<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 18, 1998
ANACOMP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 1-8328 35-1144230
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
12365 CROSTHWAITE CIRCLE, POWAY, CALIFORNIA 92064
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (619) 679-9797
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 18, 1998, Anacomp, Inc., an Indiana corporation (the "Company"),
completed its acquisition (the "Acquisition") of assets constituting
substantially all of the business and operations (the "First Image
Businesses") of First Image Management Company ("First Image"), a division of
First Financial Management Corporation, a wholly-owned subsidiary of First
Data Corporation. The Acquisition was consummated pursuant to the Asset
Purchase Agreement, dated as of May 5, 1998, as amended (the "Asset Purchase
Agreement"), filed as an exhibit hereto. Anacomp assumed substantially all
of the ongoing liabilities of the First Image Businesses. The First Image
Businesses include (i) image access services, primarily Computer Output to
Microfilm ("COM") and Compact Disc ("CD") services (the "IAS Business"), (ii)
document print and distribution services such as laser print and mail and
demand publishing services (the "DPDS Business") and (iii) document
acquisition services such as outsourced health care and insurance claims
entry and data capture services (the "DAS Business").
The $150 million purchase price for the First Image Businesses was
determined by negotiations among the parties. The Company financed the
purchase price of the Acquisition through an offering (the "Offering") of
$135 million aggregate principal amount of 10 7/8% Series C Senior
Subordinated Notes due 2004 (the "Notes"), which were priced at 104%, and the
reminder was financed with available cash reserves. The Notes were initially
purchased by NatWest Capital Markets Limited in a private placement under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), and resold to "qualified institutional buyers" pursuant to Rule 144A
under the Securities Act. All of the net proceeds of the Offering were used
to finance the Acquisition.
The Company plans to continue operating the IAS Business. The IAS
Business provides a variety of imaging, archival and document management
services. These services, which are substantially the same as the Company's
COM service business, include the transfer of structured computer data, such
as reports, statements and invoices, onto various media.
For the year ended December 31, 1997, the revenues of the IAS Business
were $124.3 million, with 84% of those revenues coming from COM, the largest
segment of the IAS Business. Additional revenues come from laser print
services which are used to transform computer-generated output onto paper,
and a smaller portion of revenues were derived from transforming
computer-generated output onto relatively newer products, such as CDs.
Finally, the IAS Business provides equipment and supplies related to these
services, including microfiche readers, microfilm and chemicals.
The IAS Business operates 42 production centers geographically dispersed
throughout the United States and has over 750 employees. Like the Company,
the IAS Business has focused on maintaining strong client relationships, and
has an annual client retention rate of approximately 90%. The IAS Business
also utilizes innovative technology, such as on-line ordering and status
reporting, in its sales and marketing efforts.
The Company intends to sell the DAS Business and the DPDS Business
(collectively, the "Dispositions") before the end of its fiscal year,
September 30, 1998. In May 1998, the Company executed two letters of intent
with third parties confirming agreements in principle for those third parties
to purchase substantially all the assets and assume substantially all of the
liabilities of the DAS Business and the DPDS Business. The combined sales price
of the DAS Business and the DPDS Business under the letters of intent would be
$48.1 million. The sales price would be subject to downward adjustment of a
maximum of $2.4 million in the event that material adverse information about
the DAS Business and the DPDS Business is discovered during the course of the
third parties' ongoing due diligence. The letters of intent are subject to
satisfaction or waiver of certain conditions. The Company is currently in
negotiations with both third parties to complete mutually satisfactory
definitive agreements for each of the Dispositions. Until the DAS Business
and the DPDS Business are sold, the Company expects to operate the two
business units as usual without any disruption to clients or employees.
During the last five fiscal years, the Company has provided the
following services and products to First Image which will become subsumed
within the combined entity after the Acquisition. Since October 1993, the
Company has been the exclusive provider of field maintenance services for the
COM systems maintained in First Image's service centers, which resulted in
revenues of $7.3 million for the Company in fiscal 1997. For the period
September 1994 to September 1997, the Company was the exclusive provider of
the duplicate microfilm used in First Image's service centers, accounting for
$5.1 million of the Company's revenues in fiscal 1997. First Image had
purchased a portion of its COM original microfilm requirements from Anacomp
since September 1993, and such purchases were $2 million in fiscal 1997.
From time to time, First Image has purchased XFP 2000 COM systems both
directly from Anacomp and from Eastman Kodak Company ("Kodak") pursuant to
resales of systems purchased by Kodak from the Company pursuant to an
original equipment manufacturer agreement. The Company had direct sales of
XFP 2000 COM systems to First Image of $.3 million in fiscal 1997. First
Image purchased $.7 million of other micrographics related equipment and
supplies from the Company in fiscal 1997. In addition, in June 1994,
<PAGE>
the Company purchased from First Image its resale business that sold
micrographics equipment and supplies to end-users.
ITEM 5. OTHER.
The Company entered into a new $80 million senior secured revolving
credit facility pursuant to a Revolving Credit Agreement, dated as of June
15, 1998 (the "New Revolving Credit Facility"), by and among the Company, the
lending institutions named therein and BankBoston, N.A., as agent, to replace
the Company's previously existing $80 million senior secured term loan and
revolving credit facilities (the "Senior Debt Refinancing"). The New
Revolving Credit Facility is secured by substantially all of the assets of
the Company and contains financial covenants and other restrictions on the
Company. The Company believes that the New Revolving Credit Facility will
enable the Company to access working capital at more favorable interest rates
while providing greater cash management flexibility through both the
utilization of excess cash balances and the elimination of mandatory
repayments prior to maturity.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of business acquired.
Set forth below with respect to First Image are the following financial
statements as of and for the periods indicated:
(1) Report of Independent Auditors
(2) Balance Sheet as of December 31, 1997
(3) Statement of Income for the year ended December 31, 1997
(4) Statement of Division Equity for the year ended December 31, 1997
(5) Statement of Cash Flows for the year ended December 31, 1997
(6) Notes to Financial Statements
(7) Unaudited Balance Sheet as of March 31, 1998
(8) Unaudited Statements of Income for the three months ended
March 31, 1998 and 1997
(9) Unaudited Statements of Cash Flows for the three months ended
March 31, 1998 and 1997
(10) Unaudited Notes to Financial Statements
As of the date hereof, it is impracticable to provide financial
statements for First Image as of and for periods prior to those provided
below. The Company will file the additional required financial statements on
or before 60 days after the date hereof.
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
of First Data Corporation
We have audited the accompanying balance sheet of First Image Management
Company (the "Company"), a division of First Data Corporation, as of December
31, 1997 and the related statements of income, division equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Image Management
Company, a division of First Data Corporation, at December 31, 1997 and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Atlanta, Georgia
April 30, 1998
except for note 15,
as to which the date
is May 5, 1998
4
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
BALANCE SHEET
DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 388
Accounts receivable, net of allowance of $2,879................................. 47,635
Intercompany trade receivables.................................................. 521
Deferred tax assets............................................................. 3,921
Prepaid expenses and other current assets....................................... 10,827
Supplies inventory.............................................................. 5,128
---------
Total current assets.............................................................. 68,420
Property and equipment:
Land, buildings and improvements................................................ 3,787
Leasehold improvements.......................................................... 8,737
Equipment....................................................................... 78,171
Furniture and fixtures.......................................................... 7,960
---------
98,655
Accumulated depreciation........................................................ (69,286)
---------
29,369
Goodwill and other intangible assets less accumulated amortization of $50,920..... 165,683
Other assets...................................................................... 243
---------
Total assets...................................................................... $ 263,715
---------
---------
LIABILITIES AND DIVISION EQUITY
Liabilities:
Accounts payable................................................................ $ 5,331
Intercompany trade accounts payable............................................. 200
Accrued salaries and benefits................................................... 2,367
Other accrued liabilities....................................................... 14,001
Deferred revenue................................................................ 2,986
Notes payable and capital lease obligations--current............................ 429
---------
Total current liabilities......................................................... 25,314
Deferred tax liability............................................................ 1,865
Notes payable and capital lease obligations--long term............................ 806
Other liabilities................................................................. 426
Commitments and contingencies
Division equity................................................................... 235,304
---------
Total liabilities and division equity............................................. $ 263,715
---------
---------
</TABLE>
See accompanying notes.
5
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Revenue........................................................................... $ 221,983
Expenses:
Salaries and benefits........................................................... 85,870
Forms and supplies.............................................................. 25,285
Equipment and occupancy......................................................... 40,802
Other operating and administrative.............................................. 32,707
Depreciation and amortization................................................... 19,660
Provision for employee severance and office closure............................. 667
Overhead charges from First Data Corporation.................................... 2,220
---------
Total expenses.................................................................... 207,211
---------
Operating income.................................................................. 14,772
Gain on divestiture of product line............................................... 1,915
Interest expense.................................................................. (84)
---------
Income before income taxes........................................................ 16,603
Provision for income taxes........................................................ 8,345
---------
Net income........................................................................ $ 8,258
---------
---------
</TABLE>
See accompanying notes.
6
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
STATEMENT OF DIVISION EQUITY
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at January 1, 1997.......................................... $ 220,325
Capital contribution from First Data Corporation.................. 6,721
Net income........................................................ 8,258
---------
Balance at December 31, 1997........................................ $ 235,304
---------
---------
</TABLE>
See accompanying notes.
7
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income........................................................................ $ 8,258
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation.................................................................... 10,511
Amortization.................................................................... 9,149
Gain on divestiture of product line............................................. (1,915)
Deferred tax benefit............................................................ (1,523)
Changes in operating assets and liabilities:
Accounts receivable........................................................... (7,105)
Prepaid expenses, supplies inventory and other assets......................... (5,033)
Accrued salaries and benefits................................................. (636)
Accounts payable and other accrued liabilities................................ 6,959
Deferred revenue.............................................................. 2,939
Intercompany trade accounts................................................... 1,924
---------
Net cash provided by operating activities......................................... 23,528
INVESTING ACTIVITIES
Purchases of property and equipment............................................... (9,986)
Acquisitions...................................................................... (20,533)
Proceeds from divestiture of product line......................................... 2,086
Other............................................................................. (2,157)
---------
Net cash used in investing activities............................................. (30,590)
FINANCING ACTIVITIES
Capital contribution from First Data Corporation.................................. 6,721
Repayment of note payable......................................................... (401)
---------
Net cash provided by financing activities......................................... 6,320
---------
Decrease in cash and cash equivalents............................................. (742)
Cash and cash equivalents at beginning of year.................................... 1,130
---------
Cash and cash equivalents at end of year.......................................... $ 388
---------
---------
</TABLE>
See accompanying notes.
8
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
1. ORGANIZATION, BASIS OF ACCOUNTING AND DESCRIPTION OF BUSINESS
First Image Management Company ("First Image" or the "Company") operates in
a single business segment and is comprised of a group of document management
services business units which operate as a division of First Data Corporation
("First Data"). First Image was originally formed by First Financial Management
Corporation ("First Financial Management") through a series of acquisitions
which created a fully integrated document management services company. First
Image delivers a full range of services to a diverse client base, including:
document imaging on various media (microfiche, CD-ROM and laser disk); print and
mail services; demand publishing; health care and insurance claims entry; and
data capture. In October 1995, First Data, in a transaction accounted for under
the pooling of interests method, merged with First Financial Management. In
January 1998, First Data announced its intention to sell the Company. The
accompanying financial statements do not give any effect to any such possible
transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
SUPPLIES INVENTORY
Supplies inventory consists of paper, toner, developer and other disposable
chemicals, film, compact discs and micrographic chemicals, and packaging
material. Supplies are valued at the lower of cost or market with cost
determined using the first-in-first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation expense is
calculated over the estimated useful lives of the related assets (three to eight
years) using the straight-line method for financial reporting purposes.
Leasehold improvements are amortized over the term of the related lease.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets acquired and is being amortized
using the straight-line method over 40 years. At December 31, 1997, the Company
had goodwill of $127.6 million. Other intangible assets consist primarily of
acquired contract costs and, to a much lesser extent, non-compete agreements.
These costs are amortized on a straight-line basis over the length of the
agreement or benefit period, generally ranging from 7 to 15 years. Goodwill and
other intangible assets are reviewed for impairment whenever events indicate
that their carrying amount may not be recoverable. In such reviews, estimated
undiscounted future cash flows associated with these assets are compared with
their carrying value to determine if a write-down to fair value (normally
measured by discounting estimated future cash flows) is required.
9
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue from sales of products and services is recognized based upon
shipment of products or performance of services. Revenues from prepaid
maintenance contracts are deferred and recognized in earnings over the period
the service is provided. Postage related to mailing services is generally
reimbursed by customers, accordingly, revenue is presented net of postage
reimbursements.
INCOME TAXES
The Company accounts for income taxes under the liability method required by
Statement of Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR
INCOME TAXES, whereby deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting and tax purposes.
The taxable income of the Company is included in the U.S. federal income tax
return of First Data. For financial reporting purposes, the Company's provision
for income taxes has been determined as if the Company were a separate
tax-paying entity. Current income taxes payable are included in division equity.
EMPLOYEE STOCK OPTIONS
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123")
established accounting and reporting standards for stock based employee
compensation plans. As permitted by the standard, First Data and the Company
elected to continue to account for employee stock options under Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB
25"), and related interpretations. Accordingly, adoption of the standard has not
affected the Company's results of operations or financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. ACQUISITION AND DIVESTITURE
In January 1997, the Company acquired certain assets associated with the
"computer output to microfiche" business of the Eastman Kodak Company. This
transaction has been accounted for as a purchase business combination and the
results of the acquired operations have been included in the Company's results
since the acquisition date. The consideration paid for this acquisition, after
adjustment, amounted to $20.5 million of which $16.0 million, $2.4 million and
$2.1 million were allocated to acquired contracts costs, a non-compete agreement
and equipment, respectively. The amortization periods for the acquired contract
costs and non-compete agreement are 7 and 5 years, respectively. The pro forma
impact of this acquisition is not material to the Company's results of
operations.
10
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
3. ACQUISITION AND DIVESTITURE (CONTINUED)
In December 1997, the Company sold its Micropublishing product line for cash
proceeds of $2.1 million and recognized a $1.9 million gain. The terms of the
sale agreement provide for the Company to earn up to an additional $0.5 million
in proceeds if certain revenue targets are met.
4. RELATED PARTY TRANSACTIONS
The Company has various transactions with First Data and its affiliates.
These transactions can be generally classified into the following categories:
- trade activities--this involves the Company deriving revenues for
providing document management services to First Data affiliates and
incurring expenses from First Data affiliates for various services. The
following summarizes the Company's trade transactions with First Data and
affiliates:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Trade revenues............................................................. $ 12,058
Trade expenses............................................................. 26
</TABLE>
- allocation of general and administrative costs--this is a general
allocation of First Data corporate overhead based on 1% of the Company's
revenue. Functions provided by First Data corporate include administration
of employee benefit programs, internal audit, financial systems licensing
and processing, taxes and other support services. This allocation is not
necessarily indicative of the level of expenses that might have been
incurred had the Company contracted directly with third parties.
Management has not made a study or any attempt to obtain quotes from third
parties to determine what the cost of obtaining such services from third
parties would have been.
- direct charges--certain programs and activities are administered by First
Data on a company-wide basis. Examples are employee benefit plans, group
and other insurance programs and certain vendor agreements that are
negotiated by First Data on an enterprise wide basis. The costs of these
programs and activities are specifically identifiable to each
participating business unit and, for this reason, the costs are not
included in the table above.
Management believes that the overall amount of charges to and from First
Data are reasonable and that the accompanying financial statements reflect all
of the Company's costs of doing business.
First Data does not have any specific indebtedness related to the Company
and the accompanying financial statements do not reflect any allocations of
First Data interest expense. There are no formal financing arrangements with
First Data. However, cash not necessary for the Company's near term operating
requirements has been remitted to First Data which in turn has funded the
Company's operating, investing and financing activities as required.
Accordingly, apart from net income, the net change in the division equity
balance has been reflected as a financing activity in the accompanying statement
of cash flows. The average balance in division equity was $229.0 million for the
year ended December 31, 1997.
11
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets were comprised of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
<S> <C>
Prepaid postage....................................................... $ 7,164
Prepaid maintenance agreements........................................ 2,530
Other................................................................. 1,133
-------
$ 10,827
-------
-------
</TABLE>
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities were comprised of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
<S> <C>
Accrued maintenance contract costs.................................... $ 4,436
Accrued sales and other non-income taxes.............................. 4,961
Accrued inventory purchases........................................... 906
Other................................................................. 3,698
-------
$ 14,001
-------
-------
</TABLE>
7. NOTES PAYABLE
Notes payable are payable to various Kentucky governmental authorities and
bear interest at rates ranging from 2% to 7.89% and are due as follows:
1998--$281; 1999--$247; 2000--$129; 2001--$111; 2002 and thereafter--$69.
Certain of the Company's property and equipment are pledged as collateral
against these notes.
8. CONCENTRATION OF CREDIT RISK
The Company's customers, while concentrated in the United States, are spread
across diverse market sectors and range in size from small local to Fortune 500
companies. There were no single customers accounting for 5% or more of the
Company's revenues for the year ended December 31, 1997. The Company, through
two separate subcontracts with two separate companies, derives revenues from two
agencies of the U.S. government aggregating 6% of 1997 revenues. The Company's
accounts receivable are unsecured and the Company is at risk to the extent such
amounts become uncollectable. The Company establishes its allowance for doubtful
accounts based upon the credit risk of specific customers, historical trends and
other information.
12
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
9. OPERATING AND CAPITAL LEASES
The Company leases certain office equipment and office space under
noncancellable lease agreements. Future minimum lease payments under
noncancellable operating and capital leases, with initial lease terms of at
least one year at the time of inception, are as follows at December 31, 1997:
<TABLE>
<CAPTION>
CAPITAL OPERATING
--------- -------------
<S> <C> <C>
1998..................................................................................... $ 8,190 $ 170
1999..................................................................................... 7,031 104
2000..................................................................................... 4,184 79
2001..................................................................................... 2,812 63
2002..................................................................................... 1,706 36
Thereafter............................................................................... 712 --
--------- -----
Total minimum lease payments............................................................. $ 24,635 452
---------
---------
Less: amount representing interest....................................................... 54
-----
-----
Present value of minimum lease payments.................................................. $ 398
-----
-----
</TABLE>
Total rent expense for all operating leases was approximately $8.0 million
for the year ended December 31, 1997. The gross and net book values of assets
held under capital lease agreements were $686 and $398, respectively at December
31, 1997.
10. STOCK OPTION PLAN
The Company participates in a First Data plan that provides for the granting
of First Data stock options to key employees and other key individuals who
perform services for the Company. A total of 53.7 million shares of First Data
common stock have been reserved for issuance under First Data plans, of which
7.6 million shares remain available for future grant as of December 31, 1997.
The options have been issued at a price equivalent to First Data common stock's
fair market value at the date of grant, generally have ten year terms and
generally become exercisable in three or four equal annual increments beginning
12 months after the date of grant.
In October 1996, First Data instituted an employee stock purchase plan for
which a total of six million shares have been reserved for issuance, of which
4.8 million shares remain available for future grant as of December 31, 1997.
Monies accumulated through payroll deductions elected by eligible employees are
used to effect quarterly purchases of First Data common stock at a 15% discount
from the lower of the market price at the beginning or end of the quarter.
The Company has elected to follow APB 25 for First Data stock options
because, as discussed below, the alternative fair value accounting under SFAS
No. 123 requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise price of
the stock options equals the market price of the underlying First Data stock on
the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, assuming the Company has accounted for its First Data
employee stock options granted subsequent to
13
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
10. STOCK OPTION PLAN (CONTINUED)
December 31, 1994 under the fair value method of SFAS No. 123. The fair value
for options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Risk-free interest rate......................................................... 6.23%
Dividend yield.................................................................. 0.22%
Volatility of First Data common stock........................................... 18.9%
Expected option life............................................................ 5 years
Expected employee stock purchase right life..................................... 0.25 years
Weighted-average fair value of options granted.................................. $12
Weighted-average fair value of employee stock purchase rights................... $7
</TABLE>
The Company's pro forma net income after amortizing the fair value of the
options and the stock purchase rights over their vesting period is $7.6 million
for the year ended December 31, 1997. SFAS 123 is applicable only to options
granted subsequent to December 31, 1994, accordingly, its pro forma effect will
not be fully reflected until 1999.
Because the Company's First Data employee stock options have characteristics
significantly different from those of traded options for which the Black-Scholes
model was developed, and because changes in the subjective input assumptions can
materially affect the fair value estimate, the existing models, in management's
opinion, do not necessarily provide a reliable single measure of the fair value
of its First Data employee stock options.
A summary of First Data stock option activity for the Company's employees is
as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
----------- ---------------
<S> <C> <C>
Outstanding at beginning of period.................................... 295,592 $ 30
Granted............................................................... 147,560 38
Exercised............................................................. (28,547) 34
Canceled.............................................................. (92,657) 38
-----------
Outstanding at end of period.......................................... 321,948 $ 31
-----------
-----------
Exercisable........................................................... 73,991
-----------
-----------
</TABLE>
14
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
10. STOCK OPTION PLAN (CONTINUED)
The following summarizes information about stock options outstanding:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------- ----------- ------------------- ----------------- ----------- -----------------
<C> <C> <S> <C> <C> <C>
$ 3--$ 8 32,946 2.7 years $ 4 32,946 $ 4
$ 11--$28 38,096 7.3 years $ 22 19,870 $ 19
$ 31--$40 250,906 8.6 years $ 36 21,175 $ 37
----------- -----------
321,948 7.8 years $ 31 73,991 $ 18
----------- -----------
----------- -----------
</TABLE>
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------------
<S> <C>
Federal............................................................... $ 6,423
State and local....................................................... 1,922
------
Total................................................................. $ 8,345
------
------
</TABLE>
Deferred income taxes result from the recognition of temporary differences.
Temporary differences are differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will
result in differences between income for tax purposes and income for financial
statement purposes in future years.
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
---------------------
<S> <C>
Current................................................................ $ 9,868
Deferred............................................................... (1,523)
-------
Total.................................................................. $ 8,345
-------
-------
</TABLE>
15
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
11. INCOME TAXES (CONTINUED)
The Company's net deferred tax assets (liabilities) consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
<S> <C>
Deferred tax assets:
Accrued costs....................................................... $ 2,564
Accounts receivable allowance....................................... 1,357
-------
Total deferred tax assets............................................. 3,921
Valuation allowance................................................... --
-------
Net deferred tax assets......................................... 3,921
Deferred tax liabilities:
Depreciation and amortization....................................... (1,865)
-------
Total deferred tax liabilities........................................ (1,865)
-------
Net deferred tax assets............................................. $ 2,056
-------
-------
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------------
<S> <C>
Tax at U.S. statutory rate............................................ $ 5,811
Increases in taxes from:
State and local taxes............................................... 1,249
Non-deductible goodwill............................................. 1,267
Other non-deductible................................................ 76
Other............................................................... (58)
------
Total................................................................. $ 8,345
------
------
</TABLE>
12. RETIREMENT PLAN
First Data has an incentive savings plan which allows eligible employees of
First Data and its subsidiaries to contribute a percentage of their compensation
and provides for certain matching, service-related and other contributions. The
Company's matching and service-related contributions associated with the plan
were approximately $1.2 million for the year ended December 31, 1997.
13. CONTINGENCIES
The Company is involved in certain litigation arising in the ordinary course
of business. In the opinion of management, the ultimate resolution of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
16
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
14. YEAR 2000 REMEDIATION (UNAUDITED)
The Company is faced with "Year 2000" remediation issues. Many computer
programs were written with a two digit date field and if these programs are not
made Year 2000 compliant, they will be unable to correctly process date
information on or after the Year 2000. Remediation efforts go beyond the
Company's internal computer systems and require coordination with clients,
vendors, government entities and other third parties to assure that their
systems and related interfaces are compliant. Failure to achieve timely
remediation of the Company's computer systems that process client information
and transactions would have a material adverse effect on the Company's business,
operations and financial results.
In response to the Year 2000 concerns, First Data created a Year 2000 Task
Force to coordinate and monitor the progress in the Year 2000 remediation
efforts. The Task Force reports directly to First Data's executive management
and also provides regular reports to the Board of Directors. In addition, at the
direction of the Audit Committee of the Board of Directors, First Data engaged
the Gartner Group to provide an independent analysis and assessment of its Year
2000 remediation efforts. The Gartner Group provides regular progress reports to
executive management and the Board of Directors and regularly meets with the
Audit Committee of the Board to discuss its reports.
The Company's plans call for all mission critical systems to be renovated
and compliance testing underway by the end of 1998. Acceptance testing with
clients and other third parties will take place between late 1998 and mid 1999.
Completion of all third party interfacing testing is dependent upon those third
parties completing their own internal remediation. The Company could be
adversely affected to the extent third parties with which it interfaces have not
properly addressed their Year 2000 issues.
The Company anticipates expenditures for Year 2000 remediation efforts and
testing to approximate $1.5 million in 1998 and $500 in 1999.
15. SUBSEQUENT EVENT
On May 5, 1998 First Data and First Financial Management entered into an
asset purchase agreement (the "Agreement") with Anacomp, Inc. ("Anacomp").
Pursuant to the terms of the Agreement, Anacomp will purchase substantially all
of the Company's assets subject to certain liabilities for an initial purchase
price of $150 million. Such initial purchase price is subject to adjustment
based upon working capital delivered at closing. Closure of the transactions
contemplated in the Agreement is subject to certain regulatory approvals. The
accompanying financial statements do not give effect to any of the transactions
contemplated under the Agreement.
17
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 363
Accounts receivable, net of allowance of $1,949................................ 49,100
Intercompany trade receivables................................................. 565
Deferred tax assets............................................................ 3,532
Prepaid expenses and other current assets...................................... 8,899
Supplies inventory............................................................. 4,847
-----------
Total current assets....................................................... 67,306
Property and equipment:
Land, buildings and improvements............................................... 3,761
Leasehold improvements......................................................... 8,973
Equipment...................................................................... 72,207
Furniture and fixtures......................................................... 6,781
-----------
91,722
Less: Accumulated depreciation................................................. (63,119)
-----------
Net property and equipment................................................. 28,603
Goodwill and other intangible assets less accumulated amortization of $53,322.... 163,375
Other assets..................................................................... 96
-----------
Total assets............................................................... $ 259,380
-----------
-----------
LIABILITIES AND DIVISION EQUITY
Liabilities:
Accounts payable............................................................... $ 5,203
Intercompany trade accounts payable............................................ 1,054
Accrued salaries and benefits.................................................. 3,246
Other accrued liabilities...................................................... 14,574
Deferred revenue............................................................... 2,650
Notes payable and capital lease obligations--current........................... 376
-----------
Total current liabilities.................................................. 27,103
Deferred tax liability........................................................... 1,865
Notes payable and capital lease obligations--long term........................... 753
Other liabilities................................................................ 425
Commitments and contingencies....................................................
Division equity.................................................................. 229,234
-----------
Total liabilities and division equity...................................... $ 259,380
-----------
-----------
</TABLE>
See accompanying notes.
18
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
STATEMENTS OF INCOME
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenue..................................................................................... $ 56,881 $ 57,422
Expenses:
Salaries and benefits..................................................................... 20,611 21,301
Forms and supplies........................................................................ 5,987 6,386
Equipment and occupancy................................................................... 9,502 10,355
Other operating and administrative........................................................ 8,435 7,419
Depreciation and amortization............................................................. 5,140 4,767
Provision for employee severance and office closure....................................... -- 275
Overhead charges from First Data Corporation.............................................. 569 574
--------- ---------
Total expenses........................................................................ 50,244 51,077
--------- ---------
Operating income............................................................................ 6,637 6,345
Interest expense............................................................................ (19) (21)
Provision for income taxes.................................................................. (3,327) (3,178)
--------- ---------
Net income............................................................................ $ 3,291 $ 3,146
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
19
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
(A DIVISION OF FIRST DATA CORPORATION)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $ 3,291 $ 3,146
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation............................................................................ 2,738 2,570
Amortization............................................................................ 2,402 2,197
Deferred tax (benefit) provision........................................................ 389 (1,524)
Changes in operating assets and liabilities:
Accounts receivable................................................................... (1,465) (2,896)
Prepaid expenses, supplies inventory and other assets................................. 2,356 (1,373)
Accounts payable and accrued liabilities.............................................. 444 2,541
Accrued salaries and benefits......................................................... 879 67
Deferred revenue...................................................................... (336) 4,488
Intercompany trade accounts........................................................... 810 2,245
----------- ----------
Net cash provided by operating activities........................................... 11,508 11,461
INVESTING ACTIVITIES
Acquisitions.............................................................................. (94) (22,678)
Purchases of property and equipment....................................................... (1,972) (3,562)
----------- ----------
Net cash used in investing activities............................................... (2,066) (26,240)
FINANCING ACTIVITIES
Payment of long-term debt................................................................. (106) (264)
Capital contribution from (return of capital) to First Data Corporation................... (9,361) 14,262
----------- ----------
Net cash (used in) provided by financing activities................................. (9,467) 13,998
Decrease in cash and cash equivalents..................................................... (25) (781)
Cash and cash equivalents at beginning of period.......................................... 388 1,130
----------- ----------
Cash and cash equivalents at end of period................................................ $ 363 $ 349
----------- ----------
----------- ----------
</TABLE>
20
<PAGE>
FIRST IMAGE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying financial statements of First Image Management Company
("FIMC" or the "Company") should be read in conjunction with the Company's
financial statements for the year ended December 31, 1997. Significant
accounting policies disclosed therein have not changed.
The accompanying financial statements are unaudited; however, in the opinion
of management, they include all normal recurring adjustments necessary for a
fair presentation of the financial position of the Company at March 31, 1998 and
the results of its operations and cash flows for the three months ended March
31, 1998 and 1997. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
2. SUBSEQUENT EVENT
On May 5, 1998 First Data and First Financial Management entered into an
asset purchase agreement (the "Agreement") with Anacomp, Inc. ("Anacomp").
Pursuant to the terms of the Agreement, Anacomp will purchase substantially all
of the Company's assets subject to certain liabilities for an initial purchase
price of $150 million. Such initial purchase price is subject to adjustment
based upon working capital delivered at closing. Closure of the transactions
contemplated in the Agreement is subject to certain regulatory approvals. The
accompanying financial statements do not give effect to any of the transactions
contemplated under the Agreement.
(b) Pro forma financial information
21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Unaudited Pro Forma Consolidated Statement of Operations for the twelve
months ended September 30, 1997 for the Company and December 31, 1997 for First
Image and for the six months ended March 31, 1998 for both the Company and First
Image, and the Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1998 for both the Company and First Image have been prepared giving effect to
the Offering, the application of the net proceeds therefrom, the Prior
Refinancings (as defined), the Senior Debt Refinancing, the Acquisition, and the
Dispositions as if they had occurred at the beginning of the applicable
statement of operations periods and as of the balance sheet date.
In February 1997, the Company refinanced its existing 11 5/8% Senior Secured
Notes due 2002 with a senior secured term loan and revolving credit facility,
reducing its outstanding borrowings from $97.9 million to $55 million. In March
1997, the Company refinanced its existing 13% Senior Subordinated Notes due 2002
($160 million face value) with its 10 7/8% Senior Subordinated Notes due 2004,
Series B (the "Existing Notes") ($200 million face value). These two
refinancings are referred to collectively as the "Prior Refinancings."
The Unaudited Pro Forma Consolidated Financial Information does not purport
to be indicative of the results that would have been obtained had such
transactions in fact been completed as of the date and for the periods presented
or that may be obtained in the future.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 FOR THE COMPANY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 FOR FIRST IMAGE
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE ADJUSTMENTS
SENIOR DEBT FOR THE
HISTORICAL REFINANCING ACQUISITION
THE PRIOR HISTORICAL AND THE AND THE
COMPANY REFINANCINGS SUBTOTAL FIRST IMAGE OFFERING DISPOSITIONS PRO FORMA
---------- ------------ --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 462,510 $ 462,510 $ 221,983 $(97,636)(13)$571,453
(15,404)(14)
Operating costs and expenses:
Costs of sales and services...... 304,514 304,514 151,957 (73,187)(13) 367,880
(15,404)(14)
Selling, general and
administrative expenses........ 90,731 90,731 55,254 (19,660)(15) 120,922
10,666 (16)
(16,069)(13)
Amortization of reorganization
asset.......................... 75,780 75,780 75,780
---------- ------------ --------- ----------- ----------- ----------- ---------
Total operating costs and
expenses......................... 471,025 -- 471,025 207,211 -- (113,654) 564,582
---------- ------------ --------- ----------- ----------- ----------- ---------
Income (loss) from operations
before interest, other income,
income taxes and extraordinary
item............................. (8,515) -- (8,515) 14,772 -- 614 6,871
Interest income.................... 4,346 (475)(2) 3,871 (89)(8) (880)(17) 2,902
Interest expense and fee
amortization..................... (35,896) (176)(3) (31,645) (84) 5,498 (9) 82 (13) (42,277)
7,460 (4) (4,145)(10) 3,428 (18)
(4,700)(5) (1,452)(11)
24,003 (6) (13,959)(12)
(22,336)(7)
Other income (expense)............. (1,285) (1,285) 1,915 630
---------- ------------ --------- ----------- ----------- ----------- ---------
Income (loss) before taxes and
extraordinary item............... (41,350) 3,776 (37,574) 16,603 (14,147) 3,244 (31,874)
Provision (benefit) for income
taxes(1)......................... 15,500 1,586 17,086 8,345 (5,942) (9) 19,480
---------- ------------ --------- ----------- ----------- ----------- ---------
Income (loss) before extraordinary
item............................. (56,850) 2,190 (54,660) 8,258 (8,205) 3,253 (51,354)
---------- ------------ --------- ----------- ----------- ----------- ---------
---------- ------------ --------- ----------- ----------- ----------- ---------
Per share income (loss) before
extraordinary item............... $ (4.23) $ (3.82)(19)
---------- ---------
---------- ---------
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997 FOR THE COMPANY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 FOR FIRST IMAGE
(DOLLARS IN THOUSANDS)
(1) Assumes an effective tax rate of approximately 42% on all adjustments.
Adjustments for the Prior Refinancings
- --------------------------------------
(2) Reflects adjustment to interest income based on amount of cash outstanding
subsequent to the Prior Refinancings at an assumed interest rate of 5%.
(3) Represents adjustment to historical amortization of deferred debt costs as
if the senior secured term loan and revolving credit facilities had been in
place during the entire period.
(4) Represents elimination of historical interest expense related to the 11 5/8%
Senior Secured Notes due 2002 and the senior secured term loan and revolving
credit facility.
(5) Represents twelve months of interest expense related to the senior secured
term loan and revolving credit facility as if they had been outstanding for
the entire period (based on amount outstanding as of March 31, 1998 of
$54,021 and an interest rate of 8.7%).
(6) Reflects elimination of historical interest expense, fee amortization, and
debt discount amortization related to the Company's 13% Senior Subordinated
Notes due 2002 and the Existing Notes outstanding during the period.
(7) Reflects interest expense, fee amortization and debt discount amortization
on the Company's Existing Notes as if the Existing Notes had been
outstanding for the entire period.
Adjustments for the Senior Debt Refinancing and the Offering
- ------------------------------------------------------------
(8) Reflects downward adjustment of interest income (at an estimated interest
rate of 5%) based on actual cash on hand at March 31, 1998 as if the cash
amount had been on hand from the beginning of the period.
(9) Reflects elimination of pro forma amortization of deferred debt costs and
pro forma interest expense related to the senior secured term loan and
revolving credit facility (after consideration of the Prior Refinancings).
(10) Reflects twelve months of interest expense associated with the New
Revolving Credit Facility based on the pro forma amount outstanding as of
March 31, 1998 under the existing senior secured term loan and revolving
credit facilities of $55,271 (assuming an effective interest rate of 7.5%
under the New Revolving Credit Facility) before consideration of the
Dispositions.
(11) Reflects twelve months amortization of (i) $1,250 of debt issuance costs
associated with the New Revolving Credit Facility, amortizable over 60
months and (ii) $7,000 of debt issuance costs associated with the Notes,
amortizable over an assumed life of the Notes of 70 months.
(12) Reflects interest expense on $135,000 face amount of 10.875% Notes issued
at a 4% premium ($5,400) to yield a 9.9% effective interest rate after
consideration of the accretion of the premium.
Adjustments for the Acquisition and Dispositions
- ------------------------------------------------
(13) Reflects elimination of revenues, expenses and interest income for the
twelve months ended December 31, 1997 associated with the DPDS Business and
the DAS Business.
(14) Reflects elimination of equipment and supplies sales from the Company to
First Image.
(15) Reflects elimination of First Image historical depreciation and
amortization for the twelve months ended December 31, 1997.
(16) Reflects pro forma depreciation of property and equipment and amortization
of goodwill for the year ended September 30, 1997 resulting from the
allocation of the acquisition cost of First Image. Property and equipment
are being depreciated over five years and goodwill is being amortized over
ten years. For purposes of the pro forma financial statements, net book
value of First Image balance sheet items as of March 31, 1998 was assumed to
be fair market value. The purchase price allocation may change subject to a
detailed evaluation of the fair market values of the individual assets and
liabilities as of the Acquisition closing date and subject to a working
capital adjustment in the Asset Purchase Agreement.
(17) Reflects adjustment of interest income (at an estimated interest rate of
5%) based on expected utilization of $17.6 million of cash in connection
with the Acquisition.
