues and profits and apply
the same as provided for herein, such act shall not cure or waive any Event of
Default or notice thereof hereunder or invalidate any act done pursuant to such
notice. To the extent not prohibited by applicable law, nothing contained
herein, nor any collection of rents, issues and profits by Beneficiary or a
receiver, shall be construed to make Beneficiary a "mortgagee-in-possession" so
long as Beneficiary has not itself entered into actual possession of the
Premises.
(d) Nothing herein shall be construed to impose any liability
or obligation on Beneficiary under or with respect to any Lease. Trustor shall
indemnify and hold Beneficiary harmless from and against any and all
liabilities, claims, expenses, losses and damages (including, without
limitation, reasonable attorneys' fees and expenses) incurred under any Lease
or by reason of the provisions of this Section.
SECTION 2.02. Security Interest in Personal Property. (a)
This Deed of Trust shall constitute a security agreement and shall create and
evidence a security interest which is hereby granted by Trustor unto
Beneficiary for valuable consideration in all the Equipment and in all the
other items of property comprising the Trust Property in which a security
interest or lien may be granted or a pledge created pursuant to the Uniform
Commercial Code as in effect in the state in which the Premises are located or
under any other applicable common law in such state (collectively, "Personal
Property").
(b) Trustor, immediately upon the execution and delivery of
this Deed of Trust, and thereafter from time to time, shall cause this Deed of
Trust, any security instrument creating or evidencing the Lien hereof in the
Personal Property, and instrument of further assurance, including, without
limitation, Uniform Commercial Code financing statements and continuation
statements, to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in
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order to publish notice of and to fully perfect, preserve and protect the Lien
hereof upon the Personal Property. Trustor hereby appoints and authorizes
Beneficiary to act on behalf of Trustor upon Trustor's failure to comply with
the provisions of this subsection.
(c) Upon the occurrence of any Event of Default, in addition
to the remedies set forth in Article 3, Beneficiary shall have the power, to
the extent not prohibited by applicable law, to foreclose Trustor's right of
redemption in the Personal Property by sale of the Personal Property in
accordance with the Uniform Commercial Code as enacted in the state in which
the Premises are located or under other applicable law in such state. To the
extent not prohibited by applicable law, it shall not be necessary that any
Personal Property offered be physically present at any such sale or
constructively in the possession of Beneficiary or the Person conducting the
sale.
(d) Upon the occurrence of any Event of Default and
acceleration of the Notes, Beneficiary may sell the Personal Property or any
part thereof at public or private sale with notice to Trustor as hereinafter
provided, to the extent not prohibited by applicable law. The proceeds of any
such sale, after deducting all expenses of Beneficiary in taking, storing,
repairing and selling the Personal Property (including, without limitation,
reasonable attorneys' fees and expenses) shall be applied, less costs and
expenses of operation and collection (including without limitation, reasonable
attorneys' fees and expenses), to the extent not prohibited by applicable law,
as Trust Monies in accordance with the provisions of Article 11 of the
Indenture. At any sale, public or private, of the Personal Property or any
part thereof, Beneficiary, to the extent not prohibited by applicable law, may
purchase any or all of the Personal Property offered at such sale.
(e) Beneficiary shall give Trustor notice of any sale of any
of the Personal Property pursuant to the provisions of this Section.
Notwithstanding the provisions of Section 4.02, any such notice, to the extent
not prohibited by applicable law, shall conclusively be deemed to be effective
if such notice is mailed at least ten (10) days prior to any sale, by first
class or certified mail, postage prepaid, to Trustor at its address determined
in accordance with the provisions of Section 4.02.
SECTION 2.03. Fixture Filing. This Deed of Trust constitutes
a financing statement filed as a fixture filing
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in the Official Records of the County Recorder of every county in which the
Trust Property is located with respect to any and all goods which are or are to
become fixtures as defined in Section 9.313(a)(1) of the Uniform Commercial
Code of the State of Texas included within the term "Trust Property" as defined
herein and with respect to any and all goods and other personal property of
Trustor that may now be or hereinafter become such fixtures related to the
Premises.
ARTICLE 3
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.01. Events of Default. (a) An Event of Default
shall have occurred under this Deed of Trust if there shall occur under the
Indenture an "Event of Default" (as such term is defined in the Indenture).
(b) With respect to non-monetary defaults arising solely
under this Deed of Trust (i.e. not otherwise provided for under the Indenture),
Trustor shall be given notice thereof, and 30 days from the receipt of such
notice to cure such default, provided, however, if such default is not
susceptible of cure by the payment of money for so long as it shall require to
cure the same, so long as Trustor is diligently pursuing such care, but in no
event in excess of 180 days.
SECTION 3.02. Remedies in Case of an Event of Default. If
any Event of Default shall have occurred and be continuing, Trustee or
Beneficiary may, but shall not be obligated to, in addition to any other action
permitted by law, take one or more of the following actions, to the extent not
prohibited by applicable law:
(a) by written notice to Trustor, declare the entire unpaid
amount of the Obligations to be due and payable immediately;
(b) personally, or by its trustees or attorneys, (i) enter
into and upon all or any part of the Trust Property and exclude
Trustor, its trustees and servants wholly therefrom, (ii) use,
operate, manage and control the Premises and the Equipment and conduct
the business thereof, (iii) maintain and restore the Trust Property,
(iv) make all necessary or proper repairs, renewals and replacements
and such useful alterations thereto and thereon as Beneficiary may
deem advisable, (v) manage,
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lease and operate the Trust Property and carry on the business thereof
and exercise rights and powers of Trustor with respect thereto either
in the name of Trustor or otherwise or (vi) collect and receive all
earnings, revenues, rents, issues, profits and income of the Trust
Property and any or every part thereof;
(c) with or without entry, personally or by its trustees or
attorneys, (i) direct Trustee to proceed with foreclosure, and in such
event Trustee is authorized and empowered at it shall be Trustee's
special duty, upon such direction from Beneficiary, to sell the Trust
Property and all estate, right, title and interest, claim and demand
therein at one or more sales as an entirety or in parcels, to the
highest bidder or bidders for cash or credit, as directed by
Beneficiary, at the location, at such time and place upon such terms
and after such notice thereof as may be required or permitted by law
including without limitation Chapter 51 of the Texas Property Code,
(ii) institute and prosecute proceedings for the complete or partial
foreclosure of the lien of this Deed of Trust or (iii) take control of
and sell the Personal Property as provided in Article 2, or as
provided by the Uniform Commercial Code in the state where the
Premises are located;
(d) take such steps to protect and enforce its rights whether
by action, suit or proceeding at law or in equity for the specific
performance of any covenant, condition or agreement in any of the
Collateral Documents, or in aid of the execution of any power granted
in this Deed of Trust, or for any foreclosure or sale hereunder, or
for the enforcement of any other appropriate legal or equitable remedy
or otherwise as Beneficiary shall elect; or
(e) take any of the above-mentioned actions in respect of any
or a number of individual parcels of the Land or items of personal
property, in the event that the Trust Property is comprised of more
than one parcel of Land or multiple items of Personal Property.
SECTION 3.03. Sale of Trust Property if Event of Default Occurs;
Proceeds of Sale. (a) On the completion of any sale or sales by Trustee or
Beneficiary made under or by virtue of this Article, Trustee or Beneficiary or
an officer of any court empowered to do so shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient
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instrument or instruments conveying, assigning and instruments transferring all
estate, right, title and interest in and to the property and rights sold. To
the extent not prohibited by applicable law, Beneficiary is hereby irrevocably
appointed the true and lawful trustee and attorney of Trustor, in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the Trust Property and rights so sold, and for that purpose Beneficiary may
execute all necessary instruments of conveyance, assignment and transfer, and
may substitute one or more Persons with like power, and Trustor hereby ratifies
and confirms all that Beneficiary or any such substitute shall lawfully do by
virtue hereof. This power of attorney is coupled with the interest of
Beneficiary created by this Deed of Trust. Trustor shall ratify and confirm
any such sale or sales by executing and delivering to Beneficiary or such
purchaser or purchasers all instruments as may be requested for such purpose.
To the extent not prohibited by applicable law, any such sale or sales made
under or by virtue of this Article shall operate to divest all the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Trustor in and to the properties and rights so sold, and shall be a
perpetual bar both at law and in equity against any Trustor and against any and
all Persons claiming or who may claim the same, or any part thereof from,
through or under Trustor.
(b) The proceeds of any sale made under or by virtue of this
Article together with any other sums which then may be held by Beneficiary
under this Deed of Trust, whether under the provisions of this Article or
otherwise, shall be applied, less costs and expenses of operation and
collection (including without limitation, reasonable attorneys' fees and
expenses) as Trust Monies in accordance with the provisions of Article 11 of
the Indenture.
(c) To the extent not prohibited by applicable law,
Beneficiary may bid for and acquire the Trust Property or any part thereof at
any sale made under or by virtue of this Article.
(d) To the extent not prohibited by applicable law, Trustee
and Beneficiary may adjourn from time to time any sale by it to be made under
or by virtue of this Deed of Trust by announcement at the time and place
appointed for such sale or for such adjourned sale or sales, and, except as
otherwise provided by any applicable provision of law, Trustee and Beneficiary,
without further notice or
<PAGE> 23
22
publication, may make such sale at the time and place to which the same shall
be so adjourned.
(e) To the extent not prohibited by applicable law, if the
Trust Property is comprised of more than one parcel of Land or items of
Personal Property, Trustee or Beneficiary may take any of the actions
authorized by this Section in respect of any or a number of individual parcels
or items of Personal Property.
SECTION 3.04. Additional Remedies in Case of an Event of
Default. (a) To the extent not prohibited by applicable law, Beneficiary
shall be entitled to recover judgment as aforesaid either before, after or
during the pendency of any proceedings for the enforcement of the provisions of
this Deed of Trust, and the right of Beneficiary to recover such judgment shall
not be affected by any entry, foreclosure or sale hereunder, or by the exercise
of any other right, power or remedy for the enforcement of the provisions of
this Deed of Trust or the foreclosure of the Lien of, or conveyance pursuant
to, this Deed of Trust. In case of proceedings against Trustor in insolvency
or bankruptcy or any proceedings for its reorganization or involving the
liquidation of its assets, Beneficiary shall be entitled to prove the whole
amount of principal, premium and interest due in respect of the Obligations to
the full amount thereof without deducting therefrom any proceeds obtained from
the sale of the whole or any part of the Trust Property or from the sale of any
or a number of parcels or items of Personal Property in the event that the
Trust Property is comprised of more than one parcel of Land or items of
Personal Property.
(b) To the extent not prohibited by applicable law, any
recovery of any judgment by Beneficiary and any levy of any execution under any
judgment upon the Trust Property shall not affect in any manner or to any
extent the Lien of this Deed of Trust upon the Trust Property or any part
thereof, or any Liens, conveyances, powers, rights and remedies of Beneficiary
hereunder, but such Liens, conveyances, powers, rights and remedies shall
continue unimpaired as before.
(c) Any monies collected by Trustee or Beneficiary under this
Section shall be applied in accordance with the provisions of subsection
3.03(b).
SECTION 3.05. Legal Proceedings After an Event of Default.
(a) After the occurrence of any Event of Default
<PAGE> 24
23
and immediately upon the commencement of any action, suit or legal proceedings
to obtain judgment for the Obligations or any part thereof, or of any
proceedings to foreclose the Lien of or otherwise enforce the provisions of
this Deed of Trust or of any other proceedings in aid of the enforcement of
this Deed of Trust, Trustor shall enter its voluntary appearance in such
action, suit or proceeding.
(b) Upon the occurrence of an Event of Default, Trustee and
Beneficiary shall be entitled forthwith as a matter of right, to the extent not
prohibited by applicable law, either before or after declaring the Obligations
or any part thereof to be due and payable, to the appointment of a receiver
without giving notice to any party and without regard to the adequacy or
inadequacy of any security for the Obligations.
(c) Trustor shall not (i) at any time insist upon, or plead,
or in any manner whatsoever claim or take any benefit or advantage of any stay
or extension or moratorium, law, any exemption from execution or sale of the
Trust Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Deed of Trust, (ii) claim, take or insist on any benefit or advantage of
any law now or hereafter in force providing for the valuation or appraisal of
the Trust Property, or any part thereof, prior to any sale or sales of the
Trust Property which may be made pursuant to this Deed of Trust, or pursuant to
any decree, judgment or order of any court of competent jurisdiction, or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent not prohibited by applicable law, Trustor hereby
expressly waives all benefit or advantage of any such law or laws, including,
without limitation, any statute of limitations applicable to this Deed of Trust
and any and all rights to trial by jury in any action or proceeding related to
the enforcement of this Deed of Trust, and covenants not to hinder, delay or
impede the execution of any power granted or delegated to Beneficiary by this
Deed of Trust, but to suffer and permit the execution of every such power as
though no such law or laws had been made or enacted. To the extent not
prohibited by applicable law, Trustor, for itself and all who may claim under
it, waives all right to have the Trust Property, or any part thereof, marshaled
on any foreclosure of this Deed of Trust.
<PAGE> 25
24
SECTION 3.06. Remedies Not Exclusive. To the extent not
prohibited by applicable law, no remedy conferred upon or reserved to Trustee
or Beneficiary by this Deed of Trust is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this Deed of Trust
whether now or hereafter existing at law or in equity. Any delay or omission
of Trustee or Beneficiary to exercise any right or power accruing on any Event
of Default shall not impair any such right or power and shall not be construed
to be a waiver of or acquiescence in any such Event of Default. Every power
and remedy given by this Deed of Trust may be exercised from time to time as
often as may be deemed expedient by Beneficiary. If Trustee or Beneficiary
accepts any monies required to be paid by Trustor under this Deed of Trust
after the same becomes due such acceptance shall not, to the extent not
prohibited by applicable law, constitute a waiver of the right either to
require prompt payment when due, of all other sums secured by this Deed of
Trust or to declare an Event of Default with regard to subsequent Defaults. If
Trustee or Beneficiary accepts any monies required to be paid by Trustor under
this Deed of Trust in an amount less than the sum then due, such acceptance, to
the extent not prohibited by applicable law, shall be deemed an acceptance on
account only and on the condition that it shall not constitute a waiver of the
obligation of Trustor to pay the entire sum then due and Trustor's failure to
pay the entire sum then due shall be and continue to be an Event of Default
notwithstanding acceptance of such amount on account.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. Severability. In the event any one or more of
the provisions contained in this Deed of Trust shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Deed of Trust, but this Deed of Trust shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein or therein.
The invalidity of any provision of this Deed of Trust in any one jurisdiction
shall not affect or impair in any manner the validity of such provision in any
other jurisdiction. The invalidity or unenforceability of this Deed of Trust
with respect to any item of or any portion of the Obligations
<PAGE> 26
25
which it secures shall not invalidate or render unenforceable this Deed of
Trust or the Lien hereof with respect to any other item or portion of the
Obligations.
SECTION 4.02. Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be delivered in the manner and to
the parties specified in the Indenture.
SECTION 4.03. Covenants To Run with the Land. All the
grants, covenants, terms, provisions and conditions in this Deed of Trust shall
run with the Land and bind Trustor and shall apply to and bind the successors
and assigns of Trustor and shall inure to the benefit of the Beneficiary, and
its successors and assigns.
SECTION 4.04. Captions; Gender and Number. The captions and
section headings of this Deed of Trust are for convenience only and are not to
be used to interpret or define the provisions hereof. All terms contained
herein shall be construed, whenever the context of this Deed of Trust so
requires, so that the singular includes the plural and so that the masculine
includes the feminine.
SECTION 4.05. Limitation on Interest Payable. It is the
intention of the parties to conform strictly to the usury laws, whether state
or federal, that are applicable to the transaction of which this Deed of Trust
is a part. All agreements between Trustor and Beneficiary whether now existing
or hereafter arising and whether oral or written, are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed
to be paid by Trustor for the use, forbearance or detention of the money to be
loaned under the Indenture, or for the payment or performance of any covenant
or obligation contained herein or in the Indenture exceed the maximum amount
permissible under applicable federal or state usury laws.
SECTION 4.06. Indemnification; Reimbursement. Trustor shall
reimburse Beneficiary, upon demand, for all costs and expenses incurred by
Beneficiary in connection with the administration and enforcement of this Deed
of Trust, and shall indemnify and hold harmless Beneficiary and the officers,
directors, employees, agents, trustees and affiliates of Beneficiary (each of
the foregoing, an "Indemnitee"; collectively, "Indemnitees"), upon demand, from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits,
<PAGE> 27
26
claims, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Deed of Trust (the "Indemnified Liabilities"); provided,
however, THAT TRUSTOR SHALL HAVE NO OBLIGATION TO AN INDEMNITEE HEREUNDER WITH
RESPECT TO INDEMNIFIED LIABILITIES IF IT HAS BEEN DETERMINED BY A FINAL
DECISION (AFTER ALL APPEALS AND THE EXPIRATION OF TIME TO APPEAL) BY A COURT OF
COMPETENT JURISDICTION THAT SUCH INDEMNIFIED LIABILITY AROSE FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNITEE. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Trustor shall contribute the maximum portion which it is permitted to
pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them. If any
action or proceeding, including, without limitation, bankruptcy or insolvency
proceedings, is commenced to which action or proceeding Beneficiary is made a
party or in which it becomes necessary to defend or uphold the Lien or validity
of this Deed of Trust, Trustor shall, upon demand, reimburse Beneficiary for
all expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by Beneficiary in such action or proceeding. Trustor's
Obligations under this Section shall survive the release of this Deed of Trust
and the discharge of Trustor's other Obligations hereunder.
SECTION 4.07. Choice of Law. The terms and provisions of
this Deed of Trust and the enforcement hereof shall be governed by and
construed in accordance with the laws of the state where the Premises are
located; provided, however, that the rights, privileges and immunities of the
Beneficiary shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 4.08. No Merger. The rights and estate created by this Deed
of Trust shall not, under any circumstances, be held to have merged into any
other estate or interest now owned or hereafter acquired by Beneficiary
<PAGE> 28
27
unless Beneficiary shall have consented to such merger in writing.
SECTION 4.09. Changes in Writing. This Deed of Trust may not
be modified, amended, discharged or waived in whole or in part except by an
instrument in writing signed by (i) Trustor, to the extent any modification,
amendment, discharge or waiver is sought to be enforced against Trustor, and
(ii) Beneficiary, if authorized by Article 9 of the Indenture, to the extent
any modification, amendment, discharge or waiver is sought to be enforced
against Beneficiary.
SECTION 4.10. Multiple Sites. This Deed of Trust is one of a
series of Collateral Documents securing the Obligations. Trustor agrees that
the conveyance and lien of this Deed of Trust shall be absolute and
unconditional and, to the extent not prohibited by applicable law, shall not in
any manner be affected or impaired by any acts or omissions whatsoever of
Beneficiary and without limiting the generality of the foregoing, the
conveyance and lien hereof shall not be impaired by any acceptance by the
Trustee or Beneficiary of any security for or guarantees of any of the
Obligations hereby secured, or by any failure, neglect or omission on the part
of Trustee or Beneficiary to realize upon or protect any obligation or
indebtedness hereby secured or any collateral security therefor including those
secured by any of the Collateral Documents. To the extent not prohibited by
applicable law, the conveyance and lien hereof shall not in any manner be
impaired or affected by any release (except as to the property released), sale,
pledge, surrender, compromise, settlement, renewal, extension, indulgence,
alteration, changing, modification or disposition of any of the obligations
secured or of any of the collateral security therefor, and Trustee or
Beneficiary may at their discretion foreclose, exercise any power of sale, or
exercise or enforce any of its rights and remedies hereunder. Such exercise of
Trustee's or Beneficiary's rights and remedies under any of or all the
Collateral Documents shall not, to the extent not prohibited by applicable law,
in any manner impair the indebtedness hereby secured or the conveyance or lien
of this Deed of Trust and any exercise of the rights or remedies of Trustee or
Beneficiary hereunder shall not impair the conveyance or lien of any of the
Collateral Documents or any of Trustee's or Beneficiary's rights and remedies
thereunder. To the extent not prohibited by applicable law, the Trustor
specifically consents and agrees that Trustee and Beneficiary may exercise
their rights and remedies hereunder
<PAGE> 29
28
and under the Collateral Documents or any of the Notes separately or
concurrently and in any order that it may deem appropriate.