(18) Reflects elimination of interest expense as a result of the application of
100% of the expected proceeds from the disposition of the DPDS Business
and the DAS Business to repay amounts outstanding under the New Revolving
Credit Facility. Management has a reasonable expectation that the
Dispositions will be consummated within one year of the Acquisition and,
in fact, has entered into letters of intent to sell both businesses.
(19) Pro forma income (loss) before extraordinary item excludes an approximate
$2.0 million extraordinary loss (excluding income tax benefit) expected
to be recorded in connection with the Senior Debt Refinancing related to
the write-off of unamortized debt issuance costs.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE ADJUSTMENTS
HISTORICAL SENIOR DEBT FOR THE
--------------------- REFINANCING ACQUISITION
THE AND THE AND THE
COMPANY FIRST IMAGE OFFERING DISPOSITIONS PRO FORMA
-------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues................................ $235,407 $111,464 -- $ (4,504)(7) $289,940
(52,427)(8)
Operating costs and expenses:
Costs of sales and services........... 156,093 72,837 -- (4,504)(7) 188,510
(35,916)(8)
Selling, general and administrative
expenses............................ 53,437 30,161 -- (10,213)(8) 68,868
(9,850)(9)
5,333 (10)
Amortization of reorganization
assets.............................. 37,490 -- -- -- 37,490
-------- ----------- ----------- ----------- ---------
Total operating costs and expenses...... 247,020 102,998 -- (55,150) 294,868
-------- ----------- ----------- ----------- ---------
Income (loss) from operations before
interest, other income, income taxes
and extraordinary item................ (11,613) 8,466 -- (1,781) (4,928)
Interest income......................... 1,339 (31) -- 53 (8) 921
(440)(11)
Interest expense and fee amortization... (15,878) -- 535 (2) 1,714 (12) (21,138)
2,270 (3)
(2,073)(4)
(726)(5)
(6,980)(6)
Other income (loss)..................... (571) 1,915 -- -- 1,344
-------- ----------- ----------- ----------- ---------
Income (loss) before taxes and
extraordinary item.................... (26,723) 10,350 (6,974) (454) (23,801)
Provision (benefit) for income
taxes(1).............................. 4,500 5,187 (2,929) (1,031) 5,727
-------- ----------- ----------- ----------- ---------
Income (loss) before extraordinary
item.................................. $(31,223) $ 5,163 $(4,045) $ 577 $(29,528)
-------- ----------- ----------- ----------- ---------
-------- ----------- ----------- ----------- ---------
Per share income (loss) before
extraordinary item.................... $ (2.26) $ (2.13)(13)
-------- ---------
-------- ---------
</TABLE>
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(1) Assumes an effective tax rate of approximately 42% on all adjustments.
Adjustments for the Senior Debt Refinancing and the Offering
- ------------------------------------------------------------
(2) Reflects elimination of amortization of debt issuance costs under the
existing senior secured term loan and revolving credit facilities.
(3) Reflects elimination of historical interest expense under the existing
senior secured term loan and revolving credit facilities.
(4) Reflects six months of interest expense associated with the New Revolving
Credit Facility based on the pro forma amount outstanding as of March 31,
1998 under the existing senior secured term loan and revolving credit
facilities of $55,271 (assuming an effective interest rate of 7.5% under the
New Revolving Credit Facility) before consideration of the Dispositions.
(5) Reflects six months amortization of (i) $1,250 of debt issuance costs
associated with the New Revolving Credit Facility, amortizable over 60
months and (ii) $7,000 of debt issuance costs associated with the Notes,
amortizable over an assumed life of the Notes of 70 months.
Adjustments for the Acquisition and Dispositions
- ------------------------------------------------
(6) Reflects interest expense on $135,000 face amount of 10.875% Notes issued at
a 4% premium ($5,400) to yield a 9.9% effective interest rate after
consideration of the accretion of the premium.
(7) Reflects elimination of equipment and supplies sales from the Company to
First Image.
(8) Reflects elimination of revenues, expenses and interest income for the six
months ended March 31, 1998 associated with the DPDS Business and the DAS
Business.
(9) Reflects elimination of First Image historical depreciation and amortization
for the six months ended March 31, 1998.
(10) Reflects pro forma depreciation of property and equipment and amortization
of goodwill for the six months ended March 31, 1998 resulting from the
allocation of the acquisition cost of First Image. Property and equipment
are being depreciated over five years and goodwill is being amortized over
ten years. For purposes of the pro forma financial statements, net book
value of First Image balance sheet items as of March 31, 1998 was assumed
to be fair market value. The purchase price allocation will change subject
to a detailed evaluation of the fair market values of the individual
assets and liabilities as of the Acquisition closing date and subject to a
working capital adjustment in the Asset Purchase Agreement.
(11) Reflects adjustment of interest income (at an estimated interest rate of
5%) based on expected utilization of $17.6 million of cash in connection
with the Acquisition.
(12) Reflects elimination of interest expenses as a result of the application of
100% of the expected proceeds from the disposition of the DPDS Business and
the DAS Business to repay amounts outstanding under the New Revolving
Credit Facility. Management has a reasonable expectation that the
Dispositions will be consummated within one year of the Acquisition and,
in fact, has entered into letters of intent to sell both businesses.
(13) Pro forma income (loss) before extraordinary item excludes an approximate
$2.0 million loss (excluding income tax benefit) expected to be recorded
in connection with the Senior Debt Refinancing related to the write-off of
unamortized deferred debt costs.
26
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE ADJUSTMENTS
HISTORICAL SENIOR DEBT FOR THE
---------------------- REFINANCING ACQUISITION
THE FIRST AND THE AND THE PENDING
COMPANY IMAGE OFFERING DISPOSITIONS DISPOSITIONS PRO FORMA
--------- ----------- ----------- ----------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 30,803 $ 363 $ 133,400 (1) $ (151,000)(4) $ 13,560
(6)(5)
Restricted cash....................... 4,052 (28,871)(5) 4,052
Accounts and Notes Receivable, net.... 66,835 49,665 (1,297)(6) 86,332
Current portion of long-term
receivables......................... 3,823 3,823
Inventories........................... 26,757 4,847 (1,147)(5) 30,457
Prepaid expenses and other............ 8,527 12,431 (6,368)(5)
(3,532)(7) 11,058
--------- ----------- ----------- ----------- ------------ ---------
Total current assets.................... 140,797 67,306 133,400 (192,221) 149,282
Property and equipment, net............. 33,002 28,603 (16,817)(5) 44,788
Long-term receivables, net of current
portion............................... 6,726 6,726
Excess of purchase price over net assets
of businesses acquired and other
intangibles, net...................... 24,791 163,375 86,808 (8) 107,882
(3,717)(5)
(163,375)(7)
Reorganization value in excess of
identifiable asset, net............... 123,955 123,955
Assets held for sale--DAS............... 20,900 (9) (20,900)(10)
Assets held for sale--DPDS.............. 24,800 (9) (24,800)(10)
Other assets............................ 14,548 96 7,000 (1) (15)(5) 20,843
(2,036)(2)
1,250 (3)
--------- ----------- ----------- ----------- ------------ ---------
Total Assets............................ $ 343,819 $259,380 $ 139,614 $ (243,637) $(45,700) $453,476
--------- ----------- ----------- ----------- ------------ ---------
--------- ----------- ----------- ----------- ------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..... $ 8,281 $ 376 $ (8,281)(3) $ (349)(5) $ 27
Accounts Payable...................... 30,649 5,203 (2,782)(5) 31,773
(1,297)(6)
Accrued compensation, benefits and
withholdings........................ 15,731 3,246 (1,662)(5) 17,315
Accrued income taxes.................. 14,310 (855)(2) 13,455
Accrued interest...................... 14,317 14,317
Other accrued liabilities............. 28,429 18,278 (5,560)(5) 41,147
--------- ----------- ----------- ----------- ------------ ---------
Total current liabilities............... 111,717 27,103 (9,136) (11,650) 118,034
--------- ----------- ----------- ----------- ------------ ---------
Non current liabilities:
Long-term debt, net of current
portion............................. 245,856 753 140,400 (1) (700)(5) (45,700)(10) 350,140
9,531 (3)
Other noncurrent liabilities.......... 941 2,290 (188)(5) 1,178
(1,865)(7)
--------- ----------- ----------- ----------- ------------ ---------
Total noncurrent liabilities............ 246,797 3,043 149,931 (2,753) (45,700) 351,318
--------- ----------- ----------- ----------- ------------ ---------
Total Liabilities....................... 358,514 30,146 140,795 (14,403) (45,700) 469,352
--------- ----------- ----------- ----------- ------------ ---------
Stockholders equity:
Common stock.......................... 140 140
Capital in excess of par value........ 107,454 107,454
Cumulative translation adjustment
(from 5/31/98)...................... (1,247) (1,247)
Stockholders' equity (deficit) (from
5/31/98)............................ (121,042) 229,234 (1,181)(2) (229,234)(7) (122,223)
--------- ----------- ----------- ----------- ------------ ---------
Total stockholders' equity (deficit).... (14,695) 229,234 (1,181) (229,234) (15,876)
--------- ----------- ----------- ----------- ------------ ---------
Total Liabilities and Stockholders'
Equity (deficit)...................... $ 343,819 $259,380 $ 139,614 $ (243,637) $(45,700) $453,476
--------- ----------- ----------- ----------- ------------ ---------
--------- ----------- ----------- ----------- ------------ ---------
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
Adjustments for the Senior Debt Refinancing and the Offering
- ------------------------------------------------------------
(1) Reflects the issuance of $135,000 face amount of 10.875% Notes issued at a
4% premium ($5,400). Net proceeds received from the Offering are expected to
be $133,400, net of expected debt issuance costs of $7,000.
(2) Reflects the write-off of $2,036 of deferred debt issue costs associated
with the Company's existing senior secured term loan and revolving credit
facilities, net of related tax benefit of $855.
(3) Reflects the closing of the Company's $80 million New Revolving Credit
Facility, replacing the Company's existing $80 million senior secured term
loan and revolving credit facilities. Estimated costs of the refinancing of
$1,250 are reflected as additional borrowings against the New Revolving
Credit Facility.
Adjustments for the Acquisition and Dispositions
- ------------------------------------------------
(4) Reflects the Acquisition for an assumed cash purchase price of $150 million
plus estimated acquisition-related costs of $1 million.
(5) Reflects elimination of assets and liabilities at their estimated fair
market value as of March 31, 1998 associated with the DPDS Business and the
DAS Business. For purposes of the pro forma financial statements, net book
value of the First Image balance sheet items as of March 31, 1998 was
assumed to be fair market value. The purchase price allocation will change
subject to a detailed evaluation of the fair market values of the individual
assets and liabilities as of the Acquisition closing date and subject to a
working capital adjustment in the Asset Purchase Agreement.
(6) Reflects elimination of a receivable/payable between Anacomp and First Image
of $1,297.
(7) Reflects elimination of the following amounts associated with the
application of purchase accounting in connection with the Acquisition:
- deferred tax assets ($3,532) and deferred tax liabilities ($1,865) of
First Image;
- goodwill and other intangible assets of First Image ($163,375); and
- division equity of First Image ($229,234).
(8) Reflects excess of the purchase price paid over estimated fair market value
of tangible assets acquired and liabilities assumed in connection with the
Acquisition.
(9) Reflects management's estimate of the proceeds from the disposition of the
DPDS Business and the DAS Business.
(10) Assumes 100% of the proceeds from the disposition of the DPDS Business and
the DAS Business is used to repay amounts outstanding under the New Senior
Credit Facility, in accordance with management's current intentions.
Management has a reasonable expectation that the Dispositions will be
consummated within one year of the Acquisition and, in fact, has entered
into letters of intent to sell both businesses.
28
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------------
<S> <C> <C>
2.1 -- Asset Purchase Agreement, dated as of May 5, 1998, among Anacomp,
Inc., First Financial Management Corporation and First Data
Corporation.
2.2 -- Amendment No. 1, dated as of June 18, 1998, to the Asset Purchase
Agreement, dated as of May 5, 1998, among Anacomp, Inc., First
Financial Management Corporation and First Data Corporation.
4.1 -- Indenture, dated as of June 18, 1998, between the Anacomp, Inc.,
as issuer, and IBJ Schroder Bank & Trust Company, as trustee, relating
the 10 7/8% Series C Senior Subordinated Notes due 2004 and the
10 7/8% Series D Senior Subordinated Notes due 2004 (containing, as
exhibits, specimens of such Series C Notes and Series D Notes).
4.2 -- Purchase Agreement, dated June 12, 1998, between Anacomp, Inc.
and NatWest Capital Markets Limited, relating the 10 7/8% Series C
Senior Subordinated Notes due 2004.
4.3 -- Exchange and Registration Rights Agreement, dated June 18, 1998
between Anacomp, Inc. and NatWest Capital Markets Limited, relating
the 10 7/8% Series C Senior Subordinated Notes due 2004 and the
10 7/8% Series D Senior Subordinated Notes due 2004.
4.4 -- First Supplemental Indenture, dated as of June 12, 1998, to the
Indenture, dated as of March 24, 1997, between Anacomp, Inc., as
issuer, and IBJ Schroder Bank & Trust Company, as trustee, relating
the 10 7/8% Senior Subordinated Notes due 2004, Series A and the
10 7/8% Senior Subordinated Notes due 2004, Series B (containing, as
exhibits, specimens of such Series A Notes and Series B Notes).
10.1 -- Revolving Credit Agreement, dated as of June 15, 1998, among
Anacomp, Inc., the various lending institutions named therein and
BankBoston, N.A. as agent.
23.1 -- Consent of Ernst & Young LLP
99.1 -- Press release of the Company, dated June 18, 1998.
</TABLE>
29
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the
Registrant by the undersigned thereunto duly authorized.
ANACOMP, INC.
By: /s/ DONALD L. VILES
------------------------------------
DONALD L. VILES
Executive Vice President and
Chief Financial Officer
Date: June 24, 1998
30
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------------
<S> <C> <C>
2.1 -- Asset Purchase Agreement, dated as of May 5, 1998, among Anacomp,
Inc., First Financial Management Corporation and First Data
Corporation.
2.2 -- Amendment No. 1, dated as of June 18, 1998, to the Asset Purchase
Agreement, dated as of May 5, 1998, among Anacomp, Inc., First
Financial Management Corporation and First Data Corporation.
4.1 -- Indenture, dated as of June 18, 1998, between the Anacomp, Inc.,
as issuer, and IBJ Schroder Bank & Trust Company, as trustee, relating
the 10 7/8% Series C Senior Subordinated Notes due 2004 and the
10 7/8% Series D Senior Subordinated Notes due 2004 (containing, as
exhibits, specimens of such Series C Notes and Series D Notes).
4.2 -- Purchase Agreement, dated June 12, 1998, between Anacomp, Inc.
and NatWest Capital Markets Limited, relating the 10 7/8% Series C
Senior Subordinated Notes due 2004.
4.3 -- Exchange and Registration Rights Agreement, dated June 18, 1998
between Anacomp, Inc. and NatWest Capital Markets Limited, relating
the 10 7/8% Series C Senior Subordinated Notes due 2004 and the
10 7/8% Series D Senior Subordinated Notes due 2004.
4.4 -- First Supplemental Indenture, dated as of June 12, 1998, to the
Indenture, dated as of March 24, 1997, between Anacomp, Inc., as
issuer, and IBJ Schroder Bank & Trust Company, as trustee, relating
the 10 7/8% Senior Subordinated Notes due 2004, Series A and the
10 7/8% Senior Subordinated Notes due 2004, Series B (containing, as
exhibits, specimens of such Series A Notes and Series B Notes).
10.1 -- Revolving Credit Agreement, dated as of June 15, 1998, among
Anacomp, Inc., the various lending institutions named therein and
BankBoston, N.A. as agent.
23.1 -- Consent of Ernst & Young LLP
99.1 -- Press release of the Company, dated June 18, 1998.
</TABLE>
<PAGE>
Exhibit 2.1
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
Dated as of May 5, 1998
Among
ANACOMP, INC.,
FIRST FINANCIAL MANAGEMENT CORPORATION
and
FIRST DATA CORPORATION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 11
2.4. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2. Adjustment to Purchase Price . . . . . . . . . . . . . . . . . . . 13
3.3. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
CLOSING
4.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Payment of Initial Amount on the Closing Date. . . . . . . . . . . 16
4.3. Buyer's Additional Closing Date Deliveries . . . . . . . . . . . . 16
4.4. Sellers' Closing Date Deliveries . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
5.1. Organization of Sellers. . . . . . . . . . . . . . . . . . . . . . 19
5.2. Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . 19
5.3. Authority of Sellers . . . . . . . . . . . . . . . . . . . . . . . 20
5.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 21
5.5. Operations Since Balance Sheet Date. . . . . . . . . . . . . . . . 22
5.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7. Availability of Assets and Legality of Use . . . . . . . . . . . . 24
5.8. Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . 24
5.9. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10. Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.11. Condition of Property . . . . . . . . . . . . . . . . . . . . . . 25
5.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . . . 26
5.15. Patents and Trademarks. . . . . . . . . . . . . . . . . . . . . . 26
5.16. Receivables; Inventories. . . . . . . . . . . . . . . . . . . . . 28
5.17. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . 29
5.18. Employees and Related Agreements; ERISA.. . . . . . . . . . . . . 29
5.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . 30
5.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . 31
5.22. No Violation, Litigation or Regulatory Action . . . . . . . . . . 31
5.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 32
5.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.25. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.26. Certain Agreements. . . . . . . . . . . . . . . . . . . . . . . . 34
5.27. Form Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.28. Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . 34
5.29. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.30. Book and Records of Subsidiaries. . . . . . . . . . . . . . . . . 35
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1. Organization of Buyer. . . . . . . . . . . . . . . . . . . . . . . 35
6.2. Authority of Buyer . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3. No Violation, Litigation or Regulatory Action. . . . . . . . . . . 36
6.4. No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.5. Financial Ability. . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
7.1. Investigation of Purchased Assets by Buyer . . . . . . . . . . . . 37
7.2. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3. Consents of Third Parties; Governmental Approvals; Closing . . . . 38
7.4. Operations Prior to the Closing Date . . . . . . . . . . . . . . . 38
7.5. Formation of LLC; Data Preparation, Inc. . . . . . . . . . . . . . 41
7.6. Antitrust Law Compliance . . . . . . . . . . . . . . . . . . . . . 41
7.7. Audited Financial Statements . . . . . . . . . . . . . . . . . . . 41
7.8. Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
ii
<PAGE>
ARTICLE VIII
ADDITIONAL AGREEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
8.1. Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3. Employees and Employee Benefit Plans . . . . . . . . . . . . . . . 47
8.4. Post-Closing Remittances . . . . . . . . . . . . . . . . . . . . . 49
8.5. Intercompany Obligations . . . . . . . . . . . . . . . . . . . . . 49
8.6. Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . . 50
8.7. Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.8. FDC Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
9.1. No Misrepresentation or Breach of Covenants and Warranties . . . . 52
9.2. No Material Adverse Effect.. . . . . . . . . . . . . . . . . . . . 52
9.3. No Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.4. Environmental Property Transfer Acts . . . . . . . . . . . . . . . 52
9.5. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.6. Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
10.1. No Misrepresentation or Breach of Covenants and Warranties. . . . 53
10.2. No Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.3. Closing Deliveries. . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Sellers. . . . . . . . . . . . . . . . . . . . 54
11.2. Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . 55
11.3. Notice of Claims. . . . . . . . . . . . . . . . . . . . . . . . . 56
11.4. Third Person Claims . . . . . . . . . . . . . . . . . . . . . . . 57
11.5. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
iii
<PAGE>
ARTICLE XII
TERMINATION
<TABLE>
<CAPTION>
<S> <C> <C>
12.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.2. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . 61
12.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Representations and Warranties. . . . . . . . . . . . 61
13.2. Confidential Nature of Information. . . . . . . . . . . . . . . . 62
13.3. No Public Announcement. . . . . . . . . . . . . . . . . . . . . . 62
13.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 64
13.6. Access to Records after Closing . . . . . . . . . . . . . . . . . 65
13.7. Entire Agreement; Amendments. . . . . . . . . . . . . . . . . . . 65
13.8. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.9. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.11. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . 66
13.12. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . 66
13.13. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 67
13.14. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 67
13.15. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 5, 1998, among Anacomp,
Inc., an Indiana corporation ("Buyer"), First Financial Management
Corporation, a Georgia corporation ("FFMC"), and First Data Corporation, a
Delaware corporation ("FDC" and, together with FFMC, the "Sellers").
RECITALS
WHEREAS, FFMC is, among other things, engaged through First Image
Management Company and the Subsidiaries (collectively, the "Division") in the
business of document management services; and
WHEREAS, FFMC desires to sell to Buyer, and Buyer desires to
purchase from FFMC, on a going concern basis, substantially all of the
assets, properties and business of the Division, and to assume substantially
all of the liabilities of the Division, all on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among FDC, FFMC and
Buyer as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from
time to time to the extent permitted by the applicable provisions thereof and
by this Agreement.
"ACS" means Appalachian Computer Services, Inc., a Kentucky
corporation, or a successor limited liability company which will be formed by
FFMC pursuant to Section 7.5.
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"Agreed Accounting Principles" means GAAP applied in a manner
consistent with the accounting principles applied in the preparation of the
Audited Balance Sheet as modified by the principles set forth in Schedule 1.1
hereto.
"Agreed Net Working Capital" has the meaning specified in Section
3.2(a).
<PAGE>
"Agreed Rate" means the prime rate published in the "Money Rates"
section of the Wall Street Journal, as that rate may vary from time to time.
"Allocation Schedule" has the meaning specified in Section 3.3.
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Assumption Agreement" means an Assumption Agreement in a form
reasonably satisfactory to the parties.
"Audited Balance Sheet" means the audited balance sheet of the
Division as of December 31, 1997 included in Schedule 5.4.
"Balance Sheet Date" means December 31, 1997.
"Business" has the meaning specified in Section 2.1.
"Buyer" has the meaning specified in the first paragraph of this
Agreement.
"Buyer Ancillary Agreements" means the Assumption Agreement and the
Transition Services Agreement.
"Buyer Group Member" means (i) Buyer and its Affiliates, (ii)
directors, officers, employees, agents, attorneys and consultants of Buyer
and its Affiliates and (iii) the successors and assigns of the foregoing.
"Buyer's Plans" has the meaning specified in Section 8.3(b).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder.
"Claim Notice" has the meaning specified in Section 11.3(a).
"Closing" means the closing of the transfer of the Purchased Assets
from FFMC to Buyer.
"Closing Balance Sheet" has the meaning specified in Section
3.2(c)(i).
"Closing Date" has the meaning specified in Section 4.1.
"Closing Net Working Capital" means the Net Working Capital of the
Division as of the close of business on the business day immediately
preceding the Closing Date, as determined in accordance with Section 3.2.
2
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated January 8, 1998, as amended, between Buyer and FDC, a copy of
which is attached hereto as Exhibit A.
"Contaminant" means any waste, pollutant, hazardous or toxic
substance or waste, petroleum, petroleum-based substance or waste to the
extent regulated by any Environmental Law.
"Court Order" means any judgment, order, award, writ, injunction or
decree of any foreign, federal, state, local or other court or tribunal and
any award in any arbitration proceeding.
"Dispute Notice" has the meaning specified in Section 3.2(c)(ii).
"Division" has the meaning specified in the first recital to this
Agreement.
"Division Real Property" means any real or personal property,
plant, building, facility, structure, equipment or unit, or other asset
owned, leased or operated by FFMC or any Subsidiary and used in the Business.
"Encumbrance" means any lien, claim, charge, option, security
interest, mortgage, pledge, easement, right of way, conditional sale or other
title retention agreement, defect in title, right of first refusal in favor
of any third party, preemptive right or other similar restrictions of any
kind.
"Environmental Encumbrance" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law or (ii)
damages arising from, or costs incurred by such Governmental Body in response
to, a Release or threatened Release of a Contaminant into the environment.
"Environmental Expense" means any Expense incurred in connection
with investigating, defending or remediating any Environmental Loss.
"Environmental Law" means all Requirements of Law derived from or
relating to all federal, state and local laws or regulations and all common
law theories relating to or addressing the environment, health or safety, or
the use, treatment, storage, disposal or transportation of Contaminants,
including but not limited to CERCLA, OSHA and RCRA and any state equivalent
thereof.
"Environmental Loss" means all Loss resulting from an Environmental
Matter.
3
<PAGE>
"Environmental Matters" means any matter relating to (i) the
Release or threatened Release of a Contaminant on, in, at, to, from or
beneath a facility or (ii) liabilities arising under applicable Environmental
Law.
"Environmental Property Transfer Acts" means any applicable
Requirements or Laws that for environmental reasons conditions, restricts,
prohibits or requires any notification or disclosure with respect to the
direct or indirect transfer, sale, lease or closure of any property.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Closing Net Working Capital" means the estimate of
Closing Net Working Capital contemplated by Section 3.2(b).
"Excluded Assets" has the meaning specified in Section 2.2.
"Excluded Taxes" has the meaning set forth in Section 8.2.1.
"Expenses" means any and all reasonable expenses incurred in
connection with investigating, defending or asserting any claim, action, suit
or proceeding incident to any matter indemnified against hereunder (including
court filing fees, court costs, arbitration fees or costs, witness fees, and
reasonable fees and disbursements of legal counsel, investigators, expert
witnesses, accountants and other professionals).
"FDC" has the meaning specified in the first paragraph of this
Agreement.
"FFMC" has the meaning specified in the first paragraph of this
Agreement.
"FIMC L.L.C." means FIMC L.L.C., a Delaware limited liability
company.
"GAAP" means United States generally accepted accounting
principles, consistently applied, in effect at the date of the financial
statement to which it refers.
"Governmental Body" means any domestic or foreign, federal, state,
local or other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in Section 5.8.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. "Independent Accountants" means the Atlanta
office of Price Waterhouse LLP.
"Initial Amount" has the meaning specified in Section 3.1.
4
<PAGE>
"Instrument of Assignment" means an Instrument of Assignment in a
form reasonably satisfactory to the parties.
"Intellectual Property Rights" shall mean all of the following used
primarily in the Business: (i) patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade
names, corporate names, and Internet domain names, together with all goodwill
associated with each of the foregoing; (iii) copyrights and copyrightable
works; (iv) registrations, applications and renewals for any of the
foregoing; (v) trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, manufacturing
and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial and accounting data, business and marketing plans, and
customer and supplier lists, and related information; and (vi) computer
software.
"Intercompany Trade Payables and Receivables" means the trade
payables and receivables between the Division and Affiliates of Sellers
arising in the ordinary course of business at market rates to the extent
reflected in the calculation of Closing Net Working Capital.
"Interim Balance Sheet" means the unaudited balance sheet of the
Division as of March 31, 1998 included in Schedule 5.4.
"IRS" means the Internal Revenue Service.
"knowledge of Sellers" means the actual knowledge, after reasonable
inquiry, of Walter E. Boehm, Jeffrey Holtz, Frank J. Laurent, Richard W.
Laurie, Mury Salls, Ciaran Storan and Gary J. Trainor. For purposes of
Section 5.23 only, "knowledge of Sellers" also means the actual knowledge of
Robert Gregory.
"LLCs" means FIMC L.L.C. and the successor limited liability
company of Appalachian Computer Services, Inc. contemplated by Section 7.5.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"Material Adverse Effect" means a material adverse effect on the
business, assets, results of operations or financial condition of the
Division, other than changes (a) relating to generally applicable economic
conditions or the Division's industry in general, (b) resulting from the
announcement by Sellers of their intention to sell the Division or (c)
resulting from the execution of this Agreement or the consummation of the
transactions contemplated hereby.
"Net Working Capital" means the difference between "Current Assets"
and "Current Liabilities" of the Division, with Current Assets consisting of
those categories reflected as such on the Working Capital Model (excluding
cash, bank deposits and cash equivalents), and
5
<PAGE>
with Current Liabilities consisting of those categories reflected as such on
the Working Capital Model, prepared in accordance with the Agreed Accounting
Principles and otherwise on a basis consistent with the Working Capital
Model.
"ordinary course" or "ordinary course of business" means, for any
Person, the ordinary course of business of such Person consistent with past
practices (including with respect to quantity and frequency).
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
Sections 651 et seq., any amendment thereto, any successor statute, and any
regulations promulgated thereunder.
"Owned Real Property" has the meaning specified in Section 5.9.
"Permitted Encumbrances" means (i) liens for current Taxes and
other governmental charges and assessments which are not yet due and payable,
(ii) liens of landlords and liens of carriers, workmen, mechanics and
materialmen and other like liens arising in the ordinary course of business
for sums not yet due and payable and (iii) other liens or imperfections on
property reflected on the title commitments contained in Schedule 5.9 (except
as otherwise set forth in Schedule 5.9).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Post-Closing Tax Periods" means (i) with respect to Taxes other
than Taxes imposed on the Subsidiaries or for which the Subsidiaries may
otherwise be liable, the period beginning immediately after the Closing Date
and (ii) with respect to Taxes imposed on the Subsidiaries or for which the
Subsidiaries may otherwise be liable, taxable years or periods beginning
after the Closing Date and, with respect to any Straddle Period, the portion
of such Straddle Period beginning immediately after the Closing Date (in all
cases determined in accordance with Section 8.2.1(c)).
"Pre-Closing Tax Periods" means (i) with respect to Taxes other
than Taxes imposed on the Subsidiaries or for which the Subsidiaries may
otherwise be liable, the period through and including the Closing Date and
(ii) with respect to Taxes imposed on the Subsidiaries or for which the
Subsidiaries may otherwise be liable, taxable years or periods ending on or
before the Closing Date and, with respect to any Straddle Period, the portion
of such Straddle Period ending on and including the Closing Date (in all
cases determined in accordance with Section 8.2.1(c)).
"Purchase Price" has the meaning specified in Section 3.1.
6
<PAGE>
"Purchased Assets" has the meaning specified in Section 2.1. For
purposes of the representations and warranties contained in Article V,
"Purchased Assets" shall include the assets of the Subsidiaries.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., and any successor statute, and any regulations
promulgated thereunder.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of
a Contaminant into the indoor or outdoor environment or into or out of any
Division Real Property.
"Remedial Action" means actions required under Environmental Laws
to (i) clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment, (ii) prevent the Release or threatened
Release or minimize the further Release of Contaminants or (iii) investigate
and determine if a remedial response is needed and to design such a response
and post-remedial investigation, monitoring, operation and maintenance and
care.
"Requirements of Law" means any domestic or foreign, federal, state
and local laws, statutes, regulations, rules, codes or ordinances enacted,
adopted, issued or promulgated by any Governmental Body.
"Restricted Activities" means: (i) the business of transforming
structured or unstructured electronic data or digital image onto microfiche
or microfilm, 5 1/4 inch, 12 inch or 14 inch optical disk or paper, (ii) the
preprocessing, printing, inserting, sorting, finishing and/or mailing of
written communications, via USPS or courier, on a customized or
project-by-project basis; (iii) the conversion of data stored on paper to an
electronic format by means of manually entering such data in a computer
system or by the scanning of such paper image and converting the scanned
image into electronic data for output to microfiche, microfilm or 5 1/4 inch,
12 inch or 14 inch optical disk; (iv) the scanning and/or indexing of paper
documents to microfiche or microfilm and the duplication thereof; (v) the
duplication of microfiche, microfilm or 5 1/4 inch, 12 inch or 14 inch
optical disk; (vi) the microfilming of paper documents and duplication
thereof; or (vii) the photographic film processing of exposed microfilm and
the duplication thereof.
"Sellers" has the meaning specified in the first paragraph of this
Agreement.
"Seller Agreements" has the meaning specified in Section 5.21.
"Seller Ancillary Agreements" means the Instrument of Assignment
and the Transition Services Agreement.
"Seller Group Member" means (i) FDC, FFMC and their respective
Affiliates, (ii) directors, officers, employees, agents, attorneys and
consultants of FDC, FFMC and their respective Affiliates and (iii) the
successors and assigns of the foregoing.
7
<PAGE>
"Seller Tax Group" means any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) or any analogous combined, consolidated or
unitary group defined under state, local or foreign income Tax law, in each
case that includes FDC and FFMC.
"Seller's Savings Plan" has the meaning specified in Section
8.3(d).
"Straddle Period" means any taxable year or period beginning before
and ending after the Closing Date.
"Subsidiaries" means ACS, Employee Benefit Plans, Inc. and FIMC
L.L.C.
"Tax" (and, with correlative meaning, "Taxes") means any federal,
state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value added, estimated, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed
by any Governmental Body, whether disputed or not.
"Tax Return" means any return, report or similar statement required
to be filed with respect to any Taxes (including any attached schedules) and
any amendment thereto, including, without limitation, any information return,
claim for refund, amended return and declaration of estimated Tax.
"Tax Sharing Arrangement" shall mean any written agreement
providing for the allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Tax Return which
Tax Return includes FFMC or any Subsidiary.
"Termination Date" has the meaning specified in Section 12.1(f).
"Third-Party Buyer" has the meaning specified in Section 13.5(a).
"Transferred Employees" has the meaning specified in Section
8.3(a).
"Transition Services Agreement" means a Transition Services
Agreement in a form reasonably satisfactory to the parties containing the
terms set forth in Exhibit B hereto.
"Vacation Schedule" has the meaning specified in Section 8.3(f).
"Warn Act" means the Worker Adjustment and Retraining Notification
Act of 1988.
"Working Capital Model" means the model used to determine the
Agreed Net Working Capital set forth in Schedule 1.1 hereto.
8
<PAGE>
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, FFMC shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase from FFMC, on a
going concern basis, free and clear of all Encumbrances (except for Permitted
Encumbrances), all of the business and operations of FFMC conducted by the
Division (such business and operations being herein called the "Business")
and all of the assets, properties and rights of FFMC of every kind and
description, wherever located, real, personal or mixed, tangible or
intangible, and, in each case, currently used or held for use to conduct the
Business as the same shall exist on the Closing Date (herein collectively
called the "Purchased Assets"), including, without limitation, all right,
title and interest of FFMC in, to and under:
(a) All of the assets reflected on the Interim Balance Sheet,
except for cash and for those assets disposed of or converted into
cash after the Interim Balance Sheet Date in the ordinary course of
business and in accordance with this Agreement;
(b) All notes and accounts receivable generated for the benefit
of the Division, together with all prepayments, prepaid expenses and
deposits relating to the Division to the extent reflected in Closing
Net Working Capital;
(c) All raw materials, supplies, samples, work-in-process,
finished goods, goods on consignment and other materials included in
the inventory of the Division;
(d) The Governmental Permits listed in Schedule 5.8;
(e) The Owned Real Property and options to acquire real property
listed in Schedule 5.9, together with all buildings, fixtures and
improvements, including construction-in-progress, located thereon,
together with all waterlines, rights of way, uses, license, easements,
hereditaments, tenements, and appurtenances located on such property
and owned by FFMC;
(f) The real estate leases listed or described in Schedule 5.10,
together with all right, title and interest of FFMC, if any, in the
buildings, office, warehouse or plant space, fixtures and improvements
thereon, including construction-in-progress, and appurtenances
thereto, located on such real property;
(g) The machinery, equipment, vehicles, furniture and other
personal property listed or referred to in Schedule 5.13;
9
<PAGE>
(h) The personal property leases listed in Schedule 5.14;
(i) The copyrights, trademarks, trade names and service marks
(and all goodwill associated therewith), registered or unregistered,
and the applications for registration thereof and the patents and
applications therefor and any of the foregoing listed in Schedule
5.15;
(j) The agreements listed in Schedule 5.18(A);
(k) The contracts, agreements or understandings listed or
described in Schedule 5.20 and all unfulfilled purchase and sale
orders of the Division;
(l) All of the issued and outstanding capital stock (or, in the
case of the LLCs, membership interests) of each of the Subsidiaries;
(m) All goodwill associated with the Business and the Purchased
Assets;
(n) All mailing lists, customer lists, subscriber lists,
processes, computer software, manuals or business procedures, trade
secrets, know how, drawings and other proprietary or confidential
information of FFMC primarily used in or primarily relating to the
Business, including related procedures, files and manuals and all
source and object codes and documentation related thereto;
(o) All rights, claims or causes of action against third parties
arising under warranties or defects of workmanship, manufacturing or
design from vendors and others in connection with the Purchased Assets
(other than those related to Excluded Assets or Excluded Liabilities);
and
(p) All books and records (including all data and other
information stored on discs, tapes or other media) of FFMC relating
primarily to the assets, properties, business and operations of the
Business and all books and records of the Subsidiaries.
2.2. Excluded Assets. Notwithstanding the provisions of Section 2.1,
the Purchased Assets shall not include the following (herein referred to as the
"Excluded Assets"):
(a) All cash, bank deposits and cash equivalents;
(b) The names "First Data Corporation," "FDC" or any related or
similar trade names, trademarks, service marks or logos to the extent
the same incorporate the name "First Data Corporation," "FDC" or any
variation thereof;
(c) The account receivable on the Interim Balance Sheet which is
collectible from ComTec;
10
<PAGE>
(d) All contracts of insurance;
(e) All corporate minute books and stock transfer books and the
corporate seal of Sellers other than those of the Subsidiaries;
(f) All refunds of any Tax for which Sellers are liable pursuant
to Section 8.2, except to the extent that Buyer is entitled to such
refund pursuant to Section 8.2;
(g) Sellers' employment and employee benefit plans or
arrangements listed in Schedule 5.18(A) or 5.18(B) or otherwise
maintained by Sellers on behalf of persons employed by FFMC;
(h) The capital stock of First Image Management Corporation;
(i) The right to the earn-out payment pursuant to the Asset
Purchase Agreement between FFMC and Bell & Howell Publications Systems
Co. dated December 15, 1997; and
(j) All assets, contracts and other arrangements listed on
Schedule 2.2(J).
2.3. Assumed Liabilities. On the Closing Date, Buyer shall deliver
to FFMC the Assumption Agreement, pursuant to which Buyer shall assume and agree
to discharge the following obligations and liabilities of FFMC in accordance
with their respective terms and subject to the respective conditions thereof:
(a) All liabilities reflected in the calculation of Closing Net
Working Capital;
(b) The long-term liabilities of FFMC reflected on the Interim
Balance Sheet as a dollar amount (including any interest thereon);
(c) Except as disclosed on Schedule 2.2(J), all liabilities and
obligations of FFMC to be paid or performed after the Closing Date
under (i) the Seller Agreements, (ii) the leases, contracts and other
agreements not required by the terms of Section 5.20 to be listed in a
Schedule to this Agreement and relating to the Business (but in each
case, only to the extent relating to the Business), (iii) the leases,
contracts and other agreements entered into by FFMC with respect to
the Business after the date hereof consistent with the terms of this
Agreement and (iv) unfulfilled purchase and sale orders of the
Division;
(d) Except for the lawsuits, arbitrations, claims, suits,
proceedings or investigations described in Schedule 5.22 (including
any update of such Schedule
11
<PAGE>
but excluding item 5 on such Schedule), all lawsuits, arbitrations, claims,
suits, proceedings or investigations arising out of or relating to the
Business;
(e) Except as provided in Section 11.1(a), all liabilities and
obligations related to, associated with or arising out of (i) the
occupancy, operation, use or control of any of the Division Real
Property on or prior to the Closing Date or (ii) the operation of the
Business on or prior to the Closing Date, in each case incurred under
or imposed by any Environmental Law, including without limitation any
Release or threatened Release of any Contaminant on, in, at, to,
beneath or from (A) the Division Real Property (including, without
limitation, all facilities, improvements, structures and equipment
thereon, surface water thereon or adjacent thereto and soil or
groundwater thereunder) or (B) any real property or facility owned by
a third Person to which Contaminants generated by the Business were
sent prior to the Closing Date;
(f) All liabilities in respect of Taxes for which Buyer is
liable pursuant to Section 8.2;
(g) The liabilities for which Buyer is liable pursuant to
Section 8.3; and
(h) Any liabilities or obligations with respect to any products
or services that were marketed or sold prior to the Closing.
All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder (excluding any Excluded Liabilities) are referred to herein as the
"Assumed Liabilities."
2.4. Excluded Liabilities. Buyer shall not assume or be obligated to
pay, perform or otherwise discharge any liability or obligation of Sellers,
direct or indirect, known or unknown, absolute or contingent, not expressly
assumed by Buyer pursuant to the Assumption Agreement (all such liabilities and
obligations not being assumed being herein called the "Excluded Liabilities")
and all Excluded Liabilities shall remain the obligations of Sellers.
Notwithstanding anything to the contrary in Section 2.3, Excluded Liabilities
shall include the following:
(i) any liabilities in respect of Taxes for which Sellers are
liable pursuant to Section 8.2;
(ii) any intercompany payables and other liabilities or
obligations of Sellers to any of their respective Affiliates (except
to the extent taken into account in the calculation of Closing Net
Working Capital);
(iii) any costs and expenses incurred by Sellers incident to
their negotiation and preparation of this Agreement and their
performance and compliance with the agreements and conditions
contained herein;
12
<PAGE>
(iv) any liabilities or obligations in respect of any Excluded
Assets;
(v) the liabilities for which Sellers are liable pursuant to
Section 8.3;
(vi) the lawsuits, arbitrations, claims, suits, proceedings or
investigations described in Schedule 5.22 (including any update of
such Schedule but excluding item 5 in such Schedule);
(vii) all liabilities or obligations of EBPLife Insurance
Company and EBP Re, Ltd. and all liabilities or obligations of
Employee Benefit Plans, Inc. that are not directly related to the
Business;
(viii) all liabilities and obligations of Data Preparation,
Inc. other than those specifically identified in a schedule to this
Agreement or taken into account in the calculation of Closing Net
Working Capital;
(ix) the earn-out or other contingent payment obligations of the
Division pursuant to the acquisition agreements identified in Schedule
5.5(B); and
(x) any indebtedness for borrowed money of FFMC or any
Subsidiary except to the extent reflected on the Interim Balance Sheet
(including any interest thereon).
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price. The purchase price for the Purchased Assets
(the "Purchase Price") shall be equal to $150,000,000 (the "Initial Amount") in
cash, subject to adjustment as provided in Section 3.2. The Initial Amount
shall be paid or caused to be paid by Buyer pursuant to Section 4.2 hereof.
3.2. Adjustment to Purchase Price.
(a) Adjustment Amount. The Purchase Price shall be adjusted upwards
or downwards in an amount equal to the difference between the Closing Net
Working Capital and the Agreed Net Working Capital. For the purposes of this
Agreement, the Agreed Net Working Capital is deemed to be $39,457,000 and is
determined pursuant to the Working Capital Model.
(b) Determination of Estimated Closing Net Working Capital. Within
ten calendar days after the Closing Date, Sellers shall deliver to Buyer a
certificate executed on behalf of Sellers by the President or any Vice President
of FFMC, dated the date of its delivery, setting forth Sellers' best good faith
estimate of the Estimated Closing Net Working Capital based upon the most recent
available financial statements and prepared in accordance with the Agreed
13
<PAGE>
Accounting Principles and otherwise on a basis consistent with the Working
Capital Model. If the Estimated Closing Net Working Capital is less than the
Agreed Net Working Capital, FFMC shall promptly pay such deficiency to Buyer by
wire transfer to one or more accounts designated by Buyer. If the Estimated
Closing Net Working Capital exceeds the Agreed Net Working Capital, Buyer shall
promptly pay such excess to FFMC by wire transfer to one or more bank accounts
designated by FFMC.
(c) Adjustment Procedure.
(i) Within sixty (60) calendar days after the Closing Date,
Sellers shall cause the Atlanta office of Ernst & Young LLP, on their
behalf, to prepare and deliver to Buyer an unaudited consolidated
balance sheet of the Division, dated as of the close of business on
the business day immediately preceding the Closing Date (the "Closing
Balance Sheet"), which shall include a calculation of the Closing Net
Working Capital and shall certify that the Closing Balance Sheet has
been prepared in accordance with the Agreed Accounting Principles and
otherwise on a basis consistent with the Working Capital Model.
(ii) If Buyer wishes to dispute the Closing Balance Sheet or the
calculation of the Closing Net Working Capital, Buyer shall deliver to
Sellers, within thirty (30) calendar days of receipt thereof, a notice
specifying in reasonable detail those items or amounts as to which
Buyer disagrees, the reason for such disagreement and the resulting
adjustments proposed by Buyer (the "Dispute Notice").
(d) Expert Determination. If a Dispute Notice is delivered pursuant
to Section 3.2(c)(ii), the parties shall use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine the Closing Net Working Capital. If the Buyer and Sellers cannot
reach agreement within ten (10) business days from the date of delivery of the
Dispute Notice, the disputed items and amounts shall be submitted to the
Independent Accountants in accordance with this Section 3.2(d). Upon a request
to refer a matter to the Independent Accountants, Buyer and Sellers shall use
their commercially reasonable efforts to agree on the procedures to be followed
by the Independent Accountants (including procedures with regard to presentation
of evidence) within ten days following such request. If Buyer and Sellers are
unable to agree upon procedures at the end of such ten-day period, the
Independent Accountants shall establish such procedures giving due regard to the
intention of Buyer and Sellers to resolve disputes as quickly, efficiently and
inexpensively as possible, which procedures may be, but need not be, those
proposed by either Buyer or Sellers. Each of Buyer and Sellers shall then
submit evidence in support of its position on each item in dispute as well as
the procedures to be followed by the Independent Accountants, and the
Independent Accountants shall decide the dispute in accordance therewith. In
reaching a decision on each item in dispute, the Independent Accountants shall
not be limited to the selection of either Buyer's or Sellers' position on each
such disputed item. The Independent Accountants shall deliver to Sellers and
Buyer, as promptly as practicable (but no later than thirty (30) days after
receipt of the disputed items), a written report
14
<PAGE>
setting forth their determination of the Closing Net Working Capital, which
determination shall be final, conclusive and binding upon the parties, and
shall not be subject to appeal to any court or tribunal. Each party will
bear its own expenses in connection with the Closing Balance Sheet, the
Dispute Notice, if any, and the submission to the Independent Accountants,
except that the Independent Accountants' fees and expenses will be allocated
to Buyer and Sellers proportionately based upon a comparison of the magnitude
of the average differential between any determinations made by the
Independent Accountants and the amounts submitted to the Independent
Accountants by each of Buyer and Sellers.
(e) Final Payment. Promptly (but not later than five days) after
the determination of the Closing Net Working Capital pursuant to this Section
3.2 that is final and binding as set forth herein:
(i) If the Closing Net Working Capital exceeds the Estimated
Closing Net Working Capital, Buyer shall pay to FFMC, by wire transfer
of immediately available funds to such bank account of FFMC as FFMC
shall designate in writing to Buyer, an amount equal to the excess of
the Closing Net Working Capital over the Estimated Closing Net Working
Capital, plus interest on such excess from the date of the payment of
Estimated Closing Net Working Capital to the date of payment pursuant
to this clause (e) at the Agreed Rate; or
(ii) If the Estimated Closing Net Working Capital exceeds the
Closing Net Working Capital, FFMC shall pay to Buyer, by wire transfer
of immediately available funds to such bank account of Buyer as Buyer
shall designate in writing to FFMC, an amount equal to the excess of
the Estimated Closing Net Working Capital over the Closing Net Working
Capital, plus interest on such excess from the date of the payment of
Estimated Closing Net Working Capital to the date of payment pursuant
to this clause (e) at the Agreed Rate.
(f) Access. Sellers, Ernst & Young LLP, the Independent Accountants
and their respective representatives will have reasonable access to the
personnel, books, records and accounts of the Division for any purposes related
to their preparation or review, as the case may be, of the Closing Balance Sheet
and the determination of the Closing Net Working Capital. In addition, each
party agrees to cause its representatives to make their workpapers and
supporting documentation available to the other.
3.3. Allocation of Purchase Price. Prior to March 15, 1999, Buyer
and FFMC shall agree upon a schedule (the "Allocation Schedule") allocating the
Purchase Price (including, for the purpose of this Section 3.3, any other
consideration paid to FFMC, including the Assumed Liabilities) among the
Purchased Assets (with any amount allocated to the membership interests of an
LLC further allocated among the assets of such LLC). Buyer and FFMC hereby
agree that, on the Allocation Schedule, $981,000 shall be allocated to the
purchase of all of the shares of Employee Benefit Plans, Inc. and $25 million
shall be allocated to the purchase of all the equity interests of ACS and, to
the extent not held in ACS, any contracts held for the benefit of ACS in
15
<PAGE>
the name of FFMC (such equity interests and such contracts, collectively the
"ACS Business"); provided, however, that if the ACS Business is sold by Buyer
prior to March 15, 1999 in a sale comparable to the sale of the ACS Business
set forth herein, the amount allocated to the purchase of the ACS Business
shall be the sale price in such subsequent sale by Buyer, subject to a
maximum allocation of $40 million and a minimum allocation of $20 million.
The Allocation Schedule shall be reasonable and shall be prepared in
accordance with Section 1060 of the Code, the regulations thereunder and the
preceding sentence. Promptly after agreeing to the Allocation Schedule, FFMC
and Buyer shall sign the Allocation Schedule and return an executed copy
thereof to Buyer and FFMC, respectively. Buyer and FFMC each agrees to file
IRS Form 8594, and all federal, state, local and foreign Tax Returns, in
accordance with the Allocation Schedule. Buyer and FFMC each agrees promptly
to provide the other with any other information required to complete IRS Form
8594.
ARTICLE IV
CLOSING
4.1. Closing Date. The Closing shall be consummated at 10:00
A.M., local time, on the third business day after satisfaction or waiver of
all of the conditions set forth in Articles IX and X have been satisfied or
waived (to the extent permitted), or such later date as may be agreed upon by
Buyer and FFMC at the offices of Sidley & Austin, One First National Plaza,
Chicago, Illinois or at such other place or at such other time as shall be
agreed upon by Buyer and FFMC. The "Closing Date" shall mean 12:01 a.m. on
the date on which the Closing is actually held.
4.2. Payment of Initial Amount on the Closing Date. Subject to
fulfillment or waiver of the conditions set forth in Article IX, at Closing
Buyer shall pay to or cause to be paid to FFMC the Initial Amount by wire
transfer of immediately available funds to the account specified in Schedule
4.2.
4.3. Buyer's Additional Closing Date Deliveries. Subject to
fulfillment or waiver of the conditions set forth in Article IX, at Closing
Buyer shall deliver to FFMC all of the following:
(a) A copy of Buyer's Certificate of Incorporation certified as
of a recent date by the Secretary of State of the State of Indiana;
(b) Certificate of existence of Buyer issued as of a recent date
by the Secretary of State of the State of Indiana;
(c) Certificate of the secretary or an assistant secretary of
Buyer, dated the Closing Date, in form and substance reasonably
satisfactory to FFMC, as to (i) no amendments to the Certificate of
Incorporation of Buyer since a specified date, (ii) the by-laws of
Buyer, (iii) the resolutions of the Board of Directors of Buyer
authorizing the execution and performance of this Agreement and the
16
<PAGE>
contemplated transactions and (iv) incumbency and signatures of the
officers of Buyer executing this Agreement and any Buyer Ancillary
Agreement;
(d) The Assumption Agreement duly executed by Buyer;
(e) The certificate contemplated by Section 10.1, duly executed
by the President or any Vice President of Buyer; and
(f) The Transition Services Agreement duly executed by Buyer.
4.4. Sellers' Closing Date Deliveries. Subject to fulfillment or
waiver of the conditions set forth in Article X, at Closing Seller shall deliver
to Buyer all of the following:
(a) A copy of the Restated Certificate of Incorporation of FDC
certified as of a recent date by the Secretary of State of the State
of Delaware;
(b) A copy of the Articles of Incorporation of FFMC certified as
of a recent date by the Secretary of State of the State of Georgia;
(c) A copy of the organizational document of each of the
Subsidiaries certified as of a recent date by the Secretary of State
of the jurisdiction in which the Subsidiary is organized;
(d) Certificates of good standing of FDC and FFMC issued as of a
recent date by the Secretary of State of the State of Delaware and the
Secretary of State of the State of Georgia, respectively;
(e) Certificate of good standing of each Subsidiary issued as of
a recent date by the jurisdiction in which the Subsidiary is
organized;
(f) Certificate of the secretary or an assistant secretary of
FDC, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) no amendments to the Restated
Certificate of Incorporation of FDC since the date of the certificate
specified in clause (a) above, (ii) the by-laws of FDC, (iii) the
resolutions of the Board of Directors of FDC authorizing the execution
and performance of this Agreement, any Seller Ancillary Agreement to
which FDC is a party and the transactions contemplated hereby and
thereby and (iv) incumbency and signatures of the officers of FDC
executing this Agreement and any Seller Ancillary Agreement to which
FDC is a party;
(g) Certificate of the secretary or an assistant secretary of
FFMC, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) no amendments to the Articles of
Incorporation of FFMC since the date of the certificate specified in
clause (b) above, (ii) the by-laws of FFMC, (iii) the
17
<PAGE>
resolutions of the Board of Directors of FFMC authorizing the execution and
performance of this Agreement, any Seller Ancillary Agreement to which FFMC
is a party and the transactions contemplated hereby and thereby and (iv)
incumbency and signatures of the officers of FFMC executing this Agreement
and any Seller Ancillary Agreement to which FFMC is a party;
(h) The Instrument of Assignment duly executed by FFMC;
(i) Certificates of title or origin (or like documents) with
respect to any vehicles or other equipment included in the Purchased
Assets for which a certificate of title or origin is required in order
to transfer title;
(j) All consents, waivers or approvals obtained by FFMC with
respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(k) The Transition Services Agreement duly executed by FDC;
(l) The certificates representing all of the shares of each of
the Subsidiaries (other than the LLCs), duly endorsed to in blank or
accompanied by duly executed in blank and witnessed stock powers;
(m) An instrument of assignment conveying all of the membership
interests in the LLCs to Buyer, duly executed by FFMC;
(n) The certificates contemplated by Sections 9.1 and 9.2, duly
executed by the President or any Vice President of FDC;
(o) A special warranty deed with respect to each of the parcels
of Owned Real Property which is owned by FFMC and which is being
transferred, duly executed by FFMC and in form and substance
reasonably satisfactory to Buyer;
(p) An assignment with respect to each of the leases of real
estate described in Schedule 5.11 which is being transferred, duly
executed by FFMC and in form and substance reasonably satisfactory to
Buyer;
(q) An assignment with respect to the trademarks being
transferred suitable for recording, duly executed by FFMC and in form
and substance reasonably satisfactory to Buyer;
(r) Title insurance policies insuring Buyer's interest in the
Owned Real Property consistent with the requirements of Schedule 5.9
and otherwise reasonably acceptable to Buyer; and
18
<PAGE>
(s) Such other bills of sale, assignments and other instruments
of transfer or conveyance as Buyer may reasonably request or as may be
otherwise necessary to evidence and effect the sale, assignment,
transfer, conveyance and delivery of the Purchased Assets to Buyer.
In addition to the above deliveries, FFMC shall take all steps and actions as
Buyer may reasonably request or as may otherwise be necessary to put Buyer in
actual possession or control of the Purchased Assets to the extent FFMC is in
possession or control thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Sellers jointly and severally
represent and warrant to Buyer and agree as follows:
5.1. Organization of Sellers. FDC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
FFMC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia. Each Seller is duly qualified to
transact business as a foreign corporation and is in good standing in each
jurisdiction where the nature of the business conducted by it or the properties
owned or leased by it requires qualification, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. FFMC
has the corporate power and authority to own or lease and to operate and use the
Purchased Assets and to carry on the Business as now conducted.
5.2. Subsidiaries and Investments. Except for the Subsidiaries and
except as set forth in Schedule 5.2, Sellers do not, directly or indirectly,
own, of record or beneficially, any outstanding voting securities or other
equity interests in any corporation, partnership, limited liability company,
joint venture or other entity which is involved directly or indirectly in or
relates to the Business. Each of the Subsidiaries (other than the LLCs) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation as set forth on
Schedule 5.2, with full corporate power to conduct its business as it is
presently being conducted and to own, lease and use its properties and assets.
FIMC L.L.C. is, and the limited liability company to be formed pursuant to
Section 7.5(a) will be, a limited liability company duly organized, validly
existing and in good standing under the laws of the state of Delaware with full
company power to conduct its business as it is presently being conducted and to
own, lease and use its properties and assets. Each of the Subsidiaries is duly
qualified to transact business and is in good standing in each jurisdiction
where the nature of the business conducted by it or the properties owned or
leased by it requires qualification, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect. Except as set
forth on Schedule 5.2, FFMC owns, directly or indirectly, all the outstanding
capital stock (or, in the case of the LLCs, membership interests) of each of the
Subsidiaries, free and clear of all Encumbrances, including, without limitation,
any agreement, understanding or restriction
19
<PAGE>
affecting the voting rights or other incidents of record or beneficial ownership
to such stock. All such capital stock (or, in the case of the LLCs, membership
interests) is duly authorized, validly issued and outstanding, fully paid and
nonassessable, and free of preemptive rights. Schedule 5.2 sets forth the
number of authorized, issued and outstanding shares of capital stock with
respect to each corporate Subsidiary and all membership interests in each
limited liability company Subsidiary. None of the Subsidiaries has any
commitment to issue or sell any shares of its capital stock (or, in the case of
the LLCs, membership interests) or any securities or obligations convertible
into or exchangeable for, or giving any Person any right to acquire from such
Subsidiary, any shares of its capital stock (or, in the case of the LLCs,
membership interests), and no such securities or obligations are outstanding.
No Subsidiary has outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote with the holders of capital stock on any
matter. Except as set forth in Schedule 5.2, Employee Benefit Plans, Inc. does
not own and, since November 1, 1995, has not owned more than 50% of the equity
interests in any Person. Except as set forth in Schedule 5.2, ACS does not own
and, since November 1, 1995, has not owned more than 50% of the equity interests
in any Person.
5.3. Authority of Sellers. Each of Sellers has the corporate power
and authority to execute, deliver and perform this Agreement and all of the
Seller Ancillary Agreements to which it is a party. The execution, delivery and
performance of this Agreement and the Seller Ancillary Agreements by Sellers
have been duly authorized and approved by each Seller's board of directors and
do not require any further authorization or consent of Sellers or their
respective stockholders. This Agreement has been duly authorized, executed and
delivered by Sellers and (assuming the valid authorization, execution and
delivery of this Agreement by Buyer) is the legal, valid and binding obligation
of Sellers enforceable in accordance with its terms, and each of the Seller
Ancillary Agreements has been duly authorized by FDC or FFMC, as the case may
be, and (assuming the valid authorization, execution and delivery thereof by
Buyer, where Buyer is a party, or the other party or parties thereto) upon
execution and delivery by FDC or FFMC, as the case may be, will be a legal,
valid and binding obligation of FDC or FFMC, as the case may be, enforceable in
accordance with its terms, in each case subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
Except as set forth in Schedule 5.3, neither the execution and
delivery of this Agreement or any of the Seller Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, violate, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or
imposition of any Encumbrance upon any of the Purchased Assets or the
Subsidiaries, under (1) the charter or By-laws of Sellers or similar
organizational documents of any Subsidiary, (2) any Seller Agreement,
(3) any other note, indenture, instrument, agreement, binding
commitment or undertaking,
20
<PAGE>
mortgage, lease, license, franchise, permit (including Governmental
Permits) or other authorization, right, restriction or obligation to which
Sellers or any Subsidiary is a party or any of the Purchased Assets is
subject or by which Sellers or any Subsidiary is bound, (4) any Court Order
to which Sellers or any Subsidiary is a party or any of the Purchased
Assets is subject or by which Sellers or any Subsidiary is bound or (5) any
Requirements of Laws affecting Sellers, any Subsidiary or the Purchased
Assets, other than, in the case of clauses (2) and (3), any such conflicts,
violations, breaches, defaults, rights, loss of rights or Encumbrances
that, individually or in the aggregate, would not have a Material Adverse
Effect or would not prevent the consummation of any of the transactions
contemplated hereby;
(ii) require the approval, consent, authorization or act of, or
the making or giving by Sellers or any Subsidiary of any declaration,
notice, filing or registration with or to, any Governmental Body,
except for (A) in connection, or in compliance, with the provisions of
the HSR Act and (B) such approvals, consents, authorizations,
declarations, notices, filings or registrations the failure of which
to be obtained or made would not prevent the consummation of any of
the transactions contemplated hereby; or
(iii) require the approval, consent, authorization or act of,
or the making or giving by Sellers or any Subsidiary of any
declaration, notice, filing or registration with or to, any Person
other than a Governmental Body, except for such approvals, consents,
authorizations, declarations, notices, filings or registrations the
failure of which to be obtained or made would not have a Material
Adverse Effect or would not prevent the consummation of any of the
transactions contemplated hereby.
5.4. Financial Statements. Schedule 5.4 contains the unaudited
consolidated balance sheets of the Division as of March 31, 1998, December
31, 1996 and December 31, 1995, the related consolidated and consolidating
statements of income for the periods ended December 31, 1996 and December 31,
1995 and the related consolidated statement of income for the period ended
March 31, 1998. Schedule 5.4 also contains the audited consolidated balance
sheet of the Division as of December 31, 1997 and the related consolidated
statements of income and cash flows for the period then ended. The financial
statements contained in Schedule 5.4 have been prepared from, and are in
accordance with, the books and records of the Division. Except as set forth
in the financial statements or in Schedule 5.4, such balance sheets and
statements of income have been prepared in conformity with GAAP consistently
applied (except that the unaudited financial statements set forth in Schedule
5.4 do not contain footnotes required by GAAP), and such balance sheets and
related statements of income present fairly in all material respects the
financial position and results of operations of the Division as of their
respective dates and for the periods covered thereby (except that the Interim
Balance Sheet and the related statement of income for the period then ended
are subject to normal year-end adjustments).
21
<PAGE>
5.5. Operations Since Balance Sheet Date. (a) Except as set
forth in Schedule 5.5(A), since the Balance Sheet Date, there have been no
changes in the Purchased Assets or the Business which have had a Material
Adverse Effect.
(b) Except as set forth in Schedule 5.5(B), since the Balance
Sheet Date, each of FFMC and the Subsidiaries has conducted the Business only
in the ordinary course. Without limiting the generality of the foregoing,
since the Balance Sheet Date, except as set forth in such Schedule, each of
FFMC and the Subsidiaries has not, in respect of the Business:
(i) made any material change in the Business or its operations,
except such changes as may be required to comply with any applicable
Requirements of Law;
(ii) made any capital expenditure or entered into any contract or
commitment therefor involving the payment by FFMC or any Subsidiary of
an amount in excess of $100,000 (except for the purchase of three
Kodak CD-ROM systems previously disclosed to Buyer);
(iii) entered into any contract for the purchase of real
property or for the sale of any Owned Real Property listed in
Schedule 5.10;
(iv) sold, leased (as lessor), transferred, assigned or otherwise
disposed of (including any transfers to any of Sellers' Affiliates),
or mortgaged or pledged, or imposed or suffered to be imposed any
Encumbrance on, the Purchased Assets or any of the assets reflected on
the Audited Balance Sheet or any assets acquired by FFMC or any
Subsidiary after the Balance Sheet Date, except for inventory and
minor amounts of personal property sold or otherwise disposed of in
the ordinary course of the Business and except for Permitted
Encumbrances;
(v) cancelled any debts owed to or claims held by it (including
the settlement of any claims or litigation) other than in the ordinary
course of the Business;
(vi) created, incurred, assumed, guaranteed or endorsed, or
agreed to create, incur, assume, guarantee or endorse, any
indebtedness for borrowed money (other than money borrowed or advances
from any of its Affiliates in the ordinary course of the Business) or
entered into, as lessee, any capitalized lease obligations (as defined
in Statement of Financial Accounting Standards No. 13);
(vii) accelerated or delayed collection of notes or accounts
receivable generated by the Business in advance of or beyond their
regular due dates or the dates when the same would have been collected
in the ordinary course of the Business;
22
<PAGE>
(viii) delayed or accelerated payment of any account payable
or other liability of the Business beyond or in advance of its due
date or the date when such liability would have been paid in the
ordinary course of the Business;
(ix) made, or agreed to make, any distribution of assets to any
of its Affiliates (other than cash realized upon collection of
receivables in the ordinary course of the Business);
(x) instituted any material increase in any compensation payable
to any employee of FFMC or any Subsidiary with respect to the Business
(whose annual compensation at the Balance Sheet Date was in excess of
$50,000) or in any profit-sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement, medical, hospital,
disability, welfare or other benefits made available to current or
former employees of FFMC or any Subsidiary with respect to the
Business;
(xi) made or authorized any change in the organizational
documents of FFMC or any Subsidiary;
(xii) merged any Subsidiary with or into or consolidated any
Subsidiary with any other Person or in any way reclassified any shares
of the capital stock of any Subsidiary;
(xiii) made any material change in the amount or scope of
coverage of insurance currently carried;
(xiv) made any change in the accounting policies applied in
the preparation of the financial statements contained in Schedule 5.4;
(xv) hired any employee whose salary is in excess of $50,000 or
entered into a contract with any consultant which requires an annual
payment by the Division in excess of $50,000;
(xvi) delayed or postponed inventory purchases, repair and
maintenance of real or personal properties, other than delays or
postponements in the ordinary course of business that do not adversely
impair the services provided to customers; or
(xvii) agreed or committed to do any of the foregoing.
5.6. Taxes. Except as set forth in Schedule 5.6, in respect of the
Business and Purchased Assets (i) each of the Subsidiaries and FFMC has filed
or been included in all material Tax Returns required to be filed by it or on
its behalf on or before the date hereof; (ii) all Taxes shown to be due on
the Tax Returns referred to in clause (i), and all other material Taxes due
in respect of periods to which such Tax Returns relate, have been paid or
reflected (in accordance
23
<PAGE>
with GAAP) as a liability or reserve on the Balance Sheet; (iii) neither the
Subsidiaries nor FFMC has waived in writing any statute of limitations in
respect of Taxes which waiver is currently in effect; (iv) the Tax Returns
referred to in clause (i) with respect to federal Taxes have been examined by
the IRS or the period for assessment of the Taxes in respect of which such
Tax Returns were required to be filed has expired; (v) all deficiencies
asserted or assessments made as a result of any examination of the Tax
Returns referred to in clause (i) have been paid in full; (vi) all Taxes
which the Subsidiaries or FFMC is required by law to withhold or to collect
for payment have been duly withheld or collected, and either (x) timely paid
to the appropriate taxing authorities to the extent such Taxes are due and
payable, or (y) set aside in accounts for such purpose, or accrued, reserved
against and entered upon the books of the Business to the extent such Taxes
are not yet due and payable; (vii) all Tax Sharing Arrangements to which the
Subsidiaries are a party (other than this Agreement) will terminate prior to
the Closing Date and no Subsidiary will have any liability thereunder on or
after the Closing Date; (viii) none of the corporate Subsidiaries has been a
member of an Affiliated Group (as defined in Section 1504(a) of the Code) for
which consolidated Tax returns were filed or were required to be filed other
than the Affiliate Group of which FDC is the common parent; and (ix) no power
of attorney that is currently in force has been granted with respect to any
matter relating to Taxes that could affect the Business, the Purchased Assets
or the Subsidiaries. Notwithstanding anything to the contrary in this
Agreement, nothing in this Section 5.6 shall cause Sellers to be liable for
any Taxes for which Sellers are not expressly liable pursuant to Section 8.2
(relating to Tax matters).
5.7. Availability of Assets and Legality of Use. Except as set
forth in Schedule 5.7 and except as contemplated by the Transition Services
Agreement, the Purchased Assets constitute all the assets, properties and
rights used or held for use in the Business as conducted by FFMC or any
Subsidiary prior to the date hereof (including, but not limited to, all
books, records, computers and computer programs). Each material item of
tangible personal property included in the Purchased Assets from the DPDS and
DAS business units of the Division is in good condition (subject to normal
wear and tear) and serviceable condition. The tangible personal property
included in the Purchased Assets from the IAS business unit of the Division
is, in the aggregate, in good condition (subject to normal wear and tear) and
serviceable condition. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SPECIFICALLY PROVIDED FOR HEREIN, ALL OF THE TANGIBLE PERSONAL PROPERTY
INCLUDED IN THE PURCHASED ASSETS ARE SOLD TO BUYER "AS IS" WITHOUT IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR OTHERWISE (EXCEPT
FOR MANUFACTURER'S WARRANTIES). Schedule 5.7 also sets forth a description
of all services provided by either Seller or any Affiliate of Sellers with
respect to the Business over the last two years utilizing assets not included
in the Purchased Assets and the manner in which the costs of providing such
services have been allocated to the Business.
5.8. Governmental Permits. Each of FFMC and the Subsidiaries
owns, holds or possesses all material licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or lease, operate
and use the Purchased Assets and to carry on and conduct the Business as
currently conducted (herein collectively called "Governmental Permits").
Schedule 5.8 sets forth such Governmental
24
<PAGE>
Permits. Except as set forth in Schedule 5.8, all such Governmental Permits
are in full force and effect and are fully transferrable to Buyer. Complete
and correct copies of all of the Governmental Permits listed in Schedule 5.8
have heretofore been delivered to Buyer by FFMC.
Except as set forth in Schedule 5.8, to the knowledge of Sellers,
(i) each of FFMC and the Subsidiaries has fulfilled and performed in all
material respects its obligations under each of the Governmental Permits, and
no event has occurred or condition or state of facts exists which constitutes
or, after notice or lapse of time or both, would constitute a material breach
or default under any such Governmental Permit or which permits or, after
notice or lapse of time or both, would permit revocation or termination of
any such Governmental Permit and (ii) no notice of cancellation, of default
or of any material dispute concerning any Governmental Permit, or of any
event, condition or state of facts described in the preceding clause, has
been received by FFMC or any Subsidiary.
5.9. Real Property. Schedule 5.9 contains a brief description of
(i) each parcel of real property owned by FFMC and used in or relating to the
Business and each parcel of real property owned by any Subsidiary (the "Owned
Real Property") and (ii) any parcel of real property which is subject to an
option held by FFMC to acquire such real property for use in the Business or
an option held by any Subsidiary. Schedule 5.9 also contains a copy of a
policy or a commitment for a policy of title insurance for each of the
parcels so described. To the knowledge of Sellers, the Owned Real Property
has access to public roads and to all utilities, including electricity,
sanitary and storm sewers, potable water, natural gas and other utilities
necessary for the operation of the Business. The Owned Real Property is
properly zoned for its current use and occupation. To the knowledge of
Sellers, there are no encroachments or Encumbrances (other than the Permitted
Encumbrances) upon any of the parcels comprising the Owned Real Property and
no portion of any improvement thereon encroaches upon any property not
included within the Owned Real Property or upon the area of any easement
affecting the Owned Real Property. The current use or occupancy of the Owned
Real Property does not violate in any material respect any instrument or
agreement of record affecting such Owned Real Property or any order of any
governmental authority having jurisdiction over any of the Owned Real
Property.
5.10. Real Property Leases. Schedule 5.10 sets forth a list and
brief description of each lease or similar agreement (showing the location of
the real property covered by such lease or other agreement) under which (i)
FFMC is lessee of, or holds or operates, any real property owned by any third
Person and used in or relating to the Business, (ii) any Subsidiary is lessee
of, or holds or operates, any real property owned by any third Person
(together with the real property referred to in clause (i), the "Leased Real
Property")or (iii) FFMC or any Subsidiary is the lessor of any of the Owned
Real Property.
5.11. Condition of Property. As of the date hereof, except as set
forth in Schedule 5.11, no portion of the real estate owned or leased by the
Division and none of the tangible personal property included in the Purchased
Assets have suffered any material damage by fire or other casualty, in each
case which has not heretofore been repaired and restored to its
25
<PAGE>
operating condition prior to such damage. FFMC does not owe any money to any
architect, contractor, subcontractor or materialman for labor or materials
performed, rendered or supplied to, or in connection with, any Owned Real
Property or leased real estate relating to the Business within the past
twelve (12) months except as set forth in Schedule 5.11. There is no work
being done at, or materials being supplied to, any parcel of Owned Real
Property at the date hereof other than routine maintenance projects having
aggregate costs through completion of not more than $75,000.
5.12. Condemnation. As of the date of this Agreement, neither the
whole nor any part of any of the Owned Real Property or any real property
leased, used or occupied by FFMC in connection with the Business or by any
Subsidiary is subject to any pending suit for condemnation or other taking by
any Governmental Body, and, to the knowledge of Sellers, no such condemnation
or other taking is threatened or contemplated.
5.13. Personal Property. Schedule 5.13 contains a list as of
March 31, 1998 of all machinery, equipment, vehicles, furniture and other
personal property owned by FFMC or any Subsidiary having an original cost of
$10,000 or more (which, in the case of FFMC, is used in or relates to the
Business).
5.14. Personal Property Leases. Schedule 5.14 contains as of the
date of this Agreement a brief description of each lease or other agreement
or right, whether written or oral, (including in each case the annual rental,
the expiration date thereof and a brief description of the property covered)
under which FFMC or any Subsidiary is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property owned by a
third Person and, in the case of FFMC, is used in or relates to the Business,
except those which are terminable by FFMC or any Subsidiary without penalty
on 60 days' or less notice or which provide for annual rentals of less than
$125,000.
5.15. Patents and Trademarks. (a) Schedule 5.15 contains a list
and description of:
(i) all United States and foreign patents and patent
applications and patent disclosures, all United States and foreign
copyright registrations and applications, all material computer
software (excluding "shrink-wrap" or similar licenses), all United
States, state and foreign trademarks, service marks and trade names
for which registrations have been issued or applied for, all other
United States, state and foreign trademarks, service marks and trade
names, and all Internet domain names owned by FFMC or any Subsidiary
or in which FFMC or any Subsidiary holds any right, license or
interest and, in each case with respect to FFMC, are primarily used in
or primarily relate to the Business (other than such patents,
trademarks, service marks and trade names that have not been used by
FFMC or any Subsidiary since January 1, 1996), showing in each case
the registered or other owner, expiration date and number, if any;
26
<PAGE>
(ii) all agreements and licenses (excluding "shrink-wrap" or
similar licenses for computer software) relating or pertaining to any
asset, property or right of the character described in the preceding
clause to which FFMC or any Subsidiary is a party, showing in each
case the parties thereto;
(iii) all licenses or agreements pertaining to mailing lists,
know-how, trade secrets, inventions, disclosures or uses of ideas
primarily used in or primarily relating to the Business to which FFMC
is a party or to which any Subsidiary is a party, showing in each case
the parties thereto; and
(iv) all registered assumed or fictitious names under which FFMC
or any Subsidiary is conducting the Business or has within the
previous three years conducted the Business.