SECTION 4.11. Continuing Security Interest; Transfer of
Notes. This Deed of Trust shall create a continuing security interest in the
Trust Property and shall (i) remain in full force and effect until all
Obligations are indefeasibly paid in full and this Deed of Trust is reconveyed
in accordance with the provisions of the Indenture, (ii) be binding upon
Trustor, its successors and assigns and (iii) inure, together with the rights
and remedies of the Trustee and Beneficiary hereunder, to the benefit of the
Trustee and Beneficiary, and each Holder from time to time of any Notes and
each of their respective successors, transferees and assigns; no other Person
(including, without limitation, any other creditor of the Trustor) shall have
any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (iii), Beneficiary may assign
or otherwise transfer any indebtedness held by it secured by this Deed of Trust
to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to such party herein or otherwise.
SECTION 4.12. Security Interest Absolute. All rights of
Trustee and Beneficiary and security interests hereunder and all obligations of
Trustor hereunder shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Obligations,
the Notes, the Indenture, any Collateral Document or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
obligations, the Notes, the indenture or any other agreement or
instrument relating thereto;
(iii) any exchange, release or nonperfection of any other
property, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Obligations; or
<PAGE> 30
29
(iv) any other circumstances which might otherwise constitute
a defense available to, or a discharge of, Trustor (other than the
indefeasible payment in full of the Obligations).
SECTION 4.13. Waiver of Hearing. To the extent it may
lawfully do so, Trustor expressly waives any constitutional or other right to a
judicial hearing prior to the time Beneficiary takes possession of or disposes
the Trust Property as provided in Sections 2.01 or 3.02.
SECTION 4.14. Conflicts with TIA. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this Deed of Trust by any of the provisions of the TIA, such
required provision shall control.
SECTION 4.15. Reasonable Care. The powers conferred on
Trustee and Beneficiary hereunder are solely to protect their interest in the
Trust Property and shall not impose on it any duty to exercise any such powers.
Except for exercising reasonable care in the safe custody of any Trust Property
in its possession and for accounting for money actually received by it
hereunder and such duties as may be imposed by the TIA upon Beneficiary,
Trustee and Beneficiary shall have no duty as to any Trust Property or any
responsibility for taking any necessary steps to preserve rights against any
parties or any other rights pertaining to any Trust Property, and neither it
nor any of its officers, directors, employees or agents shall, be responsible
to Trustor for any act or failure to act, except for its own gross negligence,
bad faith or willful misconduct.
SECTION 4.16. No Release. Nothing set forth in this Deed of
Trust shall impose any obligation on Beneficiary to perform or observe any
term, covenant, condition or agreement on Trustor's part to be so performed or
observed or impose any liability on Trustee or Beneficiary for any act or
omission on the part of Trustor relating thereto or for any breach of any
representation or warranty on the part of Trustor contained herein in respect
of the Trust Property or made in connection herewith.
SECTION 4.17. No Waiver. No failure by Trustee or
Beneficiary to insist upon the strict performance of any term hereof or to
exercise any right, power or remedy consequent upon a breach thereof shall
constitute a waiver of any such term or right, power or remedy or of any such
breach. No waiver of any breach shall affect or alter this
<PAGE> 31
30
Deed of Trust, which shall continue in full force and effect, or shall affect
or alter the rights of Trustee or Beneficiary with respect to any other then
existing or subsequent breach.
SECTION 4.18. Trustee's Powers and Liabilities. (a)
Trustee, by acceptance hereof, covenants faithfully to perform and fulfill the
trusts herein created, being liable, however, only for gross negligence or
wilful misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by it in
accordance with the terms hereof. All authorities, powers and discretions
given in this Deed of Trust to Trustee or Beneficiary may be exercised by
either, without the other, with the same effect as if exercised jointly.
(b) Trustee may resign at any time upon giving thirty days'
notice in writing to Trustor and to Beneficiary.
(c) Beneficiary may remove Trustee at any time or from time
to time and select a successor trustee. In the event of the death, removal,
resignation, refusal to act, inability to act or absence of Trustee from the
state in which the premises are located, or in its sole discretion for any
reason whatsoever, Beneficiary may, without notice and without specifying the
reason therefor and without applying to any court, select and appoint a
successor trustee, and all powers, rights, duties and authority of the former
Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of his duties unless required by Beneficiary. Such substitute
trustee shall be appointed by written instrument duly recorded in the county
where the Land is located. Trustor hereby ratifies and confirms any and all
acts which the herein named Trustee, or his successor or successors in this
trust, shall do lawfully by virtue hereof. Trustor hereby agrees, on behalf of
itself and its successors and assigns, that the recitals contained in any deed
or deeds executed in due form by any Trustee or Substitute trustee, acting
under the provisions of this instrument, shall be prima facie evidence of the
facts recited, and that it shall not be necessary to prove in any court,
otherwise than by such recitals, the existence of the facts essential to
authorize the execution and delivery of such deed or deeds and the passing of
title thereby.
<PAGE> 32
31
(d) Trustee shall not be required to see that this Deed of
Trust is recorded, nor liable for its validity or its priority as a first deed
of trust, or otherwise, nor shall Trustee be answerable or responsible for
performance or observance of the covenants and agreements imposed upon Trustor
or Beneficiary by this Deed of Trust or any other agreement. Trustee, as well
as Beneficiary, shall have authority in their respective discretion to employ
agents and attorneys in the execution of this trust and to protect the interest
of the Beneficiary hereunder, and to the extent permitted by law they shall be
compensated and all expenses relating to the employment of such agents and/or
attorneys, including expenses of litigations, shall be paid out of the proceeds
of the sale of the Trust Property conveyed hereby should a sale be had, but if
no such sale be had, all sums so paid out shall be recoverable to the extent
permitted by law by all remedies at law or in equity.
(e) At any time, or from time to time, without liability
therefor and with 10 days' prior written notice to Trustor, upon written
request of Beneficiary and without affecting the effect of this Deed of Trust
upon the remainder of the Trust Property, Trustee may (i) reconvey any part of
the Trust Property, (ii) consent in writing to the making of any map or plat
thereof, (iii) join in granting any easement thereon or (iv) join in any
extension agreement or any agreement subordinating the lien or charge hereof.
IN WITNESS WHEREOF, this Deed of Trust has been duly executed by
Trustor as of the date first written above.
ANACOMP, INC.
Witness:
By:
--------------------------- --------------------------
Title:
<PAGE> 33
32
Witness:
By:
--------------------------- --------------------------
Title:
<PAGE> 34
33
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On , 1995, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared , personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
Person(s) whose name(s) is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity(ies), and that by
his signature(s) on the instrument the Person(s), or entity upon behalf of
which the Person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------
Notary Public
<PAGE> 35
34
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On , 1995, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared , personally
known to me (or proved to me on the basis of satisfactory evidence) to he the
Person(s) whose name(s) is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity(ies), and that by
his signature(s) on the instrument the Person(s), or entity upon behalf of
which the Person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------
Notary Public
<PAGE> 36
35
[ ] COUNTY, TEXAS
SCHEDULE A
<PAGE> 37
36
[ ] COUNTY, TEXAS
SCHEDULE B
Such matters and exceptions to title as are specifically set
forth in the Mortgagee's/Beneficiary's policy of title insurance, insuring the
lien of this Mortgage/Deed of Trust upon the Mortgaged/Trust Property as issued
pursuant to Lawyers Title Insurance Corporation Commitment No.
________________.
<PAGE> 1
Recording requested by and [Draft--3/24/95]
when recorded mail to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Gary R. Eisenman, Esq.
[This space for
recorder's use only]
================================================================================
FIRST LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS AND
PROFITS,
SECURITY AGREEMENT AND FIXTURE FILING
BY
ANACOMP, INC.
Trustor,
TO
[ ],
as Trustee
and
THE BANK OF NEW YORK,
as Beneficiary
Relating to Premises in
Poway, California
$225,000,000
Dated as of: , 1995
================================================================================
<PAGE> 2
FIRST LEASEHOLD DEED OF TRUST,
ASSIGNMENT OF RENTS AND PROFITS,
SECURITY AGREEMENT AND FIXTURE FILING
This FIRST LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS AND
PROFITS, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") dated as of
, 1995, is made by ANACOMP, INC. ("Trustor"), an Indiana corporation having an
office and mailing address at One Buckhead Plaza, 3060 Peachtree Road, N.W.
30305, as mortgagor, assignor and debtor, in favor of
("Trustee") and THE BANK OF NEW YORK, a New York banking corporation, having an
office and mailing address at 101 Barclay Street, 21 West, New York, New York
10286, solely in its capacity as trustee pursuant to the Indenture (as defined
in Recital 2 below) (together with any successors or assigns in such capacity,
"Beneficiary"). All capitalized terms not defined herein shall have the
meanings ascribed to them in the Indenture.
R E C I T A L S:
1. Trustor is the owner of a leasehold estate in the Premises
(as hereinafter defined).
2. Trustor and Beneficiary, as trustee (together with any
successors and assigns in such capacity), have entered into a certain indenture
(as amended from time to time, the "Indenture") dated the date hereof, pursuant
to which Trustor has issued Senior Secured Notes due [insert month and day]
2002 (the "Notes") in the aggregate principal amount of $225,000,000.
3. Simultaneously with the execution and delivery of this
Deed of Trust, Trustor and Beneficiary have entered into a certain Security and
Pledge Agreement, dated the date hereof, pursuant to which Trustor has granted
to Beneficiary a security interest in certain personal property to secure the
obligations of Trustor in respect of the Notes and the Indenture along with
certain other Collateral Documents which also provide security for the
obligations of Trustor as aforesaid.
4. This Deed of Trust is given by Trustor to Secure the
Indenture Obligations which include, but are not limited to, the obligations of
Trustor to pay principal of, and premium, if any, and interest on, the Notes
when due and payable, and all other amounts due or to become due under or
<PAGE> 3
2
in connection with the Indenture, the Notes, the Security and Pledge Agreement
and any other Collateral Document or hereunder, and the performance of all
other obligations of Trustor to Beneficiary and the Holders (collectively, the
"Obligations").
GRANT TO TRUSTEE:
For valuable consideration and as security for the payment and
performance of the Obligations, Trustor does hereby grant, sell, convey,
transfer and assign unto Trustee, IN TRUST, with power of sale and right of
entry and possession, and create a security interest in and first priority
mortgage lien upon, all Trustor's right, title and interest, if any, in and to
the following property whether now owned or held or hereafter acquired
(collectively, "Trust Property"):
A. The leasehold estate in the land described in Schedule A
as created by that certain lease specifically described in Schedule A-1 (the
"Ground Lease"), together with any and all easements, rights-of-way, sidewalks,
gores of land, streets, ways, alleys, passages, passageways, sewer rights,
waters, water courses, water rights and powers, air, light and other rights,
estates, titles, interests, privileges, liberties, servitudes, licenses,
tenements, hereditaments and appurtenances whatsoever, in any way belonging,
relating or appertaining thereto, or any part thereof, or which hereafter shall
in any way belong, relate or be appurtenant thereto, and all reversions,
remainders, income, rents, issues, revenues and profits thereof (collectively,
the "Land");
B. The buildings, structures and other improvements and any
and all alterations now or hereafter located or erected on the Land, including,
without limitation, attachments, walks and ways (collectively, the
"Improvements"; together with the Land, the "Premises");
C. Any and all permits, certificates, approvals and
authorizations, however characterized, issued or in any way furnished, whether
necessary or not for the operation and use of the Premises, including, without
limitation, building permits, certificates of occupancy, environmental
certificates, industrial permits or licenses and certificates of operation
(collectively, "Permits"), other
<PAGE> 4
3
than any Permits that by their terms may not be mortgaged, pledged or
transferred, or expire or are cancelled upon any mortgage, pledge or transfer
thereof;
D. All machinery, apparatus, equipment, fittings, fixtures,
improvements and articles of personal property of every kind and nature
whatsoever now or hereafter attached or affixed to the Premises or used in
connection with the use, enjoyment and operation of the Premises or the
maintenance or preservation thereof, including, without limitation, all
manufacturing equipment, tools, utility systems, fire sprinkler and alarm
systems, HVAC equipment, boiler, electronic data processing, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, window cleaning, maintenance or other systems or equipment, lobby and
all other indoor or outdoor furniture, appliances or supplies, and all other
articles used or useful in connection with the use, operation, maintenance or
repair of any part of the Premises including, without limitation, the rights of
Trustor as lessee to any of the foregoing under any capital lease or
installment sale which may be permitted under the Indenture, which shall, to
the fullest extent permitted under applicable law, be deemed conclusively to be
real property and conveyed by this Deed of Trust (collectively, "Equipment")
(certain of the above-described goods are to become fixtures on the Premises);
E. Trustor's interest, as landlord, franchisor, licensor or
grantor, in all leases of space, franchise agreements, leases, occupancy or
concession agreements (collectively, "Leases"; each, a "Lease") now existing or
hereafter entered into relating in any manner to the Premises or Equipment and
any and all amendments, modifications, supplements and renewals of Leases,
whether now in effect or hereafter coming into effect, including, without
limitation, all rents, additional rents, cash or securities deposited
thereunder to secure performance of the lessee's, franchisee's, licensee's or
obligee's obligations thereunder, revenues, earnings, profits and income,
advance rental payments, payments incident to assignment, sublease or surrender
of a Lease, claims for forfeited deposits and claims for damages, now due or
hereafter to become due, with respect to any Lease;
F. All drawings, plans, specifications, file materials,
operating and maintenance records, catalogues, tenant lists, correspondences,
advertising materials, operating manuals, warranties, guaranties, appraisals,
<PAGE> 5
4
studies and data relating to the Premises or the Equipment or the construction
of any Alteration or the maintenance of any Permit ("Plans and Warranties");
G. All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation or other awards or payments
with respect thereto, including interest thereon, together with any and all
monies now or hereafter on deposit for the payment of real estate taxes,
assessments or common area charges levied against the Premises, unearned
premiums on policies of insurance maintained by Trustor; and
H. All right, title and interest of the Trustor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of and all additions and appurtenances to, the Land, the Improvements,
Equipment, Permits, Plans and Warranties and the Leases hereinafter acquired by
or released to Trustor or constructed, assembled or placed by Trustor on the
Land, or the Improvements, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without any
further mortgage, deed of trust, conveyance, assignment or other act by
Trustor, shall become subject to the lien of this Deed of Trust as fully and
completely, and with the same effect, as though now owned by Trustor and
specifically described herein;
TO HAVE AND TO HOLD the Trust Property and the rights and
privileged hereby mortgaged or intended to be, unto Trustee and Trustee's
successors and assigns for the benefit of the Beneficiary, for the purpose of
securing payment and performance of the Obligations, in each and every case
subject to the terms, conditions and provisions of this Deed of Trust and the
Indenture, IN TRUST, upon the terms herein set forth for the benefit and
security of the Beneficiary.
<PAGE> 6
5
C O V E N A N T S :
Trustor warrants, represents and covenants as follows:
ARTICLE 1
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF TRUSTOR
SECTION 1.01. Payment and Performance. Trustor shall
promptly pay and perform all the Obligations in strict accordance with the
terms of the Obligations.
SECTION 1.02. Good Title; Priority. (a) Trustor represents
and warrants that:
(i) it has a valid and subsisting leasehold estate in the
Premises, and good title to the other Trust Property subject to no
mortgage, deed of trust, pledge, security interest, encumbrance, lien,
lease, license, easement, assignment, collateral assignment or charge
of any kind, including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any
filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code of the state in which the Premises are located
or any similar statute or any subordination arrangement in favor of
any party other than Beneficiary (collectively, "Current Liens"),
except for the Permitted Liens which are as set forth on Schedule B;
and
(ii) this Deed of Trust creates and constitutes a valid and
enforceable first priority Deed of Trust on the real property of the
Trust Property, and, to the extent any of the Trust Property consists
of personalty, a security interest in the Trust Property prior to
Current Liens, other than Permitted Liens (but not to extensions,
amendments or supplements of any Permitted Lien that increases the
amount or value of such Permitted Lien or causes additional Trust
Property to become subject to such Permitted Lien), that are known to
the Trustor or that can be perfected by the filing of financing
statements, mortgages or the making of other similar filings or by the
possession of such personalty, and Trustor does now and will forever
warrant to Beneficiary and all its successors and
<PAGE> 7
6
assigns such title and the validity and priority of the Lien hereby
created and evidenced against the claims of all Persons and parties
whomsoever.
(b) Except as permitted by the Indenture, Trustor shall keep
in effect all material rights and appurtenances to or that constitute a part
of, and Permits that relate to, the Trust Property.
SECTION 1.03. Further Documentation To Assure Lien; Fees and
Expenses. (a) Trustor shall, at the sole cost and expense of Trustor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Beneficiary shall from time to time reasonably request, which may
be necessary in the reasonable judgment of Beneficiary from time to time to
assure, perfect, convey, assign, transfer and confirm unto Beneficiary, the
property and rights hereby conveyed or assigned, or which Trustor hereunder or
under the Indenture may be bound to convey or assign to Beneficiary or which
may facilitate the performance of the terms of this Deed of Trust, or the
filing, registering or recording of this Deed of Trust.
(b) Trustor shall pay all filing, registration or recording
fees and taxes, whether now in existence or later imposed, and all expenses
incident to the execution, delivery, recordation, perfection and continued
perfection of this Deed of Trust, any mortgage instrument supplemental hereto,
any security instrument with respect to the Personal Property (as hereinafter
defined), any Uniform Commercial Code financing statements and continuation
statements, and any instrument of further assurance required by Beneficiary to
be filed, registered or recorded pursuant to this Deed of Trust.
SECTION 1.04. Payment of Taxes, Insurance Premiums,
Assessments; Compliance with Law and Insurance Requirements. (a) Unless
contested in accordance with the provisions of subsection 1.04(d), Trustor
shall pay and discharge, from time to time when the same shall become due, all
real estate and other taxes, special assessments, levies, permits, inspection
and license fees, all premiums for insurance, all utility charges, including
water and sewer rents and charges, and all other public charges, imposed upon
or assessed against the Trust Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Trust Property, including,
without limita-
<PAGE> 8
7
tion, those arising in respect of the occupancy, use or possession thereof.
(b) From and after the occurrence of an Event of Default (as
hereinafter defined), Trustor shall deposit with Beneficiary, on the first day
of each month, an amount reasonably estimated by Beneficiary to be equal to
onetwelfth (1/12th) of the annual taxes, assessments and other items required
to be discharged by Trustor under subsection 1.04(a). Such amounts shall be
held by Beneficiary as Trust Monies and applied to the payment when due of the
Obligations in respect of which such amounts were deposited. If the amounts so
paid to Beneficiary under this subsection prove insufficient to pay the amounts
required to be discharged by Trustor, then upon demand Trustor will pay to
Beneficiary such additional amounts. In the event that the Notes become
immediately due and payable upon maturity or acceleration, Beneficiary may
apply all or any part of the sums held pursuant to this subsection to payment
and performance of the Obligations in accordance with Article 11 of the
Indenture.
(c) Trustor or the lessor under the Ground Lease currently
has and shall maintain in full force and effect all material Permits now or
hereafter required by any federal, state, municipal or local government or
quasi-governmental agency or authority (each of the foregoing, an "Authority")
to operate or use and occupy the Premises and the Equipment, in each case, for
its intended uses. Unless contested in accordance with the provisions of
subsection 1.04(d), Trustor shall comply promptly in all respects with all
requirements set forth in the Permits and all requirements of any law,
ordinance, rule, regulation or requirement of any Authority related to all or
any part of the Trust Property or the condition, use or occupancy of all or any
part thereof or any recorded deed of restriction, declaration, covenant running
with the land or otherwise, now or hereafter in force except in such cases
where such noncompliance would not have a material adverse effect on the
condition, use, operation or value of the relevant Trust Property. Trustor
shall not initiate or consent to any change in the zoning or any other
permitted use classification of the Land which could reasonably be expected to
have an adverse effect on the Lien of this Deed of Trust or the value of the
Premises without the written consent of Beneficiary.
(d) Trustor may at its own expense contest the amount or
applicability of any of the obligations described
<PAGE> 9
8
in subsections 1.04(a) and 1.04(c) by appropriate legal proceedings,
prosecution of which operates to prevent the collection thereof and the sale or
forfeiture of the Trust Property or any part thereof to satisfy the same;
provided, however, that in connection with such contest, Trustor shall have
made provision for the payment of such contested amount on Trustor's books if
and to the extent required by generally accepted accounting principles or, if
deemed necessary in the reasonable opinion of Beneficiary, deposited with
Beneficiary a sum sufficient to pay and discharge such obligation and
Beneficiary's estimate of all interest and penalties related thereto.
Notwithstanding the foregoing provisions of this subsection, (i) no contest of
any such obligations may be pursued by Trustor if such contest would expose
Beneficiary or any holder of a Note to any criminal liability or, unless
Trustor shall have furnished a bond or other security therefor reasonably
satisfactory to Beneficiary, any additional civil liability for failure to
comply with such obligations and (ii) if at any time payment of any obligation
imposed upon Trustor by this Section shall become necessary to prevent the
delivery of a tax deed conveying the Trust Property or any portion thereof
because of nonpayment, Trustor shall pay the same in sufficient time to prevent
the delivery of such tax deed.
(e) Trustor shall not in its use and occupancy of the
Premises or the Equipment (including, without limitation, in the making of any
Alteration) take any action that could reasonably be expected to be the basis
for termination, revocation or denial of any insurance coverage required to be
maintained under this Deed of Trust or the Indenture or that could reasonably
be expected to be the basis for a defense to any claim under any insurance
policy maintained in respect of the Premises or the Equipment and Trustor shall
otherwise comply in all material respects with the requirements of the
insurance maintained in respect of the Premises or the Equipment.
(f) Trustor shall, immediately upon receipt of any written
notice regarding any failure by Trustor to pay, discharge or comply with any of
the obligations described in subsection 1.04(a), 1.04(b) or 1.04(e), furnish a
copy of such notice to Beneficiary.
SECTION 1.05. Payment of Certain Taxes. If the United
States, the state in which the Land is located or any political subdivision
thereof shall levy, assess or charge any tax, imposition or assessment upon
this Deed of Trust, the Indenture or any other document relating to the
<PAGE> 10
9
Obligations or the interest of Beneficiary in any of the Trust Property (other
than income, franchise or similar taxes imposed on Beneficiary, or the holders
of any Notes), Trustor shall pay all such taxes, assessments and impositions
to, for, or on account of Beneficiary when due and payable and shall furnish to
Beneficiary proof of such payment.
SECTION 1.06. Required Insurance Policies. (a) Trustor
shall maintain in full force the insurance coverages in respect of the Trust
Property required by Section 4.18 of the Indenture.
(b) All insurance policies in respect of the coverages
required hereunder shall be in amounts at least sufficient to prevent
coinsurance liability and except for any losses with respect to the premises
all losses thereunder shall be payable to Beneficiary, as loss payee, pursuant
to a standard noncontributory New York mortgagee endorsement or local
equivalent. Trustor hereby agrees to promptly endorse over to Beneficiary any
losses made payable to Trustor. Each policy of insurance required under this
Section shall provide that it may not be cancelled or otherwise terminated
without at least [thirty] days' prior written notice to Beneficiary and shall
permit Beneficiary to pay any premium therefor within ten days after receipt of
any notice stating that such premium has not been paid when due. The policy or
policies of such insurance or certificates of insurance evidencing the required
coverages shall be delivered to Beneficiary.
(c) On or prior to the expiration of any insurance policy
required hereunder to be obtained by Trustor, Trustor shall provide to
Beneficiary evidence of a one year renewal of such policy.
(d) Trustor shall not purchase separate insurance policies
concurrent in form or contributing in the event of loss with those policies
required to be maintained under this Section, unless Beneficiary is included
thereon as a named insured and, if applicable, with loss payable to Beneficiary
under a standard endorsement of the character
<PAGE> 11
10
described in subsection 1.06(b) and the policy evidencing such insurance
otherwise complies with the requirements of subsection 1.06(b). Trustor shall
immediately notify Beneficiary whenever any such separate insurance policy is
obtained and shall promptly deliver to Beneficiary the policy or certificate
evidencing such insurance.
SECTION 1.07. Failure To Make Certain Payments. If Trustor
shall fail to perform any of the covenants contained in this Deed of Trust,
including, without limitation, Trustor's covenants to pay the premiums in
respect of all required insurance coverages and such failure shall continue
after any applicable notice and grace period, Beneficiary may, but shall not be
obligated to, and shall have no liability whatsoever for its failure to, make
advances to perform such covenant on Trustor's behalf, and all sums so advanced
shall be immediately due and payable by Trustor and shall bear interest at a
rate which shall equal the highest interest rate then applicable under the
Indenture (the "Default Rate"). Neither the provisions of this Section nor any
action taken by Beneficiary pursuant to the provisions of this Section shall
prevent any such failure to observe any covenant contained in this Deed of
Trust from constituting a Default or an Event of Default.
SECTION 1.08. Inspection. Trustor shall permit
representatives of Beneficiary and its accountants and attorneys to visit and
inspect the Premises at such times as may be reasonably requested by
Beneficiary upon prior notice to Trustor.
SECTION 1.09. Use and Configuration; Maintenance of
Improvements. (a) Trustor represents and warrants that: (i) the Premises are
served by all utilities required or necessary for the current use thereof; (ii)
all streets necessary to serve the Premises are substantially completed and
serviceable and have been dedicated and accepted as such by each governmental
authority having jurisdiction and (iii) Trustor has access to the Premises from
public roads or by way of recorded easements sufficient to allow Trustor to
conduct its business at the Premises as conducted presently.
(b) Trustor shall or shall cause, the Trust Property to be
maintained at all times in good working order, condition and repair (ordinary
wear and tear excepted) and shall not commit any waste on or with respect to
the Trust Property that has the effect of reducing the value of the Trust
Property. Trustor (i) shall not alter
<PAGE> 12
11
the occupancy of the Premises or use of all or any part of the Premises or
Equipment without the prior written consent of Beneficiary if such alteration
could reasonably be expected to reduce materially the value of the Trust
Property, and (ii) shall do all other acts which from the character or use of
the Premises or Equipment reasonably may be necessary or appropriate to comply
with the terms hereof and of the Indenture. Except as otherwise provided in
Article 10 or 11 of the Indenture or in the Security and Pledge Agreement, the
Premises shall not be demolished nor shall any Equipment be removed without the
prior written consent of Beneficiary.
SECTION 1.10. Trustor's Obligations with Respect to Leases.
(a) If, in accordance with the provisions of Section 1.11, Trustor shall be
permitted to enter into any Leases or any Leases exist on the date hereof,
Trustor shall not, except as otherwise provided in Article 10 of the Indenture,
(i) execute any assignment of any Lease or of the rents or any part thereof
from the Trust Property other than the assignment herein to Beneficiary or as
otherwise permitted under Section 1.11; (ii) accept any prepayments of any
installment of rents or other amounts to become due under any Lease for a
period exceeding one month; or (iii) enter into or modify any Lease in any
fashion which will impair the value of the Trust Property or the security
provided by this Deed of Trust without the prior written consent of
Beneficiary.
(b) Trustee shall furnish to Beneficiary, within thirty days
after each request by Beneficiary to do so, a written statement in respect of
any of or all the Leases setting forth the space occupied, if any, the portion
of the Trust Property demised thereby, the rentals or other amounts payable
thereunder and such other information as Beneficiary may reasonably request (to
the extent reasonably available to Trustor).
SECTION 1.11. Transfer Restrictions. Except to the extent
permitted by the Indenture, Trustor may not, without the prior written consent
of Beneficiary, further mortgage, encumber, pledge, hypothecate, sell, convey,
lease, sublease or assign all or any part of, or interest in, the Trust
Property or suffer any of the foregoing to occur by operation of law or
otherwise after the date hereof.
SECTION 1.12. Destruction, Condemnation. (a) If there shall
occur any damage to, or loss or destruction of,
<PAGE> 13
12
the Trust Property or any part of thereof (each, a "Destruction") in an amount
exceeding $50,000, Trustor shall promptly send to Beneficiary a notice setting
forth the nature and extent of such Destruction. Subject to the provisions of
the Ground Lease, the proceeds of any insurance that are payable in respect of
any such Destruction are hereby assigned and shall be paid to Beneficiary to be
held as Trust Monies subject to the terms of the Indenture, to the extent the
same are not paid directly to Beneficiary pursuant to the terms of any
insurance policy required hereby.
(b) If there shall occur any taking of the Trust Property or
any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Trust Property or any part thereof,
by any governmental authority, civil or military (each, a "Taking") with
respect to Trust Property that has a fair value exceeding $50,000, Trustor
shall immediately notify Beneficiary upon receiving notice of such Taking or
commencement of proceedings therefor. Subject to the terms of the Ground Lease
any proceeds, award or payment in respect of any Taking are hereby assigned and
shall be paid to Beneficiary to be held as Trust Monies subject to the terms of
the Indenture. Trustor shall take all steps necessary to notify the condemning
authority of such assignment.
SECTION 1.13. Hazardous Material. (a) The following terms
shall have the following meanings when used in this Section:
(1) "Environmental and Safety Laws" means any and all
applicable current and future treaties, laws, regulations, enforceable
requirements, binding determinations, orders, decrees, judgments,
injunctions, permits, approvals, authorizations, licenses,
permissions, notices or binding agreements issued, promulgated or
entered by any governmental authority relating to the environment,
employee health or safety as it pertains to the use or handling of, or
exposure to, Hazardous Substances, to preservation or reclamation of
natural resources, or to the management, release or threatened release
of contaminants or noxious odors, including the Hazardous Materials
Transportation Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization
<PAGE> 14
13
Act of 1986 ("CERCLA"), the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, the Clean Air Act of
1970, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1970, as amended, the Emergency
Planning and Community Right-to-Know Act of 1986, the Safe Drinking
Water Act of 1974, as amended, and any similar or implementing state
law, and all amendments or regulations promulgated thereunder;
(2) "Environmental Claim" means any written notice of any
governmental authority alleging potential liability for damage to the
environment or by any Person alleging potential liability for personal
injury (including sickness, disease or death), in either case,
resulting from or based upon (a) the presence or Release (including
intentional and unintentional, negligent and nonnegligent, sudden or
nonsudden, accidental or nonaccidental leaks or spills) of any
Hazardous Substance at, in or from the property, whether or not owned
or leased by the Trustor or any of its subsidiaries or (b) any other
circumstances forming the basis of any violation, or alleged
violation, of any Environmental and Safety Law;
(3) "Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, material or waste, including
petroleum, its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of the
foregoing characteristics, including, without limitation,
polychlorinated biphenyls, asbestos or asbestos-containing material,
and any substance, waste or material regulated under Environmental and
Safety Laws; and
(4) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching,
emanation or migration in, into, onto or through the environment
(including ambient air, surface water, groundwater, land surface,
subsurface strata or workplace), including the movement of any
contaminant through or in the air, soil, surface water or groundwater.
<PAGE> 15
14
(b) Trustor represents and warrants that: (i) it has
obtained all permits which are required with respect to the ownership and
operation of its business at the Trust Property under Environmental and Safety
Laws, except for such permits, the lack of which could not have a material
adverse effect on the business or operations of Trustor; (ii) it is in
compliance in all material respects with all terms and conditions of all such
permits as they relate to the Premises, and is also in compliance in all
respects with Environmental and Safety Laws, except for any noncompliance which
could not have a material adverse effect on the business or operations of the
Trustor; (iii) there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or violation, investigation, proceeding, notice
of demand letter pending or, to the best of its knowledge, threatened against
it or any subsidiary under the Environmental and Safety Laws relating to the
Premises which could result in a fine, penalty or other cost or expense which
Trustor, after inquiry, reasonably expects could give rise to a material
adverse effect on the business or operations of Trustor; and (iv) there are no
past or present events, conditions, circumstances, activities, practices,
incidents or actions which may interfere with or prevent compliance with the
Environmental and Safety Laws relating to the Premises, or which may give rise
to any material common law or legal liability, or otherwise form the basis of
any Environmental Claim, based on or related to a Release or threatened Release
of any Hazardous Substance, except for such Release or threatened Release that
could not give rise to a material adverse effect on the business or operations
of Trustor; and (v) to the best knowledge of Trustor there have been no past
events, conditions, circumstances, activities, practices, incidents or actions
which may interfere with or prevent compliance with the Environmental and
Safety Laws relating to the Premises, or which may give rise to any material
common law or legal liability, or otherwise form the basis of any Environmental
Claim, based on or related to a Release or threatened Release of any Hazardous
Substance, except for such Release or threatened Release that could not give
rise to a material adverse effect on the business or operations of Trustor.
(c) Trustor shall: (i) comply with any and all present and
future Environmental and Safety Laws relating to the Premises; (ii) pay when
required the cost of any Environmental Claim required by any Environmental and
Safety Law or by any order, regulation, consent decree or similar agreement or
instrument and keep the Trust Property free of any Lien imposed pursuant to any
Environmental and Safety
<PAGE> 16
15
Law; and (iii) not Release any Hazardous Substances on, under or from the Trust
Property in violation of any Environmental and Safety Law. In the event
Trustor fails to comply with the covenants in the preceding sentence in a
manner which Trustor, after inquiry, reasonably expects could give rise to a
material adverse effect on the business or operations of Trustor, Beneficiary
may, in addition to any other remedies set forth herein, but shall not be
obligated to, as trustee for and at Trustor's sole cost and expense, cause any
necessary remediation, removal, response or corrective action relating to
Hazardous Substances to be taken. Any costs or expenses incurred by
Beneficiary for such purpose shall be immediately due and payable by Trustor.
Trustor shall provide to Beneficiary a license to remove any Hazardous
Substances located on any Trust Property. Beneficiary shall have the right,
but shall not be obligated, at any time during the continuance of an Event of
Default, at the sole cost and expense of Trustor, to conduct an environmental
audit of the Trust Property by such Persons or firms appointed by Beneficiary;
and Trustor shall cooperate in all respects in the conduct of such
environmental audit, including, without limitation, by providing access to the
Trust Property and to all records relating thereto. Trustor shall indemnify
and hold Beneficiary harmless from and against all loss, cost, damage or
expense (including, without limitation, reasonable attorneys' fees and
expenses) that Beneficiary may sustain by reason of the assertion against
Beneficiary by any party of any Environmental Claim relating to such Hazardous
Substances or actions taken with respect thereto as authorized hereunder.
SECTION 1.14. Asbestos. After the date hereof, Trustor shall
not install nor permit to be installed in the Trust Property friable asbestos
or any asbestos-containing material (collectively, "ACM") except in compliance
with all applicable federal, state or local laws or regulations or orders
respecting such material except such ACM the presence of which Trustor, after
inquiry, reasonably expects could not give rise to a material adverse effect on
the business or operations of Trustor. With respect to any ACM currently
present in the Trust Property, Trustor shall comply with all federal, state or
local laws, regulations or orders applicable to ACM located on the Premises,
all at Trustor's sole cost and expense. If Trustor shall fail so to comply
with such laws or regulations and Mortgagor, after inquiry, reasonably expects
that such failure could give rise to a material adverse effect on the business
or operations of the Trustor, Beneficiary may, but shall not be obligated to,
in
<PAGE> 17
16
addition to any other remedies set forth herein, take whatever steps it deems
necessary or appropriate to comply with applicable law, regulations or orders.
Any costs or expenses incurred by Beneficiary for such purpose shall be
immediately due and payable by Trustor and bear interest at the Default Rate.
Trustor shall provide to Beneficiary and its agents and employees access to the
Trust Property and hereby specifically grants to Beneficiary a license to
remove such ACM if Trustor fails to do so and removal is required under any law
as provided for above; provided, however, that nothing contained herein shall
obligate Beneficiary to exercise any rights under such license. Trustor shall
indemnify and hold Beneficiary harmless from and against all loss, cost, damage
and expense (including, without limitation, reasonable attorneys' fees and
expenses) that Beneficiary may sustain, as a result of the presence of any ACV,
and any removal thereof or compliance with any applicable laws, regulations or
orders.
ARTICLE 2
ASSIGNMENT OF RENTS AND PROFITS;
SECURITY AGREEMENT; FIXTURE FILING
SECTION 2.01. Assignment of Leases, Rents, Issues and
Profits. (a) For valuable consideration, Trustor hereby irrevocably grants,
transfers and assigns to Beneficiary, and grants to Beneficiary a security
interest in, all Trustor's right, title and interest whether now existing or
hereafter acquired, in the Leases, including, without limitation, the right,
power and authority to collect the rents, issues, income and profits of the
Trust Property. The assignment set forth in the foregoing sentence shall be
absolute.
(b) Notwithstanding the provisions of subsection 2.01(a),
Trustor shall have the right, so long as no Event of Default shall have
occurred and be continuing, to collect and retain all rents, issues and profits
relating to the Trust Property as the same become due and payable. Upon the
occurrence and continuance of any Event of Default, Beneficiary may at any time
without notice, either in person, by agent, or by a receiver to be appointed by
a court, and without regard to the adequacy of any security for the
Obligations, to the extent not prohibited by applicable law, (i) enter upon and
take possession of the Premises and Equipment or any part thereof, and (ii) in
its own name sue for or otherwise collect such rents, issues and
<PAGE> 18
17
profits, including those past due and unpaid and hold any such collections as
Trust Monies, to be applied, less costs and expenses of operation and
collection (including, without limitation, reasonable attorneys' fees and
expenses), in accordance with the provisions of Article 11 of the Indenture.