(b) Except as set forth in Schedule 5.15: (i) with the exception
of claims contained in unissued patent applications (if any), FFMC or a
Subsidiary owns all right, title and interest in and to, or has a valid and
enforceable license to use as currently used by FFMC or any Subsidiary in
connection with the Business, free and clear of all Encumbrances except
Permitted Encumbrances and subject to the limitations imposed by each
applicable licensor, all of the Intellectual Property Rights; (ii) FFMC or a
Subsidiary has taken reasonable steps to maintain and protect all of the
Intellectual Property Rights FFMC or any Subsidiary owns and will continue to
maintain and protect the same prior to the Closing so as not to materially
adversely affect the validity or enforceability thereof; (iii) neither FFMC
nor any Subsidiary has agreed to indemnify any Person for or against any
interference, infringement or misappropriation with respect to any
Intellectual Property Rights FFMC or any Subsidiary owns; (iv) immediately
subsequent to the Closing, the Intellectual Property Rights will be owned by
or be available for use by Buyer on terms and conditions substantially
identical to those under which FFMC and its Subsidiaries owned or used the
Intellectual Property Rights immediately prior to the Closing (assuming the
payment by Buyer of any software transfer costs), except for Intellectual
Property Rights which the failure to so own or to so use would not reasonably
be expected to have a Material Adverse Effect; (v) no proceedings are pending
or, to the knowledge of Sellers, threatened against FFMC or any Subsidiary
that challenge (A) the validity, enforceability or ownership by FFMC or any
Subsidiary of any Intellectual Property Rights that are owned by FFMC or any
Subsidiary or (B) the ownership by FFMC or any Subsidiary of any other right
or property described in Schedule 5.15; and (vi) to the knowledge of Sellers,
there is no infringement or misappropriation by any other Person of any
Intellectual Property Rights that are owned by FFMC or any Subsidiary.
(c) To the knowledge of Sellers, the operations, activities,
products, equipment, machinery or processes of the Business do not infringe,
misappropriate or violate the patents, patent rights, trade secrets,
trademarks, service marks, trade names, Internet domain names, copyrights or
other property rights of any other Person. Since January 1, 1996, neither
FFMC nor any Subsidiary has received any notice from any other Person
pertaining to or challenging the right of FFMC or any Subsidiary to use any
of the Intellectual Property Rights.
27
<PAGE>
(d) Each of FFMC and the Subsidiaries has ownership and possession
of the source code and user and system documentation for all computer
software owned by FFMC or any Subsidiary and set forth in Schedule 5.15.
(e) (i) FFMC has provided to the Buyer true and complete copies of
the plans relating to the Sellers' year 2000 compliance efforts being
undertaken by the Sellers in connection with the Business (the "Y2K Plans"),
together with true and complete copies of the most recent status reports
relating to the Y2K Plans (the "Y2K Reports"). Expenditures related to the
Y2K Plans have been included in the Company's budget.
(ii) Buyer agrees that in connection with the implementation of the
DAS Y2K Plan set forth in Schedule 5.15(E) (the "DAS Y2K Plan"), it will
provide to Richard Lowrie or to a replacement identified by Sellers, approved
by Buyer, such approval not to be unreasonably withheld (Lowrie or his
replacement, the "Seller Y2K Executive") access to all Buyer employees and
records relating to such implementation, as may be necessary in the judgment
of the Seller Y2K Executive to allow the Seller Y2K Executive to evaluate the
implementation of the DAS Y2K Plan, including without limitation copies of
all status or progress reports prepared by Buyer or any third party and all
financial records relating to expenditures for the DAS Y2K Plan and the right
to attend, in person or telephonically, all internal Buyer meetings,
briefings or conference calls regarding the status of the implementation of
the DAS Y2K Plan. The Seller Y2K Executive may provide written requests for
access to specific Buyer records and to specific Buyer employees in
connection with the monitoring function and Buyer will promptly respond to
such requests. The Seller Y2K Executive will evaluate the status of the DAS
Y2K Plan and provide written recommendations to Buyer regarding steps
required to be taken by Buyer to complete the steps outlined in the DAS Y2K
Plan. Provided that Buyer has provided access to all the information
required and implemented all written recommendations of the Seller Y2K
Executive and the costs of implementation of the DAS Y2K Plan, including the
written recommendations of the Seller Y2K Executive, exceed $1.2 million,
Sellers will reimburse Buyer for 100% of such costs incurred by Buyer between
$1.2 million and $3.0 million. Sellers will be responsible for no costs
incurred by Buyer in connection with implementation of the DAS Y2K Plan in
excess of $3 million. Sellers agree that Buyer may assign its rights under
this Section 5.15(e)(ii) to a purchaser of the DAS business subject to the
terms and conditions contained in this Section 5.15(e)(ii) and to the
assumption by such purchaser of Buyer's obligations.
5.16. Receivables; Inventories. All accounts receivable of the
Division have arisen from bona fide transactions by the Division in the
ordinary course of business. Sellers are not aware of any facts or
circumstances which would be reasonably likely to result in any material
increase in the uncollectability of such receivables as a class in excess of
the reserve therefor set forth on the Interim Balance Sheet. The inventories
of the Division (including raw materials, supplies, work-in-process, finished
goods and other materials but excluding equipment and spare parts) are in
good and merchantable condition and fit for the purposes for which they were
procured, processed or prepared.
28
<PAGE>
5.17. Title to Property. Except as set forth in Schedule 5.17,
FFMC or one of the Subsidiaries possesses good and marketable title to all of
the Owned Real Property and all buildings, structures and other improvements
thereon, in each case free and clear of all Encumbrances, except for
Permitted Encumbrances. FFMC or one of the Subsidiaries has good and
marketable title to all of the other tangible Purchased Assets purported to
be owned by it, free and clear of all Encumbrances, except for Permitted
Encumbrances. Upon delivery to Buyer on the Closing Date of the instruments
of transfer contemplated by Section 4.4, FFMC will thereby transfer to Buyer
good and marketable title to all of the tangible Purchased Assets purported
to be owned by it or any of the Subsidiaries, subject to no Encumbrances,
except for Permitted Encumbrances. FFMC or one of the Subsidiaries has valid
and subsisting leasehold interests in the Leased Real Property, all free and
clear of any Encumbrances other than Permitted Encumbrances and the matters
disclosed in Schedule 5.10.
5.18. Employees and Related Agreements; ERISA. (a) Except as
described in Schedule 5.18(A), neither FFMC nor any Subsidiary is, with
respect to the Business, a party to or bound by any oral or written:
(i) employee collective bargaining agreement, employment
agreement, consulting, advisory or service agreement, deferred
compensation agreement or confidentiality agreement with employees or
other agreement regarding rates of pay or working conditions of any
employees engaged in the Business;
(ii) contract or agreement with any present or former officer,
director or employee, agent, or attorney-in-fact of FFMC or any
Subsidiary; or
(iii) stock option, stock purchase, bonus, commission sales
or other incentive plan or agreement.
FFMC has made any commission sales plans available to Buyer.
(b) Except as described in Schedule 5.18(B), neither FFMC nor any
Subsidiary maintains, or is required to contribute to, any "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA) or "welfare
benefit plan" (as such term is defined in Section (1) of ERISA), on behalf of
any employees of the Business. FFMC has delivered to Buyer, with respect to
each of the plans described in such Schedule, correct and complete copies of
(i) all plan documents and amendments, trust agreements and insurance
contracts, (ii) the three most recent Annual Report (Form 5500 Series) and
accompanying schedules, as filed and (iii) the current summary plan
description.
(c) Neither FFMC nor any of the Subsidiaries contributes, or is
obligated or has ever been obligated to contribute, to any multiemployer plan
(within the meaning of section 4001 of ERISA) with respect to employees of
the Business.
29
<PAGE>
(d) Schedule 5.18(D) contains: (i) a list of all employees or
commission salespersons, consultants, agents or other representatives
employed in connection with the Business as of April 23, 1998, (ii) the then
current annual compensation of, and a description of the fringe benefits
(other than those generally available to employees of the Business) provided
by FFMC or any Subsidiary to, any such persons and (iii) a list of any
payments or commitments of FFMC or any Subsidiary to pay any severance or
termination pay to such persons or former employees of the Division.
(e) Except as set forth in Schedule 5.18(E), to the knowledge of
Sellers, neither FFMC nor any Subsidiary is involved in any material
transaction or other situation with any employee, officer, director or
Affiliate of FFMC which may be generally characterized as a "conflict of
interest", including, but not limited to, direct or indirect interests in the
business of competitors, suppliers or customers of FFMC or any Subsidiary.
(f) Except as described in Schedule 5.18(F), no event has
occurred, and there exists no condition or set of circumstances, with respect
to any "employee benefit plan" (within the meaning of Section 3(3) of ERISA)
in connection with which any Subsidiary has any liability to the IRS, the
U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any
other Person under ERISA, the Code or any other applicable law.
5.19. Employee Relations. Except as set forth in Schedule 5.19,
each of FFMC and the Subsidiaries has complied and is in compliance with in
respect of the Business in all material respects with all applicable laws,
rules and regulations which relate to prices, wages, hours, discrimination in
employment and collective bargaining. During the past five years, except as
set forth in Schedule 5.19, neither the Division nor the Subsidiaries has
experienced any strikes, grievances, unfair labor practice claims or other
material employee disputes.
5.20. Contracts. As of the date of this Agreement, except as set
forth in Schedule 5.20 or any other Schedule hereto, FFMC is not, with
respect to the Business, and the Subsidiaries are not a party to or bound by:
(i) any contract for the purchase or sale of real property;
(ii) any contract for the purchase of raw materials, supplies,
services or equipment which FFMC reasonably anticipates will involve
the annual payment of more than $250,000 after the date hereof;
(iii) any contract for the sale of products or services of
the Business which FFMC reasonably anticipates will involve the annual
payment of more than $500,000 after the date hereof;
(iv) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or
advertising or public relations contract
30
<PAGE>
which FFMC reasonably anticipates will involve the annual payment by the
Division of more than $50,000 after the date hereof;
(v) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others;
(vi) any agreement which provides for the incurrence by FFMC or
any Subsidiary of debt for borrowed money including capitalized
leases;
(vii) any agreement containing competitive restraints on the
ability of the Division to purchase supplies or to sell any products
or services;
(viii) any contracts which contain restrictions with respect
to the payment of dividends or any other distribution in respect of
the capital stock of any Subsidiary;
(ix) any agreement relating to the acquisition or divestiture of
the capital stock or equity securities, assets or business of any
Subsidiary;
(x) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by either FFMC or any
Subsidiary, other than in the ordinary course of business or pursuant
to agreements in effect on the date hereof; or
(xi) any other contract, agreement, commitment, understanding or
instrument which is material to the Business.
5.21. Status of Contracts. Except as set forth in Schedule 5.21
or in any other Schedule hereto, each of the leases, contracts and other
agreements listed in Schedules 5.10, 5.14, 5.15, 5.18 and 5.20 (collectively,
the "Seller Agreements") constitutes a valid and binding obligation of FFMC
or the Subsidiaries, as the case may be, enforceable in accordance with its
terms (subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors'
rights and to general equity principles). Except as set forth in Schedule
5.21, (i) neither FFMC nor any Subsidiary is in material breach or material
default under any of the Seller Agreements, (ii) no event has occurred which,
with notice, or lapse of time or both, would constitute a material breach or
material default thereof by FFMC or any Subsidiary or, to the knowledge of
Sellers, constitute a material breach or material default thereof by any
other party thereto and (iii) neither FFMC nor any Subsidiary has repudiated,
and, to the knowledge of Sellers, no other party thereto has repudiated, any
material provision thereof. Complete and correct copies of each of the
Seller Agreements have heretofore been made available to Buyer by FFMC.
5.22. No Violation, Litigation or Regulatory Action. Except as
set forth in Schedule 5.22:
31
<PAGE>
(i) to the knowledge of Sellers, each of FFMC and the
Subsidiaries has complied and is in compliance in all material
respects with all Requirements of Laws and Court Orders which are
applicable to the Purchased Assets or the Business or which would be
reasonably expected to materially impair the ability of Sellers to
perform its obligations hereunder;
(ii) as of the date hereof, there are no lawsuits, arbitrations,
claims, suits, proceedings or investigations pending or, to the
knowledge of Sellers, threatened against FDC, FFMC or any Subsidiary
in respect of the Purchased Assets or the Business; and
(iii) as of the date hereof, there is no action, suit, claim,
arbitration, investigation or proceeding pending or, to the knowledge
of Sellers, threatened relating to the transactions contemplated by
this Agreement.
5.23. Environmental Matters. Except as set forth in Schedule 5.23:
(i) the operations of the Business comply and have complied in
all material respects with all applicable Environmental Laws;
(ii) each of FFMC and its Subsidiaries owns, holds, possesses or
has applied for all Governmental Permits which are necessary under
Environmental Laws to entitle it to own or lease, operate and use the
Purchased Assets and to carry on and conduct the Business
substantially as currently conducted;
(iii) neither FFMC, with respect to the Business, nor any of
the Division Real Property nor any Subsidiary is the subject of any
investigation by, order from or written agreement with any Person
(including without limitation any prior owner or operator of the
Division Real Property) respecting (x) any Environmental Law, (y) any
Remedial Action or (z) any claim of Environmental Losses and
Environmental Expenses arising from the Release or threatened Release
of a Contaminant into the environment;
(iv) neither FFMC (with respect to the Business) nor any
Subsidiary is subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
material violation of or material liability under any Environmental
Law;
(v) since January 1, 1994, neither FFMC (with respect to the
Business) nor any Subsidiary has (in each case, for which there is any
ongoing liability or continuing obligations):
(x) reported a Release of a hazardous substance
pursuant to Section 103(a) of CERCLA, or any state
equivalent; or
32
<PAGE>
(y) filed a notice pursuant to Section 103(c) of
CERCLA;
(vi) since January 1, 1994, neither FFMC nor any Subsidiary has
received any written notice or claim to the effect that it is or may
be liable to any Person as a result of the Release of a Contaminant
into the environment from or on the Division or is the Division Real
Property or, to the knowledge of Sellers, any property in the
immediate vicinity of the Division Real Property, listed or formally
proposed for listing on the National Priority List promulgated
pursuant to CERCLA or on any other Federal or state list of
Contaminant sites requiring investigation or cleanup;
(vii) to the knowledge of Sellers, no Environmental Encumbrance has
attached to the Division Real Property;
(viii) contaminants have not been used, generated, transported
to or from, treated, stored, Released or disposed of in, onto, under
or from the Division Real Property by FFMC or any Subsidiary in
violation of any Environmental Law or, to the knowledge of Sellers, by
any predecessor-in-title or agent of Sellers or any other person or
entity at any time;
(ix) any PCBs or PCB-containing equipment owned by FFMC or any
Subsidiary or any asbestos-containing materials known to Sellers at
the Division Real Property conform in all material respects with
applicable Environmental Laws;
(x) to the knowledge of Sellers, there are no underground tanks
or any other underground storage facilities (other than stormwater
drainage basins) located on the Owned Real Property; and
(xi) to the knowledge of Sellers, the Division has no liabilities
related to, associated with or arising out of (i) the occupancy, operation,
use or control of any of the Division Real Property on or prior to the
Closing Date or (ii) the operation of the Business on or prior to the Closing
Date, in each case resulting from the violation of any Environmental Law,
including without limitation any Release or threatened Release of any
Contaminant on, in, at, to, beneath or from (A) the Division Real Property
(including, without limitation, all facilities, improvements, structures and
equipment thereon, surface water thereon or adjacent thereto and soil or
groundwater thereunder) or (B) any real property or facility owned by a third
Person to which Contaminants generated by the Business were sent prior to the
Closing Date.
5.24. Insurance. FFMC or its Affiliates maintain, with respect to
the Business and the Purchased Assets, policies of fire and extended coverage
and casualty, liability worker's compensation and other forms of insurance in
such amount and against such risks and losses as are in its judgment prudent
and shall use reasonable efforts to keep such insurance or comparable
33
<PAGE>
insurance in full force and effect through the Closing Date. Schedule 5.24
sets forth the claim history of the Division for the past three years under
all such policies.
5.25. No Finder. Neither of Sellers, any Subsidiary nor any
Person acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement other than to Morgan Stanley &
Co. Incorporated, whose fees and expenses, to the extent payable, shall be
paid by Sellers. Sellers are solely responsible for any payment, fee or
commission that may be due to Morgan Stanley & Co. Incorporated in connection
with the transactions contemplated hereby.
5.26. Certain Agreements. Except as set forth in Schedule 5.26,
neither FFMC, any of the Subsidiaries nor any of their Affiliates is a party
to any agreement with any officer, director or employee of the Division (i)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction or relating to a transaction
involving the Business or the Division of the nature of the transaction
contemplated by this Agreement or (ii) the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement, other than, in each case,
agreements as to which Sellers will assume sole responsibility.
5.27. Form Agreements. Schedule 5.27 contains copies of a
representative sample of the standard form of contracts used in the Business.
To the knowledge of Sellers, as of the date hereof, there are no service
problems resulting in a service re-run that are outside of the ordinary
course of business and in excess of $25,000.
5.28. Customers and Suppliers.
(i) Schedule 5.28 lists the fifty largest customers (based on
revenues) of the Division for each of the two most recent fiscal
years.
(ii) Since December 31, 1997 through the date hereof, no material
supplier of the Division has indicated in writing or, to the knowledge
of Sellers, otherwise that it shall stop supplying materials, products
or services to the Division, and no customer listed on Schedule 5.28
has indicated in writing or, to the knowledge of Sellers, otherwise
that it shall stop buying materials, products or services from the
Division.
(iii) Since December 31, 1997, except as indicated on Schedule 5.28,
the Division has not changed its pricing structure with respect to any
customer listed on Schedule 5.28, other than non-material price increases
or decreases to meet competition in the ordinary course of business and
has not experienced any price increases by any of its material suppliers,
other than non-material price increases
34
<PAGE>
which FFMC believes are similar to price increases that such suppliers have
imposed on similarly situated companies.
5.29. Liabilities. Other than those reflected on the audited
December 31, 1997 balance sheet and the notes thereto or disclosed in
Schedule 5.29 or any other schedule hereto, to the knowledge of Sellers,
there are no liabilities or obligations relating to the Business of any kind,
absolute, accrued, contingent, known or unknown, or otherwise, whether due or
to become due, that would constitute a liability which by its nature or
character would be required to be recorded or disclosed in accordance with
GAAP other than liabilities incurred in the ordinary course of business since
December 31, 1997 or taken into account in the calculation of Closing Net
Working Capital.
5.30. Book and Records of Subsidiaries. The respective minute
books of the Subsidiaries, as previously made available to Buyer and its
representatives, contain accurate records of all meetings of, and corporate
action taken by (including action taken by written consent), the respective
stockholders and Boards of Directors of each Subsidiary. No Subsidiary has
any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by
any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of
Sellers or a Subsidiary.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to Sellers and agrees as follows:
6.1. Organization of Buyer. Buyer is a corporation duly organized
and validly existing under the laws of the State of Indiana and has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.
6.2. Authority of Buyer. Buyer has full power and authority to
execute, deliver and perform this Agreement and all of the Buyer Ancillary
Agreements. The execution, delivery and performance of this Agreement and
the Buyer Ancillary Agreements by Buyer have been duly authorized and
approved by Buyer's board of directors and do not require any further
authorization or consent of Buyer or its stockholders. This Agreement has
been duly authorized, executed and delivered by Buyer and (assuming the valid
authorization, execution and delivery of this Agreement by Sellers) is the
legal, valid and binding agreement of Buyer enforceable in accordance with
its terms, and each of the Buyer Ancillary Agreements has been duly
authorized by Buyer and (assuming the valid authorization, execution and
delivery thereof by FDC or FFMC,
35
<PAGE>
as the case may be) upon execution and delivery by Buyer will be a legal,
valid and binding obligation of Buyer enforceable in accordance with its
terms, in each case subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles.
Neither the execution and delivery of this Agreement or any of the
Buyer Ancillary Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the
terms, conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or
a loss of rights under (1) the Certificate of Incorporation or By-laws
of Buyer, (2) any material note, instrument, agreement, mortgage,
lease, license, franchise, permit or other authorization, right,
restriction or obligation to which Buyer is a party or any of its
properties is subject or by which Buyer is bound, (3) any Court Order
to which Buyer is a party or by which it is bound or (4) any
Requirements of Laws affecting Buyer, other than, in the case of
clause (2), any such conflicts, breaches, defaults, rights or loss of
rights that, individually or in the aggregate, would not materially
impair the ability of Buyer to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated
hereby; or
(ii) require the approval, consent, authorization or act of, or
the making by Buyer of any declaration, notice, filing or registration
with, any Person, except for (A) in connection, or in compliance, with
the provisions of the HSR Act and (B) such approvals, consents,
authorizations, declarations, filings or registrations the failure of
which to be obtained or made would not materially impair the ability
of Buyer to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
6.3. No Violation, Litigation or Regulatory Action. Except as set
forth in Schedule 6.3:
(i) as of the date hereof, there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the knowledge of Buyer,
threatened against Buyer or its subsidiaries which are reasonably
expected to materially impair the ability of Buyer to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby; and
(ii) as of the date hereof, there is no action, suit, claim,
arbitration, investigation or proceeding pending or, to the knowledge
of Buyer, threatened relating to the transactions contemplated by this
Agreement or any of the Buyer Ancillary Agreements.
36
<PAGE>
6.4. No Finder. Neither Buyer nor any Person acting on its behalf
has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement other than to Gleacher NatWest, Inc., whose fees and expenses,
to the extent payable, shall be paid by Buyer. Buyer is solely responsible
for any payment, fee or commission that may be due to Gleacher NatWest, Inc.
in connection with the transactions contemplated hereby.
6.5. Financial Ability. Buyer has the financial ability to
consummate the transactions contemplated by this Agreement and has furnished
FFMC with evidence thereof.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date:
7.1. Investigation of Purchased Assets by Buyer. FFMC, the
Subsidiaries and their respective officers, employees, agents, accountants
and attorneys shall afford to the officers, employees and authorized
representatives of Buyer (including, without limitation, independent public
accountants, attorneys and lenders) reasonable access during normal business
hours, upon reasonable advance notice, to the offices, properties, employees
and business and financial records (including computer files, retrieval
programs and similar documentation) of FFMC and the Subsidiaries to the
extent Buyer shall reasonably deem necessary or desirable and shall furnish
to Buyer or its authorized representatives such additional information
concerning the Purchased Assets and the Business as shall be reasonably
requested. Buyer and Sellers agree that, pursuant to the Confidentiality
Agreement, Buyer has and may continue to provide potential acquirors of the
DPDS and DAS units of the Division with the information obtained by Buyer
pursuant to this Section 7.1, it being agreed by Buyer that such potential
acquirors shall not have direct access to the offices, properties, employees
and business and financial records of the Division. In addition to the
foregoing, Buyer and its officers, employees, agents and authorized
representatives may, upon reasonable advance notice and with the
participation of FFMC or its representatives, contact customers and suppliers
of the Division. Buyer agrees that the investigation contemplated by this
Section 7.1 shall be conducted in such a manner as not to interfere
unreasonably with the operations of FFMC or the Subsidiaries.
7.2. Notification. Each of Buyer and Sellers shall promptly
notify the other of any action, suit or proceeding that shall be instituted
or threatened against such party to restrain, prohibit or otherwise challenge
the legality of any transaction contemplated by this Agreement. Each of
Buyer and Sellers shall promptly notify the other of any lawsuit, claim,
proceeding or investigation that may be threatened, brought, asserted or
commenced which would have been listed in Schedule 5.22 or Schedule 6.3, as
the case may be, if such lawsuit, claim, proceeding or investigation had
arisen prior to the date hereof. Sellers shall update Schedule 5.22 for any
37
<PAGE>
such lawsuit, claim, proceeding or investigation and shall update Schedules
5.20 and 5.28(ii) for any item which, if existing prior to the date of this
Agreement, would have been required to be set forth on such schedule. Each
of Buyer and Sellers shall promptly notify the other if any of them discovers
a breach of the representations, warranties or covenants contained in this
Agreement.
7.3. Consents of Third Parties; Governmental Approvals; Closing.
(a) FFMC and Buyer will act diligently and reasonably to secure, before the
Closing Date, the consent, approval or waiver, in form and substance
reasonably satisfactory to Buyer, from any party to any Seller Agreement
required to be obtained to assign or transfer any such Agreements to Buyer
(or, in the case of the DAS unit of the Division, to transfer such Agreements
to ACS) and to obtain the release of FFMC from liability in respect thereof;
provided, however, that neither FFMC nor Buyer shall have any obligation to
offer or pay any consideration in order to obtain any such consents or
approvals; and provided, further, that FFMC shall not make any agreement or
understanding affecting the Purchased Assets or the Business as a condition
for obtaining any such consents or waivers except with the prior written
consent of Buyer (which consent shall not be unreasonably withheld).
(b) During the period prior to the Closing Date, and after the
Closing Date, as necessary, FFMC and Buyer shall act diligently and
reasonably, and shall cooperate with each other, to secure any consents and
approvals of any Governmental Body required to be obtained by them in order
to assign or transfer any Governmental Permits to Buyer, to permit the
consummation of the transactions contemplated by this Agreement; provided,
however, that FFMC shall not make any agreement or understanding affecting
the Purchased Assets or the Business as a condition for obtaining any such
consents or approvals except with the prior written consent of Buyer (which
consent shall not be unreasonably withheld).
(c) Subject to the terms and conditions contained herein, each of
Sellers and Buyer agrees to use its commercially reasonable efforts to
effectuate the transactions contemplated hereby as expeditiously as
reasonably practicable, to fulfill and cause to be fulfilled the conditions
to Closing (including consummating the financing contemplated by Section 9.5)
and to release any liens that are not Permitted Encumbrances.
7.4. Operations Prior to the Closing Date. (a) FFMC shall, and
shall cause each of the Subsidiaries to, operate and carry on the Business
only in the ordinary course. Consistent with the foregoing, FFMC shall, and
shall cause each of the Subsidiaries to, keep and maintain the Purchased
Assets in good operating condition and repair and shall use its reasonable
efforts consistent with good business practice to preserve the goodwill of
the suppliers, contractors, licensors, employees, customers, distributors and
others having business relations with the Business.
(b) Notwithstanding Section 7.4(a), except as expressly
contemplated by this Agreement, except as set forth in Schedule 7.4(B) or
except with the express written approval of
38
<PAGE>
Buyer (which Buyer agrees shall not be unreasonably withheld or delayed),
Sellers shall not with respect to the Business (and shall cause each of the
Subsidiaries not to):
(i) make any material change in the Business or its operations,
except such changes as may be required to comply with any applicable
Requirements of Law;
(ii) make any capital expenditure or enter into any contract or
commitment therefor involving the payment by FFMC or any Subsidiary of
an amount in excess of $100,000 (except for the purchase of three
Kodak CD-ROM systems previously disclosed to Buyer);
(iii) enter into any contract for the purchase of real property or
for the sale of any Owned Real Property listed in Schedule 5.10;
(iv) sell, lease (as lessor), transfer, assign or otherwise
dispose of (including any transfers to any of its Affiliates), or
mortgage or pledge, or impose or suffer to be imposed any Encumbrance
on, any of the Purchased Assets, other than inventory sold or
otherwise disposed of in the ordinary course of the Business,
Permitted Encumbrances and personal property no longer useful in the
ordinary course of the Business and not having a fair market value in
excess of $100,000 in the aggregate;
(v) cancel any debts owed to or claims held by it (including the
settlement of any claims or litigation) other than in the ordinary
course of the Business;
(vi) create, incur, assume, guarantee or endorse or agree to
create, incur, assume, guarantee or endorse any indebtedness for
borrowed money (other than money borrowed or advances from any of its
Affiliates in the ordinary course of the Business) or enter into, as
lessee, any capitalized lease obligations (as defined in Statement of
Financial Accounting Standards No. 13);
(vii) accelerate or delay collection of any notes or accounts
receivable generated by the Business in advance of or beyond their
regular due dates or the dates when the same would have been collected
in the ordinary course of the Business;
(viii) delay or accelerate payment of any account payable or
other liability of the Business beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary
course of the Business;
39
<PAGE>
(ix) make, or agree to make, any payment of cash or distribution
of assets to any of its Affiliates (other than cash realized upon
collection of receivables generated in the ordinary course of the
Business);
(x) institute any increase in any profit-sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other employee benefit plan
with respect to its current or former employees, except as may be
required to comply with applicable Requirements of Law or contracts in
effect on the date hereof; provided, however, that FFMC and the
Subsidiaries, as the case may be, shall notify Buyer of any such
permitted increase not later than the 10th day following the
effectuation of such increase;
(xi) make any change in the compensation of its employees whose
salary and bonus exceeds $50,000, other than changes made in
accordance with normal compensation practices and consistent with past
compensation practices or pursuant to contracts in effect on the date
hereof, provided, however, that FFMC and the Subsidiaries, as the case
may be, shall notify Buyer of any such permitted increase not later
than the 10th day following the effectuation of such increase;
(xii) make or authorize any change in the organizational documents
of any Subsidiary;
(xiii) merge any Subsidiary with or into or consolidate any Subsidiary
with any other Person or in any way reclassify any shares of the capital
stock of any Subsidiary;
(xiv) make any material change in the amount or scope of insurance
coverage currently carried;
(xv) make any change in the accounting policies applied in the
preparation of the financial statements contained in Schedule 5.4;
(xvi) hire any employee whose salary is in excess of $50,000 or
enter into a contract with any consultant which requires an annual
payment by the Division in excess of $50,000;
(xvii) delay or postpone inventory purchases, repair and maintenance
of real or personal properties, other than delays or postponements in the
ordinary course of business that do not adversely impair the services
provided to customers;
40
<PAGE>
(xviii) enter into any lease or license agreement (or series of
related leases or licenses) which FFMC reasonably anticipates will
involve the annual payment of more than $125,000;
(xix) enter into any contract for the purchase of raw materials,
supplies, services or equipment which FFMC reasonably anticipates will
involve the annual payment of more than $250,000; or
(xx) agree or commit to do any of the foregoing.
7.5. Formation of LLC; Data Preparation, Inc.. (a) On or prior to
the Closing Date, FFMC shall cause Appalachian Computer Services, Inc. to be
merged with and into a newly formed limited liability company. In such case,
FFMC agrees that, as of the Closing, such limited liability company will be
directly and wholly owned by FFMC and will have not engaged in any business
activities or conducted any operations or incurred or assumed any liability
(other than as a result of the merger with Appalachian Computer Services,
Inc.). FFMC will treat such limited liability company as a division for
federal (and state and local to the extent possible) income tax purposes and
will not elect (or allow such limited liability company to elect) to treat
such limited liability company as a corporation for federal, state and local
income tax purposes.
(b) On or prior to the Closing Date, Sellers will cause ACS to
distribute the capital stock of Data Preparation, Inc. to FFMC and will
thereafter liquidate Data Preparation, Inc.
7.6. Antitrust Law Compliance. As promptly as practicable after
the date hereof (but in no event later than five business days after the date
hereof), Buyer and Sellers shall file with the Federal Trade Commission and
the Antitrust Division of the Department of Justice the notifications and
other information required to be filed under the HSR Act, or any rules and
regulations promulgated thereunder, with respect to the transactions
contemplated hereby. Each party warrants that all such filings by it will be,
as of the date filed, true and accurate and in accordance with the
requirements of the HSR Act and any such rules and regulations. Each of
Buyer and Sellers agrees to make available to the other such information as
each of them may reasonably request relative to its business, assets and
property (including, in the case of Sellers, the Business) as may be required
of each of them to file any additional information requested by such agencies
under the HSR Act and any such rules and regulations.
7.7. Audited Financial Statements. As promptly as reasonably
practicable, Sellers shall, at the expense of Buyer, cause the balance sheets
of the Division as of December 31, 1996 and December 31, 1995, respectively,
contained in Schedule 5.4 and the related statements of income contained in
Schedule 5.4, together with the statements of cash flows for the years then
ended, to be audited by Ernst & Young LLP. Sellers shall cause Ernst & Young
LLP to deliver its report concerning such financial statements as promptly as
reasonably practicable (but in no event later than 45 days after the Closing
Date).
41
<PAGE>
7.8. Acquisition Proposals. Each Seller agrees that it, and its
Affiliates, officers and directors, and the officers and directors of its
Affiliates, shall not, and each of them shall direct and use its commercially
reasonable efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or
accountant) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders or
stockholders, as the case may be) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of, the Division or the Purchased Assets (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
an Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal. Sellers shall immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Sellers shall notify Buyer promptly if any Acquisition Proposal
is received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
Sellers, and shall promptly request each person which has heretofore executed
a confidentiality agreement to return to Sellers or destroy all confidential
information heretofore furnished to such person by or on behalf of Sellers.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Use of Names. Sellers are not conveying ownership rights or
granting Buyer a license to use any of the tradenames or trademarks of FDC or
any Affiliate of FDC (other than the trademarks identified on Schedule 5.15)
and, after the Closing, Buyer shall not use in any manner the names or marks
of FDC or any Affiliate of FDC (other than the trademarks identified on
Schedule 5.15) or any word that is similar in sound or appearance to such
names or marks. In the event Buyer or any Affiliate of Buyer violates any of
its obligations under this Section 8.1, FDC and its Affiliates may proceed
against it in law or in equity for such damages or other relief as a court
may deem appropriate. Buyer acknowledges that a violation of this Section
8.1 may cause FDC and its Affiliates irreparable harm which may not be
adequately compensated for by money damages. Buyer therefore agrees that in
the event of any actual or threatened violation of this Section 8.1, FDC and
any of its Affiliates shall be entitled, in addition to other remedies that
they may have, to a temporary restraining order and to preliminary and final
injunctive relief against Buyer or such Affiliate of Buyer to prevent any
violations of this Section 8.1.
8.2. Tax Matters.
8.2.1. Liability for Taxes. (a) Sellers shall be liable for and
pay, and pursuant to Article XI (and subject to the limitations thereof)
shall indemnify and hold harmless each Buyer Group Member from and against:
(A) all Taxes (whether assessed or unassessed) applicable to the
42
<PAGE>
Business, the Purchased Assets or the Assumed Liabilities (other than Taxes
imposed on the Subsidiaries, or for which the Subsidiaries may otherwise be
liable), in each case attributable to Pre-Closing Tax Periods, (B) all Taxes
imposed on any Subsidiary pursuant to Treas. Reg. Section 1.1502-6 or similar
provision of state or local law as a result of the Subsidiary having been a
member of Seller Tax Group, and (C) all Taxes imposed on the Subsidiaries, or
for which the Subsidiaries may otherwise be liable, for Pre-Closing Tax
Periods; provided, however, that Sellers shall not be liable for or pay, and
shall not indemnify or hold harmless any Buyer Group Member from or against:
(I) any Tax liability or reserve taken into account in the calculation of the
Closing Net Working Capital as provided for in Section 3.2, (II) any Taxes
that result from any actual or deemed election under Section 338 of the Code
or any similar provisions of state, local or foreign law as a result of the
purchase of the issued and outstanding capital stock of Employee Benefits
Plans, Inc. or that result from any Buyer Group Member engaging in any
activity or transaction that would cause the transactions contemplated by
this Agreement to be treated as a purchase or sale of assets of Employee
Benefits Plans, Inc. for federal, state or local Tax purposes, and (III) any
Taxes imposed on the Purchased Assets, the Business or any of the
Subsidiaries as a result of transactions engaged in by any Buyer Group Member
occurring on the Closing Date that are properly allocable (based on, among
other relevant factors, factors set forth in Treas. Reg. Section
1.1502-76(b)(1)(ii)(B)) to the portion of the Closing Date after 12:01 a.m.
on the Closing Date (Taxes described in this proviso hereinafter "Excluded
Taxes"). Buyer and Sellers agree that, with respect to any transaction
described in clause (III) of the preceding sentence, the Subsidiaries
(excluding in this case the LLCs) and all persons related to such
Subsidiaries under Section 267(b) of the Code immediately after the Closing
Date shall treat the transaction for all federal income Tax purposes (in
accordance with Treas. Reg. Section 1.1502-76(b)(1)(ii)(B), and (to the
extent permitted) in accordance with other income Tax purposes) as occurring
at the beginning of the day following the Closing Date. Sellers shall be
entitled to any refund of (or credit for) Taxes attributable to Pre-Closing
Tax Periods.
(b) Buyer shall be liable for and pay, and pursuant to Article XI
(and subject to the limitations thereof) shall indemnify and hold harmless
each Seller Group Member against: (A) all Taxes (whether assessed or
unassessed) applicable to the Business, the Purchased Assets or the Assumed
Liabilities (other than Taxes imposed on the Subsidiaries, or for which the
Subsidiaries may otherwise be liable), in each case attributable to
Post-Closing Tax Periods; (B) all Taxes imposed on the Subsidiaries, or for
which the Subsidiaries may otherwise be liable, for Post-Closing Tax Periods;
and (C) Excluded Taxes. Except as otherwise provided herein, Buyer shall be
entitled to any refund of (or credit for) Taxes attributable to Post-Closing
Tax Periods.
(c) For purposes of Sections 8.2.1(a) and (b), whenever it is
necessary to determine the liability for Taxes attributable to Pre-Closing
Tax Periods, on one hand, and Post-Closing Tax Periods, on the other hand,
such determination shall be made on a "closing of the books basis" by
assuming that the relevant books were closed at the close of the Closing
Date; provided, however, that (I) transactions occurring on the Closing Date
that are properly allocable (based on, among other relevant factors, factors
set forth in Treas. Reg. Section 1.1502-76(b)(1)(ii)(B))
43
<PAGE>
to the portion of the Closing Date after 12:01 a.m. on the Closing Date shall
be allocated to Post-Closing Tax Periods, and (II) exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned between Pre-Closing Tax Periods and
Post-Closing Tax Periods on a daily basis and Taxes that are computed on a
periodic basis, such as property Taxes, shall also be so apportioned on a
daily basis. Notwithstanding the foregoing provisions of this paragraph (c),
if the transactions contemplated by this Agreement result in the reassessment
of the value of any property owned by the Division or any Subsidiary for
property Tax purposes, or the imposition of any property Taxes at a rate
which is different than the rate that would have been imposed if such
transactions had not occurred, then (y) the portion of such property Taxes
for the Pre-Closing Tax Period shall be determined on a daily basis, using
the assessed value and Tax rate that would have applied had such transactions
not occurred, and (z) the portion of such property Taxes for the Post-Closing
Tax Period shall be the total property Taxes for the relevant taxable year or
period minus the amount described in clause (y) of this sentence.