(c) To the extent not prohibited by applicable law,
Beneficiary's right to collect the rents, issues and profits upon default by
Trustor pursuant to this Section is in no manner conditional upon Beneficiary
first taking possession of the Premises. Should Beneficiary enter and take
possession of the Premises, or collect the rents, issues and profits and apply
the same as provided for herein, such act shall not cure or waive any Event of
Default or notice thereof hereunder or invalidate any act done pursuant to such
notice. To the extent not prohibited by applicable law, nothing contained
herein, nor any collection of rents, issues and profits by Beneficiary or a
receiver, shall be construed to make Beneficiary a "mortgagee-in-possession" so
long as Beneficiary has not itself entered into actual possession of the
Premises.
(d) Nothing herein shall be construed to impose any liability
or obligation on Beneficiary under or with respect to any Lease. Trustor shall
indemnify and hold Beneficiary harmless from and against any and all
liabilities, claims, expenses, losses and damages (including, without
limitation, reasonable attorneys' fees and expenses) incurred under any Lease
or by reason of the provisions of this Section.
SECTION 2.02. Security Interest in Personal Property. (a)
This Deed of Trust shall constitute a security agreement and shall create and
evidence a security interest which is hereby granted by Trustor unto
Beneficiary for valuable consideration in all the Equipment and in all the
other items of property comprising the Trust Property in which a security
interest or lien may be granted or a pledge created pursuant to the Uniform
Commercial Code as in effect in the state in which the Premises are located or
under any other applicable common law in such state (collectively, "Personal
Property").
(b) Trustor, immediately upon the execution and delivery of
this Deed of Trust, and thereafter from time to time, shall cause this Deed of
Trust, any security instrument creating or evidencing the Lien hereof in the
Personal Property, and instrument of further assurance,
<PAGE> 19
18
including, without limitation, Uniform Commercial Code financing statements and
continuation statements, to be filed, registered or recorded in such manner and
in such places as may be required by any present or future law in order to
publish notice of and to fully perfect, preserve and protect the Lien hereof
upon the Personal Property. Trustor hereby appoints and authorizes Beneficiary
to act on behalf of Trustor upon Trustor's failure to comply with the
provisions of this subsection.
(c) Upon the occurrence of any Event of Default, in addition
to the remedies set forth in Article 3, Beneficiary shall have the power, to
the extent not prohibited by applicable law, to foreclose Trustor's right of
redemption in the Personal Property by sale of the Personal Property in
accordance with the Uniform Commercial Code as enacted in the state in which
the Premises are located or under other applicable law in such state. To the
extent not prohibited by applicable law, it shall not be necessary that any
Personal Property offered be physically present at any such sale or
constructively in the possession of Beneficiary or the Person conducting the
sale.
(d) Upon the occurrence of any Event of Default and
acceleration of the Notes, Beneficiary may sell the Personal Property or any
part thereof at public or private sale with notice to Trustor as hereinafter
provided, to the extent not prohibited by applicable law. The proceeds of any
such sale, after deducting all expenses of Beneficiary in taking, storing,
repairing and selling the Personal Property (including, without limitation,
reasonable attorneys' fees and expenses) shall be applied, less costs and
expenses of operation and collection (including, without limitation, reasonable
attorneys' fees and expenses), to the extent not prohibited by applicable law,
as Trust Monies in accordance with the provisions of Article 11 of the
Indenture. At any sale, public or private, of the Personal Property or any
part thereof, Beneficiary, to the extent not prohibited by applicable law, may
purchase any or all of the Personal Property offered at such sale.
(e) Beneficiary shall give Trustor notice of any sale of any
of the Personal Property pursuant to the provisions of this Section.
Notwithstanding the provisions of Section 4.02, any such notice, to the extent
not prohibited by applicable law, shall conclusively be deemed to be effective
if such notice is mailed at least ten (10) days prior to any sale, by
first-class or certified mail,
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19
postage prepaid, to Trustor at its address determined in accordance with the
provisions of Section 4.02.
SECTION 2.03. Fixture Filing. This Deed of Trust constitutes
a financing statement filed as a fixture filing in the Official Records of the
County Recorder of every county in which the Trust Property is located with
respect to any and all goods which are or are to become fixtures as defined in
Section 9313(1)(a) of the Uniform Commercial Code of the State of California
included within the term "Trust Property" as defined herein and with respect to
any and all goods and other personal property of Trustor that may now be or
hereinafter become such fixtures related to the Premises.
ARTICLE 3
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.01. Events of Default. (a) An Event of Default
shall have occurred under this Deed of Trust if there shall occur under the
Indenture an "Event of Default" (as such term is defined in the Indenture).
(b) With respect to non-monetary defaults arising solely
under this Deed of Trust (i.e. not otherwise provided for under the Indenture
or defaults arising under Section 4.19), Trustor shall be given notice thereof,
and 30 days from the receipt of such notice to cure such default provided,
however, if such default is not susceptible of cure by the payment of money,
for so long as it shall require to cure the same, so long as Trustor is
diligently pursuing such cure, but in no event in excess of 180 days.
SECTION 3.02. Remedies in Case of an Event of Default. If
any Event of Default shall have occurred and be continuing, Trustee or
Beneficiary may, but shall not be obligated to, in addition to any other action
permitted by law, take one or more of the following actions, to the extent not
prohibited by applicable law:
(a) by written notice to Trustor, declare the entire unpaid
amount of the Obligations to be due and payable immediately;
(b) personally, or by its trustees or attorneys, (i) enter
into and upon all or any part of the Trust Property and exclude
Trustor, its trustees and servants wholly therefrom, (ii) use,
operate, manage and control
<PAGE> 21
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the Premises and the Equipment and conduct the business thereof, (iii)
maintain and restore the Trust Property, (iv) make all necessary or
proper repairs, renewals and replacements and such useful alterations
thereto and thereon as Beneficiary may deem advisable, (v) manage,
lease and operate the Trust Property and carry on the business thereof
and exercise rights and powers of Trustor with respect thereto either
in the name of Trustor or otherwise, or (vi) collect and receive all
earnings, revenues, rents, issues, profits and income of the Trust
Property and any or every part thereof;
(c) with or without entry, personally or by its trustees or
attorneys, (i) direct Trustee to proceed with foreclosure, and in such
event Trustee is authorized and empowered at, it shall be Trustee's
special duty, upon such direction from Beneficiary, to sell the Trust
Property and all estate, right, title and interest, claim and demand
therein at one or more sales as an entirety or in parcels, to the
highest bidder or bidders for cash or credit, as directed by
beneficiary, at the location, at such time and place upon such terms
and after such notice thereof as may be required or permitted by law,
(ii) institute and prosecute proceedings for the complete or partial
foreclosure of the lien of this Deed of Trust or (iii) take control of
and sell the Personal Property as provided in Article 2, or as
provided by the Uniform Commercial Code in the state where the
Premises are located;
(d) take such steps to protect and enforce its rights whether
by action, suit or proceeding at law or in equity for the specific
performance of any covenant, condition or agreement in any of the
Collateral Documents, or in aid of the execution of any power granted
in this Deed of Trust, or for any foreclosure or sale hereunder, or
for the enforcement of any other appropriate legal or equitable remedy
or otherwise as Beneficiary shall elect; or
(e) take any of the above-mentioned actions in respect of any
or a number of individual parcels of the Land or items of personal
property, in the event that the Trust Property is comprised of more
than one parcel of Land or multiple items of Personal Property.
SECTION 3.03. Sale of Trust Property if Event of Default Occurs;
Proceeds of Sale. (a) On the completion of
<PAGE> 22
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any sale or sales by Trustee or Beneficiary made under or by virtue of this
Article, Trustee or Beneficiary or an officer of any court empowered to do so
shall execute and deliver to the accepted purchaser or purchasers a good and
sufficient instrument or instruments conveying, assigning and instruments
transferring all estate, right, title and interest in and to the property and
rights sold. To the extent not prohibited by applicable law, Beneficiary is
hereby irrevocably appointed the true and lawful trustee and attorney of
Trustor, in its name and stead, to make all necessary conveyances, assignments,
transfers and deliveries of the Trust Property and rights so sold, and for that
purpose Beneficiary may execute all necessary instruments of conveyance,
assignment and transfer, and may substitute one or more Persons with like
power, and Trustor hereby ratifies and confirms all that Beneficiary or any
such substitute shall lawfully do by virtue hereof. This power of attorney is
coupled with the interest of Beneficiary created by this Deed of Trust.
Trustor shall ratify and confirm any such sale or sales by executing and
delivering to Beneficiary or such purchaser or purchasers all instruments as
may be requested for such purpose. To the extent not prohibited by applicable
law, any such sale or sales made under or by virtue of this Article shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Trustor in and to the properties
and rights so sold, and shall be a perpetual bar both at law and in equity
against any Trustor and against any and all Persons claiming or who may claim
the same, or any part thereof from, through or under Trustor.
(b) The proceeds of any sale made under or by virtue of this
Article together with any other sums which then may be held by Beneficiary
under this Deed of Trust, whether under the provisions of this Article or
otherwise, shall be applied, less costs and expenses of operation and
collection (including without limitation, reasonable attorneys' fees and
expenses) as Trust Monies in accordance with the provisions of Article 11 of
the Indenture.
(c) To the extent not prohibited by applicable law,
Beneficiary may bid for and acquire the Trust Property or any part thereof at
any sale made under or by virtue of this Article.
(d) To the extent not prohibited by applicable law, Trustee
and Beneficiary may adjourn from time to time any sale by it to be made under
or by virtue of this Deed of Trust by announcement at the time and place
appointed for
<PAGE> 23
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such sale or for such adjourned sale or sales, and, except as otherwise
provided by any applicable provision of law, Trustee and Beneficiary, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(e) To the extent not prohibited by applicable law, if the
Trust Property is comprised of more than one parcel of Land or items of
Personal Property, Trustee or Beneficiary may take any of the actions
authorized by this Section in respect of any or a number of individual parcels
or items of Personal Property.
SECTION 3.04. Additional Remedies in Case of an Event of
Default. (a) To the extent not prohibited by applicable law, Beneficiary
shall be entitled to recover judgment as aforesaid either before, after or
during the pendency of any proceedings for the enforcement of the provisions of
this Deed of Trust, and the right of Beneficiary to recover such judgment shall
not be affected by any entry, foreclosure or sale hereunder, or by the exercise
of any other right, power or remedy for the enforcement of the provisions of
this Deed of Trust or the foreclosure of the Lien of, or conveyance pursuant
to, this Deed of Trust. In case of proceedings against Trustor in insolvency
or bankruptcy or any proceedings for its reorganization or involving the
liquidation of its assets, Beneficiary shall be entitled to prove the whole
amount of principal, premium and interest due in respect of the Obligations to
the full amount thereof without deducting therefrom any proceeds obtained from
the sale of the whole or any part of the Trust Property or from the sale of any
or a number of parcels or items of Personal Property in the event that the
Trust Property is comprised of more than one parcel of Land or items of
Personal Property.
(b) To the extent not prohibited by applicable law, any
recovery of any judgment by Beneficiary and any levy of any execution under any
judgment upon the Trust Property shall not affect in any manner or to any
extent the Lien of this Deed of Trust upon the Trust Property or any part
thereof, or any Liens, conveyances, powers, rights and remedies of Beneficiary
hereunder, but such Liens, conveyances, powers, rights and remedies shall
continue unimpaired as before.
(c) Any monies collected by Trustee or Beneficiary under this
Section shall be applied in accordance with the provisions of subsection
3.03(b).
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SECTION 3.05. Legal Proceedings After an Event of Default.
(a) After the occurrence of any Event of Default and immediately upon the
commencement of any action, suit or legal proceedings to obtain judgment for
the Obligations or any part thereof, or of any proceedings to foreclose the
Lien of or otherwise enforce the provisions of this Deed of Trust or of any
other proceedings in aid of the enforcement of this Deed of Trust, Trustor
shall enter its voluntary appearance in such action, suit or proceeding.
(b) Upon the occurrence of an Event of Default, Trustee and
Beneficiary shall be entitled forthwith as a matter of right, to the extent not
prohibited by applicable law, either before or after declaring the Obligations
or any part thereof to be due and payable, to the appointment of a receiver
without giving notice to any party and without regard to the adequacy or
inadequacy of any security for the Obligations.
(c) Trustor shall not (i) at any time insist upon, or plead,
or in any manner whatsoever claim or take any benefit or advantage of any stay
or extension or moratorium, law, any exemption from execution or sale of the
Trust Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Deed of Trust, (ii) claim, take or insist on any benefit or advantage of
any law now or hereafter in force providing for the valuation or appraisal of
the Trust Property, or any part thereof, prior to any sale or sales of the
Trust Property which may be made pursuant to this Deed of Trust, or pursuant to
any decree, judgment or order of any court of competent jurisdiction, or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent not prohibited by applicable law, Trustor hereby
expressly waives all benefit or advantage of any such law or laws, including,
without limitation, any statute of limitations applicable to this Deed of Trust
and any and all rights to trial by jury in any action or proceeding related to
the enforcement of this Deed of Trust, and covenants not to hinder, delay or
impede the execution of any power granted or delegated to Beneficiary by this
Deed of Trust, but to suffer and permit the execution of every such power as
though no such law or laws had been made or enacted. To the extent not
prohibited by applicable law, Trustor, for itself and all who may claim under
it, waives all right to have the Trust Property, or
<PAGE> 25
24
any part thereof, marshaled on any foreclosure of this Deed of Trust.
SECTION 3.06. Remedies Not Exclusive. To the extent not
prohibited by applicable law, no remedy conferred upon or reserved to Trustee
or Beneficiary by this Deed of Trust is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this Deed of Trust
whether now or hereafter existing at law or in equity. Any delay or omission
of Trustee or Beneficiary to exercise any right or power accruing on any Event
of Default shall not impair any such right or power and shall not be construed
to be a waiver of or acquiescence in any such Event of Default. Every power
and remedy given by this Deed of Trust may be exercised from time to time as
often as may be deemed expedient by Beneficiary. If Trustee or Beneficiary
accepts any monies required to be paid by Trustor under this Deed of Trust
after the same becomes due such acceptance shall not, to the extent not
prohibited by applicable law, constitute a waiver of the right either to
require prompt payment when due, of all other sums secured by this Deed of
Trust or to declare an Event of Default with regard to subsequent Defaults. If
Trustee or Beneficiary accepts any monies required to be paid by Trustor under
this Deed of Trust in an amount less than the sum then due, such acceptance, to
the extent not prohibited by applicable law, shall be deemed an acceptance on
account only and on the condition that it shall not constitute a waiver of the
obligation of Trustor to pay the entire sum then due and Trustor's failure to
pay the entire sum then due shall be and continue to be an Event of Default
notwithstanding acceptance of such amount on account.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. Severability. In the event any one or more of
the provisions contained in this Deed of Trust shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Deed of Trust, but this Deed of Trust shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein or therein.
The invalidity of any provision of this Deed of Trust in any one jurisdiction
shall not affect or impair in any manner the
<PAGE> 26
25
validity of such provision in any other jurisdiction. The invalidity or
unenforceability of this Deed of Trust with respect to any item of or any
portion of the Obligations which it secures shall not invalidate or render
unenforceable this Deed of Trust or the Lien hereof with respect to any other
item or portion of the Obligations.
SECTION 4.02. Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be delivered in the manner and to
the parties specified in the Indenture.
SECTION 4.03. Covenants To Run with the Land. All the
grants, covenants, terms, provisions and conditions in this Deed of Trust shall
run with the Land and bind Trustor and shall apply to and bind the successors
and assigns of Trustor and shall inure to the benefit of the Beneficiary, and
its successors and assigns.
SECTION 4.04. Captions; Gender and Number. The captions and
section headings of this Deed of Trust are for convenience only and are not to
be used to interpret or define the provisions hereof. All terms contained
herein shall be construed, whenever the context of this Deed of Trust so
requires, so that the singular includes the plural and so that the masculine
includes the feminine.
SECTION 4.05. Limitation on Interest Payable. It is the
intention of the parties to conform strictly to the usury laws, whether state
or federal, that are applicable to the transaction of which this Deed of Trust
is a part. All agreements between Trustor and Beneficiary whether now existing
or hereafter arising and whether oral or written, are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed
to be paid by Trustor for the use, forbearance or detention of the money to be
loaned under the Indenture, or for the payment or performance of any covenant
or obligation contained herein or in the Indenture exceed the maximum amount
permissible under applicable federal or state usury laws.
SECTION 4.06. Indemnification; Reimbursement. Trustor shall
reimburse Beneficiary, upon demand, for all costs and expenses incurred by
Beneficiary in connection with the administration and enforcement of this Deed
of Trust, and shall indemnify and hold harmless Beneficiary and the officers,
directors, employees, agents, trustees and affiliates of Beneficiary (each of
the foregoing, an
<PAGE> 27
26
"Indemnitee"; collectively, "Indemnitees"), upon demand, from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Deed of Trust (the "Indemnified
Liabilities"); provided, however, THAT TRUSTOR SHALL HAVE NO OBLIGATION TO AN
INDEMNITEE HEREUNDER WITH RESPECT TO INDEMNIFIED LIABILITIES IF IT HAS BEEN
DETERMINED BY A FINAL DECISION (AFTER ALL APPEALS AND THE EXPIRATION OF TIME TO
APPEAL) BY A COURT OF COMPETENT JURISDICTION THAT SUCH INDEMNIFIED LIABILITY
AROSE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNITEE. To
the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, Trustor shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them. If any action or proceeding, including, without limitation,
bankruptcy or insolvency proceedings, is commenced to which action or
proceeding Beneficiary is made a party or in which it becomes necessary to
defend or uphold the Lien or validity of this Deed of Trust, Trustor shall,
upon demand, reimburse Beneficiary for all expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by Beneficiary in
such action or proceeding. Trustor's Obligations under this Section shall
survive the release of this Deed of Trust and the discharge of Trustor's other
Obligations hereunder.
SECTION 4.07. Choice of Law. The terms and provisions of
this Deed of Trust and the enforcement hereof shall be governed by and
construed in accordance with the laws of the state where the Premises are
located; provided, however, that the rights, privileges and immunities of the
Beneficiary shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
<PAGE> 28
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SECTION 4.08. No Merger. The rights and estate created by
this Deed of Trust shall not, under any circumstances, be held to have merged
into any other estate or interest now owned or hereafter acquired by
Beneficiary unless Beneficiary shall have consented to such merger in writing.
SECTION 4.09. Changes in Writing. This Deed of Trust may not
be modified, amended, discharged or waived in whole or in part except by an
instrument in writing signed by (i) Trustor, to the extent any modification,
amendment, discharge or waiver is sought to be enforced against Trustor, and
(ii) Beneficiary, if authorized by Article 9 of the Indenture, to the extent
any modification, amendment, discharge or waiver is sought to be enforced
against Beneficiary.
SECTION 4.10. Multiple Sites. This Deed of Trust is one of a
series of Collateral Documents securing the Obligations. Trustor agrees that
the conveyance and lien of this Deed of Trust shall be absolute and
unconditional and, to the extent not prohibited by applicable law, shall not in
any manner be affected or impaired by any acts or omissions whatsoever of
Beneficiary and without limiting the generality of the foregoing, the
conveyance and lien hereof shall not be impaired by any acceptance by the
Trustee or Beneficiary of any security for or guarantees of any of the
Obligations hereby secured, or by any failure, neglect or omission on the part
of Trustee or Beneficiary to realize upon or protect any obligation or
indebtedness hereby secured or any collateral security therefor including those
secured by any of the Collateral Documents. To the extent not prohibited by
applicable law, the conveyance and lien hereof shall not in any manner be
impaired or affected by any release (except as to the property released), sale,
pledge, surrender, compromise, settlement, renewal, extension, indulgence,
alteration, changing, modification or disposition of any of the obligations
secured or of any of the collateral security therefor, and Trustee or
Beneficiary may at their discretion foreclose, exercise any power of sale, or
exercise or enforce any of its rights and remedies hereunder. Such exercise of
Trustee's or Beneficiary's rights and remedies under any of or all the
Collateral Documents shall not, to the extent not prohibited by applicable law,
in any manner impair the indebtedness hereby secured or the conveyance or lien
of this Deed of Trust and any exercise of the rights or remedies of Trustee or
Beneficiary hereunder shall not impair the conveyance or lien of any of the
Collateral Documents or any of Trustee's or Beneficiary's rights and remedies
thereunder. To the
<PAGE> 29
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extent not prohibited by applicable law, the Trustor specifically consents and
agrees that Trustee and Beneficiary may exercise their rights and remedies
hereunder and under the Collateral Documents or any of the Notes separately or
concurrently and in any order that it may deem appropriate.
SECTION 4.11. Continuing Security Interest; Transfer of
Notes. This Deed of Trust shall create a continuing security interest in the
Trust Property and shall (i) remain in full force and effect until all
Obligations are indefeasibly paid in full and this Deed of Trust is reconveyed
in accordance with the provisions of the Indenture, (ii) be binding upon
Trustor, its successors and assigns and (iii) inure, together with the rights
and remedies of the Trustee and Beneficiary hereunder, to the benefit of the
Trustee and Beneficiary, and each Holder from time to time of any Notes and
each of their respective successors, transferees and assigns; no other Persons
(including, without limitation, any other creditor of the Trustor) shall have
any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (iii), Beneficiary may assign
or otherwise transfer any indebtedness held by it secured by this Deed of Trust
to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to such party herein or otherwise.
SECTION 4.12. Security Interest Absolute. All rights of
Trustee and Beneficiary and security interests hereunder and all obligations of
Trustor hereunder shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Obligations,
the Notes, the Indenture, any Collateral Document or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
obligations, the Notes, the indenture or any other agreement or
instrument relating thereto;
(iii) any exchange, release or nonperfection of any other
property, or any release or amendment or waiver
<PAGE> 30
29
of or consent to or departure from any guarantee, for all or any of the
Obligations; or
(iv) any other circumstances which might otherwise constitute
a defense available to, or a discharge of, Trustor (other than the
indefeasible payment in full of the Obligations).
SECTION 4.13. Waiver of Hearing. To the extent it may
lawfully do so, Trustor expressly waives any constitutional or other right to a
judicial hearing prior to the time Beneficiary takes possession of or disposes
the Trust Property as provided in Sections 2.01 or 3.02.
SECTION 4.14. Conflicts with TIA. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this Deed of Trust by any of the provisions of the TIA, such
required provision shall control.
SECTION 4.15. Reasonable Care. The powers conferred on
Trustee and Beneficiary hereunder are solely to protect their interest in the
Trust Property and shall not impose on it any duty to exercise any such powers.
Except for exercising reasonable care in the safe custody of any Trust Property
in its possession and for accounting for money actually received by it
hereunder and such duties as may be imposed by the TIA upon Beneficiary,
Trustee and Beneficiary shall have no duty as to any Trust Property or any
responsibility for taking any necessary steps to preserve rights against any
parties or any other rights pertaining to any Trust Property, and neither it
nor any of its officers, directors, employees or agents shall, be responsible
to Trustor for any act or failure to act, except for its own gross negligence,
bad faith or willful misconduct.
SECTION 4.16. No Release. Nothing set forth in this Deed of
Trust shall impose any obligation on Beneficiary to perform or observe any
term, covenant, condition or agreement on Trustor's part to be so performed or
observed or impose any liability on Trustee or Beneficiary for any act or
omission on the part of Trustor relating thereto or for any breach of any
representation or warranty on the part of Trustor contained herein in respect
of the Trust Property or made in connection herewith.
SECTION 4.17. No Waiver. No failure by Trustee or
Beneficiary to insist upon the strict performance of any
<PAGE> 31
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term hereof or to exercise any right, power or remedy consequent upon a breach
thereof shall constitute a waiver of any such term or right, power or remedy or
of any such breach. No waiver of any breach shall affect or alter this Deed of
Trust, which shall continue in full force and effect, or shall affect or alter
the rights of Trustee or Beneficiary with respect to any other then existing or
subsequent breach.
SECTION 4.18. Trustee's Powers and Liabilities. (a)
Trustee, by acceptance hereof, covenants faithfully to perform and fulfill the
trusts herein created, being liable, however, only for gross negligence or
wilful misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by it in
accordance with the terms hereof. All authorities, powers and discretions
given in this Deed of Trust to Trustee or Beneficiary may be exercised by
either, without the other, with the same effect as if exercised jointly.
(b) Trustee may resign at any time upon giving thirty (30)
days' notice in writing to Trustor and to Beneficiary.
(c) Beneficiary may remove Trustee at any time or from time
to time and select a successor trustee. In the event of the death, removal,
resignation, refusal to act, inability to act or absence of Trustee from the
state in which the premises are located, or in its sole discretion for any
reason whatsoever, Beneficiary may, without notice and without specifying the
reason therefor and without applying to any court, select and appoint a
successor trustee, and all powers, rights, duties and authority of the former
Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of his duties unless required by Beneficiary. Such substitute
trustee shall be appointed by written instrument duly recorded in the county
where the Land is located. Trustor hereby ratifies and confirms any and all
acts which the herein named Trustee, or his successor or successors in this
trust, shall do lawfully by virtue hereof. Trustor hereby agrees, on behalf of
itself and its successors and assigns, that the recitals contained in any deed
or deeds executed in due form by any Trustee or Substitute trustee, acting
under the provisions of this instrument, shall be prima facie evidence of the
facts recited, and that it shall not be necessary to prove in any court,
otherwise than by such
<PAGE> 32
31
recitals, the existence of the facts essential to authorize the execution and
delivery of such deed or deeds and the passing of title thereby.
(d) Trustee shall not be required to see that this Deed of
Trust is recorded, nor liable for its validity or its priority as a first deed
of trust, or otherwise, nor shall Trustee he answerable or responsible for
performance or observance of the covenants and agreements imposed upon Trustor
or Beneficiary by this Deed of Trust or any other agreement. Trustee, as well
as Beneficiary, shall have authority in their respective discretion to employ
agents and attorneys in the execution of this trust and to protect the interest
of the Beneficiary hereunder, and to the extent permitted by law they shall be
compensated and all expenses relating to the employment of such agents and/or
attorneys, including expenses of litigations, shall be paid out of the proceeds
of the sale of the Trust Property conveyed hereby should a sale be had, but if
no such sale be had, all sums so paid out shall be recoverable to the extent
permitted by law by all remedies at law or in equity.
(e) At any time, or from time to time, without liability
therefor and with 10 days' prior written notice to Trustor, upon written
request of Beneficiary and without affecting the effect of this Deed of Trust
upon the remainder of the Trust Property, Trustee may (i) reconvey any part of
the Trust Property, (ii) consent in writing to the making of any map or plat
thereof, (iii) join in granting any easement thereon or (iv) join in any
extension agreement or any agreement subordinating the lien or charge hereof.
SECTION 4.19. The Ground Lease. Notwithstanding any other
provision hereof or of the Ground Lease:
(a) Trustor will not modify, extend or in any way alter the
material terms of the Ground Lease or any terms of the Ground Lease effect of
which would be to increase Trustor's obligations under the Ground Lease or in
any way impair or lessen the value of Trust Property or cancel, release,
terminate or surrender the Ground Lease, or waive, excuse, condone or in any
way release or discharge the lessor thereunder of or from the obligations,
covenants, conditions and agreements by said lessor to be done and performed;
and Trustor does expressly release, relinquish and assign unto Beneficiary all
its right, power and authority to cancel, surrender, amend, modify or alter in
any way the material terms and provisions of the Ground
<PAGE> 33
32
Lease or any terms of the Ground Lease effect of which would be to increase
Trustor's obligations under the Ground Lease or in any way impair or lessen the
value of Trust Property.
(b) Trustor shall at all times, promptly and faithfully keep
and perform, or cause to be kept and performed, all the covenants and
conditions contained in the Ground Lease by the lessee therein to be kept and
performed and shall in all respects conform to and comply with the terms and
conditions of the Ground Lease and Trustor further covenants that it will not
do or permit anything to be done, the doing of which, or refrain from doing
anything, the omission of which, would materially impair the security of this
Deed of Trust or which would be grounds for declaring a default under the
Ground Lease.
(c) Trustor shall give Beneficiary prompt notice in writing
of any default under the Ground Lease or of the receipt by Trustor of any
notice of default from the lessor thereunder by providing to Beneficiary a copy
of any such notice received by Trustor from such lessor, without regard to the
fact that Beneficiary may be entitled to such notice directly from such lessor.
Trustor shall promptly notify Beneficiary of any default under the Ground Lease
by such lessor or giving of any notice by such lessor to Trustor of such
lessor's intention to end the term thereof. Trustor shall furnish to
Beneficiary promptly upon Beneficiary's request any and all information
concerning the performance by Trustor of the covenants of the Ground Lease as
shall be reasonably requested by Beneficiary and shall permit Beneficiary or
its representatives at all reasonable times and upon reasonable notice to make
investigation or examination concerning the performance by Trustor of the
covenants of the Ground Lease.
(d) If there shall have occurred a "tenant default" under the
Ground Lease, Beneficiary may (but shall not be obligated to) take any such
action Beneficiary deems necessary or desirable to cure, in whole or in part,
any material failure of compliance by Trustor under the Ground Lease; and upon
the receipt by Beneficiary from Trustor or the lessor under the Ground Lease of
any written notice of such tenant default by Trustor as the lessee thereunder,
Beneficiary may rely thereon, and such notice shall constitute full authority
and protection to Beneficiary for any action taken or omitted to be taken in
good faith reliance thereon. All sums, including, without limitation,
reasonable attorneys' fees and expenses, so expended by the Beneficiary to cure
any such default, or expended to sustain
<PAGE> 34
33
the lien of this Deed of Trust or its priority and shall be paid by the Trustor
promptly. Nothing in this Section shall limit Trustor's rights under the
Ground Lease to contest requirements of law or other similar matters to the
fullest extent permitted by the Ground Lease. Trustor hereby expressly grants
to Beneficiary, and agrees that Beneficiary shall have, the absolute and
immediate right to enter in and upon the Premises or any part thereof to such
extent and as often as Beneficiary, in its reasonable discretion, deems
necessary or desirable in order to cure any such default or alleged default by
Trustor.
(e) Trustor shall, at least six months prior to the last day
upon which Trustor, as lessee under the Ground Lease, may validly exercise any
option to renew or extend the term of the Ground Lease (i) exercise such option
in such manner as will cause the term of the Ground Lease effectively to be
renewed or extended for the period provided by such option and (ii) give prompt
written notice thereof to Beneficiary; provided, that, in the event of the
failure of Trustor so to do, Beneficiary shall have, and is hereby granted, the
irrevocable right to exercise any such option, whether in its own name and
behalf or in the name and behalf of its designee or nominee or in the name and
behalf of Trustor or in any other manner authorized under the Ground Lease as
Beneficiary shall in its sole discretion determine.
(f) So long as this Deed of Trust is in effect, there shall
be no merger of the Ground Lease or any interest therein, or of the leasehold
estate created thereby, with the fee estate in the Premises or any portion
thereof by reason of the fact that the Ground Lease or such interest therein or
such leasehold estate may be held directly or indirectly by or for the account
of any Person who shall hold the fee estate in the Premises or any portion
thereof or any interest of the lessor under the Ground Lease. In case Trustor
acquires the fee title to the Premises, this Deed of Trust shall attach to and
cover and be a lien upon the fee title or such other estate so acquired, and
such fee title or other estate shall, without further assignment, mortgage or
conveyance, become and be subject to the lien of and covered by this Deed of
Trust with the same force as if Trustor had been the owner of the fee simple
interest in the Premises on the date hereof. Trustor shall notify Beneficiary
of any such acquisition and, on written request by Beneficiary, shall cause to
be executed and recorded all such other and further assurances or other
instruments in writing as may in the opinion of Beneficiary be necessary or
<PAGE> 35
34
appropriate to effect the intent and meaning hereof and shall deliver to
Beneficiary a Beneficiary's loan title insurance policy insuring that such fee
title is subject to the lien of this Deed of Trust.
(g) In the event that the Trustor intends to acquire fee
title to the leasehold estate as described above, Trustor shall provide
Beneficiary with written notice of its intent to so acquire or its decision to
exercise its option or right not less than 30 days prior to such acquisition.
IN WITNESS WHEREOF, this Deed of Trust has been duly executed
by Trustor as of the date first written above.
ANACOMP, INC.
Witness:
___________________________ By:__________________________
Title:
Witness:
___________________________ By:__________________________
Title:
<PAGE> 36
35
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On , 1995, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared , personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
Person(s) whose name(s) is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity(ies), and that by
his signature(s) on the instrument the Person(s), or entity upon behalf of
which the Person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
<PAGE> 37
36
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On , 1995, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared , personally
known to me (or proved to me on the basis of satisfactory evidence) to he the
Person(s) whose name(s) is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity(ies), and that by
his signature(s) on the instrument the Person(s), or entity upon behalf of
which the Person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
<PAGE> 38
37
[ ]COUNTY, CALIFORNIA
SCHEDULE A
<PAGE> 39
38
SCHEDULE A-1
[Description of Current Poway Lease]
<PAGE> 40
39
[ ] COUNTY, CALIFORNIA
SCHEDULE B
Such matters and exceptions to title as are specifically set
forth in the Mortgagee's/Beneficiary's policy of title insurance, insuring the
lien of this Mortgage/Deed of Trust upon the Mortgaged/Trust Property as issued
pursuant to Lawyers Title Insurance Corporation Commitment No. ________________.
<PAGE> 1
Exhibit 4.6
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (the "Agreement"), dated as of
April __, 1995, is among The First National Bank of Chicago, as agent under the
Credit Agreement (hereinafter defined)(in such capacity and as collateral agent
under the Credit Agreement Security Documents (hereinafter defined), the
"Agent") on behalf of the lenders parties to the Credit Agreement (the "Credit
Agreement Lenders"), and The Bank of New York, as trustee under the Senior Note
Indenture (hereinafter defined)(in such capacity and as collateral agent,
pledgee or mortgagee under the Senior Note Security Documents (hereinafter
defined), the "Senior Note Trustee"), on behalf of the holders of the Senior
Notes (hereinafter defined) (the "Senior Noteholders").
WITNESSETH THAT:
WHEREAS, Anacomp, Inc., an Indiana corporation (the
"Company"), the Agent and the Credit Agreement Lenders have entered into a
certain Credit Agreement, dated as of April __, 1995 (as amended from time to
time, the "Credit Agreement"), relating to the promissory notes issued
thereunder to the Credit Agreement Lenders (the "Credit Agreement Notes");
WHEREAS, payment and performance of each of the Company's
obligations under the Credit Agreement and the Credit Agreement Notes are
secured by a security interest in the Collateral (hereinafter defined) granted
to the Agent, as collateral agent on behalf of the Credit Agreement Lenders, by
the Company pursuant to the Pledge and Security Agreement, dated as of April
__, 1995 (as amended from time to time, the "Credit Agreement Security
Agreement") and the other Credit Agreement Security Documents (hereinafter
defined);
WHEREAS, the Company and the Senior Note Trustee on behalf of
the Senior Noteholders have entered into a certain Indenture, dated as of April
__, 1995 (as amended from time to time, the "Senior Note Indenture"), relating
to the Company's __% Senior Secured Notes due 2002 (as amended from time to
time, the "Senior Notes");
WHEREAS, payment and performance of the Company's obligations
under the Senior Note Indenture and the Senior Notes are secured by, among
other things, a security interest in the Collateral granted to the Senior Note
Trustee, as collateral agent on behalf of the Senior Noteholders, by the
Company pursuant to a Security and Pledge Agreement, dated as of April __, 1995
(as amended from time to time, the "Senior Note Security Agreement") and the
other Senior Note Security Documents (hereinafter defined);
WHEREAS, the Company, the Credit Agreement Lenders, the Senior
Noteholders, the Agent and the Senior Note Trustee have
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<PAGE> 2
agreed that the relative rights and priorities of the Agent, the Credit
Agreement Lenders, the Senior Note Trustee and the Senior Noteholders with
respect to the Collateral in connection with the transactions described herein
are to be subject to the provisions of this Agreement;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements contained herein and intending to be legally
bound hereby, covenant and agree as follows:
1. Certain Definitions. As used in this Agreement, the
following additional terms shall have the following meanings, unless the
context otherwise requires:
"Bankruptcy Code" shall mean Title 11 of the United
States Code, as amended.
"Collateral" shall mean the "Collateral" as defined
in the Credit Agreement Security Agreement as in effect on the date hereof
(without giving effect to any subsequent amendments to the definition of
"Collateral" under the Credit Agreement Security Agreement).
"Credit Agreement Loan Documents" shall mean the
Credit Agreement, the Credit Agreement Notes and the Credit Agreement Security
Documents.
"Credit Agreement Security Documents" shall mean the
Credit Agreement Security Agreement and amendments or supplements thereto, and
any other mortgages, deeds of trust, security agreements, financing statements,
pledge agreements or security instruments and documents executed by the Company
creating, evidencing or governing any security interest in or lien on any of
the Collateral to secure the Obligations contemplated by the Credit Agreement.
"Liens" shall mean any lien, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement and any lease in the nature thereof).
"Loan Documents" shall mean the Credit Agreement Loan
Documents and the Senior Note Loan Documents.
"Lockbox" shall have the meaning assigned thereto in
the Credit Agreement Security Agreement.
"Obligations" shall mean each and every obligation
and liability of the Company to the Agent, the Credit Agreement Lenders, the
Senior Note Trustee, or the Senior Noteholders, however now existing or
hereafter incurred, whether direct or
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<PAGE> 3
indirect, absolute or contingent, secured or unsecured, matured or not matured,
arising out of any of the Credit Agreement Loan Documents or Senior Note Loan
Documents, as the case may be, including, without limitation, any principal,
interest, letter of credit reimbursement obligations, penalties or fees
thereon.
"Permitted Credit Agreement Obligations" means the aggregate
principal amount of all loans, and the aggregate drawn and undrawn amounts of
all letters of credit, from time to time outstanding under the Credit
Agreement, but only to the extent incurred in accordance with Section 4.03(b)
(iv) of the Indenture as in effect on the date hereof (without giving effect
to any subsequent amendments to such section), together with all interest,
fees, costs and expenses from time to time outstanding under the Credit
Agreement in connection therewith, including any such interest, fees, costs
and expenses accrued after the filing of any bankruptcy case or similar
proceeding by or against the Company and whether or not allowed by the court in
such bankruptcy case or similar proceeding. For purposes of this definition,
any indebtedness which is not permitted to be incurred under such Section
solely as a result of the existence of a Default or Event of Default (each as
defined in the Senior Note Indenture) at the time of its incurrence shall
nevertheless be deemed a "Permitted Credit Agreement Obligation" unless prior
to the incurrence of such indebtedness the Agent has received written notice
from the Senior Note Trustee of the existence of such Default or Event of
Default. "Security Documents" shall mean the Credit Agreement Security
Documents and the Senior Note Security Documents.