(d) Notwithstanding paragraphs (a), (b), and (c) of this Section
8.2.1, any sales Tax, use Tax, real property transfer or gains Tax,
documentary stamp Tax or similar Tax attributable to the sale or transfer of
the Business or the Purchased Assets shall be paid 50% by Buyer and 50% by
Sellers.
(e) Sellers or the Buyer, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this
Section 8.2.1. Within a reasonable time prior to the payment of any said
Tax, the party paying such Tax shall give written notice to the other party
of the Tax payable and the portion which is the liability of each party,
although failure to do so will not relieve the other party from its liability
hereunder.
8.2.2. Tax Returns. (a) Subsidiaries (other than LLCs). Sellers
shall timely file or cause to be timely filed when due (taking into account
all extensions properly obtained) all Tax Returns that are required to be filed
by or with respect to each Subsidiary (other than any LLC) for taxable years or
periods ending on or before the Closing Date (in the case of Tax Returns
required to be filed by or with respect to any such Subsidiary on a combined,
consolidated or unitary basis with either Seller or any Affiliate thereof other
than solely any Subsidiary) or due on or before the Closing Date (with respect
to other Tax Returns), and in each case Sellers shall remit or cause to be
remitted any Taxes due in respect of such Tax Returns. With respect to Tax
Returns to be filed by Sellers pursuant to the preceding sentence, such Tax
Returns shall be prepared by Sellers in a manner consistent with past practice
and no position shall be taken, election made or method adopted that is
inconsistent with positions taken, elections made or methods used in prior
periods in filing such Tax Returns unless Sellers are advised in writing by
their tax advisor that there is no reasonable basis under relevant Tax law to
take such position, election or method. Buyer shall prepare and, except as
provided below, timely file or cause to be timely filed when due (taking into
account all extensions properly obtained) all other Tax Returns that are
required to be filed by or with respect to each Subsidiary (other than any LLC)
44
<PAGE>
and, except as provided below, Buyer shall remit or cause to be remitted any
Taxes due in respect of such Tax Returns. With respect to Tax Returns to be
filed by Buyer pursuant to the preceding sentence that relate to taxable
years or periods ending on or before the Closing Date (w) such Tax Returns
shall be prepared by Buyer in a manner consistent with past practice and no
position shall be taken, election made or method adopted that is inconsistent
with positions taken, elections made or methods used in prior periods in
filing such Tax Returns (including, without limitation, positions which would
have the effect of accelerating income to periods for which Sellers are
liable or deferring deductions to periods for which Buyer is liable) unless
Buyer is advised in writing by its tax advisor that there is no reasonable
basis under relevant Tax law to take such position, election or method, (x)
such Tax Returns shall be submitted to Sellers not later than 30 days prior
to the due date for filing such Tax Returns (or, if such due date is within
45 days following the Closing Date, as promptly as practicable following the
Closing Date) for review and approval by Sellers, (y) Buyer shall make any
changes to such Tax Returns as Sellers shall request in its sole discretion
and (z) upon final approval by Sellers, Sellers shall file such Tax Returns
and shall remit or cause to be remitted any Taxes due in respect of such Tax
Returns.
(b) Purchased Assets (other than non-LLC Subsidiaries). Except as
provided in Section 8.2.2(a), Sellers and Buyer will each prepare and timely
file when due (taking into account all extensions properly obtained) all Tax
Returns that are required under applicable law with respect to the Business,
the Purchased Assets and the Assumed Liabilities (or with respect to any LLC)
and will each remit (or cause to be remitted) any Taxes due in respect of
such Tax Returns.
(c) Reimbursement. Sellers or Buyer shall pay the other party for
the Taxes for which Sellers or Buyer, respectively, is liable pursuant to
this Section 8.2. but which are payable with any Tax Return to be filed by
the other party pursuant to this Section 8.2.2 upon the written request of
the party entitled to payment, setting forth in detail the computation of the
amount owed by Sellers or Buyer, as the case may be, but in no event earlier
than 10 days (nor later than 5 days) prior to the due date for paying such
Taxes.
8.2.3. Contest Provisions. (a) Buyer or Sellers, as the case may be,
shall promptly notify the other party in writing upon receipt by them, any of
their Affiliates, or any Subsidiary of notice of any pending or threatened
federal, state, local or foreign Tax audits, examinations or assessments which
might affect the Tax liabilities for which the other party might be liable
pursuant Section 8.2.1.
(b) Sellers (x) shall, with respect to Taxes imposed on a
Subsidiary, have the sole right to represent each Subsidiary's interests in
any Tax audit or administrative or court proceeding relating to Pre-Closing
Tax Periods or otherwise relating to Taxes for which Sellers may be liable
pursuant to this Section 8.2, and to employ counsel of its choice at its
expense, and (y) shall, with respect to Taxes imposed on the Business,
Purchased Assets, and Assumed Liabilities (other than Taxes imposed on a
Subsidiary), have the sole right to control any Tax audit or administrative
or court proceeding relating to Pre-Closing Tax Periods, and to employ
counsel
45
<PAGE>
of its choice at its own expense; provided, however, that Buyer shall have
the right to participate in the Tax audits or administrative or court
proceedings described above at its own expense. Sellers shall not be
entitled to settle a Tax claim under the preceding sentence without Buyer's
consent (which consent shall not be unreasonably withheld) if such settlement
would result in Buyer or any of the Subsidiaries being bound legally (in a
way in which a closing agreement under Section 7121 of the Code entered into
by a taxpayer with respect to a proposed adjustment may legally bind the
taxpayer for future years with respect to such adjustment) for Tax periods
(or portions thereof) beginning after the Closing Date and in all cases would
result in a Material Adverse Effect; provided, however, that Sellers shall
not be so restricted if and to the extent Sellers provide indemnification for
such Material Adverse Effect. In the case of a Straddle Period with respect
to Taxes imposed on a Subsidiary, Sellers shall be entitled to participate at
its expense in any Tax audit or administrative or court proceeding relating
(in whole or in part) to Taxes attributable to the portion of such Straddle
Period ending on and including the Closing Date and, with the written consent
of Buyer, and at Seller's sole expense, may assume the entire control of such
audit or proceeding. None of Buyer, any of its Affiliates, or any Subsidiary
may settle any Tax claim for any Taxes for which Seller may be liable
pursuant to this Section 8.2, without the prior written consent of Seller,
which consent may not be unreasonably withheld.
8.2.4. Assistance and Cooperation. After the Closing Date, each
of Sellers and Buyer shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance
with Section 8.2.2;
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns;
(iii) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents
relating to Taxes;
(iv) provide timely notice to the other in writing of any pending
or threatened Tax audits or assessments of each Subsidiary for taxable
periods for which the other may have a liability under Section 8.2.1;
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period;
(vi) timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Taxes
described in paragraph (d) of Section 8.2.1 (relating to sales,
transfer and similar Taxes); and
46
<PAGE>
(vii) timely provide to the other powers of attorney or
similar authorizations necessary to carry out the purposes of this
Section 8.2.
8.2.5. Defined Terms. For purposes of this Section 8.2, and any
relevant defined terms used herein, Closing Date means the date on which the
Closing occurs.
8.3. Employees and Employee Benefit Plans. (a) Effective upon
Closing but as of 11:59 p.m., Chicago time, on the day immediately preceding
the Closing Date, the employment by FFMC and the employment by any Subsidiary
of employees (other than Richard Lowrie who shall remain an employee of
Sellers) engaged in the Business (collectively, the "Transferred Employees")
shall terminate and such employees shall cease to participate in any employee
benefit plans maintained by or for the benefit of FFMC or any Subsidiary.
Notwithstanding the preceding sentence, Sellers will, as an accommodation to
Buyer, allow the Transferred Employees to remain on Sellers' medical plan for
a transition period ending no later than July 1, 1998 and Buyer agrees to
promptly reimburse Sellers for all associated costs and liabilities. Buyer
shall offer employment to all persons whose employment was so terminated
effective at 12:00 a.m., Chicago time, on the Closing Date (provided, that
Buyer may elect not to offer employment to the persons listed on Schedule
8.3(A)). Buyer shall be solely responsible for the payment of any severance
pay to any Transferred Employees, except as provided in the following two
sentences. Sellers shall be responsible for the payment of any severance pay
to the persons listed on Schedule 8.3(A) if such persons are not offered
employment by Buyer or are terminated by Buyer within six months after the
Closing Date so long as Buyer does not increase the amount of such severance
payments in excess of the amounts payable under Sellers' severance plan. In
addition, Sellers shall reimburse Buyer for up to $300,000 of severance pay
which becomes payable to Transferred Employees within six months after the
Closing Date. If Buyer does not offer employment to the persons listed on
Schedule 8.3(A), such persons shall not be considered Transferred Employees
for purposes of this Section 8.3. Buyer shall assume responsibility and
liability for any penalties or liabilities arising under the Warn Act with
respect to the termination of any Transferred Employees on or after the
Closing Date. FFMC shall assume responsibility and liability for any
penalties or liabilities arising under the Warn Act with respect to the
termination of any Transferred Employees prior to the Closing Date. Buyer
acknowledges that it has not informed FFMC of any planned or contemplated
decisions or actions by Buyer that would require the service of notice under
the Warn Act.
(b) Buyer agrees that, effective as of the day after the Closing
Date, Buyer shall permit Transferred Employees to participate in employee
benefit plans, vacation, holiday and other fringe benefit plans ("Buyer's
Plans") providing benefits which are competitive in the industry.
(c) As soon as is practicable after the Closing Date, but
effective as of the Closing Date and for a period of one year thereafter,
Buyer shall provide a severance pay program which is comparable to the
Division's severance pay program or shall permit Transferred Employees to
participate in Buyer's severance plan. For purposes of computing severance
47
<PAGE>
benefits, employment of Transferred Employees by FFMC or any Subsidiary prior
to the Closing Date shall be treated as if it were employment by Buyer after
the Closing Date.
(d) Buyer's Plans which are employee pension benefit plans (as
defined in Section 3(2) of ERISA) shall be amended to provide that employment
of Transferred Employees by FFMC or any Subsidiary prior to the Closing Date
should be treated as employment by Buyer after the Closing Date for purposes
of determining when Transferred Employees become eligible to participate in
and the vested interest of any Transferred Employee in benefits under, such
Buyer's Plans. Sellers and Buyer shall take such action as may be necessary
to effectuate a trust-to-trust transfer of the First Data Incentive Savings
Plan ("Seller's Savings Plan") 401(k) account balances of Transferred
Employees to a comparable Buyer's Plan as follows. As soon as practicable
after Closing, Sellers shall cause the account of each Transferred Employee
who participates in Seller's Savings Plan to be valued. As of such valuation
date, assets equal in value to the vested amount credited to each such
Transferred Employee's account under Seller's Savings Plan will be
transferred to the trust maintained under Buyer's Plan. Such transfer shall
be in cash or, to the extent mutually agreed upon by Sellers and Buyer, in
kind, and shall also include any promissory notes evidencing outstanding loan
balances of the Transferred Employees. Prior to, and as a condition of, any
transfer of assets from Seller's Savings Plan to Buyer's Plan, each party
shall provide the other with a copy of a current IRS determination letter
evidencing the tax qualified status of its savings plan and the tax exempt
status of the plan's trust. As of the transfer date, Buyer's Plan will be
liable for the payment of benefits accrued by and transferred in respect of
the Transferred Employees under Seller's Savings Plan; provided, however,
that Buyer assumes no liability for the valuation of the accounts of the
Transferred Employees under Seller's Savings Plan.
(e) Buyer's Plans which are welfare plans (as defined in Section
3(1) of ERISA) shall (A) provide that employment by FFMC or any Subsidiary
prior to the Closing Date shall be treated as employment by the Buyer after
the Closing Date for purposes of determining eligibility for participation,
and (B) provide that any expenses incurred by Transferred Employees during
1998 on or before the Closing Date shall be taken into account during the
first plan year of such welfare plans for the purposes of satisfying
deductible or coinsurance requirements or satisfaction of maximum
out-of-pocket provisions to the same extent as if such expenses had been
incurred by such employees after the Closing Date. Within twenty (20) days
after the Closing Date, FFMC agrees to deliver to Buyer a schedule showing,
with respect to each of the Transferred Employees, the amounts set forth in
clause (B) above as of the Closing Date.
(f) FFMC has heretofore delivered to Buyer a schedule showing,
with respect to each Transferred Employee as of a recent date, the number of
days of vacation to which such employee is entitled as of such date. FFMC
agrees that within 10 days after the Closing it shall deliver to Buyer a
schedule showing, with respect to each of the Transferred Employees, the
number of days of vacation to which such employee was entitled as of the
Closing Date (the "Vacation Schedule"). Buyer agrees that Buyer shall take
responsibility for and cause to be paid in the normal course of business the
vacation pay of all Transferred Employees as reflected on the
48
<PAGE>
Vacation Schedule. For purposes of computing eligibility for and the amount
of vacation or holiday pay of a Transferred Employee to be accrued after the
Closing, employment of a Transferred Employee by FFMC or any Subsidiary shall
be taken into account to the same extent as if it were employment by Buyer.
(g) Buyer shall be responsible and liable for any claim arising
under any state worker's compensation or similar law which is based upon any
occurrence after the Closing Date.
(h) FFMC shall be responsible for providing continuation coverage
under each of its applicable health plans to employees (and their covered
dependents) who do not become Transferred Employees with respect to all
qualifying events under Part 6 of Title I of ERISA and comparable state law.
Buyer shall be responsible for providing continuation coverage under each of
its applicable health plans to Transferred Employees (and their covered
dependents) with respect to all post-Closing Date qualifying events under
Part 6 of Title I of ERISA and comparable state law.
(i) Nothing in this Section 8.3 constitutes a guarantee of
employment for any Transferred Employee, and each Transferred Employee
accepting employment with Buyer will be an employee at will unless Buyer
specifically contracts otherwise in writing. Buyer is free to amend the
terms of employment of any Transferred Employee accepting employment with
Buyer (including the terms of any benefit or compensation plan or scheme) as
the terms of such employment, plan or scheme permit. Buyer assumes no
obligations with respect to any employee of the Division except as
specifically provided pursuant to this Section 8.3. Further, this Section
8.3 is intended solely for the benefit of Sellers and does not give rise to
any rights or claim on the part of any Transferred Employee. Buyer shall not
assume any liabilities or obligations of Sellers under Sellers' benefit
plans, including without limitation, pursuant to this Agreement or the
Assumption Agreement.
8.4. Post-Closing Remittances. If, after the Closing Date, FFMC
shall receive any remittance from any account debtors with respect to any
accounts or notes receivables included in the Purchased Assets, FFMC shall
endorse such remittance to the order of Buyer and forward it to Buyer
promptly following receipt thereof. Conversely, if, after the Closing Date,
Buyer or its Affiliates shall receive any remittance in respect of sales
Taxes for which Sellers are liable pursuant to Section 8.2 or from any
account debtors not in payment of any accounts or notes receivables included
in the Purchased Assets, or not otherwise payable to Buyer or its Affiliates,
then Buyer or its Affiliates, as applicable, shall endorse such remittance to
the order of FFMC and forward it to FFMC promptly following receipt thereof.
8.5. Intercompany Obligations. Effective immediately prior to the
Closing, Sellers shall cause all intercompany payables and receivables (other
than Intercompany Trade Payables and Receivables) to be voided, canceled and
terminated without any payment therefor and shall take such action as may be
necessary so that, as of the Closing Date, there shall be no
49
<PAGE>
intercompany obligations between the Division and Affiliates of Sellers other
than Intercompany Trade Payables and Receivables, together with agreements
relating thereto.
8.6. Covenant Not to Compete. (a) Except as provided in (b) and
(c) below, Sellers covenant and agree that, beginning on the Closing Date and
for a period ending thirty-six (36) months after the Closing Date, Sellers
and their Affiliates will not own, operate, control or otherwise carry on
Restricted Activities in the United States.
(b) Nothing in this Agreement, including without limitation
Section 8.6(a), shall prevent Sellers or any of their Affiliates from:
(i) owning less than 5% of the voting or common stock of a
publicly traded company engaged in Restricted Activities;
(ii) printing, inserting and mailing written communications, via
first class mail, or providing other messaging services through the
Western Union Commercial Services business unit of FDC;
(iii) acquiring, and following such acquisition, actively
engaging in any business that has a subsidiary, division, group,
franchise or segment that is engaged in Restricted Activities, so long
as on the date of such purchase not more than 15% of the consolidated
revenues of such business are derived from Restricted Activities;
(iv) offering to a customer Restricted Activities that FDC or any
of its Affiliates would otherwise be prohibited by Section 8.6(a) from
offering provided that FDC or any of its Affiliates will perform or
provide any other material services or products to such customer in
addition to the Restricted Activities;
(v) performing or providing Restricted Activities in connection
with any other material services or products (A) in connection with
checks, credits, debits, drafts, ATM transactions or electronic funds
transfers; (B) to any current customer of FDC or an Affiliate; (C) in
connection with bill payment or presentation including, but not
limited to, MSFDC; (D) in connection with diversified financial
services, including bill payment, tax payment, money transfer, payment
instrument services and cash management services; (E) in connection
with consumer business database information services (including market
segmentation services, consumer profiling and demographic information
services); or (F) to the bank card, credit card, payment card, debit
card, smart card, stored card and mutual funds industries;
(vi) engaging in the business of sending written communications
via facsimile; or
50
<PAGE>
(vii) subject to Section 8.8, performing or providing Restricted
Activities directly to FDC or an Affiliate.
(c) Nothing in this Agreement, including without limitation
Section 8.6(a), shall prevent any Affiliate of FDC from engaging in any
activity or business which is now being provided by such Affiliate, including
Restricted Activities, or engaging in Restricted Activities after such
Affiliate ceases to be an Affiliate of FDC; provided, that if any Affiliate
of FDC is currently engaging in any Restricted Activity that would not be
permitted by Section 8.6(b), such Affiliate may continue to do so only
through the end of the current term of any existing agreement to provide such
Restricted Activity (which agreements shall not be extended or renewed).
8.7. Non-Solicitation. (a) Sellers and their Affiliates covenant
and agree that, beginning on the Closing Date and for a period ending
thirty-six (36) months after the Closing Date, Sellers and their Affiliates
will not, directly or indirectly, solicit the customers of the Division as of
the date hereof or customers of Buyer receiving the services in clauses (i),
(ii) or (iii) below as of the date hereof, in each case solely for the
purpose of providing to any such customer any of the following services on a
stand-alone basis and independent of the provision of any other material
services or products by Sellers or any Affiliates to such customer: (i)
transforming structured or unstructured electronic data or digital images
onto CD-ROM, CD-R or CD-RW; (ii) scanning paper images and converting the
scanned image into electronic data for output to CD-ROM, CD-R or CD-RW; or
(iii) the duplication of CD-ROM, CD-R or CD-RW.
(b) Except for the persons identified in Schedule 8.7(B), Sellers
agree that they shall not, and shall not permit their respective Affiliates
to, prior to eighteen (18) months after the Closing Date, solicit any
Transferred Employee (other than any person listed on Schedule 8.3(A)) whose
base salary is in excess of $50,000 to leave such employment or to accept any
other position or employment or assist any other entity in hiring such
employee; provided, however, that nothing in this Section 8.7(b) shall
preclude or be deemed to be breached by (i) the solicitation of any
individual who has been discharged by Buyer or has initiated conversations
with Seller after having resigned his or her employment with Buyer or (ii)
any public advertisement by Sellers or their respective Affiliates soliciting
applicants for employment.
8.8. FDC Affiliates. Sellers shall cause each of First Data
Merchant Services Corporation (except with respect to business with the DAS
unit of the Division which is scheduled to terminate in September 1998),
First Data Investor Services Group, Inc. and Western Union Commercial
Services to enter into (or extend) service agreements with the Division until
at least May 31, 2000 on pricing terms that are substantially comparable to
terms in effect on the date hereof.
51
<PAGE>
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be subject to the
satisfaction or, at the option of Buyer, waiver (to the extent permissible under
applicable law), on or prior to the Closing Date, of the following conditions:
9.1. No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Sellers in the performance of any of
their covenants and agreements herein which shall not have been remedied or
cured; the representations and warranties of Sellers contained in this Agreement
which are not qualified as to materiality shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date and the
representations and warranties of Sellers contained in this Agreement which are
qualified as to materiality shall be true and correct on the Closing Date as
though made on the Closing Date (except, in each case, to the extent that the
representations and warranties expressly relate to an earlier date), except, in
each case, for changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Buyer or any
transaction permitted by Section 7.4; and there shall have been delivered to
Buyer a certificate to such effect, dated the Closing Date, signed on behalf of
FDC by the President or Vice President of FDC.
9.2. No Material Adverse Effect. Between the date hereof and the
Closing Date, there shall have been no change resulting in a Material Adverse
Effect; and there shall have been delivered to Buyer a certificate to such
effect, dated the Closing Date, signed on behalf of FDC by the President or Vice
President of FDC.
9.3. No Restraint. The waiting period under the HSR Act shall have
expired or been terminated, and there shall not have been issued and be in
effect (whether temporary, preliminary or permanent) any order, decree, judgment
or injunction (collectively, an "Order") of any court or tribunal of competent
jurisdiction which prohibits the consummation of any material transactions
contemplated by this Agreement.
9.4. Environmental Property Transfer Acts. Buyer shall have received
documentation reasonably satisfactory to Buyer demonstrating compliance with any
applicable Environmental Property Transfer Act.
9.5. Financing. Buyer shall have obtained the proceeds of a debt
financing, (which may be a bridge loan or a Rule 144A offering) in the amount
set forth in the debt financing letter delivered to FFMC and on other terms
reasonably satisfactory to Buyer.
9.6. Closing Deliveries. Sellers shall have delivered to Buyer the
documents required by Section 4.4.
52
<PAGE>
Notwithstanding the failure of any one or more of the foregoing
conditions, Buyer may proceed with the Closing without satisfaction, in whole or
in part, of any one or more of such conditions and without written waiver. To
the extent that at the Closing Sellers deliver to Buyer a written notice
specifying in reasonable detail the failure of any of such conditions or the
breach by Sellers of any of the representations or warranties of Sellers herein,
and nevertheless Buyer proceeds with the Closing, Buyer shall be deemed to have
waived for all purposes any rights or remedies it may have against Sellers by
reason of the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such notice.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers under this Agreement shall be subject to
the satisfaction or, at the option of Sellers, waiver (to the extent
permissible under applicable law), on or prior to the Closing Date, of the
following conditions:
10.1. No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Buyer in the performance of any of
its covenants and agreements herein which shall not have been remedied or cured;
the representations and warranties of Buyer contained in this Agreement which
are not qualified as to materiality shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date and the
representations and warranties of Buyer contained in this Agreement which are
qualified as to materiality shall be true and correct on the Closing Date as
though made on the Closing Date, except, in each case, to the extent the
representations and warranties expressly relate to an earlier date or for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Sellers or any transaction
contemplated by this Agreement; and there shall have been delivered to Sellers a
certificate to such effect, dated the Closing Date and signed on behalf of Buyer
by the President or any Vice President of Buyer.
10.2. No Restraint. The waiting period under the HSR Act shall have
expired or been terminated, and there shall not have been issued and be in
effect (whether temporary, preliminary or permanent) an Order of any court or
tribunal of competent jurisdiction which prohibits the consummation of any
material transactions contemplated by this Agreement.
10.3. Closing Deliveries. Buyer shall have delivered to Sellers the
documents required by Section 4.3.
Notwithstanding the failure of any one or more of the foregoing
conditions, Sellers may proceed with the Closing without satisfaction, in whole
or in part, of any one or more of such conditions and without written waiver.
To the extent that at the Closing Buyer delivers to Sellers a written notice
specifying in reasonable detail the failure of any of such conditions or the
breach by Buyer of any of the representations or warranties of Buyer herein, and
nevertheless Sellers
53
<PAGE>
proceed with the Closing, Sellers shall be deemed to have waived for all
purposes any rights or remedies it may have against Buyer by reason of the
failure of any such conditions or the breach of any such representations or
warranties to the extent described in such notice.
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Sellers. (a) Sellers jointly and severally
agree to indemnify and hold harmless each Buyer Group Member from and against
any and all Losses and Expenses incurred by such Buyer Group Member in
connection with or arising from:
(i) any breach by any Seller of any of its covenants in this
Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of any Seller contained or referred to in this
Agreement (without regard to any "Material Adverse Effect" or other
materiality exceptions or qualifications contained in any such
representation or warranty) or any certificate delivered by or on
behalf of Sellers pursuant hereto; or
(iii) any Excluded Liability.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Sellers shall be required to indemnify and hold harmless under clauses
(i) and (ii) of Section 11.1(a) with respect to Losses and Expenses incurred by
Buyer Group Members only to the extent the aggregate amount of such Losses and
Expenses exceeds $2,000,000 (with such first $2,000,000 of Losses and Expenses
not being subject to indemnification) and, provided, further, that with respect
to any Losses and Expenses incurred by Buyer Group Members under clauses (i) and
(ii) of Section 11.1(a) in excess of $2,000,000, only if any individual claim
involves $25,000 or more of Losses and Expenses. In addition, in no event shall
the aggregate amount required to be paid by Sellers pursuant to Section 11.1(a)
(other than with respect to clause (iii) thereof or pursuant to a breach of
Section 5.23) exceed 20% of the Purchase Price (as adjusted pursuant to
Section 3.2). Notwithstanding the foregoing, the limitations set forth in this
Section 11.1(b) shall not apply to an intentional misrepresentation by Sellers
or to Section 2.1, Section 3.2, Section 3.3, Section 5.1, Section 5.2, the first
paragraph of Section 5.3, Section 5.6, Section 5.15(e)(ii), Section 5.25,
Section 7.3, Section 7.4, Section 7.5, Section 7.7, Section 7.8, Article VIII,
Section 13.2, Section 13.3, Section 13.5, Section 13.6, Section 13.10 and
Section 13.13.
(c) The indemnification provided for in this Section 11.1 shall
terminate eighteen months after the Closing Date (and no claims shall be made by
any Buyer Group Member under this Section 11.1 thereafter), except that the
indemnification by Sellers shall continue as to:
54
<PAGE>
(i) the obligations and representations of Sellers under the
Instrument of Assignment, as to which no time limitation shall apply;
(ii) the representations and warranties of Sellers set forth in
Sections 5.6 and 5.18 and the covenants of Sellers set forth in
Article II, Sections 3.2, 3.3, 8.1, 8.2, 8.3, 8.4, 8.5 and 8.8, which
shall survive for the applicable statute of limitations;
(iii) the covenants of Sellers set forth in Sections 8.6, 8.7
and 13.2(b), which shall survive for the period set forth therein;
(iv) the covenants of Sellers set forth in Sections 13.2(a),
13.3, 13.5, 13.6, 13.10 and 13.13 and the matter set forth in
Section 11.1(a)(iii), as to all of which no time limitation shall
apply;
(v) the representations and warranties set forth in
Sections 5.1, 5.2, the first paragraph of Section 5.3,
Sections 5.15(e) and 5.25, which shall survive for three years after
the Closing Date;
(vi) the representations and warranties of Sellers set forth in
Sections 5.23, which shall survive for five years after the Closing
Date; and
(vii) any Loss or Expense of which any Buyer Group Member has
notified Sellers in accordance with the requirements of Section 11.3
on or prior to the date such indemnification would otherwise terminate
in accordance with this Section 11.1, as to which the obligation of
Sellers shall continue until the liability of Sellers shall have been
determined pursuant to this Article XI, and Sellers shall have
reimbursed all Buyer Group Members for the full amount of such Loss
and Expense in accordance with this Article XI.
11.2. Indemnification by Buyer. (a) Buyer agrees to indemnify and
hold harmless each Seller Group Member from and against any and all Losses and
Expenses incurred by such Seller Group Member in connection with or arising
from:
(i) any breach by Buyer of any of its covenants in this
Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of Buyer contained or referred to in this Agreement or
in any certificate delivered by or on behalf of Buyer pursuant hereto;
(iii) any Assumed Liability; or
55
<PAGE>
(iv) any third-party claims relating to the operation of the
Business following the Closing Date for which Buyer is not entitled to
indemnification from Sellers.
(b) The indemnification provided for in this Section 11.2 shall
terminate eighteen months after the Closing Date (and no claims shall be made by
any Seller Group Member under this Section 11.2 thereafter), except that the
indemnification by Buyer shall continue as to:
(i) the obligations and representations of Buyer under the
Assumption Agreement, as to which no time limitation shall apply;
(ii) the covenants of Buyer set forth in Article II,
Sections 3.1, 3.2, 3.3, 8.2 8.3, 8.4 and 8.5, which shall survive for
the applicable statute of limitations;
(iii) the covenants of Buyer set forth in Sections 13.2,
13.3, 13.5, 13.6, 13.10 and 13.13 and the matters set forth in
Sections 11.2(a)(iii) and (iv), as to all of which no time limitation
shall apply; and
(iv) any Loss or Expense of which any Seller Group Member has
notified Buyer in accordance with the requirements of Section 11.3 on
or prior to the date such indemnification would otherwise terminate in
accordance with this Section 11.2, as to which the obligation of Buyer
shall continue until the liability of Buyer shall have been determined
pursuant to this Article XI, and Buyer shall have reimbursed all
Seller Group Members for the full amount of such Loss and Expense in
accordance with this Article XI.
11.3. Notice of Claims. (a) Any Buyer Group Member or Seller Group
Member (the "Indemnified Party") seeking indemnification hereunder shall give to
the party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, however, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be given promptly after the
action or suit is commenced.
(b) In calculating any Loss or Expense there shall be deducted any
insurance recovery in respect thereof (and no right of subrogation shall accrue
hereunder to any insurer). Any indemnity payment hereunder with respect to any
Loss or Expense shall be calculated on an "After-Tax Basis," which shall mean an
amount which is sufficient to compensate the indemnified party for the event
giving rise to such Loss or Expense (the "Indemnified Event"), determined after
taking into account (1) all increases in federal, state, local or other Taxes
(including
56
<PAGE>
estimated Taxes) payable by the indemnified party as a result of the receipt of
the indemnity payment (as a result of the indemnity payment being included in
income, resulting in a reduction of tax basis, or otherwise); provided, however,
that Buyer and Sellers agree to report each payment made in respect of a Loss or
Expense as an adjustment to the Purchase Price for federal income Tax purposes,
(2) all increases in federal, state, local and other Taxes (including estimated
Taxes) payable by the indemnified party for all affected taxable years as a
result of the Indemnified Event, and (3) all reductions in federal, state, local
and foreign Taxes (including estimated Taxes) payable by the indemnified party
as a result of the Indemnified Event. All calculations shall be made using
reasonable assumptions agreed upon by Buyer and Sellers at the time
indemnification is sought, taking into account the Tax benefits that have been
obtained (or that would be obtained if the Indemnified Party took all steps to
obtain such Tax benefits, determined by multiplying the maximum possible Tax
benefit by the percentage likelihood of success, as determined by the parties).
(c) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article XI shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Loss and Expense suffered by it.
11.4. Third Person Claims. (a) In order for a party to be entitled
to any indemnification provided for under this Agreement in respect of, arising
out of or involving a claim or demand made by any third Person against the
Indemnified Party, such Indemnified Party must notify the Indemnitor in writing,
and in reasonable detail, of the third Person claim promptly after receipt by
such Indemnified Party of written notice of the third Person claim; provided
however, no delay by the Indemnified Party to notify the Indemnitor shall
relieve the Indemnitor from any liability or obligation hereunder unless (and
then solely to the extent that) the Indemnitor can demonstrate that it was
damaged by such delay). Thereafter, the Indemnified Party shall deliver to the
Indemnitor, promptly after the Indemnified Party's receipt thereof, copies of
all notices and documents (including court papers) received by the Indemnitor
relating to the third Person claim. Notwithstanding the foregoing, should a
party be physically served with a complaint with regard to a third Person claim,
the Indemnified Party must notify the Indemnitor with a copy of the complaint
promptly after receipt thereof and shall deliver to the Indemnitor promptly
after the receipt of such complaint copies of notices and documents (including
court papers) received by the Indemnified Party relating to the third Person
claim.
(b) Any notice of a claim by reason of any of the representations,
warranties or covenants contained in this Agreement shall contain a reference to
the provision of this Agreement or any other agreement, document or instrument
executed hereunder or in connection herewith upon which such claim is based, the
facts giving rise to an alleged basis for the claim and the
57
<PAGE>
amount of the liability asserted against the Indemnitor by reason of the claim.
Subject to clause (c) below, in the event of the initiation of any legal
proceeding, claim or demand against the Indemnified Party by a third Person, the
Indemnitor shall have the sole and absolute right after the receipt of notice,
at its option and at its own expense, to be represented by counsel of its choice
reasonably acceptable to the Indemnified Party and to control, defend against,
negotiate, settle or otherwise deal with any proceeding, claim, or demand which
relates to any loss, liability or damage indemnified against hereunder;
provided, however, that the Indemnified Party may participate in any such
proceeding with counsel of its choice and at its expense unless the Indemnified
Party shall be a party to any such action and shall have received a written
opinion of counsel that there exists an actual conflict of interest between the
Indemnified Party and the Indemnitor with respect to the proceeding, claim or
demand, in which case the Indemnified Party shall be entitled to participate in
the defense of such proceeding, claim or demand with the Indemnitor paying for
50% of such expenses. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand. To the extent the Indemnitor elects not to
defend or abandons such proceeding, claim or demand, and the Indemnified Party
defends against or otherwise deals with any such proceeding, claim or demand,
the Indemnified Party may retain counsel, at the expense of the Indemnitor, and
control the defense and settlement of such proceeding. Neither the Indemnitor
nor the Indemnified Party may consent to entry of any judgment or settle any
such proceeding which judgment or settlement obligates the other party to pay
money, to perform obligations or to admit liability without the consent of the
other party, such consent not to be unreasonably withheld. In the event the
Indemnified Party shall refuse to consent to the settlement of any legal
proceeding, claim or demand, so long as only money damages are involved, the
liability of the Indemnitor for indemnification in respect of such legal
proceeding, claim or demand shall not exceed the amount for which the legal
proceeding, claim or demand could have been settled plus the amount of Expense
incurred by the Indemnified Party prior to the time of the proposed settlement
to which it is entitled to indemnification. After any final judgment or award
shall have been rendered by a court, arbitration board or administrative agency
of competent jurisdiction and the time in which to appeal therefrom has expired,
or a settlement shall have been consummated, or the Indemnified Party and the
Indemnitor shall arrive at a mutually binding agreement with respect to each
separate matter alleged to be indemnified by the Indemnitor hereunder, the
Indemnified Party shall forward to the Indemnitor notice of any sums due and
owing by it with respect to such matter and the Indemnitor shall pay all of the
sums so owing to the Indemnified Party by wire transfer, certified or bank
cashier's check within 30 days after the date of such notice.
(c) If any third Person claim, action or suit against any Indemnified
Party is solely for injunctive relief or is reasonably likely to have a material
adverse impact on the continuing operation of the Business (and, in each case,
Buyer is the Indemnified Party), then the Indemnified Party shall have the right
to conduct and control, through counsel of its choosing and at the Indemnitor's
expense, the defense, compromise or settlement of any such third Person claim,
action or suit against such Indemnified Party as to which indemnification will
be sought by any Indemnified Party from any Indemnitor hereunder and in any such
case the Indemnitor
58
<PAGE>
shall cooperate in connection therewith and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested by the Indemnified
Party in connection therewith; provided, that the Indemnitor may participate,
through counsel chosen by it and at its own expense, in the defense of any such
claim, action or suit as to which the Indemnified Party has so elected to
conduct and control the defense thereof; and provided, further, that the
Indemnified Party shall not, without the written consent of the Indemnitor
(which written consent shall not be unreasonably withheld), pay, compromise or
settle any such claim, action or suit, except that no such consent shall be
required if, following a written request from the Indemnified Party, the
Indemnitor shall fail, within 14 days after the making of such request, to
acknowledge and agree in writing that, if such claim, action or suit shall be
adversely determined, such Indemnitor has an obligation to provide
indemnification hereunder to such Indemnified Party. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay, settle or
compromise any such claim, action or suit, provided that in such event the
Indemnified Party shall waive any right to indemnity therefor hereunder.
(d) Notwithstanding anything contained herein to the contrary,
Sellers shall have the exclusive right to assume the defense of, or otherwise
contest or settle any claim, action, suit or proceeding described in
Schedule 5.22 (which is an Excluded Liability). Buyer agrees to cooperate and
assist Sellers with all reasonable requests (including, without limitation,
making employees available for interviews, depositions and trials) and to afford
Sellers access to any records, reports or other documents reasonably requested
by Sellers in connection with such claims, actions, suits or proceedings.
(e) If there shall be any conflict between the provisions of this
Section 11.4 relating to contests of third-party claims, and Section 8.2.3
relating to Tax contests, the provisions of Section 8.2.3 shall control with
respect to Tax contests.