"Senior Note Loan Documents" shall mean the Senior Note
Indenture, the Senior Notes and the Senior Note Security Documents.
"Senior Note Security Documents" shall mean the Senior Note
Security Agreement and amendments or supplements thereto, and any other
mortgages, deeds of trust, security agreements, financing statements, pledge
agreements or security instruments and documents executed by the Company
evidencing or governing any security interest in or lien on any of the
Collateral to secure the Obligations contemplated by the Senior Note Indenture.
The terms "Agent" and "Senior Note Trustee" include any
successor agent or trustee appointed in accordance with the Credit Agreement,
the Senior Note Indenture, the Credit Agreement Security Documents and the
Senior Note Security Documents. The terms "Credit Agreement Lenders" and
"Senior Noteholders" include the respective successors and assigns thereof.
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<PAGE> 4
2. Relative Acknowledgment/Priorities of Security
Interests and Liens.
(a) Each of the parties hereto acknowledges that the
priorities provided in this Agreement shall not be affected or impaired in
any manner whatsoever including, without limitation, on account of (i) the
invalidity, irregularity or unenforceability of all or any part of the Loan
Documents, (ii) any amendment, change or modification of the Loan Documents or
(iii) any impairment, modification, change, exchange, release or subordination
of or limitation on, any liability of, or stay of actions or lien enforcement
proceedings against, any of the Company its property, or its estate in
bankruptcy resulting from any bankruptcy, arrangement, readjustment,
composition, liquidation, rehabilitation, similar proceeding or otherwise
involving or affecting the Company. Subject to Paragraph 6(d) herein, this
Agreement shall continue and be effective until all Obligations under the
Credit Agreement Notes and the Credit Agreement shall have been indefeasibly
paid in full and the Commitments (as defined in the Credit Agreement)
terminated, or all the Liens of the Agent for the benefit of the Credit
Agreement Lenders shall have been consensually released by the Agent.
(b) Irrespective of the time, order or method of
attachment or perfection of Liens or the filing or recording of financing
statements or other Security Documents and irrespective of anything contained
in any filing or agreement to which either the Agent, the Credit Agreement
Lenders, the Senior Note Trustee, or the Senior Noteholders may now or
hereafter be a party, the Liens in the Collateral in favor of the Agent and the
Credit Agreement Lenders shall in all respects be prior and senior to any Lien
or other interests therein of the Senior Note Trustee or the Senior
Noteholders.
(c) The parties hereto shall not challenge or
question in any proceeding the validity or enforceability of this Agreement as
a whole or any term or provision contained herein. The parties hereto shall
not challenge or question in any proceeding the priority or validity of the
Liens in the Collateral granted to the Agent under the Credit Agreement
Security Documents on behalf of the Credit Agreement Lenders or the Liens in
the Collateral granted to the Senior Note Trustee under the Senior Note
Security Documents on behalf of the Senior Noteholders, subject, however, to
the express provisions of this Agreement.
3. Enforcement.
(a) Notwithstanding anything to the contrary contained in
any of the Loan Documents or otherwise provided in law or equity, so long as
any Permitted Credit Agreement Obligations to the Agent or the Credit
Agreement Lenders, or any commitment to extend any such Obligation, are
outstanding, the Agent shall have
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<PAGE> 5
the exclusive right (whether exercised pursuant to a bankruptcy or similar
proceeding or otherwise) solely on behalf of the Credit Agreement Lenders
without the consent of the Senior Note Trustee or the Senior Noteholders, but
on prior or concurrent written notice to the Senior Note Trustee describing the
actions to be taken (other than with respect to the application of funds
remitted to the Agent from the Lockboxes prior to receipt by the Agent of
written notice of the occurrence of an Event of Default as defined in the
Senior Note Indenture) in the case of any action referenced in clauses (i),
(ii) or (iii) below (provided that the failure to give such notice to the
Senior Note Trustee shall not affect the validity of such acts): (i) to take
action with respect to, to release or consent to the release of the Liens of
the Agent, the Senior Note Trustee, the Credit Agreement Lenders and the Senior
Noteholders in respect of, or to substitute, sell or otherwise dispose of, the
Collateral, in accordance with the applicable Credit Agreement Loan Documents
or as permitted by applicable law (provided, however, that the Agent shall
release the Lien of the Senior Note Trustee or the Senior Noteholders in all or
any part of the Collateral only in connection with a sale or other disposition
of such Collateral where (A) the proceeds of which are applied in accordance
with paragraph 4 hereof or are deposited into a cash collateral account to
secure the Permitted Credit Agreement Obligations and Senior Note Obligations
in the priorities set forth herein and (B) the Lien of the Agent and the Credit
Agreement Lenders in such Collateral is likewise released and (C) the Lien of
the Senior Note Trustee and the Senior Noteholders shall be released only as to
Collateral the proceeds from the sale or disposition of which is used as
described in subclause (A); provided, further, however, that, without limiting
the express rights of the Agent or the express obligations of the Senior Note
Trustee under this Agreement, the Agent shall not waive any rights of the
Senior Note Trustee or the Senior Noteholders unless the corresponding right in
respect of the Agent or the Credit Agreement Lenders shall have been similarly
waived); (ii) to enforce and realize upon the Liens held by the Agent on behalf
of the Credit Agreement Lenders, in accordance with the applicable Credit
Agreement Loan Documents or as permitted by applicable law, including to
conduct any public or private sale of all or any portion of the Collateral or
turnover of all or any portion of the Collateral under Article 9 of the Uniform
Commercial Code, (iii) to determine whether or not to accept a deed in lieu of
foreclosure or similar transfer of all or any portion of the Collateral, (iv)
to enforce all rights and privileges accruing to the Agent or the Credit
Agreement Lenders by reason of, and in accordance with, the Credit Agreement
Loan Documents, including, without limitation, to grant or refuse to grant any
and all consents, approvals and waivers, to exercise all of its rights and
privileges as attorney-in-fact for purposes of carrying out the terms of any
Credit Agreement Loan Documents, (v) to take any and all appropriate action and
to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this
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<PAGE> 6
Agreement or any of the Credit Agreement Loan Documents and (vi) to make all
decisions on behalf of itself, and the Credit Agreement Lenders, in any such
circumstances. In exercising its rights as aforesaid, the Agent shall have
sole control over the timing, circumstances and manner of exercising its rights
hereunder, provided that the Agent shall handle all transactions relating to
the Collateral in accordance with its usual practices in the ordinary course of
its business and shall adhere to the same standards of conduct as would be the
case if there were no Lien granted to the Senior Note Trustee or the Senior
Noteholders.
(b) Notwithstanding the occurrence of a default or event of
default under the Senior Note Loan Documents or any other event, condition or
circumstance whatsoever, so long as any Permitted Credit Agreement Obligation
to the Agent or the Credit Agreement Lenders, or commitment to extend any such
Obligation, is outstanding, neither the Senior Note Trustee on behalf of
itself or the Senior Noteholders, nor any Senior Noteholder shall (i) exercise
or enforce any of its rights and privileges or pursue any remedies it may have
with respect to or against any of the Collateral, (ii) take any action on
their behalf of the type which the Credit Agreement Lenders are entitled to
take under paragraph 3(a) above; (iii) take any other enforcement action with
respect to the Collateral under the Senior Note Loan Documents, or otherwise;
(iv) in any manner interfere with the security interests or the liens held by
the Agent or the Credit Agreement Lenders in the Collateral; or (v) take any
action with respect to the Collateral or require the Company to take any action
with respect to the Collateral under any of the Senior Note Loan Documents;
provided that nothing contained in this Agreement shall prevent or interfere
with the Senior Note Trustee or the Senior Noteholders from (w) monitoring the
Collateral and gathering information and requiring reports from the Company
regarding the Collateral, (x) accelerating the maturity of the Senior Notes in
accordance with the terms of the Senior Note Loan Documents and exercising and
enforcing its rights and remedies thereunder other than with respect to the
Collateral, including, without limitation, exercising remedies with respect to
property and assets not comprising part of the Collateral, (y) directing, and
instituting legal proceedings to require, the Company to take such actions as
the Senior Noteholders deem to be necessary or advisable to provide for or
permit the perfection and priority of the Liens of the Senior Note Security
Documents for the benefit of the Senior Noteholders, in accordance with the
terms of the Senior Note Indenture or the Senior Note Security Documents, or
(z) releasing or terminating any interest the Senior Note Trustee or Senior
Noteholders may have in the Collateral.
(c) Concurrent with the execution of this Agreement, the
Senior Note Trustee has delivered to the Agent UCC termination statements with
respect to the Senior Note Trustee's Liens in the Collateral. The Agent shall
hold these UCC statements
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<PAGE> 7
in trust and is authorized to file such statements of record only in connection
with a release of Liens in the Collateral permitted by this Agreement. Upon
termination of this Agreement, the Agent shall return such UCC statements (if
not filed) to the Senior Note Trustee. The Senior Note Trustee shall from time
to time promptly deliver to the Agent such additional documents of termination
or release with respect to the Liens of the Senior Noteholders as the Agent may
reasonably request to effect any release of Collateral by the Agent pursuant to
Paragraph 3(a)(i) above.
(d) The Agent agrees to provide written notice to the Senior
Note Trustee (such notice to be provided in the same manner and substantially
contemporaneously with any notice provided to the Company) of any acceleration
of the Obligations under any of the Credit Agreement Loan Documents. The
Senior Note Trustee agrees that it will provide written notice to the Agent of
any acceleration of the Obligations under any of the Senior Note Loan
Documents by the Senior Note Trustee (such notice to be provided in the same
manner and substantially and contemporaneously with any notice provided to the
Company) of any acceleration of the Senior Note Obligations.
4. Application of Proceeds of Collateral. The proceeds of any
sale, disposition or other realization by the Agent or the Senior Note Trustee,
upon all or any part of the Collateral, including any proceeds from the
Lockboxes, insurance proceeds and condemnation awards or awards or payments
in lieu thereof, shall be applied in the following order of priorities:
first, to the payment or cash collateralization in full of all
Permitted Credit Agreement Obligations payable or outstanding under, and to be
applied in accordance with, the Credit Agreement Loan Documents, until all
Permitted Credit Agreement Obligations are paid or provided for in full;
second, to the payment in full of all Obligations payable or
outstanding under, and to be applied in accordance with, the Senior Notes and
Senior Note Loan Documents, until all such Obligations are paid or provided for
in full; and
finally, to pay to the Company or as a court of competent
jurisdiction may direct, any surplus then remaining from such proceeds;
provided, however, that any such proceeds which have been remitted to the Agent
from the Lockboxes shall be required to be applied to the priorities as
specified above only after receipt by the Agent from the Senior Note Trustee of
written notice of the occurrence of an Event of Default (as defined in the
Senior Note Indenture) and directing the Agent to so apply such proceeds under
this paragraph 4.
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5. Bankruptcy.
(a) This Agreement shall be applicable both
before and after the commencement, whether voluntary or involuntary, of any
case of the Company under the Bankruptcy Code, and all references herein to the
Company, shall be deemed to apply to such entity as debtor in possession and to
any trustee in bankruptcy for the estate of such entity.
(b) So long as any Permitted Credit Agreement
Obligation to the Agent or the Credit Agreement Lenders, or commitment to
extend any such Obligation, is outstanding, in any bankruptcy or similar
proceeding of the Company the Agent and the Credit Agreement Lenders shall have
the sole right to seek, and the Senior Note Trustee and the Senior Noteholders
shall not seek, in respect of any part of the Collateral or proceeds thereof or
any Lien which may exist thereon any adequate protection rights pursuant to
Section 361 of the Bankruptcy Code or otherwise, any relief from or
modification of the automatic stay as provided in section 362 of the Bankruptcy
Code or otherwise, the entry of any cash collateral order pursuant to Section
363 of the Bankruptcy Code or otherwise, any sale of all or any portion of the
Collateral pursuant to Section 363 of the Bankruptcy Code or otherwise, or the
entry of any financing order under Section 364 of the Bankruptcy Code or
otherwise, unless in each instance the Agent, upon the direction of the Credit
Agreement Lenders in accordance with the Credit Agreement, shall consent
thereto. The Senior Note Trustee and the Senior Noteholders shall not oppose
any such relief or modification sought by the Agent or the Credit Agreement
Lenders with respect to all or any portion of the Collateral.
(c) In the event the Agent or any of the Credit
Agreement Lenders is required under any bankruptcy or other law to return to
the Company, the estate in bankruptcy thereof, any third party or any trustee,
receiver or other representative of the Company, any payment or distribution of
assets, whether in cash, property or securities, including, without limitation,
any Collateral or any proceeds of the Collateral previously received by the
Agent or such Credit Agreement Lender on account of any Permitted Credit
Agreement Obligation (a "Recovered Distribution"), then to the extent permitted
by law, this Agreement and the subordination of the Liens of the Senior Note
Trustee or the Senior Noteholders in such Collateral or proceeds set forth
herein shall be reinstated on the terms set forth herein with respect to any
such Recovered Distribution to the extent that the claim of the Agent and the
Credit Agreement Lenders resulting from the return of such Recovered
Distribution is entitled to a priority under such bankruptcy or other law at
least equal to the general unsecured obligation of the Company existing prior
to the commencement of any such bankruptcy case or other proceeding.
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<PAGE> 9
6. No Marshalling/Subrogation/Access to
Premises/Refinancing
(a) So long as any Permitted Credit Agreement
Obligation, or commitment to extend any such Obligation, is outstanding, the
Senior Note Trustee and each of the Senior Noteholders, to the fullest extent
permitted by applicable law, waive, with respect to the Collateral, any
requirement regarding, and agree not to demand, request, plead or otherwise
claim the benefit of, any marshalling, appraisement, valuation or other similar
right that may otherwise be available under applicable law.
(b) Until all Permitted Credit Agreement
Obligations owed to the Agent and the Credit Agreement Lenders have been
finally and indefeasibly paid in full and the Commitments relating to such
Obligations terminated, the Senior Noteholders shall have no right to
subrogation with respect to the Collateral.
(c) The Senior Note Trustee and the Senior
Noteholders shall not deny the Agent access to any premises or equipment to
remove or inspect any Collateral or to complete the manufacture, sale, shipment
or collection of any Collateral, all to the extent permitted by the Credit
Agreement Loan Documents or applicable law; provided that the Credit Agreement
Lenders shall indemnify the Senior Note Trustee and the Senior Noteholders for
any damage to any premises or equipment constituting collateral under the
Senior Note Security Documents to the extent arising from the Agent's use
thereof, ordinary wear and tear excepted; provided further, that such permitted
access shall in no way deprive, adversely effect or limit the Senior Note
Trustee and the Senior Note Holders of, or delay or adversely effect their
exercise or enforcement of, any rights and remedies in respect of such
collateral provided under the Senior Note Security Documents.
(d) The Agent shall have the right to cause the
Senior Note Trustee to execute and deliver a replacement intercreditor
agreement ("Replacement Agreement") to this Agreement with any entity acting as
collateral agent ("Refinance Agent") for any lender or group of lenders that
refinance the Obligations outstanding under the Credit Agreement (a
"Refinancing"), provided (i) the Refinancing shall not violate the terms of
the Indenture, (ii) the Refinance Agent is to have a first priority security
interest in all or a portion of the Collateral as defined in this Agreement,
and the Replacement Agreement only covers such common collateral (the "Common
Collateral"), and (iii) the Senior Note Trustee shall have received at least 15
days prior notice of the Refinancing and shall have received at least 5 days
prior to executing the Replacement Agreement a copy of the Replacement
Agreement. Such Replacement Agreement shall be on the same terms and
conditions as this Agreement, provided in the Replacement Agreement all
references to the terms Agent, Credit Agreement, Credit Agreement Security
Agreement and Collateral shall be to the
-9-
<PAGE> 10
Agent, Credit Agreement, Credit Agreement Security Agreement and the Common
Collateral under the documentation to govern the Refinancing.
7. Limitation of Duties.
(a) Each of the Senior Noteholders and the Senior
Note Trustee agrees that the sole and exclusive duties owed by the Agent and
the Credit Agreement Lenders to the Senior Noteholders and the Senior Note
Trustee with respect to the Collateral shall be (i) to apply the proceeds of
any sale, disposition or other realization by the Agent upon the Collateral in
accordance with paragraph 4 hereof, (ii) to release the Agent's Liens in the
Collateral, at such time as all Permitted Credit Agreement Obligations to each
of the Credit Agreement Lenders and the Agent have been finally and
indefeasibly paid in full and the Commitments terminated, and (iii) those other
duties expressly provided for under this Agreement, including, without
limitation, in the proviso to Section 3(a)(i). The Senior Noteholders and the
Senior Note Trustee agree that no additional duties or obligations whatsoever
shall be deemed or implied to be owed by the Agent or Credit Agreement Lenders
to the Senior Noteholders or the Senior Note Trustee in connection with the
Collateral. Subject to all terms and provisions of this Agreement, the Agent
(on behalf of its and its affiliates who may hold Collateral from time to time)
acknowledges that it acts as a bailee and perfection agent for the Senior Note
Trustee for purposes of perfecting the security interest of the Senior Note
Trustee, and the Senior Note Trustee (on behalf of itself and its affiliates
who may hold Collateral from time to time) acknowledges it acts as a bailee and
perfection agent for the Agent for purposes of perfecting the security interest
of the Agent, with respect to any Collateral from time to time in their
respective possession or control (including, without limitation, any Collateral
consisting of cash held in a Lockbox account), provided that neither the Agent,
the Senior Note Trustee nor such affiliates shall have any duty or liability of
any kind or nature whatsoever to any party hereto arising from such
acknowledgment other than the duty to deliver (subject to applicable law or
court order) any remaining Collateral after the Permitted Credit Agreement
Obligations or the Obligations under the Senior Note Loan Documents, as
applicable, have been paid in full in accordance with the instructions of the
person for whom it acts as bailee pursuant to this sentence.
(b) The Senior Note Trustee and each Senior
Noteholder agree that neither the Agent nor the Credit Agreement Lenders shall
have any liability to the Senior Noteholders for, and each of the Senior
Noteholders hereby waives, any claim which such Senior Noteholder may have at
any time against the Agent or the Credit Agreement Lenders arising out of any
and all actions which the Agent or the Credit Agreement Lenders take or omit to
take, in a commercially reasonable manner and not otherwise in violation of
-10-
<PAGE> 11
the express provisions of this Agreement, with respect to (i) the Credit
Agreement or any other Credit Agreement Loan Document, (ii) collection of the
Obligations of the Company under the Credit Agreement Loan Documents and (iii)
foreclosure upon and sale, liquidation or other disposition, or valuation, use,
protection or release, of the Collateral; provided that if the Agent or the
Credit Agreement Lenders fail to give the Senior Note Trustee notice as
required to be given under Section 3 of this Agreement of any particular action
taken by the Agent or the Credit Agreement Lenders, then neither the Agent nor
the Credit Agreement Lenders shall assert as a defense or objection to any
action thereafter taken by the Senior Note Trustee relating to the action taken
by the Agent or the Credit Agreement Lenders which would have been described in
such notice had such notice been given, that such action by the Senior Note
Trustee was untimely or time barred as a result of a failure to give such
notice, but this provision shall be applicable if and only if the Senior Note
Trustee (x) did not receive notice or have knowledge from any other source or
(y) would have received notice except for the Senior Note Trustee's own
negligence or misconduct.