11.5. Limitations. (a) In any case where an Indemnified Party
recovers from third Persons any amount in respect of a matter with respect to
which an Indemnitor has indemnified it pursuant to this Agreement, such
Indemnified Party shall promptly pay over to the Indemnitor the amount so
recovered (after deducting therefrom the full amount of the expenses incurred by
it in procuring such recovery), but not in excess of the sum of (i) any amount
previously so paid by the Indemnitor to or on behalf of the Indemnified Party in
respect of such matter and (ii) any amount expended by the Indemnitor in
pursuing or defending any claim arising out of such matter.
(b) No party shall have any liability for any inaccuracy in or breach
of any representation or warranty by such party if the other party or any of its
officers, employees, counsel or other representatives had actual knowledge on or
before the Closing Date of the facts as a result of which such representation or
warranty was inaccurate or breached.
59
<PAGE>
(c) The obligations of an Indemnitor in respect of a claim for
indemnification under this Agreement shall be limited to the taking of such
reasonable actions as are necessary under the circumstances giving rise to such
claim, and an Indemnitor (i) shall in no event be required to take more
extensive actions than would be required under Requirements of Law then in
effect, applicable and enforceable and (ii) shall not be liable for special,
exemplary or consequential damages, including without limitation loss of profit
or revenue, interference with operations, or loss of tenants, lenders, investors
or buyers or inability to use any of the Purchased Assets (except, in the case
of any of the foregoing in this clause (ii), with respect to a claim made by a
third party). Sellers and Buyer agree that their respective rights and
obligations in respect of matters as provided in this Agreement shall supersede
any such rights and obligations either may have under any existing or future
law.
(d) Buyer agrees that Buyer's rights to indemnification pursuant to
Section 11.1(a) is the sole and exclusive remedy of Buyer against Sellers with
respect to any Environmental Losses or Environmental Expenses suffered by Buyer
Group Members and arising from or in connection with the Business or the
Purchased Assets. Buyer agrees that it will not seek contribution or other
redress against Sellers under CERCLA or under any similar state or federal law
with respect to any such Environmental Losses or Environmental Expenses. Buyer
agrees that Sellers are required to indemnify and hold harmless the Buyer Group
Members for any Environmental Losses and Expenses only in respect of any claim,
action or suit by any third Person or any proceeding, investigation or order by
any Governmental Body.
(e) Except for remedies that cannot be waived as a matter of law and
except for injunctive and provisional relief, if the Closing occurs, this
Article XI shall be the exclusive remedy for breaches of this Agreement
(including any covenant, obligation, representation or warranty contained in
this Agreement or in any certificate delivered pursuant to this Agreement) or
otherwise in respect of the sale of the Purchased Assets contemplated hereby.
ARTICLE XII
TERMINATION
12.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual consent of Buyer and FFMC;
(b) by Buyer or FFMC if the Closing shall not have occurred on
or before July 31, 1998 (or such later date as may be mutually agreed
to by Buyer and FFMC in writing) (the "Termination Date"); provided,
however, that the Termination Date may be extended by written notice
of either Buyer or FFMC to the other to a date no later than August
31, 1998 if, as of July 31,1998, the conditions set forth in
Section 9.3 and 10.2 have not been satisfied;
60
<PAGE>
(c) by Buyer in the event of any material breach by Sellers of
any of their agreements, representations or warranties contained
herein and the failure of Sellers to cure such breach within fourteen
days after receipt of notice from Buyer requesting such breach to be
cured;
(d) by FFMC in the event of any material breach by Buyer of any
of Buyer's agreements, representations or warranties contained herein
and the failure of Buyer to cure such breach within fourteen days
after receipt of notice from FFMC requesting such breach to be cured;
(e) by Buyer or FFMC if any court of competent jurisdiction in
the United States or other United States Governmental Body shall have
issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; or
(f) by FFMC at any time (i) 10 business days after the waiting
period under the HSR Act shall have expired or (ii) 15 business days
after the waiting period under the HSR Act shall have been terminated,
in either case provided that FFMC can reasonably demonstrate its
ability to satisfy all of the conditions in Article IX (other than
Section 9.5).
12.2. Notice of Termination. Any party desiring to terminate this
Agreement pursuant to Section 12.1 shall give written notice of such termination
to the other party to this Agreement.
12.3. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to this Article XIII, all further obligations of
the parties under this Agreement (other than Sections 13.2(a), 13.10 and
13.14) shall be terminated without further liability of any party to the
other parties. Nothing herein shall relieve any party from liability for any
willful breach of any of its representations, warranties, covenants or
agreements contained in this Agreement prior to termination of this Agreement
or any obligations hereunder.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Representations and Warranties. Each
representation and warranty contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement through the
period during which claims for indemnification may be made pursuant to
Article XI (at which time such representation and warranty shall terminate).
61
<PAGE>
13.2. Confidential Nature of Information. (a) Each party hereto
agrees that all documents, materials and other information which it shall have
obtained regarding the other party during the course of the negotiations leading
to the consummation of the transactions contemplated hereby (whether obtained
before or after the date of this Agreement), the investigation provided for
herein and the preparation of this Agreement and other related documents shall
be held in confidence pursuant to the Confidentiality Agreement. The
obligations of the parties set forth in the Confidentiality Agreement shall
survive the termination of this Agreement.
(b) Sellers will not, and will cause their Affiliates not to, for a
period beginning on the Closing Date and ending eighteen (18) months after the
Closing Date, disclose to any Person other than Buyer any "Proprietary
Information" (as hereinafter defined) relating to the conduct of the business by
the Division. For purposes of this Agreement, the phrase "Proprietary
Information" means trade secrets and any other information not publicly
available which relates to specific matters concerning the business conducted by
the Division, such as pricing policies; sales procedures or methods; strategic
plans; internal financial information; and research and development plans and
activities. Nothing in the preceding sentence shall preclude Sellers or their
Affiliates from disclosing Proprietary Information if such Proprietary
Information (i) becomes publicly available through no fault of Sellers or their
Affiliates, (ii) is required to be disclosed by any law, regulation or order of
any Governmental Body, (iii) is independently known or developed by other
business units of FDC or (iv) is or becomes available to Sellers or their
Affiliates on a nonconfidential basis from a source which, to the knowledge of
Sellers, is not prohibited from disclosing such information to Sellers or their
Affiliates by a legal, contractual or fiduciary obligation to Buyer.
13.3. No Public Announcement. Neither Buyer nor Sellers shall,
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such party shall be so obligated by law or stock
exchange or similar regulation, in which case the other party shall be advised
and the parties shall use their commercially reasonable efforts to cause a
mutually agreeable release or announcement to be issued; provided, however, that
the foregoing shall not preclude communications or disclosures necessary to
implement the provisions of this Agreement or to comply with the accounting and
Securities and Exchange Commission disclosure obligations.
13.4. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or by confirmed facsimile or when sent by registered
or certified mail or by private courier addressed as follows:
62
<PAGE>
If to Buyer, to:
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Attention: Ralph W. Koehrer
Facsimile: 619-679-8359
with a copy to:
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Attention: George C. Gaskin
Facsimile: 619-486-2060
and to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Michael C. Ryan
Facsimile: 212-504-6666
If to Sellers, to:
First Data Corporation
401 Hackensack Avenue
Hackensack, NJ 07601
Attention: Robert J. Levenson
Facsimile: 201-342-5427
with a copy to:
First Data Corporation
5660 New Northside Dr. NW, Suite 1400
Atlanta, GA 30328-5800
Attention: Michael T. Whealy
Facsimile: 770-690-4200
63
<PAGE>
and to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile: 312-853-7036
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
13.5. Successors and Assigns. (a) This Agreement and the rights of
any party under this Agreement shall not be assignable by any party without the
written consent of the other parties, except for Section 5.15(e)(ii) which may
be assigned as provided therein and as provided in this Section 13.5(a).
Notwithstanding the foregoing, Sellers acknowledge that Buyer may, without the
consent of Sellers, sell or otherwise dispose of certain assets and liabilities
of the Division to third parties (each, a "Third-Party Buyer"). If Buyer sells
or otherwise disposes of certain assets and liabilities of the Division, the
parties agree that in connection with such sales or dispositions, at Buyer's
option, either (i) Buyer shall have the right to assert claims under Article XI
on behalf of any Third-Party Buyer and to recover Losses and Expenses incurred
by the Third-Party Buyer under the terms of this Agreement (it being understood
that no such Third-Party Buyer shall be entitled to make any claim directly
against Sellers under this Agreement) or (ii) Buyer may assign this Agreement
and Buyer's rights and obligations hereunder to a Third-Party Buyer to the
extent that this Agreement and Buyer's rights and obligations hereunder relate
to the assets and liabilities acquired by the Third-Party Buyer, provided that,
prior to the effectiveness of any assignment pursuant to this clause (ii) the
Third-Party Buyer agrees in writing in a letter addressed to Sellers that (x)
there will be a new $2,000,000 deductible with respect to indemnification claims
made by the Third-Party Buyer against Sellers, (y) the existing cap on liability
of 20% of the Purchase Price (to the extent applicable to any claim) represents
an aggregate amount applicable to all claims made by any Person against Sellers
under this Agreement and (z) the Third-Party Buyer will be bound by the other
limitations on indemnification (to the extent applicable to any claim) set forth
in this Agreement. No assignment by Buyer pursuant to clause (ii) of the
preceding sentence shall in any way limit or reduce the indemnification
obligation of Sellers to Buyer under this Agreement with respect to any assets
and liabilities of the Division acquired by a Third-Party Buyer from Buyer or
the Purchased Assets and Assumed Liabilities retained by Buyer, it being agreed
that any claim against Sellers under this Agreement may only be asserted by one
claimant.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any Person other than the parties and successors and assigns permitted by
this Section 13.5 any right, remedy or claim under or by reason of this
Agreement.
64
<PAGE>
13.6. Access to Records after Closing. For a period of six years
after the Closing Date, FFMC and its representatives shall have reasonable
access to and may make copies of all of the books and records of FFMC or any
Subsidiary transferred to Buyer hereunder to the extent that such access may
reasonably be required by FFMC in connection with Excluded Assets, Excluded
Liabilities or matters relating to or affected by the operations of the Business
prior to the Closing Date. Such access shall be afforded by Buyer upon receipt
of reasonable advance notice and during normal business hours. FFMC shall be
solely responsible for any costs or expenses incurred by it pursuant to this
Section 13.6. If Buyer shall desire to dispose of any of such books and records
prior to the expiration of such six-year period, Buyer shall, prior to such
disposition, give FFMC a reasonable opportunity, at FFMC's expense, to segregate
and remove such books and records as FFMC may select. Without limiting the
foregoing, Sellers shall also have reasonable access to any books, records,
personnel and business and financial records (and shall receive reasonable
cooperation from Buyer) as may be required by FFMC in connection with the items
identified in Sections 2.2(i) and 2.4(ix).
For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to and may make copies of all of
the books and records relating to the Business which FFMC or any of its
affiliates may retain after the Closing Date. Such access shall be afforded by
FFMC and its affiliates upon receipt of reasonable advance notice and during
normal business hours. Buyer shall be solely responsible for any costs and
expenses incurred by it pursuant to this Section 13.6. If FFMC or any of its
affiliates shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, FFMC shall, prior to such disposition, give
Buyer a reasonable opportunity, at Buyer's expense, to segregate and remove such
books and records as Buyer may select.
13.7. Entire Agreement; Amendments. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto and
the Confidentiality Agreement contain the entire understanding of the parties
hereto with regard to the subject matter contained herein or therein, and
supersede all prior agreements, understandings or letters of intent between or
among any of the parties hereto (written or oral). This Agreement shall not be
amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
13.8. Interpretation. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
Disclosure of any fact or item in any Schedule hereto referenced by a particular
section in this Agreement shall be deemed to have been disclosed with respect to
every other section in this Agreement only if such disclosure would permit a
reasonable person to find such disclosure relevant to such other sections. The
specification of any dollar amount in the representations or warranties
contained in this Agreement or the inclusion of any specific item in any
Schedules hereto is not intended to imply that such amounts, or higher or lower
amounts, or the items so
65
<PAGE>
included or other items, are or are not material, and neither party shall use
the fact of the setting of such amounts or the inclusion of any such item in any
dispute or controversy between the parties as to whether any obligation, item or
matter not described herein or included in a Schedule is or is not material for
purposes of this Agreement. Sellers may, from time to time prior to or at the
Closing, by notice in accordance with the terms of this Agreement, supplement,
amend or create any Schedule, in order to add information or correct previously
supplied information. No such amendment shall be evidence, in and of itself,
that the representations and warranties in the corresponding section are no
longer true and correct. It is specifically agreed that such Schedules may be
amended to add immaterial, as well as material, items thereto. No such
supplemental, amended or additional Schedule shall be deemed to cure any breach
for purposes of Section 9.1. If, however, the Closing occurs, any such
supplement, amendment or addition will be effective to cure and correct for all
other purposes any breach of any representation, warranty or covenant which
would have existed if Sellers had not made such supplement, amendment or
addition, and all references to any Schedule hereto which is supplemented or
amended as provided in this Section 13.8 shall for all purposes after the
Closing be deemed to be a reference to such Schedule as so supplemented or
amended.
13.9. Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
13.10. Expenses. Whether or not the Closing occurs, each party
hereto will pay all costs and expenses incident to its negotiation and
preparation of this Agreement and to its performance and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with, including the fees, expenses and disbursements of its counsel and
accountants.
13.11. Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
13.12. Execution in Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall
66
<PAGE>
be considered one and the same agreement, and shall become binding when one or
more counterparts have been signed by each of the parties hereto and delivered
to each of Sellers and Buyer.
13.13. Further Assurances. On the Closing Date FFMC shall (i)
deliver to Buyer such other bills of sale, deeds, endorsements, assignments and
other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in Buyer all the
right, title and interest of FFMC in, to or under any or all of the Purchased
Assets, and (ii) take all steps as may be reasonably necessary to put Buyer in
actual possession and control of all the Purchased Assets. From time to time
following the Closing, FFMC shall execute and deliver, or cause to be executed
and delivered, to Buyer such other instruments of conveyance and transfer as
Buyer may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, Buyer and put Buyer in
possession of, any part of the Purchased Assets, and, in the case of licenses,
certificates, approvals, authorizations, agreements, contracts, leases,
easements and other commitments included in the Purchased Assets which cannot be
transferred or assigned effectively without the consent of third parties which
consent has not been obtained prior to the Closing, to cooperate with Buyer at
its request in endeavoring to obtain such consent promptly and allowing Buyer to
retain the benefit thereof. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any
license, certificate, approval, authorization, agreement, contract, lease,
easement or other commitment included in the Purchased Assets if an attempted
assignment thereof without the consent of a third party thereto would constitute
a breach thereof giving the third party a right of termination. If any such
consent shall not be obtained or if any attempted assignment would be
ineffective or would impair Buyer's rights under the Purchased Asset in question
so that Buyer would not in effect acquire the benefit of all such rights,
Sellers, to the maximum extent permitted by law and the Purchased Asset (but
excluding any obligation of Sellers to offer or pay any consideration therefor),
shall act after the Closing Date as Buyer's agent in order to obtain for it the
benefits thereunder. Buyer and Sellers shall cooperate, to the maximum extent
permitted by law and the Purchased Asset (but excluding any obligation of
Sellers to offer or pay any consideration therefor), with each other in any
legal and reasonable arrangement designed to provide such benefits to Buyer and
to relieve Sellers from any burden associated therewith.
13.14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
13.15. Disclaimer of Warranties. Sellers make no representations or
warranties with respect to any projections, forecasts or forward-looking
information provided to Buyer. There is no assurance that any projected or
forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS EXPRESSLY
COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT AND THE
CERTIFICATE DELIVERED BY SELLERS PURSUANT TO SECTION 4.4(N), FFMC IS SELLING THE
PURCHASED
67
<PAGE>
ASSETS ON AN "AS IS, WHERE IS" BASIS AND SELLERS DISCLAIM ALL OTHER WARRANTIES,
REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR IMPLIED. SELLERS MAKE NO
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER. Buyer acknowledges that neither
of Sellers nor any of their representatives nor any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any memoranda, charts, summaries or schedules heretofore made
available by Sellers or their representatives to Buyer or any other information
which is not included in this Agreement or the Schedules hereto, and neither of
Sellers nor any of their representatives nor any other Person will have or be
subject to any liability to Buyer, any Affiliate of Buyer or any other Person
resulting from the distribution of any such information to, or use of any such
information by, Buyer, any Affiliate of Buyer or any of their agents,
consultants, accountants, counsel or other representatives.
68
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
ANACOMP, INC.
By: /s/ Ralph W. Koehrer
----------------------------
Ralph W. Koehrer
FIRST FINANCIAL MANAGEMENT
CORPORATION
By: /s/ Robert J. Levenson
----------------------------
FIRST DATA CORPORATION
By: /s/ Robert J. Levenson
----------------------------
69
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A -- Confidentiality Agreement
Exhibit B -- Terms of Transition Services Agreement
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1 -- Working Capital Model
Schedule 2.2(J) -- Excluded Assets
Schedule 4.2 -- Payment on the Closing Date
Schedule 5.2 -- Subsidiaries and Investments
Schedule 5.3 -- Authority of Sellers
Schedule 5.4 -- Financial Statements
Schedule 5.5(A) -- Operations Since Balance Sheet Date
Schedule 5.5(B) -- Operations Since Balance Sheet Date
Schedule 5.6 -- Taxes
Schedule 5.7 -- Availability of Assets and Legality of Use
Schedule 5.8 -- Governmental Permits
Schedule 5.9 -- Real Property
Schedule 5.10 -- Real Property Leases
Schedule 5.11 -- Condition of Property
Schedule 5.13 -- Personal Property
Schedule 5.14 -- Personal Property Leases
Schedule 5.15 -- Patents and Trademarks
Schedule 5.15(E) -- DAS Year 2000 Plan
Schedule 5.17 -- Title to Property
Schedule 5.18(A) -- Employees and Related Agreements; ERISA
Schedule 5.18(B) -- Employees and Related Agreements; ERISA
Schedule 5.18(D) -- Employees and Related Agreements; ERISA
Schedule 5.18(E) -- Employees and Related Agreements; ERISA
Schedule 5.18(F) -- Employees and Related Agreements; ERISA
Schedule 5.19 -- Employee Relations
Schedule 5.20 -- Contracts
Schedule 5.21 -- Status of Contracts
Schedule 5.22 -- No Violation, Litigation or Regulatory Action
Schedule 5.23 -- Environmental Matters
Schedule 5.24 -- Insurance
Schedule 5.26 -- Certain Agreements
Schedule 5.27 -- Form Agreements
Schedule 5.28 -- Customers and Suppliers
Schedule 5.29 -- Liabilities
Schedule 6.3 -- No Violation, Litigation or Regulatory Action
Schedule 7.4(B) -- Operations Prior to the Closing Date
Schedule 8.3(A) -- Employees and Employee Benefits Plans
Schedule 8.7(B) -- Non-Solicitation
</TABLE>
<PAGE>
EXHIBIT A
<PAGE>
[Letterhead]
January 8, 1998
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
CONFIDENTIALITY AGREEMENT
-------------------------
Dear Sirs:
In connection with your possible interest in the acquisition of First Image
Management Company ("First Image" or the "Company") ("the
Transaction"), a wholly-owned subsidiary of First Data Corporation
("FDC"), you have requested that we or our representatives furnish you or
your representatives with certain information relating to the Company or the
Transaction. All such information (whether written, oral or electronically
transmitted) furnished (whether before or after the date hereof) by us or our
directors, officers, employees, affiliates, representatives (including,
without limitation, financial advisors, attorneys and accountants) or agents
(collectively, "our Representatives") to you or your directors, officers,
employees, affiliates, representatives (including, without limitation,
financial advisors, attorneys and accountants) or agents or your potential
sources of financing for the Transaction (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or
other documents prepared by you or your Representatives in connection with your
or their review of, or your interest in, the Transaction which contain or
reflect any such information is hereinafter referred to as the
"Information". The term Information will not, however, include information
which (i) is or becomes publicly available other than as a result of a
disclosure by you or your Representatives or (ii) is or becomes available to
you on a nonconfidential basis from a source (other than us or our
Representatives) which, to the best of your knowledge after due inquiry, is
not prohibited from disclosing such information to you by legal, contractual
or fiduciary obligation to us or (iii) is independently known or developed by
you without the use, directly or indirectly, of Information received from us.
With respect to oral Information that we disclose to you or your
Representatives, we agree to identify any such oral presentation or
communication as Information immediately before, during or after such oral
presentation or communication.
Accordingly, you hereby agree that:
1. You and your Representatives (1) will keep the Information confidential
and will not (except as required by applicable law, regulation or legal
process, and only after compliance with paragraph 3 below), without our
prior written consent, disclose any Information in any
<PAGE>
manner whatsoever, and (ii) will not use any Information other than in
connection with the Transaction; provided, however, that you may reveal the
Information to you Representatives (a) who need to know the Information for
the purpose of evaluating the Transaction, (b) who are informed by you of
the confidential nature of the Information and (c) who agree to act in
accordance with the terms of this letter agreement. You will cause your
Representatives to observe the terms of this letter agreement, and you will
be responsible for any breach of this letter agreement by any of your
Representatives.
2. You and your Representatives will not (except as required by applicable
law, regulation or legal process, and only after compliance with paragraph 3
below), without our prior written consent, disclose to any person the fact
that the Information exists or has been made available, that you are
considering the Transaction or any other transaction involving the Company
or FDC, or that discussions or negotiations are taking or have taken place
concerning the Transaction or involving the Company or FDC or any term,
condition or other fact relating to the Transaction or such discussions or
negotiations, including, without limitation, the status thereof.
3. In the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law, regulation or legal process
to disclose any of the Information, you will notify us promptly so that we
may seek a protective order or other appropriate remedy or, in our sole
discretion, waive compliance with the terms of this letter agreement. In the
event that no such protective order or other remedy is obtained, or that
FDC waives compliance with the terms of this letter agreement, you will
furnish only that portion of the Information which you are advised by
counsel is legally required and will exercise all reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded the
Information.
4. If you determine not to proceed with the Transaction, you will promptly
inform our Representative, Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), of that decision and, in that case, and at any time upon the
request of the Company or FDC or any of our Representatives, you will
either (i) promptly destroy all copies of the written Information in your or
your Representatives' possession and confirm such destruction to us in
writing, or (ii) promptly deliver to the Company at your own expense all
copies of written Information in your or your Representatives' possession.
Subject to the first paragraph of this letter agreement, any oral
Information will continue to be subject to the terms of this letter
agreement.
5. You acknowledge that neither we, nor Morgan Stanley or its affiliates, nor
our other Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended, makes any
express or implied representation or warranty as to the accuracy or
completeness of the Information, and you agree that no such person will
have any liability relating to the Information or for any errors therein
or omissions therefrom. You further agree that you are not entitled to
rely on the accuracy or completeness of the Information and that you will
be entitled to rely solely on such representations and warranties as may be
included in any definitive agreement with respect to the Transaction,
subject to such limitations and restrictions as may be contained therein.
<PAGE>
6. Assuming that the Transaction is not consummated by the parties
hereto, you agree that, for a period of eighteen (18) months from
the date of this letter agreement, you will not, directly or
indirectly, solicit for employment or hire any employee of the
Company or FDC with whom you have had contact or who became known to
you in connection with your consideration of the Transaction;
provided, however, that the foregoing provision will not prevent you
from employing any such person who contacts you on his or her own
initiative without any direct or indirect solicitation by or
encouragement from you.
7. You agree that all (i) communications regarding the Transaction,
(ii) requests for additional information, facility tours or
management meetings, and (iii) discussions or questions regarding
procedures with respect to the Transaction, will be first submitted
or directed to Morgan Stanley and not to the Company or to FDC. You
acknowledge and agree that (a) we and our Representatives are free
to conduct the process leading up to a possible Transaction as we
and our Representatives, in our sole discretion, determine
(including, without limitation, by negotiating with any prospective
buyer and entering into a preliminary or definitive agreement
without prior notice to you or any other person), (b) we reserve the
right, in our sole discretion, to change the procedures relating to
our consideration of the Transaction at any time without prior
notice to you or any other person, to reject any and all proposals
made by you or any of your Representatives with regard to the
Transaction, and to terminate discussions and negotiations with you
at any time and for any reason, and (c) unless and until a written
definitive agreement concerning the Transaction has been executed,
neither we nor any of our Representatives will have any liability to
you with respect to the Transaction, whether by virtue of this
letter agreement, any other written or oral expression with respect
to the Transaction or otherwise.
8. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by
you or by your Representatives, and, without prejudice to any other
rights and remedies otherwise available to us, you agree to the
granting of injunctive relief in our favor without proof of actual
damages. In the event of litigation relating to this letter
agreement, if a court of competent jurisdiction determines in a
final, nonappealable order that this letter agreement has been
breached by you or by your Representatives, then you will reimburse
FDC and/or the Company for its costs and expenses (including,
without limitation, legal fees and expenses) incurred in connection
with all such Litigation.
9. You agree that no failure or delay by us in exercising any right,
power or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or
privilege hereunder.
10. This letter agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts
between residents of that State and executed in and to be performed in
that State.
11. This letter agreement contains the entire agreement between you and
us concerning the confidentiality of the Information, and no
modifications of this letter agreement or waiver of
<PAGE>
the terms and conditions hereof will be binding upon you or us. unless
approved in writing by each of you and us.
Please confirm your agreement with the foregoing by signing and returning to
the undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
FIRST DATA CORPORATION
By: /s/ Michael T. Wherly
-------------------------------
Name: GC -
-------------------------------
Title: Michael T. Wherly
-------------------------------
Accepted and Agreed as of the date
first written below:
- -----------------------------------
ANACOMP, INC.
By: /s/ George C. Gaskins
-----------------------------
Name: George C. Gaskins
-----------------------------
Title:Senior Vice President and General Counsel
-----------------------------
January 8, 1998
-----------------------------
<PAGE>
ADDENDUM TO CONFIDENTIALITY AGREEMENT
THIS ADDENDUM (this "Addendum") to Confidentiality Agreement dated
January 8, 1998 (the "Confidentiality Agreement") is entered into as of the
30th day of April, 1998 between Anacomp, Inc. ("Anacomp") and First Data
Corporation ("FDC").
This parties agree as follows:
1. Capitalized terms not otherwise defined herein shall have the
meanings specified in the Confidentiality Agreement.
2. FDC acknowledges that Anacomp has provided and will continue
to provide information to potential acquirors of the DFDS and DAS units of
First Image. The parties agree that the Foregoing is a permissible extension
of the Confidentiality Agreement; provided that [i] the Information is
otherwise provided in accordance with and subject to the terms of the
Confidentiality Agreement and [ii] the potential acquirors shall not have
direct access to the offices, properties, employees and businesses and
financial records of First Image until the closing of the Transaction.
3. This Addendum will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts between
residents of that State and executed in and to be performed in that State.
IN WITNESS WHEREOF, the parties have caused this Addendum to be
executed by a duly authorized representative.
FIRST DATA CORPORATION
By: Michael T. Wheaty
-----------------
Name: Michael T. Wheaty
Title: Executive Vice President & General Counsel
ANACOMP, INC.
By: Groose C. Gaskins
Name: Groose C. Gaskins
Title: Senior VP and General Counsel
<PAGE>
EXHIBIT B
Transition Services Agreement will include the following terms:
* Sellers will use commercially reasonable efforts to provide or make
available to Buyer the services and/or software identified in Items 2 and
4 of Schedule 5.7 for a period of time to be agreed upon by the parties.
With respect to the services in Item 2 of Schedule 5.7, Buyer will pay
Sellers on the same basis as the Division pays FDC as of the date hereof.
With respect to Item 4 of Schedule 5.7, Buyer will reimburse Sellers for
their actual out-of-pocket costs incurred in connection with the
foregoing.
* Between signing and Closing, Buyer and Sellers will review Items 2 and 4
of Schedule 5.7 to determine which services and/or software are
reasonably necessary for Buyer.
* Sellers shall have no obligation to provide the services or make
available the software to the extent that to do so would violate their
obligations under any license or other agreement to which they are bound.
<PAGE>
Exhibit 2.2
AMENDMENT NO. 1
to
ASSET PURCHASE AGREEMENT
Dated as of May 5, 1998
among
ANACOMP, INC.,
FIRST FINANCIAL MANAGEMENT CORPORATION
and
FIRST DATA CORPORATION
<PAGE>
AMENDMENT NO. 1 TO ASSET
PURCHASE AGREEMENT
THIS AMENDMENT NO. 1, dated as of June __, 1998 (this "Amendment"), to
Asset Purchase Agreement dated as of May 5, 1998 among Anacomp, Inc. ("Buyer"),
First Financial Management Corporation ("FFMC") and First Data Corporation
("FDC" and, together with FFMC, "Sellers").
W I T N E S E T H:
WHEREAS, Buyer and Sellers have agreed that, notwithstanding the
provisions of the Asset Purchase Agreement, the calculation of Closing Net
Working Capital in the middle of a month is impractical; and
WHEREAS, in order to determine Closing Net Working Capital at the end
of a month and to set forth certain other mutual agreements with respect to the
Asset Purchase Agreement, the parties desire to enter into this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Amendment, unless the context shall
otherwise require, a term defined in the Asset Purchase Agreement has the same
meaning when used in this Amendment and a term defined anywhere in this
Amendment has the same meaning throughout.
In addition, Section 1.1 of the Asset Purchase Agreement shall be
amended by deleting the definition of "Closing Net Working Capital" set forth
therein in its entirety and substituting in lieu thereof:
"Closing Net Working Capital" means the Net Working Capital of the
Division as of the close of business on May 31, 1998, as determined in
accordance with Section 3.2.
1.2. Interpretation. Each definition in this Amendment includes the
singular and the plural, and reference to the neuter gender includes the
masculine and feminine where appropriate. References to any statute or
regulation means such statute or regulation as amended at the time and include
any successor legislation or regulations. The heading to the
<PAGE>
Articles and Sections are for convenience of reference and shall not affect the
meaning or interpretation of this Amendment. Except as otherwise stated,
reference to Articles, Sections, Exhibits and Schedules mean the Articles,
Sections and Schedules of this Amendment.
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets.
(a) Section 2.1(a) of the Asset Purchase Agreement shall be deleted
in its entirety and the following shall be substituted in lieu thereof:
"(a) All of the assets reflected on the Interim Balance Sheet,
except for cash generated by the Division prior to June 1, 1998 and
for those assets disposed of or converted into cash after the Interim
Balance Sheet Date in the ordinary course of Business and in
accordance with this Agreement;"
(b) A new clause (q) shall be added to Section 2.1 of the Asset
Purchase Agreement to read as follows:
"(q) All cash, bank deposits, and cash equivalents in the
accounts set forth in Schedule 2.1 hereto."
2.2. Excluded Assets. Section 2.2(a) of the Asset Purchase Agreement
shallb e deleted in its entirety and the following shall be substituted in liew
thereof:
"(a) All cash, bank deposits and cash equivalents generated by
the Division prior to June 1, 1998;"
2.3. Assumed Liabilities. Section 2.3(a) of the Asset Purchase
Agreement shall be deleted in its entirety and the following shall be
substituted in lieu thereof:
"(a) All liabilities reflectd in the calculation of Closing Net
Working Capital and all liabilities of the type reflected in such
calculation which have accrued on or after June 1, 1998;"
2
<PAGE>
2.4. Adjustment Procedure. Section 3.2(c)(i) of the Asset Purchase
Agreement shall be deleted in its entirety and the following shall be
substituted in lieu thereof:
"(i) Within sixty (60) calendar days after the Closing Date,
Seller shall cause the Atlanta office of Ernst & Young LLP, on their
behalf, to prepare and deliver to Buyer an unaudited consolidated
balance sheet of the Division, dated as of May 31, 1998 (the "Closing
Balance Sheet"), which shall include a calculation of the Closing Net
Working Capital and shall certify that the Closing Balance Sheet has
been prepared in accordance with the Agreed Accounting Principles and
otherwise on a basis consistent with the Working Capital Model."
2.5. Liability for Taxes. Clause (I) of Section 8.2.1(a) shall be
deleted in its entirety and the following shall be substituted in lieu
thereof:
"(I) any Tax liability or reserve taken into account in the
calculation of the Closing Net Working Capital as provided in
Section 3.2 and any Tax liability or reserve of the type reflected
in such calculation which has been incurred on or after June 1,
calculation as of the Closing Date),"
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1. Counterparts. This Amendment may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
3.2. Entire Agreement. With respect to the subject matter hereof,
this Amendment shall supersede anything to the contrary contained in the Asset
Purchase Agreement.
3.3. Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or
3
<PAGE>
unenforceable in any respect, such provision shall be ineffective to the extent,
but only to the extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or unenforceable
provision or provisions or any other provisions hereof, unless such a
construction would be unreasonable.
3.4. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF
LAW PROVISIONS)OF THE STATE OF NEW YORK.
3.5. Waiver. Any term or provision of this Amendment may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Amendment if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Amendment shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Amendment or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Amendment shall be held to constitute a waiver of any other or
subsequent breach.
4
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first above written.
ANACOMP, INC.
By: /s/ George Gaskin
----------------------------
Name: George C. Gaskin
Title: Senior Vice President
FIRST FINANCIAL MANAGEMENT
CORPORATION
By: /s/ Karen Siteman
----------------------------
Name: Karen Siteman
Title: Assistant Secretary
FIRST DATA CORPORATION
By: /s/ Karen Siteman
----------------------------
Name: Karen Siteman
Title: Assistant Secretary
5
<PAGE>
SCHEDULE 2.1
1. NationsBank
Lockbox Account #3750218110
Concentration/Disbursing Account #3750218165
Payroll Disbursing Account #0101156298
General Disbursing Account #329-99-45685
2. Bank of America
Lockbox Account #1233711225
<PAGE>
Exhibit 4.1
- -----------------------------------------------------------------------------
ANACOMP, INC.
10 7/8% Series C Senior Subordinated Notes due 2004
10 7/8% Series D Senior Subordinated Notes due 2004
__________________________________
INDENTURE
Dated as of June 18, 1998
__________________________________
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
<S> <C>
Definitions and Incorporation by Reference . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . 18
SECTION 1.3. Incorporation by Reference of Trust Indenture Act . . . . 19
SECTION 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . 20
ARTICLE 2
The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . 21
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . 21
SECTION 2.4. Deposit of Moneys; Paying Agent To Hold Money in Trust . 22
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . 22
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . . . 22
SECTION 2.7. Book-Entry Provisions for Global Securities. . . . . . . 23
SECTION 2.8. Certificated Securities. . . . . . . . . . . . . . . . . 24
SECTION 2.9. Replacement Securities . . . . . . . . . . . . . . . . . 24
SECTION 2.10. Outstanding Securities . . . . . . . . . . . . . . . . . 24
SECTION 2.11. Temporary Securities . . . . . . . . . . . . . . . . . . 25
SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.13. Defaulted Interest . . . . . . . . . . . . . . . . . . . 25
SECTION 2.14. Restrictive Legends. . . . . . . . . . . . . . . . . . . 26
SECTION 2.15. Special Transfer Provisions. . . . . . . . . . . . . . . 27
SECTION 2.16. Record Date. . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.17. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 3
Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . 29
SECTION 3.2. Selection of Securities To Be Redeemed . . . . . . . . . 29
SECTION 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . 30
SECTION 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . 30
SECTION 3.5. Deposit of Redemption Price. . . . . . . . . . . . . . . 31
SECTION 3.6. Securities Redeemed in Part. . . . . . . . . . . . . . . 31
ARTICLE 4
(i)
<PAGE>
Page
----
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . 31
SECTION 4.2. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3. Limitation on Indebtedness. . . . . . . . . . . . . . . . 32
SECTION 4.4. Limitation on Restricted Subsidiary Indebtedness
and Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.5. Limitation on Restricted Payments . . . . . . . . . . . . 36
SECTION 4.6. Limitation on Restrictions on Distributions from
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.7. Limitation on Sales of Assets and Restricted
Subsidiary Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.8. Limitation on Transactions with Affiliates. . . . . . . . 44
SECTION 4.9. Change of Control . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.10. Compliance Certificate . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Further Instruments and Acts . . . . . . . . . . . . . . 47
SECTION 4.12. Limitation on Liens. . . . . . . . . . . . . . . . . . . 47
SECTION 4.13. Limitation on Sale/Leaseback Transactions. . . . . . . . 48
SECTION 4.14. Limitation on Issuance and Sale of Capital Stock
of Restricted Subsidiaries. . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.15. Restricted and Unrestricted Subsidiaries . . . . . . . . 48
SECTION 4.16. Revisions to Schedules . . . . . . . . . . . . . . . . . 49
SECTION 4.17. Maintenance of Properties; Insurance . . . . . . . . . . 49
SECTION 4.18. Corporate Existence. . . . . . . . . . . . . . . . . . . 49
SECTION 4.19. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.20. Conflicting Agreements . . . . . . . . . . . . . . . . . 50
SECTION 4.21. Limitation on Layering . . . . . . . . . . . . . . . . . 50
ARTICLE 5
Merger, Consolidation or Sale of Assets. . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6
Defaults and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.2. Acceleration. . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.3. Other Remedies. . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 54
SECTION 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . 54
SECTION 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . 54
SECTION 6.7. Rights of Holders To Receive Payment. . . . . . . . . . . 55
SECTION 6.8. Collection Suit by Trustee. . . . . . . . . . . . . . . . 55
SECTION 6.9. Trustee May File Proofs of Claim. . . . . . . . . . . . . 55
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . 55
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . 56
ARTICLE 7
(ii)
<PAGE>
Page
----
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.3. Individual Rights of Trustee. . . . . . . . . . . . . . . 58
SECTION 7.4. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . 58
SECTION 7.5. Notice of Defaults. . . . . . . . . . . . . . . . . . . . 58
SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . . 58
SECTION 7.7. Compensation and Indemnity. . . . . . . . . . . . . . . . 58
SECTION 7.8. Replacement of Trustee. . . . . . . . . . . . . . . . . . 59
SECTION 7.9. Successor Trustee by Merger . . . . . . . . . . . . . . . 60
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . 60
SECTION 7.11. Preferential Collection of Claims Against Company. . . . 60
ARTICLE 8
Discharge of Indenture; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.1. Discharge of Liability on Securities; Defeasance. . . . . 61
SECTION 8.2. Conditions to Defeasance. . . . . . . . . . . . . . . . . . 61
SECTION 8.3. Application of Trust Money . . . . . . . . . . . . . . . . 62
SECTION 8.4. Repayment to Company . . . . . . . . . . . . . . . . . . . 63
SECTION 8.5. Indemnity for Government Obligations . . . . . . . . . . . 63
SECTION 8.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9
Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.1. Securities Subordinated to Senior Indebtedness . . . . . . 63
SECTION 9.2. No Payment on Securities in Certain Circumstances. . . . . 64
SECTION 9.3. Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Company . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.4. Securityholders To Be Subrogated to Rights of
Holders of Senior Indebtedness. . . . . . . . . . . . . . . . . . . 66
SECTION 9.5. Obligations of the Company Unconditional. . . . . . . . . 66
SECTION 9.6. Trustee and Paying Agent Entitled To Assume
Payments Not Prohibited in Absence of Notice. . . . . . . . . . . . 67
SECTION 9.7. Application by Trustee of Monies Deposited With It. . . . 67
SECTION 9.8. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior Indebtedness. . . . . . . 67
SECTION 9.9. Securityholders Authorize Trustee To Effectuate
Subordination of Securities . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.10. Right of Trustee and Paying Agent To Hold Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.11. Article 9 Not To Prevent Events of Default . . . . . . . 68
SECTION 9.12. No Fiduciary Duty Created to Holders of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 10
(iii)
<PAGE>
Page
----
Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.1. Without Consent of Holders . . . . . . . . . . . . . . . 69
SECTION 10.2. With Consent of Holders. . . . . . . . . . . . . . . . . 69
SECTION 10.3. Compliance with Trust Indenture Act. . . . . . . . . . . 70
SECTION 10.4. Revocation and Effect of Consents and Waivers. . . . . . 70
SECTION 10.5. Notation on or Exchange of Securities. . . . . . . . . . 71
SECTION 10.6. Trustee To Sign Amendments . . . . . . . . . . . . . . . 71
SECTION 10.7. Payment for Consent. . . . . . . . . . . . . . . . . . . 71
ARTICLE 11
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.1. Trust Indenture Act Controls . . . . . . . . . . . . . . 71
SECTION 11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.3. Communication by Holders with Other Holders. . . . . . . 72
SECTION 11.4. Certificate and Opinion as to Conditions Precedent . . . 72
SECTION 11.5. Statements Required in Certificate or Opinion. . . . . . 72
SECTION 11.6. Rules by Trustee, Paying Agent and Registrar . . . . . . 73
SECTION 11.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.8. Governing Law. . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.9. No Recourse Against Others . . . . . . . . . . . . . . . 73
SECTION 11.10. Successors. . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.11. Multiple Originals. . . . . . . . . . . . . . . . . . . 73
SECTION 11.12. Qualification of Indenture . . . . . . . . . . . . . . . 73
SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . . . 74
SECTION 11.14. Severability. . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
(iv)
<PAGE>
ANACOMP, INC.
Reconciliation and tie between Trust Indenture Act of 1939 ("TIA") and
Indenture dated as of June 18, 1998.*
<TABLE>
<CAPTION>
<S> <C>
TIA Indenture
Section Section
------- ---------
310(a)(1)........................... 7.10
(a)(2).............................. 7.10
(a)(3).............................. N.A.
(a)(4).............................. N.A.
(a)(5).............................. 7.10
(b)................................. 7.8, 7.10
(c)................................. N.A.
311(a).............................. 7.11
(b)................................. 7.11
(c)................................. N.A.
312(a).............................. 2.5
(b)................................. 11.3
(c)................................. 11.3
313(a).............................. 7.6
(b)(1).............................. N.A.
(b)(2).............................. 7.6
(c) ................................ 11.2
(d)................................. 7.6
314(a).............................. 4.2, 4.10
.................................... 11.2
(b)................................. 4.21
(c)(1).............................. 11.4
(c)(2).............................. 11.4
(c)(3).............................. N.A.
(d)................................. N.A.
(e)................................. 11.5
(f)................................. 4.10
315(a).............................. 7.1
(b)................................. 7.5; 11.2
(c)................................. 7.1
(d)................................. 7.1
(e)................................. 6.11
316(a)(last sentence) .............. 2.8
(a)(1)(A)........................... 6.5
(a)(1)(B)........................... 6.4
(a)(2).............................. N.A.
(b)................................. 6.7
(i)
<PAGE>
(c)................................. 6.7
317(a)(1)........................... 6.8
(a)(2).............................. 6.9
(b)................................. 2.4
318(a)..............................11.1
</TABLE>
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.
(ii)
<PAGE>
INDENTURE dated as of June 18, 1998, between ANACOMP, INC., an Indiana
corporation (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a New York
banking corporation (the "Trustee").
The Company has duly authorized the creation and issuance of up to
$135,000,000 aggregate principal amount of 10 7/8% Series C Senior Subordinated
Notes due 2004 (the "Initial Securities") and $135,000,000 aggregate principal
amount of 10 7/8% Series D Senior Subordinated Notes due 2004 (the "Exchange
Securities") and, to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary to make the
Securities (as defined herein), when duly issued and executed by the Company,
and authenticated and delivered hereunder, the valid obligations of the Company,
and to make this Indenture a valid and binding agreement of the Company have
been done.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"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" have meanings correlative to the foregoing.
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 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,
lease receivables or inventory (other than the disposition of inventory pursuant
to a Sale/Leaseback Transaction) at Fair Market Value in the Ordinary Course of
Business, (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
$250,000, (iv) an operating lease entered into in the ordinary course of
business with respect to property, plant or equipment that in the judgment of
the Board of Directors constitutes excess capacity or (v) a "like-kind
<PAGE>
exchange" of an asset in exchange for an asset of a third party, so long as, in
the judgment of the Company's Board of Directors, the asset received by the
Company or such Restricted Subsidiary in such exchange (x) has a Fair Market
Value at least equal to the fair market value of the asset transferred by the
Company or such Restricted Subsidiary and (y) is usable in a Permitted Line of
Business to at least the same extent as the asset transferred by the Company or
such Restricted Subsidiary. 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 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).
"Authorized Denominations" shall mean denominations of $1,000, or
integral multiples thereof, except in the case of Accrued Interest Securities,
in which case Authorized Denominations shall mean any denomination.
"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 (a) the number 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 and (b) 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 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 prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
2
<PAGE>
"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 50% 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 a majority 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.
"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
3
<PAGE>
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 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 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
4
<PAGE>
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 from this clause
(i), (x) 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 and (y) any such interest expense attributable to original
issue discount as a result of Fresh Start Accounting adjustments), 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" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries for such period determined in
accordance with GAAP but excluding for such purpose the impact of any Fresh
Start Accounting adjustment; 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 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, (v) any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person, (vi) any extraordinary
gain or loss, (vii) the cumulative effect of a
5
<PAGE>
change in accounting principles and (viii) any non-recurring restructuring
charges for any fiscal quarter in the fiscal year of the Company commencing
October 1, 1995.
"Consolidated Tangible Net Worth" means the amount by which (i) 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 (x) the par or stated value of all outstanding
Capital Stock of the Company plus (y) paid-in capital or capital surplus
relating to such Capital Stock plus (z) any retained earnings or earned surplus
exceeds (ii) the sum of (A) any accumulated deficit, (B) any amounts
attributable to Disqualified Stock, (C) the amounts appearing on the assets side
of such balance sheet for all contracts, patents, trademarks, copyrights and
other intellectual property rights, franchises, licenses, goodwill, treasury
stock, unamortized debt discount and expense and similar intangibles, (D) any
increase in the amount of capitalized research and development and capitalized
interest subsequent to the Issue Date, and (E) the amount of any write-up
subsequent to the Issue Date in the book value of any asset owned on the Issue
Date resulting from the revaluation thereof subsequent to such date, or any
write-up in excess of the cost of any asset acquired subsequent to that date.
"Credit Facility" means the revolving credit agreement, dated as of
June 15, 1998 among the Company and the various financial institutions named
therein, as the same may be amended, restated, supplemented or otherwise
modified from time to time, and includes any agreement renewing, refinancing or
replacing all or any portion of the Indebtedness thereunder.
"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.
"Depositary" shall mean The Depository Trust Company, its nominees,
and their respective successors.
"Dispositions" means the sale of (a) the document print and
distribution services business of First Image and (b) the document acquisition
services business of First Image.
"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.
"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
6
<PAGE>
the spot rate for the purchase of U.S. dollars with the applicable foreign
currency as quoted by Citibank, N.A. 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.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Securities" has the meaning set forth in the preamble to
this Indenture.
"Existing Credit Facility" means the Credit and Guarantee Agreement
dated as of February 28, 1997 among the Company and the other Parties thereto,
as the same may be amended, restated, supplemented or otherwise modified from
time to time, and includes any agreement renewing, refinancing or replacing all
or any portion of the Indebtedness thereunder.
"Existing Indenture" means the Indenture, dated as of March 24, 1997,
between the Company and IBJ Schroder Bank & Trust, as trustee, as the same may
be amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement renewing, refinancing or replacing all or any portion of
the Indebtedness under such agreement.
"Existing Notes" means the 10 7/8% Senior Subordinated Notes due 2004,
Series B issued by the Company pursuant to the Existing Indenture.
"Existing Notes Issue Date" means the date on which the Existing Notes
were issued which date was March 24, 1997.
"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 two officers of the
Company in an Officers' Certificate delivered to the Trustee or (ii) if such
property or asset has a Fair Market Value in excess of $5,000,000, by 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.
"First Image" means First Image Management Company, a division of
First Financial Management Corporation.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary that
is incorporated in a jurisdiction other than the United States of America, any
State thereof or the District of Columbia.
7
<PAGE>
"Fresh Start Accounting" means Fresh Start Accounting as described in
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" (Am. Inst. of Certified Public Accountants 1990), as
then in effect, or any comparable statement then in effect.
"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,
except as otherwise expressly provided in this Indenture.
"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 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.
"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
8
<PAGE>
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 (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. 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 and the Securities and the performance of all other
obligations to the Trustee and the Holders under this Indenture and the
Securities, according to the terms hereof and thereof.
9
<PAGE>
"Initial Face Amount" means $135,000,000, the face amount of the
Initial Securities which, when multiplied by the premium at which the Initial
Securities were issued, yielded gross proceeds, to the Company of $140,400,000.
"Initial Securities" has the meaning set forth in the preamble to the
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"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.
"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 4.5 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 as 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 asset 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).
"Issue Date" means the first date on which the Initial Securities are
issued pursuant to this Indenture.
"Lien" means any mortgage, deed of trust, 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).
10
<PAGE>
"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.
"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 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 4.7. 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.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined
in Regulation S of the Securities Act.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Administrative
Officer, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
11
<PAGE>
"Opinion of Counsel" means 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.
"Ordinary Course of Business" means sales or assignments of inventory
or 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 after the voluntary or
involuntary bankruptcy of the Company, including, without limitation, those
events of the type described in Section 6.1(8) and (9). 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 Wholly Owned Subsidiary (including any Person
which will become a Wholly Owned Subsidiary as a result of such Investment) or
any Person that is merged or consolidated with or into, or transfers or conveys
all or substantially all of its business or assets to, the Company or any Wholly
Owned Subsidiary at the time such Investment is made; (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 $6,000,000 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 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; (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; and (ix) Investments made as a result of
the receipt of non-cash consideration from an Asset Disposition that was made
pursuant to and in compliance with the provisions of Section 4.7 or a
disposition of assets pursuant to and in compliance with the provisions of
Article 5 hereof.
12
<PAGE>
"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 4.3(b)(vii) or Section 4.4(b)(iii); (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
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 4.3(a)(ii), Section 4.3(b)(i), Section
4.4(b)(vi) and Section 4.4(b)(vii); (vii) Liens outstanding immediately after
the Issue Date as set forth on Schedule II hereto (and not otherwise permitted
by clause (vi)); (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
13
<PAGE>
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
Section 4.3, 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, any revolving credit facility; provided, that such
indebtedness constitutes Senior Indebtedness permitted hereunder 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 4.4(b)(vii) 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 4.3(b)(vi) and, in the case of such
Restricted Subsidiary, Section 4.4(b)(ii) 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 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.
"Permitted Line of Business" means (i) the line or lines of business
in which the Company or any of its Subsidiaries is engaged on the Issue Date and
(ii) a line or lines of business similar or related to the line or lines of
business described in the foregoing clause (i).
14
<PAGE>
"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.
"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.
"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, (ii) Incurred to finance the
acquisition or construction of any property or asset and (iii) Incurred to
finance the acquisition of 100% of the Capital Stock (other than directors'
qualifying shares) of any other Person.
"Qualified Capital Stock" of any person shall mean any Capital Stock
of such Person which is not Disqualified Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"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 into 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.
"Reference Bank" means a leading bank (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not an
Affiliate of the Trustee and (iii) having an established place of business in
London.
15
<PAGE>
"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 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 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 covenants relating to the Refinancing Indebtedness are no more
restrictive in the aggregate than those of the Indebtedness being refinanced
and, if the Indebtedness being refinanced is subordinated to the Securities, the
Refinancing Indebtedness is at least as subordinated to the Securities as the
Indebtedness being refinanced.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated June 18, 1998, between the Company and NatWest Capital
Markets Limited.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"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 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 Initial Securities and the Exchange Securities
treated as a single class of securities, as amended or supplemented from time to
time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"Securities Act" means the Securities Act of 1933.
16
<PAGE>
"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 (8)
and (9) of Section 6.1) on, or any other amounts due with respect to, (i) the
Credit Facility, (ii) any Refinancing Indebtedness Incurred in respect of the
Credit Facility or in respect of any previous Refinancing Indebtedness Incurred
in respect of such Debt and (iii) any Indebtedness Incurred pursuant to clause
(a)(ii) of Section 4.3. For purposes of Section 4.7, 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 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 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 the
terms of such Indebtedness or 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 $250,000,000 (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-2" (or higher) according to Moody's Investors Service, Inc. or "A-2" (or
higher) according to Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
17
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
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 amended from time to time.
"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 Subsidiary" means any 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 1.2. Other Definitions.
18
<PAGE>
Defined in
<TABLE>
<CAPTION>
<S> <C>
Term Section
---- -------
"Affiliate Transaction"....................... 4.8
"Agent Members"............................... 2.7
"Application Date"............................ 4.7(a)
"Asset Disposition Purchase Amount"........... 4.7(a)
"Asset Disposition Purchase Date"............. 4.7(a)
"Asset Disposition Purchase Notice"........... 4.7(d)
"Asset Disposition Purchase Offer"............ 4.7(a)
"Asset Disposition Purchase Price"............ 4.7(a)
"Asset Disposition Trigger" .................. 4.7(b)
"Bankruptcy Law".............................. 6.1
"Change of Control Offer"..................... 4.9(a)
"Change of Control Purchase Date"............. 4.9(a)
"Change of Control Purchase Notice"........... 4.9(a)
"Change of Control Purchase Price"............ 4.9(a)
"covenant defeasance option".................. 8.1(b)
"Custodian"................................... 6.1
"Defaulted Interest".......................... 2.11
"Event of Default"............................ 6.1
"Global Securities"........................... 2.1
"Legal Defeasance Option"..................... 8.1(b)
"Legal Holiday"............................... 11.7
"Notice of Default"........................... 6.1
"Paying Agent"................................ 2.3
"Payment"..................................... 9.2
"Permitted Indebtedness"...................... 4.3(b)
"Permitted Restricted Subsidiary Indebtedness" 4.4(b)
"Private Placement Legend".................... 2.14
"Refinanced Indebtedness"..................... 4.3(e)
"Registrar"................................... 2.3
"Restricted Payment".......................... 4.5
"Special Redemption".......................... 3.02
"Surviving Entity"............................ Article 5
</TABLE>
SECTION 1.3. 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.
19
<PAGE>
"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 1.4. 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;
(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 2.1. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A hereto which is hereby incorporated in and expressly made a
part of this Indenture. The Exchange Securities and the Trustee's certificate
of authentication thereon shall be substantially in the form of Exhibit B hereto
which is 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 or Exhibit B, as the case may be, to the Trustee in writing.
20
<PAGE>
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in Exhibit A or Exhibit B, as the case may be, are part of
the terms of this Indenture.
The Securities shall be issued initially in the form of one or more
permanent global Securities in registered form, substantially in the form set
forth in Exhibit A (the "Global Securities"), deposited with, or on behalf of,
the Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Each Global Security shall bear such legend as may be
required or reasonably requested by the Depositary.
SECTION 2.2. 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 conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate and make available for delivery (i) Initial Securities
for original issue in an aggregate principal amount not to exceed the Initial
Face Amount and (ii) Exchange Securities from time to time for issue only in
exchange for a like principal amount of Initial Securities, in each case
registered in the name of the Depositary or the nominee of the Depositary and
shall deliver such Global Securities to the Depositary or pursuant to the
Depositary's instructions. Such order shall specify the amount of the Global
Securities to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed the Initial Face Amount except as
provided in Section 2.7. The Securities shall be issued in fully registered
form, without coupons in Authorized Denominations.
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 2.3. 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.
21
<PAGE>
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 pursuant
to Section 7.7. 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 2.4. Deposit of Moneys; Paying Agent To Hold Money in
Trust. Prior to 11:00 a.m. New York City time on each due date of the
principal and interest on any Security, the Company shall deposit with the
Paying Agent a sum in U.S. dollars 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 2.5. 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 2.6. 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(l) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request 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. No service charge shall be made for any registration
of transfer or exchange of Securities, but 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.
22
<PAGE>
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. Furthermore, any
Holder of a Global Security shall, by acceptance of such Global Security,
agree that transfers of beneficial interests in such Global Security may be
effected only through a book-entry system maintained by the Depositary (or
its agent), and that ownership of a beneficial interest in the Global
Security shall be required to be reflected in a book entry.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption
of Securities and ending at the close of business on the day of such mailing,
or (ii) to register the transfer of or exchange any Security selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
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 2.7. Book-Entry Provisions for Global Securities. (a)
The Global Securities initially shall (i) be registered in the name of the
Depositary or the nominee of the Depositary and (ii) be delivered to the
Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under any Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute legal
owner of such Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a beneficial
owner of any Security.
(b) Transfers of a Global Security shall be limited to transfers
of such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the applicable rules
and procedures of the Depositary and the provisions of Section 2.6.
(c) The registered holder of a Global Security may grant proxies
and otherwise authorize any person, including Agent Members and persons that
may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
23
<PAGE>
SECTION 2.8. Certificated Securities. If (i) the Company
notifies the Trustee in writing that DTC is no longer willing or able to act
as a depositary or DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within 90 days of
such notice or cessation, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Securities in
definitive form under the Indenture and by written order signed by two
officers directs the Trustee to authenticate such Securities or (iii) upon
the occurrence of certain other events as provided in the Indenture, then,
upon surrender by DTC of the Global Securities, Certificated Securities will
be issued to each person that DTC identifies as the beneficial owner of the
Securities represented by the Global Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of
such person or persons (or the nominee of any thereof and cause the same to
be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay
by DTC or any Participant or Indirect Participant in identifying the
beneficial owners of the related Securities and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
DTC for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Securities to be
issued.)
SECTION 2.9. 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 2.10. Outstanding Securities. Securities outstanding at
any time are all Securities authenticated by the Trustee except for those
canceled 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 an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.9, 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, at 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.
24
<PAGE>
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or by any Subsidiary thereof or by any other Affiliate
controlled by the Company shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded.
In determining whether the Holders of the required principal amount
of Securities have (i) directed the time, method or place of conducting any
proceeding for any remedy available to the Trustee hereunder, or exercising
any trust or power conferred upon the Trustee; (ii) consented to the waiver
of any past Event of Default and its consequences; or (iii) consented to the
postponement of any interest payment, Securities owned by Affiliates of the
Company shall be disregarded and considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent, only Securities which
the Trustee actually knows are so owned shall be so disregarded. The Company
shall notify the Trustee in writing when it or any of its Affiliates
purchases or otherwise acquires Securities, of the aggregate principal amount
of such Securities so purchased or otherwise acquired.
SECTION 2.11. 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.
SECTION 2.12. 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
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer,
exchange, payment or cancellation and, upon request, 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
cancellation.
SECTION 2.13. 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
25
<PAGE>
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a special record
date for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of such
special record date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
special record date therefor to be 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 2.13, 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 2.14. Restrictive Legends. Each Global Note that
constitutes a Restricted Security shall bear the following legend (the
"Private Placement Legend") unless otherwise agreed by the Company and the
Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION, NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE
26
<PAGE>
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,(D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501 (a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUER AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
SECTION 2.15. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to
any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after June 18,
2000 or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in the
form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S.
Person, the proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depositary's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding certificated
Securities) a decrease in the principal amount of the Global Note in an
amount equal to the principal amount of the beneficial interest in the Global
Note to be transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more certificated Securities of like
tenor and amount.
27
<PAGE>
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been effected in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Security for
its own account or an account with respect to which it exercises sole
investment discretion and that any such account is a QIB within the meaning
of Rule 144A, and it is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the
Securities to be transferred consist of certificated Securities which after
transfer are to be evidenced by an interest in the Global Note, upon receipt
by the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to principal amount of the certificated Securities to be
transferred, and the Trustee shall cancel the certificated Securities so
transferred.
(c) Private Placement Legend. Upon the registration of the
transfer, exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do not bear the
Private Placement Legend. Upon the registration of the transfer, exchange or
replacement of Securities bearing the Private Placement Legend, the Registrar
shall deliver only Securities that bear the Private Placement Legend unless
(i) the circumstance contemplated by paragraph (a)(i)(x) of this Section 2.15
exists or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to this Section 2.15 until the
earlier of (i) two years from the date of receipt or (ii) the date the
Securities shall have been redeemed or paid in full. The Company shall have
the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
28
<PAGE>
SECTION 2.16. 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 or consent authorized or permitted by
Sections 6.4 and 6.5. 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 2.5 prior to such solicitation.
SECTION 2.17. 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.
ARTICLE 3
Redemption
SECTION 3.1. 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.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days (or such lesser time as is acceptable to the
Trustee) 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 3.2. 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, at the discretion of the
Trustee, 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 Authorized Denominations.
Provisions 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.
29
<PAGE>
If less than all of the Notes are to be redeemed, the Trustee shall
select by such methods as the Trustee shall deem to be fair and appropriate
the particular Notes to be redeemed or any portion thereof that is an
integral multiple of no more than $1,000. Notwithstanding the foregoing, the
Company may not make any optional redemption of the Notes unless
contemporaneously with such optional redemption it redeems Existing Notes the
aggregate principal amount of which bears the same relationship to the
aggregate principal amount of the Existing Notes outstanding immediately
prior to such optional redemption as the aggregate principal amount of the
Notes being redeemed bears to the aggregate principal amount of the Notes
outstanding immediately prior to such optional redemption. The Notes will
not have the benefit of a sinking fund.
SECTION 3.3. Notice of Redemption. At least 15 days but not more
than 60 days before a date for redemption of Securities, the Company shall
mail, or cause to be mailed, a notice of redemption by first-class mail to
each Holder of Securities to be redeemed.
The notice shall identify the Securities 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 portions 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 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for 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
30
<PAGE>
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 3.5. Deposit of Redemption Price. Prior to 11:00 a.m.
New York City time on 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 in U.S. dollars 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 cancellation.
SECTION 3.6. 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 4.1. Payment of Securities. The Company shall promptly
pay the principal of and interest on the Securities in U.S. dollars 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 (other than the Company or a Wholly
Owned Subsidiary acting as 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.
SECTION 4.2. 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, the Company
shall (i) promptly furnish such reports, documents and information to the
Trustee and (ii) within 15 days after such filing with the SEC, furnish, or
cause the Trustee to furnish, such reports, documents and information to the
Securityholders. The Company shall use its best efforts to remain subject to
the periodic reporting requirements of Section 13 of the Exchange Act. 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
31
<PAGE>
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 4.3. Limitation on Indebtedness. (a) The Company shall
not, directly or indirectly, Incur any Indebtedness; provided, however, that:
(i) the Company may Incur Indebtedness ranking on a parity with the
Securities or which is subordinated in right of payment to the Securities
pursuant to the terms of such Indebtedness or pursuant to a written
agreement, if 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 after giving pro forma effect to such Incurrence, the
Consolidated Coverage Ratio would be equal to at least 1.75 to 1; and (ii)
the Company may Incur Senior Indebtedness if 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 (A) after giving pro forma
effect to such Incurrence, the Consolidated Coverage Ratio would be at least
equal to 2.5 to 1 or (B) after such Incurrence, the total principal amount of
Senior Indebtedness would not exceed $80,000,000.
(b) Notwithstanding the foregoing, the Company may Incur the
following Indebtedness if 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 (collectively, "Permitted Indebtedness"):
(i) Indebtedness to be outstanding on the Issue Date and listed on
Schedule I to this Indenture;
(ii) Indebtedness represented by the Securities;
(iii) 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;
32
<PAGE>
(iv) 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;
(v) Indebtedness Incurred in connection with a prepayment of
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;
(vi) 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 Purchase Money
Indebtedness incurred by the Company or by Restricted Subsidiaries as
permitted under Section 4.4(b)(ii) and (B) the aggregate amount of Capital
Lease Obligations Incurred by the Company or Incurred by Restricted
Subsidiaries as permitted under Section 4.4(b)(ii) does not at any one time
outstanding exceed $30,000,000 (such maximum permitted amount to increase
by $10,000,000 on each March 24, commencing on March 24, 1999);
(vii) 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;
(viii) Indebtedness in respect of Guarantees by the Company of
Indebtedness of any Restricted Subsidiary permitted to be Incurred under
Section 4.4;
(ix) Indebtedness under the Credit Facility in an aggregate principal
amount not to exceed $80,000,000 less, at any specified date, an amount
equal to actual permanent repayments of such Indebtedness prior to such
date, regardless of any subsequent increase in the aggregate principal
amount of such Indebtedness pursuant to any amendment or modification of,
or supplement to, the Credit Facility;
(x) Refinancing Indebtedness Incurred in respect of Indebtedness
Incurred pursuant to clause (i), (ii), or (v) above; and
33
<PAGE>
(xi) in addition to any Indebtedness permitted by clauses (i) through
(x) 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 4.4(b)(vi).
(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.
(d) For purposes of determining the outstanding principal amount
of any particular Indebtedness Incurred pursuant to this Section or Section
4.4, (1) Indebtedness permitted by this Section or Section 4.4 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 4.4 permitting such Indebtedness
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 4.4, 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 4.4 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 Citibank, N.A., 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 4.4, 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 4.4. 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 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
34
<PAGE>
of such Incurrence and (ii) such Indebtedness or Preferred Stock is Permitted
Restricted Subsidiary Indebtedness under Section 4.4(b).
(b) "Permitted Restricted Subsidiary Indebtedness" means:
(i) Indebtedness or Preferred Stock to be outstanding on the Issue
Date and listed on Schedule I to this Indenture;
(ii) Indebtedness in respect of Purchase Money Indebtedness or Capital
Lease Obligations directly Incurred by any Restricted Subsidiary; provided,
however, that the sum of (A) the aggregate amount of Capital Lease
Obligations Incurred by Restricted Subsidiaries or Incurred by the Company
pursuant to Section 4.3(b)(vi) and (B) the aggregate principal amount of
Purchase Money Indebtedness Incurred by Restricted Subsidiaries or Incurred
by the Company pursuant to Section 4.3(b)(vi) does not at any one time
outstanding exceed $30,000,000 (such maximum permitted amount to increase
by $10,000,000 on each March 24, commencing March 24, 1999);
(iii) 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;
(iv) 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;
(v) 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
35
<PAGE>
Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness
or Preferred Stock (except to the Company or a Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness or Preferred Stock by the issuer thereof;
(vi) Refinancing Indebtedness Incurred in respect of Indebtedness
Incurred pursuant to clause (i) above; and
(vii) in addition to any Indebtedness permitted by clauses (i)
through (vi) above, up to an aggregate of $10,000,000 in principal amount
of Indebtedness of Foreign Restricted Subsidiaries at any one time
outstanding.
SECTION 4.5. Limitation on Restricted Payments. (a) The Company
shall not, and shall 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 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 solely 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 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"), if at the
time of and after giving effect to the proposed Restricted Payment:
(1) a 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 4.3(a)(i); or
(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 and evidenced by a Board
Resolution furnished to the Trustee) declared or made since the Existing
Notes 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 first day of the fiscal quarter of the Company immediately
following the fiscal quarter in which the Existing Notes Issue Date
occurs and ending on the last day of the Company's last fiscal quarter
ended at least 45 days prior to the date of such proposed
36
<PAGE>
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, writeoffs, 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 Existing Notes
Issue Date (other than an issuance or sale to (i) a Subsidiary of the
Company, (ii) an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries or (iii)
management employees);
(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 Existing Notes 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 (and treated as
a Restricted Payment) by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary.
(b) The provisions of Section 4.5(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations made in 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 the calculation of amounts under Section 4.5(a)(3)(B);
37
<PAGE>
(ii) any purchase or redemption of Subordinated Obligations made in
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 4.3; 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 redemption shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) 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 Existing Notes 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;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.5(a); provided, however, that (A) at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
shall result therefrom) and (B) such dividend shall be included in the
calculation of the amount of Restricted Payments from and after the date of
declaration of such dividend; or
(v) so long as no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof, the redemption or
repurchase of Capital Stock of the Company, options in respect thereof or
related rights pursuant to and in accordance with the repurchase provisions
of any employee stock option or any stock purchase or other agreement
between the Company and any of its management employees; provided, however,
that such redemptions or repurchases pursuant to this Section 4.5(b)(v)
from and after the Existing Notes Issue Date shall not in the aggregate
exceed $1,000,000, plus the amount of any net cash proceeds to the Company
from sales of Capital Stock of the Company to management employees
subsequent to the Existing Notes Issue Date.
SECTION 4.6. 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
38
<PAGE>
or restriction on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions on or in respect of its Capital
Stock to the Company or any Restricted Subsidiary 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 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) hereof or contained in any amendment to any such
agreement; 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 any such
Restricted Subsidiary.
SECTION 4.7. 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 (other than the Dispositions) 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 or a
Foreign Restricted Subsidiary, at least 50% of such
39
<PAGE>
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, (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 disinterested members of the Board of
Directors, as evidenced by a Board Resolution delivered to the Trustee and
(iv) 100% of the Net Cash Proceeds of such Asset Disposition are applied as
follows: (A) within 365 days after the receipt of any Net Cash Proceeds (the
last day of such period, the "Application Date"), the Company or Restricted
Subsidiary, as the case may be, may apply all or a portion of such Net Cash
Proceeds to prepay, repay, redeem or purchase Indebtedness of the Company
under the Existing Credit Facility or the Credit Facility or the reinvestment
(whether by acquisition of an existing business or expansion, including,
without limitation, capital expenditures) in one or more Permitted Lines of
Business, or any combination thereof, (B) to the extent any or all of such
Net Cash Proceeds are not applied as set forth above in clause (A), to
purchase Existing Notes tendered to the Company in connection with an offer
made to purchase such Existing Notes following an Asset Disposition, and (C)
to the extent any or all of such Net Cash Proceeds are not applied as set
forth in clause (A) and clause (B), the Company shall apply all remaining Net
Cash Proceeds of such Asset Disposition (the "Asset Disposition Purchase
Amount") to an offer to purchase (an "Asset Disposition Purchase Offer")
Securities, on the first Business Day occurring 60 Business Days after the
Application Date (the "Asset Disposition Purchase Date") for cash at a
purchase price (such price, the "Asset Disposition Purchase Price") equal to
100% of the principal amount of the Securities so purchased plus accrued and
unpaid interest thereon to the Asset Disposition Purchase Date, in accordance
with the procedures set forth in Section 4.7(c). Any such Net Cash Proceeds
which remain after the acquisition by the Company 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 4.7(c) shall cease to be Net Cash
Proceeds.
(b) Notwithstanding the foregoing, the Company shall not be
required to make an Asset Disposition Purchase Offer until such time as the
aggregate amount of Net Cash Proceeds from Asset Dispositions required to be
so applied to the purchase of Securities exceeds $10,000,000 (the "Asset
Disposition Trigger"), and then the total amount of such Net Cash Proceeds
shall be required to be applied to an Asset Disposition Offer.
(c) 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 Asset Disposition Purchase Date,
(ii) the Company 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
40
<PAGE>
pursuant to 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 notice of the occurrence
of an Asset Disposition Trigger and an Asset Disposition Purchase Offer from
the Company. The Trustee may conclusively assume, in the absence of receipt
of notice of the occurrence of an Asset Disposition Trigger and 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:
(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 Asset Disposition Purchase Amount;
(2) that the Asset Disposition Purchase offer is being made pursuant
to this Section 4.7(c) 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 Authorized Denominations 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 4.7(c) must be given;
(4) the Asset Disposition Purchase Date;
(5) the Asset Disposition Purchase 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 S-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.
(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
41
<PAGE>
proration if Securities with an aggregate principal amount greater than the
Asset Disposition Purchase Amount are so tendered) will be paid promptly
upon the later to occur of the third 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 Holder must follow to accept the Asset
Disposition Purchase Offer; and
(11) the procedures for withdrawing an Asset Disposition Purchase
Notice.
(d) 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 Holder 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 in an Authorized
Denomination, 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 4.7(d) 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 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 Purchase Amount, the Company or the Trustee 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
Authorized Denominations 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 an
Asset Disposition Purchase offer made in accordance with this Section 4.7, a
portion of a Security if the principal amount of such portion is an
Authorized Denomination. 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.
42
<PAGE>
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 Paying Agent 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
third Business Day following the Asset Disposition Purchase Date (provided
the conditions in this Section 4.7(d) 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 4.7(d).
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 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 an
Authorized Denomination) with respect to which such notice of withdrawal is
being submitted; and
(3) the principal amount, if any, of such Security (which shall be an
Authorized Denomination) 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 2.4, 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.
(e) 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.
43
<PAGE>
SECTION 4.8. 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 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 $500,000, such Affiliate Transaction was approved by a majority
of the Board of Directors, including a majority of the disinterested members
of such Board, provided, however, that the foregoing does not prohibit (A)
any Restricted Payment permitted to be paid as described above under Section
4.5, (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 this
Indenture to employees 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 (to the extent that such indemnification arrangements
are permitted under applicable law).
SECTION 4.9. 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 Company
shall, or shall cause the Trustee to, 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 and
The Bloomberg Business News Service or, if such news services no longer
publish such notices, a 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 4.9(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
44
<PAGE>
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
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 4.9(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 4.9 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
45
<PAGE>
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:
(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 an Authorized
Denomination, 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 an Authorized Denomination. 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 Holder promptly upon the later of (a) the first Business Day following
the Change of Control Purchase Date (provided the conditions in this Section
4.9(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 4.9(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
46
<PAGE>
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 an
Authorized Denomination) with respect to which such notice of withdrawal is
being submitted; and
(3) the principal amount, if any, of such security (which shall be an
Authorized Denomination) 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 2.4, 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 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. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create
or permit to exist any Lien (other than Permitted Liens) 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, unless the
Company or such Restricted 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.
47
<PAGE>
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 any Sale/Leaseback Transaction with respect to any property or
assets unless (i) the Company or such Restricted Subsidiary, as the case may
be, would be entitled 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, (ii) the Net Cash 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 such Board of
Directors including a majority of the disinterested members of such Board of
Directors, as evidenced by a Board Resolution of such Board), and (iii) the
net cash proceeds of such Sale/Leaseback Transaction are applied in
accordance with Section 4.7.
SECTION 4.14. Limitation on 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 4.7, or (b) any issuance of Preferred Stock of a Restricted
Subsidiary to any Person permitted under Section 4.4.
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 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
48
<PAGE>
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 4.3(a)(i), (ii) such Restricted Subsidiary could then Incur under
Section 4.4 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. Revisions to Schedules. Schedule III 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, and upon such revision a new Schedule III shall be
delivered to the Trustee.
SECTION 4.17. Maintenance of Properties; Insurance. The Company
shall, and shall cause each Restricted Subsidiary to, at all times:
(a) maintain all property and assets necessary in its business in
good working order and condition (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, 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' 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 4.18. 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 4.19. Taxes. The Company shall, and shall cause each of
its Subsidiaries to, pay, prior to delinquency, all taxes, assessments and
governmental levies, except
49
<PAGE>
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 4.20. Conflicting Agreements. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any agreement or
instrument, other than any agreement governing Senior Indebtedness, 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) making any Asset
Disposition Purchase Offer or Change of Control Offer, pursuant to Section
4.7 or 4.9, respectively.
SECTION 4.21. Limitation on Layering. The Company shall not and
shall not permit any of its Restricted Subsidiaries to incur or suffer to
exist any Indebtedness if such Indebtedness is expressly subordinate or
junior in right of payment to any Senior Indebtedness and senior in right of
payment to the Securities.