8. Notices. All notices given under this Agreement
shall be in writing and shall be given by personal service, by certified or
registered mail, postage prepaid, return receipt requested, or by overnight
courier, addressed to the parties at the following addresses:
If to the Company:
Anacomp, Inc.
1 Buckhead Plaza
3060 Peachtree Road, N.W., Suite 1700
Atlanta, Georgia 30305
Telecopy:
-----------------
Telephone: (404) 262-2663
If to the Agent:
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Steven B. Farley
Telecopy: (312) 732-3885
Telephone: (312) 732-5995
-11-
<PAGE> 12
If to the Senior Note Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust
Trustee Administration
Any notice received by either the Agent or the Senior Note Trustee shall be
promptly forwarded by such party to each of the Credit Agreement Lenders or the
Senior Noteholders, as the case may be.
9. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
10. Successors and Assigns; Governing Law. This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their respective successors and assigns. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the laws of the State of
Illinois applicable to contracts made and to be performed wholly within such
state and without regard to any choice or conflict of laws rules, except to the
extent that the laws of the jurisdictions where the Collateral is located
govern the validity and perfection of the Liens created by the Security
Documents and the enforcement of the remedies contained herein.
11. Amendments. None of the provisions of this Agreement
may be changed or terminated, orally or otherwise, except by written consent of
the Agent (acting in accordance with the Credit Agreement) and the Senior Note
Trustee (acting in accordance with the Indenture).
12. Miscellaneous. This Agreement is solely for the
purpose of defining the rights and priorities of the parties hereto and their
respective successors and assigns with respect to the Collateral, and no other
person, firm, entity or corporation shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement, nor shall this
Agreement affect the obligations of the Company to the Credit Agreement
Lenders, the Agent, the Senior Noteholders, or the Senior Note Trustee under
the Credit Agreement Loan Documents, the Senior Note Loan Documents or any
other agreement or instrument, which obligations shall remain absolute and
unconditional in all circumstances. This Agreement shall not inure to the
benefit of the Company or their respective successors and assigns. This
Agreement may be executed in
-12-
<PAGE> 13
counterparts each of which shall be an original, but all of which together
shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto caused this Agreement
to be duly executed on the day and year first above written.
Agent:
The First National Bank of Chicago,
as Agent
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Senior Note Trustee:
The Bank of New York,
as Trustee
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned consents to the terms
of this Agreement:
Anacomp, Inc.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
-13-
<PAGE> 1
EXHIBIT 5.1
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, N.Y. 10038
TELEPHONE (212) 504-6000
_______
[LETTERHEAD]
March 24, 1995
Anacomp, Inc.
11550 North Meridian Street
Post Office Box 40888
Indianapolis, Indiana 46240
RE: $225,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES
Ladies and Gentlemen:
We have acted as counsel for Anacomp, Inc. (The "Company") in connection
with the preparation of the Company's Registration Statement on Form S-3 (the
"Registration Statement"), which has been filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
for the registration under the Act of $225,000,000 principal amount of the
Company's Senior Secured Notes due 2002 (the "Notes"). The Notes are to be
issued under an Indenture (the "Senior Secured Note Indenture") between the
Company and The Bank of New York as trustee (the "Trustee"). The Company
intends to enter into an underwriting agreement (the "Underwriting Agreement")
with Salomon Brothers Inc and Smith Barney, Inc., as underwriters (the
"Underwriters").
We have examined and relied upon the originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records of the
Company and such other instruments and other certificates of public officials,
officers, and representatives of the Company, and such other persons, and we
have made such investigations of law, as we have deemed appropriate as a basis
for the opinions expressed below. In arriving at the opinions expressed below,
we have assumed and have not verified that the signatures on all documents that
we have examined are genuine. In addition, we have assumed that the Notes will
be
<PAGE> 2
(EXHIBIT 5.1 CONT)
Anacomp, Inc. -2- March 24, 1995
executed and delivered in substantially the form in which they are filed as
an exhibit to the Registration Statement.
We are members of the Bar of the State of New York and do not purport to
be an expert in, or express any opinion concerning, the laws of any jurisdiction
other than the laws of the State New York, the federal laws of the United
States and the General Company Law of the State of Delaware.
Based on the foregoing, we are of the opinion that:
The Notes will be legally issued and binding obligations of the Company
(except to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws affecting the enforcement of creditor's rights generally and by the effect
of general principles of equity, regardless of whether enforceability is
considered in a proceeding in equity or at law) when (i) the Registration
Statement, as finally amended, shall have become effective under the Act and
the Senior Secured Note Indenture shall have been qualified under the Trust
Indenture Act of 1939, as amended, and duly executed and delivered by the
Company and the Trustee; (ii) the Company's Board of Directors shall have duly
adopted final resolutions authorizing the issuance and sale of the Notes as
contemplated by the Registration Statement and the Senior Secured Note
Indenture; and (iii) the Notes shall have been duly executed and authenticated
as provided in the Senior Secured Note Indenture and such resolutions and shall
have been duly delivered to the purchasers thereof against payment of the
agreed consideration therefor.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration Statement,
without admitting that we are "experts" within the meaning of the Act or the
rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this exhibit.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
---------------------------------
Cadwalader, Wickersham & Taft
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, YEAR ENDED SEPTEMBER 30,
1994 1994 ----------------- --------------------------------------------------
PRO FORMA PRO FORMA 1994 1993 1994 1993 1992 1991 1990
---------------- ----------------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from
operations
before provision
for income
taxes:.......... $ 1,328 $14,662 $ 581 $ 3,001 $15,355 $20,491 $ 32,421 $ 30,805 $ 14,006
Add:
Portion of rents
representative of
interest
factor........... 1,855 6,457 1,855 1,670 6,457 6,437 6,275 4,780 5,628
Interest on
Indebtedness
(Including
amortization of
debt discount and
debt expense).... 17,202 67,867 17,949 17,086 67,174 68,960 71,947 79,655 84,483
-------- -------- ------- ------- ------- ------- -------- -------- --------
Earnings.......... $ 20,385 $88,986 $20,385 $21,757 $88,986 $95,888 $110,643 $115,240 $104,117
================ ================= ======== ======== ======== ======== ========= ========= =========
Fixed Charges:
Portion of rents
representative of
the interest
factor........... $ 1,855 $ 6,457 $ 1,855 $ 1,670 $ 6,457 $ 6,437 $ 6,275 $ 4,780 $ 5,628
Interest on
Indebtednesses
(Including
amortization of
debt discount and
debt expense).... 17,202 67,867 17,949 17,086 67,174 68,960 71,947 79,655 84,483
-------- -------- ------- ------- ------- ------- -------- -------- --------
Fixed Charges..... $ 19,057 $74,324 $19,804 $18,756 $73,631 $75,397 $ 78,222 $ 84,435 $ 90,111
================ ================= ======== ======== ======== ======== ========= ========= =========
Ratio of Earnings
to Fixed
Charges.......... 1.07x 1.20x 1.03x 1.16x 1.21x 1.27x 1.41x 1.36x 1.16x
================ ================= ======== ======== ======== ======== ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated December 7, 1994, in this Registration Statement, to the
incorporation by reference of our report included in this Registration Statement
into the Company's previously filed Registration Statement File No. 2-96027,
File No. 2-70438, File No. 2-75588, File No. 2-81024, File No. 2-96028, File No.
2-98182, File No. 33-3343, File No. 33-5375, File No. 33-16750, File No.
33-27223, File No. 33-31178, File No. 33-31645, File No. 2-58406, File No.
2-73543, File No. 2-96029, File No. 33-5374, File No. 33-5373, File No.
33-19723, File No. 33-22643, File No. 33-22644, File No. 33-28943, File No.
33-28944, File No. 33-38211, File No. 33-52951, File No. 33-53271, and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
March 24, 1995.
<PAGE> 1
Exhibit 25
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) |__|
____________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
</TABLE>
____________________
ANACOMP, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Indiana 35-1144230
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
11550 North Meridian Street
P.O. Box 40888
Indianapolis, Indiana 46240
(Address of principal executive offices) (Zip code)
</TABLE>
____________________
_ % Senior Secured Notes due 2002
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Name Address
--------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24
OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 13th day of March, 1995.
THE BANK OF NEW YORK
By: /s/ Lloyd A. McKenzie
---------------------------
Name: Lloyd A. McKenzie
Title: Assistant Vice President
-4-
<PAGE> 5
Exhibit 7
-----------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member
of the Federal Reserve System, at the close of
business September 30, 1994, published in accordance
with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal
Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................ $ 2,833,550
Interest-bearing balances .......... 701,828
Securities:
Held-to-maturity securities ........ 1,359,569
Available-for-sale securities ...... 1,725,600
Federal funds sold in domestic
offices of the bank ................ 5,350,368
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 24,252,467
LESS: Allowance for loan and
lease losses ..................... 629,631
LESS: Allocated transfer risk
reserve .......................... 30,661
Loans and leases, net of unearned
income, allowance, and reserve 23,592,175
Assets held in trading accounts ...... 1,354,396
Premises and fixed assets (including
capitalized leases) ................ 629,219
Other real estate owned .............. 51,372
Investments in unconsolidated
subsidiaries and associated
companies .......................... 178,742
Customers' liability to this bank on
acceptances outstanding ............ 996,184
Intangible assets .................... 76,599
Other assets ......................... 1,498,770
-----------
Total assets ......................... $40,348,372
===========
LIABILITIES
Deposits:
In domestic offices ................ $19,692,982
Noninterest-bearing ................ 8,179,472
Interest-bearing.................... 11,513,510
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 10,034,789
Noninterest-bearing ................ 57,902
Interest-bearing ................... 9,976,887
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 1,240,870
Securities sold under agreements
to repurchase .................... 37,612
Demand notes issued to the U.S.
Treasury ........................... 197,519
Trading liabilities .................. 975,739
Other borrowed money:
With original maturity of one year
or less .......................... 1,621,466
With original maturity of more than
one year ......................... 33,955
Bank's liability on acceptances exe-
cuted and outstanding .............. 997,024
Subordinated notes and debentures .... 1,062,320
Other liabilities .................... 1,450,981
-----------
Total liabilities .................... 37,345,257
===========
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,577,819
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 36,779)
Cumulative foreign currency transla-
tion adjustments .................. ( 5,875)
-----------
Total equity capital ................ 3,003,115
-----------
Total liabilities and equity
capital ........................... $40,348,372
===========
</TABLE>
I, Robert E. Keilman, 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.
Robert E. Keilman
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.
Thomas A. Renyi ]
J. Carter Bacot ] Directors
Alan R. Griffith ]
-----------------------------------------------------------
- 5 -
<PAGE> 1
EXECUTION COPY
Exhibit 99
DEALER MANAGER AGREEMENT
February 28, 1995
Salomon Brothers Inc
Smith Barney Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Anacomp, Inc., an Indiana corporation (the "Company"), plans
to make a tender offer (hereinafter called, together with any extensions,
supplements and amendments thereof or thereto, the "Offer") to purchase up to
$50 million fully accreted value of the Company's outstanding 15% Senior
Subordinated Notes due 2000 (the "15% Subordinated Notes") on the terms and
subject to the conditions to be set forth in an offer to purchase and amended
and restated consent solicitation statement (the "Offer to Purchase").
Simultaneously with the Offer, the Company will solicit (the "Solicitation")
the consents of the holders of the 15% Subordinated Notes to amend certain
provisions of the Indenture dated as of October 24, 1990, as amended by a First
Supplemental Indenture dated as of March 22, 1993 (the "Indenture"), between
the Company and State Street Bank and Trust Company, a Massachusetts banking
corporation, as Trustee. The Solicitation would permit, among other things,
the Company to issue up to $225 million of senior secured notes, establish a
revolving credit facility, apply certain of the net proceeds from such notes to
retire certain outstanding indebtedness of the Company and to make the Offer
(collectively, the "Refinancing").
The terms of the Offer shall require that tendered Notes be
accompanied by the consents referred to above. The Offer and the Solicitation
will be made on the terms and subject to the conditions set forth in the Offer
to Purchase and the related consent and letter of transmittal (the "Consent and
Letter of Transmittal").
<PAGE> 2
2
The following sets forth the agreement between the Company and
you as Dealer Managers.
1. Appointment as Dealer Managers. (a) The Company hereby
appoints you as Dealer Managers and authorizes you to act as such in connection
with the Offer. As Dealer Managers, you agree, in accordance with your
customary practice, to perform those services in connection with the Offer and
the Solicitation as are customarily performed by investment banking concerns in
connection with tender offers and consent solicitations of like nature,
including, but not limited to, the solicitation of tenders and consents
pursuant to the Offer and the Solicitation. The performance of such services
by you hereunder shall commence upon the mailing of the Offer to Purchase, the
Consent and Letter of Transmittal and related documents, including, without
limitation, the letter from the Dealer Managers to Dealers (as defined below),
banks, trust companies and other persons and the letter from Dealers, banks,
trust companies and other persons to their customers (such letters collectively
referred to as the "Cover Letters") to each holder of record of the 15%
Subordinated Notes (the date of the commencement of such distribution being
herein referred to as the "Commencement Date").
(b) The Company expressly acknowledges that all opinions and
advice (written or oral) given by the Dealer Managers to the Company in
connection with the Dealer Managers' engagement are intended solely for the
benefit and use of the Company (including its management, directors and
attorneys) in considering the transactions to which they relate and the Company
agrees that no such opinion or advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor shall any public references to the Dealer Managers be made
by the Company (or such persons), without the prior written consent of the
Dealer Managers, which consent shall not be unreasonably withheld.
2. No liability for Acts of Dealers, Banks and Trust
Companies. You shall have no liability (in tort, contract or otherwise) to the
Company or any other person for any act or omission on the part of any broker
or dealer in securities ("Dealer") (other than yourself) or any bank or trust
company or any other person. In soliciting or obtaining tenders and consents,
no Dealer, bank or trust company is to be deemed to be acting as your agent or
the agent of the Company, and you, as Dealer Managers, are not
<PAGE> 3
3
to be deemed the agent of the Company, any Dealer, bank or trust company or any
other person. The Company acknowledges and agrees that, in your capacity as
Dealer Managers, you shall act as an independent contractor, and any of your
duties arising out of your engagement pursuant to this Agreement shall be owed
solely to the Company.
3. The Tender Offer and Consent Solicitation Material. The
Company agrees to furnish you with as many copies as you may reasonably request
of the Offer to Purchase, the Consent and Letter of Transmittal, the Cover
Letters, any amendments or supplements thereto and any other offering documents
or materials filed or to be filed on behalf of the Company in connection with
the Offer or the Solicitation with any governmental or regulatory authorities,
agencies or instrumentalities and any related materials, including, without
limitation, the Registration Statement on Form S-3 (File No. 33-57391) and
related Prospectus filed under the Securities Act of 1933 (the "Securities
Act") and incorporated by reference in the Offer to Purchase (collectively, as
amended or supplemented from time to time, the "Tender Offer and Consent
Solicitation Material") to be used by the Company in connection with the Offer
or the Solicitation.
The Company agrees that any Tender Offer and Consent
Solicitation Material (whether preliminary or otherwise) shall be in form and
substance reasonably satisfactory to you.
Prior to and during the period of the Offer and the
Solicitation, the Company will inform you promptly after it receives notice or
becomes aware of the happening of any event, or the discovery of any fact,
which would require the making of any change in any Tender Offer and Consent
Solicitation Material or would affect the truth or completeness of any
representation or warranty contained in this Agreement. Any such change shall
be promptly made to such Tender Offer and Consent Solicitation Material,
subject to the foregoing paragraph.
4. Termination of Appointment. Either of the Dealer
Manager's appointment hereunder may be terminated by either the Company or such
Dealer Manager at any time, with or without cause, upon written advice to that
effect to the other party, without any liability or penalty whatsoever for such
termination and, in the case of either Dealer Manager, without loss of any
right to indemnification or contribution
<PAGE> 4
4
provided in Section 12 or right to the payment of all fees and expenses payable
hereunder which have accrued to the date of such termination. If either or
both of you terminate your appointment as a Dealer Manager pursuant to the
preceding sentence, the fees accrued and reimbursement for your expenses
through the date of such termination shall be paid to you promptly after such
date.
5. Compensation. The Company agrees to pay you as
compensation for your services as Dealer Managers an aggregate fee of $150,000
payable upon completion of the Refinancing.
6. Reimbursement of Fees and Expenses. In addition to your
compensation for your services as Dealer Managers, the Company agrees to pay,
regardless of whether or not the Offer is commenced, the Company acquires any
15% Subordinated Notes pursuant to the Offer or receives any consents pursuant
to the Solicitation or the Refinancing is completed, (i) all fees and expenses
relating to the preparation, filing, printing, mailing and publishing of all
Tender Offer and Consent Solicitation Material, (ii) all fees and expenses of
the Depositary (as defined in Section 7), (iii) all advertising charges in
connection with the Offer or the Solicitation, (iv) all customary mailing and
handling fees and expenses of Dealers, banks and trust companies in forwarding
the Tender Offer and Consent Solicitation Material to their customers and (v)
all other fees and expenses in connection with the Offer or the Solicitation.
The Company also agrees to promptly reimburse you, if any of the Offer, the
Solicitation or the Refinancing is terminated or not otherwise completed, up to
$500,000 for all reasonable fees and disbursements of your counsel and all your
reasonable travel and other reasonable out-of-pocket expenses incurred in
connection with or arising out of the Offer, the Solicitation or the
Refinancing; provided, however, that if the Offer, the Solicitation or the
Refinancing is so terminated or otherwise not completed because one of the
Dealer Managers terminated without cause their appointment hereunder, then such
amount shall not be payable to such Dealer Manager for such Dealer Manager's
expenses, but shall be payable to the other Dealer Manager for such other
Dealer Manager's expenses; provided, further, however, that such amount shall
not be payable to either Dealer Manager if both the Dealer Managers shall so
terminate without cause their appointment hereunder. In addition to the amount
payable to the Dealer Managers under Section 5, if the Refinancing is
consummated,
<PAGE> 5
5
the Company hereby agrees to promptly reimburse the Dealer Managers for all
reasonable fees and disbursements of the Dealer Managers' counsel and all the
Dealer Managers' reasonable travel and other reasonable out-of-pocket expenses
incurred in connection with or arising out of the Offer or the Solicitation.
7. Securityholder Lists; Depositary. The Company shall
provide you with copies of the Company's records showing the names and
addresses of, and principal amounts of 15% Subordinated Notes held by, the
holders of 15% Subordinated Notes for purposes of the Offer and the
Solicitation and will use its best efforts to cause you to be advised from day
to day during the period of the Offer and the Solicitation as to any transfers
of 15% Subordinated Notes.
The Company shall appoint The Bank of New York to serve as
depositary (the "Depositary") in connection with the Offer and the Solicitation
and to advise you daily as to such matters as you may reasonably request. Each
of the Dealer Managers agrees to use such information as is furnished pursuant
to this Section 7 only in connection with the Offer and the Solicitation.
8. Sufficient Funds. The Company represents and warrants to
you that it has or will have sufficient funds available, and has or will have
sufficient authority to use such funds under applicable law, to enable it to
pay in accordance with the terms of and subject to the conditions contained in
the Offer and the Solicitation and Sections 5 and 6, and the Company hereby
agrees to pay promptly the full purchase price and related costs for the 15%
Subordinated Notes for which it intends to make offers and will be required to
purchase pursuant to the Offer (as more fully described in the Offer to
Purchase), any consent fees to be paid to consenting holders of Notes as
described in the Offer to Purchase and the fees and expenses payable hereunder.
9. Representations, Warranties and Covenants of the Company.
The Company represents, warrants and covenants to you that:
(a) Each of the Company and its subsidiaries, whether
directly or indirectly owned, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
chartered or
<PAGE> 6
6
organized and is duly qualified to transact business and is in good standing in
each jurisdiction wherein it owns, leases or operates property or conducts
business, excluding such jurisdictions where the failure to so register,
qualify or be authorized does not have a material adverse effect on the
financial condition or business, properties, net worth or results of operations
of the Company and its subsidiaries taken as a whole.
(b) All necessary corporate and stockholder action has been
duly taken by the Company to authorize the Offer, the Solicitation, the
execution, delivery and performance of this Agreement and the Supplemental
Indenture, the purchase of 15% Subordinated Notes in connection with the Offer
and all other actions contemplated by this Agreement, and no other corporate or
stockholder proceedings are necessary to authorize any such actions. This
Agreement has been duly authorized, executed and delivered by the Company and
is a legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject, as to enforcement of legal
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time in effect
and, as to remedies of specific performance and injunctive and other forms of
equitable relief, to equitable defenses or principles and to the discretion of
the court before which any proceeding may therefor be brought.
(c) Each of the Offer, the Solicitation, the purchase of 15%
Subordinated Notes pursuant to the Offer, the obtaining of consents pursuant to
the Solicitation, the delivery of the Tender Offer and Consent Solicitation
Material and the execution, delivery and performance of, and the consummation
of the transactions contemplated by, this Agreement does comply and will comply
with all applicable requirements of law, including, without limitation, the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder, the various state securities or "blue sky"
laws and other applicable regulations of the Securities and Exchange Commission
or any other Federal, state, local or foreign governmental or regulatory
agency, authority or instrumentality, and no consent, authorization, approval,
order, exemption or other action of or filing with any such agency, authority
or instrumentality is required in connection with any of the Offer, the
Solicitation, the purchase of 15% Subordinated Notes pursuant to the Offer, the
obtaining of consents
<PAGE> 7
7
pursuant to the Solicitation, the delivery of the Tender Offer and Consent
Solicitation Material and the execution, delivery and performance of, and the
consummation of the transactions contemplated by, this Agreement.
(d) None of the Offer, the Solicitation, the purchase of 15%
Subordinated Notes pursuant to the Offer, the obtaining of consents pursuant to
the Solicitation or the execution, delivery and performance of, or the
consummation of the transactions contemplated by, this Agreement do or will
conflict with, result in a breach or violation of, or constitute a default
under, any law or the certificate of incorporation or the Bylaws of the Company
or any of its subsidiaries or the terms of any indenture, mortgage, note or
other agreement or instrument to which the Company or any such subsidiaries is
a party or bound or subject to or to which any of their respective properties
or assets is bound or subject to or any judgment, order or decree applicable to
the Company or any such subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction over
the Company or any such subsidiaries.
(e) No restraining order has been issued against the Company
or proceedings, litigation or investigation initiated or, to the best knowledge
of the Company after due inquiry, threatened against the Company (and no
development in any pending litigation against the Company has occurred) with
respect to any of the Offer, the Solicitation, the purchase of 15% Subordinated
Notes pursuant to the Offer, the obtaining of consents pursuant to the
Solicitation or the execution, delivery and performance of, or the consummation
of the transactions contemplated by, this Agreement.
(f) The Company is not, nor is it directly or indirectly
controlled by, or acting on behalf of any person which is, (i) an "investment
company" within the meaning of the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder or (ii) a "holding company" within the
meaning of, or subject to regulation under, the Public Utility Holding Company
Act of 1935 and the rules and regulations promulgated thereunder.
(g) In connection with each of the Offer and the
Solicitation, the Company has complied, and will comply, in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder, including, without
<PAGE> 8
8
limitation, Sections 10 and 14 of the Exchange Act and Rules 10b-5, 10b-6,
14e-1 and 14e-3 thereunder, and the Tender Offer and Consent Solicitation
Material do not contain and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(h) Each of the representations and warranties set forth in
Section 8 and clauses (a) through (g) of this Section 9 will be true and
complete on and as of the Commencement Date.
10. Opinions of Counsel. The Company agrees that it will
furnish to you on the Commencement Date the opinion of Cadwalader, Wickersham &
Taft, counsel to the Company, addressed to you and dated the Commencement Date,
as set forth in Schedule I.
11. Additional Covenants of the Company. The Company will
advise you promptly of (i) the occurrence of any event which could cause the
Company to withdraw or terminate the Offer or would permit the Company to
exercise any right not to purchase the 15% Subordinated Notes tendered pursuant
to the Offer, (ii) any proposal or requirement to amend or supplement any
Tender Offer and Consent Solicitation Material, (iii) any extension,
termination, completion or expiration of the Offer or the Solicitation and (iv)
any other information relating to the Offer or the Solicitation which you may
from time to time reasonably request.
12. Indemnification. The Company agrees to indemnify and
hold harmless each Dealer Manager, the directors, officers, employees and
agents of each Dealer Manager and each person who controls either Dealer
Manager within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several,
or other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action, and each such
indemnified party shall have no liability to the Company or its parents,
owners, creditors or security holders for any loss, claim, damage or liability
or other expense, (a) arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Tender Offer and
Consent Solicitation Material, or any
<PAGE> 9
9
omission or alleged omission to state in any Tender Offer and Consent
Solicitation Material a material fact necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading or (ii) any withdrawal or termination by the Company of, or failure
by the Company to make or consummate, either of the Offer or the Solicitation
according to its terms or (iii) any breach by the Company of any representation
or warranty or failure to comply with any of the agreements contained herein or
(b) otherwise arising out of, relating to or in connection with or alleged to
arise out of, relate to or be in connection with the proposed purchase by the
Company of any 15% Subordinated Notes or the Solicitation or your role in
connection with either thereof, whether the event allegedly giving rise to such
claim shall have occurred prior to the commencement of, during the period of,
or subsequent to the consummation of, the Offer or the Solicitation, and, in
each case, agrees to reimburse each such indemnified party, as incurred, for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable to the extent that any
such loss, claim, damage or liability arises out of or is based upon (1) in the
case of clause (a)(i), any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any Dealer
Manager specifically for inclusion therein or (2) in the case of clause (b),
that is finally judicially determined to have resulted primarily from your bad
faith or gross negligence. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 12, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under the first paragraph of this Section 12
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
<PAGE> 10
10
indemnification obligation provided in the first paragraph of this Section 12.
The indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ one
firm or separate counsel (plus local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel, if (i)
the use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of interest, (ii)
the actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded, based on advice of counsel, that there may be
legal defenses available to it or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding. No
indemnified party, without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld) will settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect to which indemnification or
contribution may be sought hereunder
<PAGE> 11
11
(whether or not such indemnifying party is an actual or potential party to such
claim or action) unless such indemnifying party fails, or such indemnified
party has reasonable grounds to believe such indemnifying party will fail, to
perform or comply with its obligations hereunder, provided that, if such
consent shall have been obtained or there is a final judgment against the
indemnified party in any such claim, action, suit or proceeding, such
indemnified party shall be entitled to indemnification or, if such
indemnification is judicially determined to be unavailable, contribution as
provided herein.
If the indemnity provided for in the foregoing paragraphs of
this Section 12 is judicially determined to be unavailable to an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then you and the Company, in lieu of the Company's
indemnifying such indemnified party, agree that the Company shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and by you
from the Offer and the Solicitation or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in the
foregoing clause (i), but also the relative fault of the Company and of you in
connection with the statements, actions or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations; provided, however, that in no event shall a Dealer
Manager's aggregate contribution to the amount paid or payable exceed the
aggregate amount of fees actually received by such Dealer Manager pursuant to
this Agreement. The relative benefits received by the Company on the one hand
and by you on the other shall be deemed to be in the same proportion as (i) the
maximum aggregate value of the consideration proposed to be paid by the Company
for the purchase of 15% Subordinated Notes pursuant to the Offer and for the
receipt of Consents pursuant to the Solicitation bears to (ii) the maximum
aggregate fee proposed to be paid to you pursuant to Section 5. The relative
fault of the Company on the one hand and of you on the other (i) in the case of
an untrue or alleged untrue statement of a material fact or an omission or
alleged omission to state a material fact, shall be determined by reference to,
among other things, whether such statement or omission relates to information
supplied by the
<PAGE> 12
12
Company or by you and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
and (ii) in the case of any other action or omission, shall be determined by
reference to, among other things, whether such action or omission was taken or
omitted to be taken by the Company or by you and the parties' relative intent,
knowledge, access to information and opportunity to prevent such action or
omission.
The Company and you agree that it would not be just and
equitable if contribution pursuant to this Section 12 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. For purposes of this Section 12, each person who controls
a Dealer Manager and each director, officer, employee and agent of a Dealer
Manager shall have the same rights to contribution as such Dealer Manager,
subject in each case to the applicable terms and conditions set forth above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph 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.
13. Ownership of Securities by Smith Barney Inc. The Company
hereby acknowledges that certain mutual funds, managed by Smith Barney Mutual
Funds Management Inc. and indirectly owned by The Travelers Inc., which also
indirectly owns Smith Barney Inc., own approximately 33% of the fully accreted
value of the outstanding 15% Subordinated Notes. The parties hereto hereby
agree that any solicitation of tenders and consents pursuant to the Offer and
the Solicitation from such mutual funds shall be conducted by Salomon Brothers
Inc as Dealer Manager.
14. Full Force and Effect. The indemnity and contribution
agreements contained in Section 12, the fee and expense reimbursement
agreements contained in Sections 5 and 6 and the representations, warranties
and covenants of the Company set forth in this Agreement shall remain operative
and in full force and effect regardless of (i) any failure to commence, or the
withdrawal, termination or consummation of, the Offer, the Solicitation or the
<PAGE> 13
13
Refinancing or the termination or assignment of this Agreement, (ii) any
investigation made by or on behalf of any indemnified party, (iii) any
termination of your appointment hereunder pursuant to Section 4 or otherwise
and (iv) the completion of your services hereunder.
15. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction).
16. Counterparts. This Agreement may be executed in any
number of separate counterparts, and all the said counterparts taken together
shall be deemed to constitute one and the same instrument.
17. Binding Effect. This Agreement, including any right to
indemnity or contribution hereunder, shall inure to the benefit of and be
binding upon the Company, you and the other indemnified parties, and each of
your and their respective successors and assigns. Nothing in this Agreement is
intended, or shall be construed, to give to any other person or entity any
right hereunder or by virtue hereof.
18. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. Entire Agreement. (a) This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and replaces in their entirety the engagement letter and related
indemnification letter, each dated January 23, 1995, between the Company and
you.
(b) Nothing in this Agreement shall alter, affect or modify
in any way any underwriting or other agreement to be entered between or among
the Company and the Dealer
<PAGE> 14
14
Managers in connection with Company's issuance of the senior secured notes
referred to above.
20. Notices. All notices and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, or by facsimile
transmission, subsequently confirmed in writing as aforesaid, it to the parties
hereto as follows:
(a) If to you:
Salomon Brothers Inc
Smith Barney Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, NY 10048
Attention: General Counsel
Fax: (212) 783-2274
Confirm: (212) 783-7000
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: John W. White, Esq.
Fax: (212) 474-3700
Confirm: (212) 474-1000
(b) If to the Company:
Anacomp, Inc.
One Buckhead Plaza
3060 Peachtree, N.W.
Suite 1700
Atlanta, GA 30305
Attention: George C. Gaskin
Fax: (404) 262-2667
Confirm: (404) 264-3884
with a copy to:
<PAGE> 15
15
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Michael Ryan, Esq.
Fax: (212) 504-6666
Confirm: (212) 504-6000
21. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 12, and
no other person will have any right or obligation hereunder.
Please indicate your willingness to act as Dealer Managers on
the terms set forth herein and your acceptance of the foregoing provisions by
signing in the space provided below for that purpose and returning to us a copy
of this Agreement, whereupon this Agreement and your acceptance shall
constitute a binding agreement among us.
Very truly yours,
ANACOMP, INC.
by
-------------------------------
Name:
Title:
Accepted as of the date
first set forth above:
SALOMON BROTHERS INC
SMITH BARNEY INC.
by SALOMON BROTHERS INC
-----------------------------------------------
Name:
Title:
<PAGE> 16
EXHIBIT 99
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, N.Y. 10038
TELEPHONE (212) 504-6000
_______
[LETTERHEAD]
February 28, 1995
To Each of the Dealer Managers named on the
Signature Pages of the Dealer Manager
Agreement referred to below:
Gentlemen:
We have acted as counsel to Anacomp, Inc., an Indiana corporation (the
"Company") in connection with the Offer to Purchase and Amended and Restated
Consent Solicitation Statement, dated February 28, 1995 (the "Offer to
Purchase") and the Dealer Manager Agreement (the "Agreement") dated as of
February 28, 1995 by and among the Company and both of you. This opinion is
rendered to you pursuant to Section 10 of the Agreement. All capitalized terms
not otherwise defined herein have the meanings ascribed to them in the
Agreement.
In our capacity as such counsel, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion.
We have also obtained, and have relied upon, to the extent we have
deemed necessary, and have assumed, without independent verification, the
accuracy of certificates of officers of the Company as to certain factual
matters (to the best of our knowledge such certificates are accurate) set
forth in the Agreement. In addition, we have obtained and relied upon such
certificates and assurances from public officials and other persons as we have
deemed necessary.
We are members of the Bar of the State of New York and do not purport to
be experts in, or express any opinion concerning, the laws of any jurisdiction
other than the laws of the State of New York, the federal laws of the United
States and the General Corporation Law of the State of Delaware.
We have assumed the due execution and delivery, pursuant to due
authorization, by the Dealer Managers of the Agreement:
<PAGE> 17
(EXHIBIT 99 CONT)
-3- February 28, 1995
On the basis of the foregoing, and subject to the qualifications
hereinafter set forth, we are of the opinion that:
(i) The Company is a corporation duly organized and validly existing
under the laws of the State of Indiana and is duly qualified to transact
business in each jurisdiction wherein it owns, leases or operates property or
conducts business, excluding such jurisdictions where the failure to so
register, qualify or be authorized does not have a material adverse effect on
the financial condition or business, properties, net worth or results of
operations of the Company and its subsidiaries taken as a whole.
(ii) All necessary corporate and shareholder action has been duly
taken by the Company to authorize each of the Offer, the Solicitation, the
execution, delivery and performance of the Agreement and the Amended and
Restated Indenture, the purchase of 15% Subordinated Notes in connection with
the Offer and all other actions contemplated by the Agreement, and no other
corporate or shareholder proceedings are necessary to authorize any such
actions. The Dealer Manager Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(iii) Each of the Offer, the Solicitation, the purchase of 15%
Subordinated Notes pursuant to the Offer, the obtaining of consents pursuant to
the Solicitation, the delivery of the Tender Offer and Consent Solicitation
Material and the execution, delivery and performance of, and the consummation
of the transactions contemplated by, the Dealer Manager Agreement does comply
and will comply, in all material respects, with the Exchange Act and the
rules and regulations promulgated thereunder and other applicable regulations
of the Securities and Exchange Commission and no consent, authorization,
approval, order, exemption or other action of or filing with any Federal, state
or local governmental or regulatory agency, authority or instrumentality is
required in connection with any of the Offer, the Solicitation, the purchase of
15% Subordinated Notes pursuant to the Offer, the obtaining of consents
pursuant to the Solicitation, the delivery of the Tender Offer and Consent
Solicitation Material and the execution, delivery and performance of, and the
consummation of the transactions contemplated by, the Dealer Manager Agreement.
(iv) None of the Offer, the Solicitation, the purchase of 15%
Subordinated Notes pursuant to the Offer, the obtaining of consents pursuant to
the Solicitation or the execution, delivery and performance of, or the
consummation of the transactions contemplated by, the Agreement does or will
conflict with, result in a breach or violation of, or constitute a default
under, the certificate of incorporation or the Bylaws of the Company or the
terms of any indenture, mortgage or note or, to the best of our knowledge, any
law or other agreement or instrument to which the Company is a party or bound
or subject to or to which any of the Company's properties or assets is bound by
or subject to or any judgment, order or decree applicable to the Company of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company.
(v) With respect to the discussion that appears under the heading
"Certain Federal Income Tax Consequences" in the Offer to Purchase, such
discussion does not purport to address all possible Federal Income Tax
ramifications of the Offer and the Consent Payments but, with respect to those
Federal income tax considerations which are discussed, the discussion is
accurate in all material respects.
(vi) To the best of our knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental agency, authority
or body or any
<PAGE> 18
(EXHIBIT 99 CONT)
-3- February 28, 1995
arbitrator involving the Company or any of its subsidiaries of a character
required to be disclosed in any Tender Offer and Consent Solicitation Material
which is not adequately disclosed therein, and there is no franchise, contract
or other document of a character required to be described in any Tender Offer
and Consent Solicitation Material which is not adequately disclosed therein.
(vii) To the best of our knowledge, no restraining order has been
issued or proceeding, litigation or investigation initiated or threatened
against the Company (and no development in any pending litigation against the
Company has occurred) with respect to any of the Offer, the Solicitation, the
purchase of 15% Subordinated Notes pursuant to the Offer, the obtaining of
consents pursuant to the Solicitation or the execution, delivery and
performance of, or the consummation of the transactions contemplated by, the
Agreement.
(viii) The Company is not, nor is it directly or indirectly controlled
by, or, to the best of our knowledge, acting on behalf of any person which is,
(a) an "investment company" within the meaning of the Investment Company Act of
1940 and the rules and regulations promulgated thereunder or (b) a "holding
company" within the meaning of, or subject to regulation under, the Public
Utility Holding Company Act of 1935 and the rules and regulations promulgated
thereunder.
Although we are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Tender Offer and Consent Solicitation Material, on the basis of the foregoing
(relying as to materiality to a large extent upon participation in conferences
with officers and other representatives of the Company, the Dealer Managers and
counsel for the Dealer Managers) nothing has come to our attention which causes
us to believe that the Tender Offer and Consent Solicitation Materials, as of
the date of this opinion, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that we have not been requested
to and do not express any comment with respect to the financial statements,
projections or schedules or other financial or statistical data contained, or
incorporated by reference, in any Tender Offer and Consent Solicitation
Material and that the Registration Statement incorporated by reference therein
is subject to completion and may be amended from time to time and that we
express no comment herein with respect to any such amendments).
Our opinions expressed herein, with respect to the enforceability of
any of the documents and actions to be taken by the Board of Directors
generally, are subject to the possible limitation of such enforceability by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally from time to time in effect and by
general principles of equity (regardless of whether enforcement is sought in
equity or at law) and to the discretion of the court before which any
proceeding may therefore be brought.
Our opinions expressed with respect to the indemnity and contribution
provisions contained in any of the documents are subject to the qualification
that such provisions may be limited by Federal or State securities laws or
public policy considerations.
<PAGE> 19
(EXHIBIT 99 CONT)
This opinion is being furnished only to you and your counsel and is
solely for your and their benefit and is not to be used, circulated, quoted,
relied upon or otherwise referred to for any purpose without our prior written
consent.
Very truly yours,
/s/ Cadwalader, Wickerham & Taft
--------------------------------
Cadwalader, Wickerham & Taft