ARTICLE 5
Merger, Consolidation or Sale of Assets
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 or
group of affiliated Persons (other than to one or more Wholly Owned
Subsidiaries or to the Company) unless (i) if the Company is a party to such
transaction and is not the surviving entity (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 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 Securities and
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 under any agreements entered into by the company to effectuate the
provisions of Section 4.12 hereof; (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 under any agreements entered into by such
Restricted Subsidiary to effectuate the terms of Section 4.12 hereof; (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
50
<PAGE>
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
4.3(a)(i); (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 Tangible Net Worth which is not less than the Consolidated
Tangible 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 (A) that such
consolidation, amalgamation, merger or transfer and such supplemental
indenture (if any) and written instrument (if any) comply with this Indenture
and (B) that upon execution and delivery of such supplemental indenture or
written instrument the Company or such Surviving Entity shall be bound by the
terms of this Indenture as thereby amended and this Indenture as thereby
amended shall be enforceable against the Company or such Surviving Entity in
accordance with its terms.
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 transfer or 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 6.1. 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 and to the
extent 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 4.2, 4.3, 4.4, 4.5, 4.6,
4.7. 4.8, 4.9, 4.12, 4.13, 4.14, 4.20 or 4.21 (other than a failure to
purchase Securities when
51
<PAGE>
required under Section 4.7 or 4.9) 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 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) principal of or interest on any Indebtedness of the Company or
any Restricted Subsidiary for borrowed money is not paid when due within
any applicable grace period or any Indebtedness of the Company or any
Restricted Subsidiary is accelerated by the Holders thereof, in each case,
if the total amount so unpaid when due within any applicable grace period
or accelerated exceeds $7,500,000 or its Dollar Equivalent at the time;
(7) one or more judgments or decrees aggregating in excess of
$7,500,000 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 judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed;
(8) 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;
(9) 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
52
<PAGE>
(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 reason of the provisions of Article IX of this Indenture or 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.
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) or (5) 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 (7) above, its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(8) or (9) 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.
If an Event of Default specified in Section 6.1(8) or (9) 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.
SECTION 6.3. 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.
53
<PAGE>
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 6.4. 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 or Event of Default and its consequences except (i) a Default
or Event of Default in the payment of the principal (other than principal due by
reason of acceleration) of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.2 cannot be amended or waived
without the consent of each Securityholder affected. When a Default or Event of
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 6.5. 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 by
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, 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 6.6. Limitation on Suits. 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 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 security or indemnity
reasonably satisfactory to it 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.
54
<PAGE>
SECTION 6.7. 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 6.8. Collection Suit by Trustee. If an Event of Default in
payment of interest or principal specified in Section 6.1(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 7.7.
SECTION 6.9. 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 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 7.7.
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 7.7;
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
55
<PAGE>
Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.7 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.
ARTICLE 7
Trustee
SECTION 7.1. 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.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(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 willful
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 6.5.
(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.
56
<PAGE>
(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 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 7.2. Rights of Trustee. (a) The Trustee may rely and shall
be protected in acting or in refraining from acting 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, 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, upon
reasonable notice to the Company, to examine the books, records and premises of
the Company, personally or by agent or attorney and to consult with the officers
and representatives of the Company, including the Company's accountants and
attorneys.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on 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
willful 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.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee
57
<PAGE>
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities which may be incurred by it in compliance with such request,
order or direction.
SECTION 7.3. 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.
SECTION 7.4. 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 7.5. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Trust Officer of 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 7.6. 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 7.7. 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, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts and court costs. The Company shall indemnify
the Trustee, its officers, directors, employees and agents, 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
58
<PAGE>
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 willful 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 particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Securities may be subordinate to such other liability or indebtedness).
The Company's payment obligations pursuant to this Section and the
Lien of the Trustee referred to in the preceding paragraph shall survive the
discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.1(8) or (9) with respect to the
Company, the expenses are intended to constitute expenses of administration
under Bankruptcy Law.
SECTION 7.8. 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.
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 7.7.
59
<PAGE>
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 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. 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 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.
ARTICLE 8
Discharge of Indenture; Defeasance
60
<PAGE>
SECTION 8.1. 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 2.9) for cancellation 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 2.9), and if in
either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Sections 8.1(c) and 8.6, cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers' Certificate
and an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, 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 4.2 (to the
extent that the failure to comply with Section 4.2 shall not violate the TIA),
4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.12, 4.13, 4.14, 4.21 and 4.22, Article 5
and the related operation of Sections 6.1(3), (4) and (5) and the operation with
respect to Restricted Subsidiaries of Sections 6.1(6), (7), (8) and (9)
("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 6.1(3),
(4) or (5) or an Event of Default with respect to a Restricted Subsidiary
specified in Sections 6.1(b), (7), (8) or (9).
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 2.3, 2.4, 2.5, 2.6, 2.9, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until
the Securities have been paid in full. Thereafter, the Company's obligations in
Sections 7.7, 8.4, 8.5 and 8.6 shall survive.
SECTION 8.2. 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 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
61
<PAGE>
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 6.1(8) or (9) 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 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 8.3. 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.
62
<PAGE>
SECTION 8.4. 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; provided, however, that the Trustee and the Paying Agent before being
required to make any payment may, but need not, 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 paid to the Company. After payment
to the Company, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.5. 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 8.6. 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 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
Subordination
SECTION 9.1. 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
6.1 and 6.2 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, 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.
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
63
<PAGE>
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 9.2. 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, defeasance, 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 9.2 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:
(i) 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
(ii) the Company or the Trustee receives a notice of such default or
event of default from (A) the holders of a majority of the outstanding
principal amount of such Senior Indebtedness or (B) the trustee or agent,
if any, representing the holders in respect of such Senior Indebtedness;
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.
Notwithstanding the provisions of this Section 9.2(b), the Company may make
Payments on the Securities when:
(1) all defaults and events of default referred to in such notice are
cured or waived; or
(2) 179 days pass after such notice is given, with respect to such
defaults and/or events of default
64
<PAGE>
so long as this Article 9 (including, without limitation, Section 9.2(a))
otherwise permits a Payment at that time.
(c) In the event that notwithstanding the provisions of this Section
9.2 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 9.2(b)(ii)(2) or otherwise, such
payment (subject to the provisions of Sections 9.6 and 9.7) shall be held by the
Trustee or such Holder, in trust for the benefit of, and subject to Sections 9.6
and 9.7, 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), 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
the Credit Facility or under any agreement pursuant to which Senior Indebtedness
has been issued.
SECTION 9.3. 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 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 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, (pro rata as to
each such holder 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
65
<PAGE>
(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 9.6 and 9.7) 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 (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
thereof or 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.
SECTION 9.4. 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 9.5. 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
principal amount 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
66
<PAGE>
referred to in this Article 9, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, 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.
SECTION 9.6. 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 the
trustee or agent, if any, under the Senior Indebtedness and, prior to the
receipt of any such written notice, the Trustee and Paying Agent, subject to the
provisions of Sections 7.1 and 7.2, shall be entitled in all respects
conclusively to assume that no such facts exist.
SECTION 9.7. Application by Trustee of Monies Deposited With It.
Subject to Article 8, 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
9.1, 9.2, 9.3 and 9.4, 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 principal 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 9.6, 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 9.3(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 9.8. 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 of the holders of the Senior Indebtedness shall be effective
against the holders of the Senior Indebtedness who have not consented thereto.
67
<PAGE>
SECTION 9.9. 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 9.3 (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 principal 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 6.1. Nothing contained in this Article 9 shall limited the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Securities pursuant to Section 6.2 or to pursue any rights or remedies hereunder
or under applicable law, subject to the rights, if any, under this Article 9 of
the holders, from time to time, of Senior Indebtedness.
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,
and shall not be liable to any such holders (other than for its willful
misconduct or gross negligence) if it shall pay over to deliver to the Holders
or the Company or any other person, money or assets in compliance with the terms
of this Indenture.
ARTICLE 10
Amendments and Waivers
68
<PAGE>
SECTION 10.1. 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 add Guarantees with respect to the Securities or to secure the
Securities;
(5) 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;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to provide for the acceptance of appointment hereunder by a
successor Trustee;
(8) to make any change that does not adversely affect the rights of
any Securityholder; or
(9) to provide for the issuance of the Exchange Securities, which
will have terms substantially identical in all material respects to the
Initial Securities (except that the transfer restrictions contained in the
Initial Securities will be modified or eliminated, as appropriate), and
which will be treated, together with any outstanding Initial Securities, as
a single issue of securities.
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of this Section 10.1.
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 10.2. 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. In addition, the Holders of at least a majority in
principal amount of the Securities by written notice to the Trustee may waive
future compliance by the Company with any provision of this Indenture or the
69
<PAGE>
Securities. However, without the consent of each Securityholder affected, an
amendment or waiver may not:
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment or waiver;
(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 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 Security; or
(7) make any change in Section 6.4 or 6.7 or the second sentence of
this Section which adversely affects the rights of any Securityholder.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such amendment
or waiver. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment or
waiver under this Section.
SECTION 10.3. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 10.4. 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
70
<PAGE>
Securityholders at such record date (or their duly designated proxies), and only
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 10.5. 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 at the written direction
of the Company shall 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 10.6. Trustee To Sign Amendments. The Trustee shall sign
any amendment authorized pursuant to this Article 10 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 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that (i) such
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; and (ii) the Indenture together with such amendment complies with the
TIA.
SECTION 10.7. 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 11
Miscellaneous
SECTION 11.1. 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 11.2. Notices. Any notice or communication shall be in
writing and delivered in person, by telecopier or mailed by first-class mail
addressed as follows:
if to the Company:
Anacomp, Inc.
71
<PAGE>
12365 Crosthwaite Circle
Poway, CA 92064
Telecopy No.: (619) 679-9797
Attention of Chief Financial Officer
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street, 11th Floor
New York, N.Y. 10004
Telecopy No.: (212) 425-0542
Attention of Corporate Trust 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 11.3. 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 11.4. 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:
(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 11.5. 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;
72
<PAGE>
(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 11.6. 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 11.7. 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.
SECTION 11.8. 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. THE PARTIES HERETO SUBMIT TO THE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS INDENTURE.
SECTION 11.9. 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 or the Trustee, respectively,
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 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.
SECTION 11.11. 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 11.12. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights
73
<PAGE>
Agreement and shall pay all reasonable costs and expenses (including
attorneys' fees for the Company, the Trustee and the Holders) incurred in
connection therewith, including, but not limited to, costs and expenses of
qualification of the Indenture and the Securities and printing this Indenture
and the Securities. The Trustee shall be entitled to receive from the Company
any such Officers' Certificates, Opinions of Counsel or other documentation
as it may reasonably request in connection with any such qualification of
this Indenture under the TIA.
SECTION 11.13. 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 considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 11.14. 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.
74
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
ANACOMP, INC.
By: /s/ Donald L. Viles
----------------------------------
Name: Donald L. Viles
Title: Executive Vice President
and Chief Executive Officer
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Terrence Rawlins
------------------------------------
Name: Terrence Rawlins
Title: Assistant Vice President
<PAGE>
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE
ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),
ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,(D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501 (a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE
IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUER AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
<PAGE>
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE.
<PAGE>
Exhibit A
Page 3
[FORM OF FACE OF SECURITY]
$[_______________________]
CUSIP NO. [[____________]]
10 7/8% Series C Senior Subordinated Note due 2004
Global Note No.[_________]
ANACOMP, INC., an Indiana corporation, promises to pay to [_______],
or registered assigns, the principal sum of [____________] Dollars on April 1,
2004.
Interest Payment Dates: April 1 and October 1
Record Dates: March 1 and September 1
Additional provisions of this Security are set forth on the other side
of this Security.
Dated:
ANACOMP, INC.
[Seal] By:[_________________________________]
Vice President-Tax
[_________________________________]
Assistant Treasurer
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee, certifies that this is
one of the Securities referred to in the Indenture.
By[_________________________________]
Authorized Signatory
Dated:________________
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
10 7/8% Series C Senior Subordinated Note due 2004
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 April 1 and October 1 (each an "Interest Payment Date") of each
year, commencing October 1, 1998. Interest on the Securities will accrue from
and including the most recent date to which interest has been paid or, if no
interest has been paid, from the date of this Security. 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 March 1 or September 1 immediately 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. Except as provided in the next paragraph,
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 mailed to a Holder's registered address. The Company
shall pay to the Holder of this Security an amount in cash equal to 100% of the
interest payment due on such Interest Payment Date.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying 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
The Company issued the Securities under an Indenture dated as of June
18, 1998 ("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. Sections
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.
<PAGE>
The Securities are obligations of the Company limited to $135,000,000
aggregate principal amount (subject to Section 2.9 of the Indenture). The
Indenture imposes certain limitations on the Company and the Restricted
Subsidiaries, including, subject to certain exceptions, limitations on 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, 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.
5. Optional Redemption
Except as set forth below, the Securities will not be redeemable at
the option of the Company prior to April 1, 2000. On and after such date, the
Securities will be redeemable at the option of the Company, in whole or in part
at any time and from time to time, at the redemption prices set forth below
(expressed as percentage of the principal amount), plus accrued and unpaid
interest (if any) to the date of redemption (subject to the right of the Holders
of record on the relevant date to receive interest due on the related interest
payment date):
<TABLE>
<S> <C>
Year Percentage
---- ----------
2000 . . . . . . . . . . . . 108.156%
2001 . . . . . . . . . . . . 105.438%
2002 . . . . . . . . . . . . 102.719%
2003 and thereafter . . . . 100.0%
</TABLE>
At any time, or from time to time, on or prior to April 1, 2000 the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined) to redeem up to 35% of the aggregate principal
amount of Securities originally issued at a redemption price equal to 110.875%
of the principal amount thereof, plus, in each case, accrued and unpaid interest
to the date of redemption, provided that at least 65% of the aggregate principal
amount of Securities originally issued remains outstanding after any such
redemption. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more than
60 days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means a
public offering of Qualified Capital Stock of the Company pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act.
2
<PAGE>
If less than all of the Notes are to be redeemed, the Trustee shall
select by such methods as the Trustee shall deem to be fair and appropriate the
particular Notes to be redeemed or any portion thereof that is an integral
multiple of no more than $1,000.
Notwithstanding the foregoing, the Company may not make any optional
redemption of the Notes unless contemporaneously with such optional redemption
it redeems Existing Notes the aggregate principal amount of which bears the same
relationship to the aggregate principal amount of the Existing Notes outstanding
immediately prior to such optional redemption as the aggregate principal amount
of the Notes being redeemed bears to the aggregate principal amount of the Notes
outstanding immediately prior to such optional redemption.
The Notes will not have the benefit of a sinking fund.
6. Notice of Redemption
Notice of redemption will be mailed by the Company by first class mail
at least 30 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 Authorized
Denominations. 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.
7. Put Provisions
Upon the occurrence of a Change of Control, any Holder of Securities
will have the right to require 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 require the Company to repurchase all or part of the Securities of such
Holder at a repurchase price equal to 100% 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) from certain Net Cash
Proceeds of Asset Dispositions as provided in, and subject to the terms of the
Indenture.
8. Subordination
The Company's payment of the principal of and interest on the
Securities is subordinated and subject to the prior payment in full of the
Company's Senior Indebtedness as more fully set forth in the Indenture. Each
Holder of Securities by his acceptance hereof covenants and agrees that all
payments of the principal and interest on the Securities by the
3
<PAGE>
Company shall be subordinated in accordance with Article 9 of the Indenture and
each holder accepts and agrees to be bound by such provisions.
9. Registration Rights
Pursuant to the Registration Rights Agreement, and subject to certain
terms and conditions stated therein, the Company will be obligated to consummate
an exchange offer pursuant to which the Holders of the Initial Securities shall
have the right to exchange this Security for Exchange Securities, which have
been registered under the Securities Act, in like principal amount and having
terms identical in all material respect to the Initial Securities.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in Authorized
Denominations. 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.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. 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.
13. 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.
14. 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
4
<PAGE>
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 provide for uncertificated Securities in addition to or in place
of certificated Securities, to add Guarantees with respect to the Securities, to
secure 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 Indenture under the Act or to make any change
that does not adversely affect the rights of any Securityholder.
15. 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 acceleration, redemption 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 $7,500,000 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 $7,500,000.
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.
16. 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 Securities 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.
17. 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
5
<PAGE>
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.
18. 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.
19. 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), COST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
20. 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.
21. 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 Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Attention of Corporate Communications
6
<PAGE>
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.)
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 the Security)
[_________________________________________________________________________]
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.9 of the Indenture, check the applicable box:
[ ] Section 4.7
[ ] Section 4.9
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.7 or 4.9 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>
EXHIBIT B
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN THE INDENTURE.
<PAGE>
EXHIBIT B
Page 2
[FORM OF FACE OF SECURITY]
$[_______________________]
CUSIP NO. [[____________]]
10 7/8% Series D Senior Subordinated Note due 2004
Global Note No.[_________]
ANACOMP, INC., an Indiana corporation, promises to pay to [_______],
or registered assigns, the principal sum of [____________] Dollars on April 1,
2004.
Interest Payment Dates: April 1 and October 1
Record Dates: March 1 and September 1
Additional provisions of this Security are set forth on the other side
of this Security.
Dated:
ANACOMP, INC.
[Seal] By:[_________________________________]
President
[_________________________________]
Secretary
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee, certifies that this is
one of the Securities referred to in the Indenture.
By[_________________________________]
Authorized Signatory
Dated:____________________
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
10 7/8% Series D Senior Subordinated Note due 2004
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 April 1 and October 1 (each an "Interest Payment Date") of each
year, commencing October 1, 1998. Interest on the Securities will accrue from
and including the most recent date to which interest has been paid or, if no
interest has been paid, from the date of this Security. 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 March 1 or September 1 immediately 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. Except as provided in the next paragraph,
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 mailed to a Holder's registered address. The Company
shall pay to the Holder of this Security an amount in cash equal to 100% of the
interest payment due on such Interest Payment Date.
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying 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
The Company issued the Securities under an Indenture dated as of June
18, 1998 ("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. Sections
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.
<PAGE>
The Securities are obligations of the Company limited to $135,000,000
aggregate principal amount (subject to Section 2.9 of the Indenture). The
Indenture imposes certain limitations on the Company and the Restricted
Subsidiaries, including, subject to certain exceptions, limitations on 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, 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.
5. Optional Redemption
Except as set forth below, the Securities will not be redeemable at
the option of the Company prior to April 1, 2000. On and after such date, the
Securities will be redeemable at the option of the Company, in whole or in part
at any time and from time to time, at the redemption prices set forth below
(expressed as percentage of the principal amount), plus accrued and unpaid
interest (if any) to the date of redemption (subject to the right of the Holders
of record on the relevant date to receive interest due on the related interest
payment date):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 . . . . . . . . . . . . . 108.156%
2001 . . . . . . . . . . . . . 105.438%
2002 . . . . . . . . . . . . . 102.719%
2003 and thereafter . . . . . 100.000%
</TABLE>
At any time, or from time to time, on or prior to April 1, 2000 the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined) to redeem up to 35% of the aggregate principal
amount of Securities originally issued at a redemption price equal to 110.875%
of the principal amount thereof, plus, in each case, accrued and unpaid interest
to the date of redemption, provided that at least 65% of the aggregate principal
amount of Securities originally issued remains outstanding after any such
redemption. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more than
60 days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means a
public offering of Qualified Capital Stock of the Company pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act.
If less than all of the Notes are to be redeemed, the Trustee shall
select by such methods as the Trustee shall deem to be fair and appropriate the
particular Notes to be redeemed
2
<PAGE>
or any portion thereof that is an integral multiple of no more than $1,000.
Notwithstanding the foregoing, the Company may not make any optional redemption
of the Notes unless contemporaneously with such optional redemption it redeems
Existing Notes the aggregate principal amount of which bears the same
relationship to the aggregate principal amount of the Existing Notes outstanding
immediately prior to such optional redemption as the aggregate principal amount
of the Notes being redeemed bears to the aggregate principal amount of the Notes
outstanding immediately prior to such optional redemption. The Notes will not
have the benefit of a sinking fund.
6. Notice of Redemption
Notice of redemption will be mailed by the Company by first class mail
at least 30 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 Authorized
Denominations. 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.
7. Put Provisions
Upon the occurrence of a Change of Control, any Holder of Securities
will have the right to require 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 require the Company to repurchase all or part of the Securities of such
Holder at a repurchase price equal to 100% 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) from certain Net Cash
Proceeds of Asset Dispositions as provided in, and subject to the terms of the
Indenture.
8. Subordination
The Company's payment of the principal of and interest on the
Securities is subordinated and subject to the prior payment in full of the
Company's Senior Indebtedness as more fully set forth in the Indenture. Each
Holder of Securities by his acceptance hereof covenants and agrees that all
payments of the principal and interest on the Securities by the Company shall be
subordinated in accordance with Article 9 of the Indenture and each holder
accepts and agrees to be bound by such provisions.
3
<PAGE>
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in Authorized
Denominations. 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.
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 provide for
uncertificated Securities in addition to or in place of certificated Securities,
to add Guarantees with respect to the Securities, to secure 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
Indenture under the Act or to make any change that does not adversely affect the
rights of any Securityholder.
4
<PAGE>
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 acceleration, redemption 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 $7,500,000 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 $7,500,000.
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 Securities 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.
5
<PAGE>
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), COST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
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 Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Attention of Corporate Communications
6
<PAGE>
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.)
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 the Security)
[_________________________________________________________________________]
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.7 or 4.9 of the Indenture, check the applicable box:
[ ] Section 4.7
[ ] Section 4.9
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.7 or 4.9 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>
Schedule I to 10 7/8% Senior Subordinated Indenture
Indebtedness To Be Outstanding
Immediately After the Issue Date
<PAGE>
Schedule II to 10 7/8% Senior Subordinated Indenture
Liens To be Outstanding Immediately After the Issue Date
<PAGE>
Schedule III to 10 7/8% Senior Subordinated Indenture
U.S. Restricted Subsidiaries
Xidex International Corporation
Dysan International Sales Corporation II
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
IBJ Schroder Bank & Trust Company, as Trustee
One State Street, 11th Floor
New York, N.Y. 10004
Attention: Corporate Trust Administration
Re: Anacomp, Inc.
10 7/8% Series C Senior Subordinated Notes due 2004
Ladies and Gentlemen:
In connection with our proposed purchase of 10 7/8% Senior
Subordinated Notes due 2004 (the "Securities") of Anacomp, Inc. (the "Company"),
we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated June 12, 1998 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i) -
(iv) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which is two years after the later of the original issuance of the
Securities and the last date that the Company or any affiliate of the Company
was the owner of the Securities (the "Resale Restriction Termination Date"), we
will do so only (i) to the Company, (ii) pursuant to a registration statement
that has been declared effective under the Securities Act, (iii) for so long as
the Securities are eligible for resale pursuant to Rule 144A, to a person it
reasonably believes is a "qualified institutional buyer" that purchases for its
own account or for the account of a "qualified institutional buyer" to whom
notice is given that the transfer is being made in reliance on Rule 144A, (iv)
pursuant to offers and sales that occur outside the United States within the
meaning of
<PAGE>
Exhibit C
Page 2
Regulation S under the Securities Act, (v) to an institutional "accredited
investor" purchasing for its own account or for the account of such an
institutional "accredited investor", in each case in a minimum principal amount
of the Securities of $250,000 or (vi) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or other
transfer of the Securities is proposed to be made pursuant to clause (v) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" that is acquiring such Securities not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the
Trustee reserve the right prior to any offer, sale or other transfer prior to
the Resale Restriction Termination Date of the Securities pursuant to clauses
(iv), (v) or (vi) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
4. We are not acquiring the Securities for or on behalf of, and will
not transfer the Securities to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:[ ]
-----------------------------
Name:
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[_______________], [____]
IBJ Schroder Bank & Trust Company, as Trustee
One State Street, 11th Floor
New York, N.Y. 10004
Attention: Corporate Trust Administration
Re: Anacomp, Inc.
(the "Company") 10 7/8% Series C Senior Subordinated
Notes due 2004 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
<PAGE>
Exhibit D
Page 2
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:[___________________________]
Authorized Signature
<PAGE>
Exhibit 4.2
$135,000,000
ANACOMP, INC.
10 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2004
PURCHASE AGREEMENT
June 12, 1998
<PAGE>
PURCHASE AGREEMENT
June 12, 1998
NatWest Capital Markets Limited
135 Bishopsgate
London, EC2M 3XT
England
Ladies and Gentlemen:
Anacomp, Inc., an Indiana corporation (the "Company"), hereby confirms
its agreement with you (the "Initial Purchaser"), as set forth below.
1. The Notes. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchaser $135,000,000
aggregate principal amount of its 10 7/8% Series C Senior Subordinated Notes
due 2004 (the "Notes"). The Notes are to be issued under an indenture (the
"Indenture") to be dated as of June 18, 1998 between the Company and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee").
The Notes will be offered and sold to the Initial Purchaser without
being registered under the Securities Act of 1933, as amended (the "Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated June 3, 1998 (the "Preliminary
Memorandum") and will prepare a final offering memorandum dated June 12, 1998
(the "Final Memorandum"; the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") setting forth or including a
description of the terms of the Notes, the terms of the offering of the Notes
(the "Offering"), a description of the Company and any material developments
relating to the Company occurring after the date of the most recent
historical financial statements included therein.
The Offering is being made in connection with the acquisition (the
"Acquisition") by the Company of assets constituting substantially all of the
business and operations (the "First Image Businesses") of First Image
Management Company ("First Image"), a division of First Financial Management
Corporation ("FFMC"), a wholly-owned subsidiary of First Data Corporation
("FDC"), and the assumption of substantially all of the ongoing liabilities
of the First Image Businesses. Except as the context otherwise requires,
references herein to the Company shall be deemed to be references to the
Company after giving effect to the Acquisition. References herein to the
transactions contemplated hereby shall be deemed to include references to the
Acquisition.
The Company and the Initial Purchaser will enter into an Exchange and
Registration Rights Agreement (the "Registration Rights Agreement") prior to
or concurrently
<PAGE>
with the issuance of the Notes. Pursuant to the Registration Rights
Agreement, under the circumstances and the terms set forth therein, the
Company will agree to file with the Securities and Exchange Commission (the
"Commission"): (i) a registration statement on Form S-4 (the "Exchange Offer
Registration Statement") relating to a registered Exchange Offer (as defined
in the Registration Rights Agreement) for the Notes under the Act to offer to
the holders of the Notes the opportunity to exchange their Notes for an issue
of notes substantially identical to the Notes (except that (a) interest
thereon will accrue from the last date on which interest was paid on the
Notes, or if no such interest has been paid, from June 18, 1998, (b) such
Notes will not contain restrictions on transfer, and (c) such Notes will not
contain provisions relating to an increase in their interest rate under
certain circumstances) that would be registered under the Act (the "Exchange
Notes"); or (ii) alternatively, in the event that applicable interpretations
of the Commission do not permit the Company to effect the Exchange Offer or
do not permit any holder of the Notes to participate in the Exchange Offer, a
shelf registration statement (the "Shelf Registration Statement") to cover
resales of Notes by such holders who satisfy certain conditions relating to,
including the provision of information in connection with the Shelf
Registration Statement.
2. Representations and Warranties. The Company represents and warrants
to, and agrees with, the Initial Purchaser that prior to and after giving
effect to the Acquisition:
(a) Neither the Preliminary Memorandum, as of the date thereof,
nor the Final Memorandum or any amendment or supplement thereto, as of
the date thereof, and at all times subsequent thereto up to the Closing
Date (as defined in Section 3 below), contained or contains any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2(a) do not
apply to statements or omissions made in reliance upon and in conformity
with information relating to the Initial Purchaser furnished to the
Company in writing by the Initial Purchaser expressly for use in the
Preliminary Memorandum, the Final Memorandum or any amendment or
supplement thereto.
(b) As of the Closing Date, the Company will have the capitalization
set forth in the Final Memorandum; all of the outstanding shares of
capital stock of the Company have been, and as of the Closing Date will
be, duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights;
except as set forth in the Final Memorandum, there are no outstanding
(i) options, warrants or other rights to purchase from the Company, (ii)
agreements or other obligations of the Company to issue, or (iii) other
rights to convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in the Company. The
entities listed on Schedule 2(b) hereto are the only subsidiaries,
direct or indirect of the Company (collectively, the "Subsidiaries").
Except as disclosed on Schedule 2(b) or as disclosed in the Final
Memorandum, the Company does not own, directly or indirectly, any
capital stock or any other equity or long-term debt securities or have
any equity interest in any firm, partnership, joint venture, limited
liability company or other entity.
2
<PAGE>
(c) Each of the Company and the Subsidiaries has been duly
incorporated, is validly existing and is in good standing as a
corporation under the laws of its jurisdiction of incorporation, with
all requisite corporate power and authority to own its properties and
conduct its business as now conducted, and as described in the Final
Memorandum; each of the Company and the Subsidiaries is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a material adverse effect on the general affairs, management,
business, condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (any
such event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by the
Company and, when executed by the Company and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the
case of the Notes, when delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, will have been
duly executed, issued and delivered and will constitute valid and
legally binding obligations of the Company, entitled to the benefits of
the Indenture and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought, (iii) the extent that a
waiver of rights under any usury laws may be unenforceable and (iv)
limitations on rights to indemnity and contribution under federal or
state securities laws or the public policy underlying such laws.
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. The
Indenture meets the requirements for qualification under the Trust
Indenture Act of 1939, as amended (the "TIA"). The Indenture has been
duly and validly authorized by the Company and, when executed and
delivered by the Company (assuming the due authorization, execution and
delivery by the Trustee), will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought, (iii) the extent that a
waiver of rights under any usury laws may be unenforceable and (iv)
limitations on rights to indemnity and contribution under federal or
state securities laws or the public policy underlying such laws.
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and
validly authorized by the Company and,
3
<PAGE>
when executed and delivered by the Company (assuming the due
authorization, execution and delivery thereof by the Initial Purchaser),
will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) general principles
of equity and the discretion of the court before which any proceeding
therefor may be brought, (iii) the extent that a waiver of rights under
any usury laws may be unenforceable and (iv) limitations on rights to
indemnity and contribution under federal or state securities laws or the
public policy underlying such laws.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement has
been duly and validly authorized, executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the
performance of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby that are to be completed
on or before the Closing Date, except such as have been obtained or
disclosed in the Final Memorandum and such as may be required under
state securities or "Blue Sky" laws in connection with the purchase and
resale of the Notes by the Initial Purchaser. None of the Company or
the Subsidiaries is (i) in violation of its certificate of incorporation
or bylaws (or similar organizational document), (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation
applicable to any of them or any of their respective properties or
assets, or (iii) in breach of or in default under (nor has any event
occurred which, with notice or passage of time or both, would constitute
a default under) or in violation of any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which any of them is a party or to which any
of them or their respective properties or assets is subject
(collectively, "Contracts") except such violations, breaches or defaults
that would not, individually or in the aggregate, have a Material
Adverse Effect.
(i) The execution, delivery and performance by the Company of this
Agreement, the Indenture, and the Registration Rights Agreement and the
consummation by the Company of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof, will not
conflict with or constitute or result in a breach of or a default under
(or an event which with notice or passage of time or both would
constitute a default under) or violation of any of (i) the terms or
provisions of any Contract, except such conflicts, breaches, defaults or
violations, that would not, individually or in the aggregate, have a
Material Adverse Effect (ii) the certificate of incorporation or by-laws
(or similar organizational document) of the Company or any of the
Subsidiaries, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8
hereof) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries or any of their
respective properties or assets, except such
4
<PAGE>
conflicts, breaches, defaults or violations that would not, individually
or in the aggregate, have a Material Adverse Effect.
(j) The audited consolidated financial statements of the Company
and the Subsidiaries and of First Image, each included in the Final
Memorandum, present fairly in all material respects the financial
position, results of operations and cash flows of the Company and the
Subsidiaries and of First Image at the dates and for the periods to
which they relate and have (i) been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
and (ii) except with respect to those of First Image, comply in all
material respects with Statement of Position 90-7 with regards to Fresh
Start Reporting, except as otherwise stated therein. The summary and
selected financial and statistical data in the Final Memorandum present
fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited
financial statements included therein, except as otherwise stated
therein. Each of Arthur Andersen LLP and Ernst & Young LLP is an
independent public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(k) The pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the
applicable requirements of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii)
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (iii)
have been properly computed on the bases described therein; the
assumptions used in the preparation of the pro forma financial data and
other pro forma financial information included in the Final Memorandum
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(l) Except as disclosed in the Preliminary Memorandum and the
Final Memorandum, there is not pending or, to the knowledge of the
Company and the Subsidiaries, threatened any action, suit, proceeding,
inquiry or investigation to which the Company or any of the Subsidiaries
is a party, or to which the property or assets of the Company or any of
the Subsidiaries are subject, before or brought by any court, arbitrator
or government agency or body which, if determined adversely to the
Company or any of the Subsidiaries would, individually or in the
aggregate, have a Material Adverse Effect or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
or sale of the Notes to be sold hereunder or the consummation of the
other transactions described in the Final Memorandum.
(m) Except as disclosed in the Preliminary Memorandum and the
Final Memorandum, each of the Company and the Subsidiaries owns or
possesses adequate licenses or other rights to use all material patents,
trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by it
as described in the Final Memorandum, and none of the Company or the
Subsidiaries has received any notice of infringement of or conflict with
(or knows of any such infringement of or conflict with) asserted rights
of others with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how which, if such assertion
5
<PAGE>
of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum (collectively, the "Permits"), except where the failure to
obtain such Permits would not, individually or in the aggregate, have a
Material Adverse Effect; each of the Company and the Subsidiaries has
fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit
except where such revocation, termination or impairment would not,
individually or in the aggregate, have a Material Adverse Effect; and
none of the Company or the Subsidiaries has received any notice of any
proceeding relating to revocation or modification of any such Permit,
except as described in the Final Memorandum and except where such
revocation or modification would not, individually or in the aggregate,
have a Material Adverse Effect.
(o) Since the date of the most recent financial statements
appearing in the Final Memorandum and, except as described in the Final
Memorandum, (i) none of the Company or the Subsidiaries has incurred any
liabilities or obligations, direct or contingent, or entered into or
agreed to enter into any transactions or contracts (written or oral) not
in the ordinary course of business which liabilities, obligations,
transactions or contracts would, individually or in the aggregate,
constitute a material change in the general affairs, management,
business, condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (a
"Material Change"), (ii) none of the Company or the Subsidiaries has
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock and (iii) there has been no change in the capital stock or
long-term indebtedness of the Company or the Subsidiaries which would,
individually or in the aggregate, constitute a Material Change.
(p) Except as disclosed in the Preliminary Memorandum and the
Final Memorandum, there has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and the Subsidiaries, either individually or
taken as a whole, from that set forth in the Final Memorandum (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement).
(q) Each of the Company and the Subsidiaries has filed all
necessary federal, state, local and foreign income and franchise tax
returns, and has paid all taxes shown as due thereon; and other than tax
deficiencies which the Company or any Subsidiary is contesting in good
faith and for which the Company or such Subsidiary has provided
6
<PAGE>
adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and
the Subsidiaries believe to be reliable and accurate.
(s) None of the Company, the Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this
Agreement or the sale of the Notes to violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(t) Each of the Company and the Subsidiaries has good and
marketable title to all real property and good title to all personal
property described in the Final Memorandum as being owned by it and good
and marketable title to any leasehold estate in the real and personal
property described in the Final Memorandum as being leased by it free
and clear of all liens, charges, encumbrances or restrictions, except as
described in the Final Memorandum or to the extent the failure to have
such title or the existence of such liens, charges, encumbrances or
restrictions would not, individually or in the aggregate, have a
Material Adverse Effect. All Contracts to which the Company or any of
the Subsidiaries is a party or by which any of them is bound are valid
and enforceable against the Company or such Subsidiary, and are valid
and enforceable against the other party or parties thereto and are in
full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect.
(u) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary or any of their respective
properties or assets which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(v) Except as would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect, (A) each of the
Company and the Subsidiaries is in compliance with and not subject to
liability under applicable Environmental Laws (as defined below), (B)
each of the Company and the Subsidiaries has made all filings and
provided all notices required under any applicable Environmental Law,
and has and is in compliance with all Permits required under any
applicable Environmental Laws and each of them is in full force and
effect, (C) there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the
knowledge of the Company or any of the Subsidiaries, threatened against
the Company or any of the Subsidiaries under any Environmental Law, (D)
no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property
owned, operated, leased or controlled by the Company or any of the
Subsidiaries, (E) none of the Company or the Subsidiaries has received
notice that it has been identified as a
7
<PAGE>
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
or any comparable state law, (F) no property or facility of the Company
or any of the Subsidiaries is (i) listed or proposed for listing on the
National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, law relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials, into
the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and
(iii) underground and above ground storage tanks, and related piping,
and emissions, discharges, releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiaries which is
pending or, to the knowledge of the Company or any of the Subsidiaries,
threatened.
(x) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as is adequate in accordance with
customary industry practice for the conduct of its business and the
value of its properties. Neither the Company nor any of the
Subsidiaries has received notice from any insurer or agent of such
insurer that capital improvements of other expenditures are required or
necessary to be made in order to continue such insurance.
(y) None of the Company or the Subsidiaries has any material
liability for any prohibited transaction (within the meaning of Section
4975(c) of the Internal Revenue Code of 1986, as amended (the "Code"),
or Part 4 of Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (or an accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of ERISA) or any
complete or partial withdrawal liability (within the meaning of Section
4201 of ERISA) with respect to any pension, profit sharing or other plan
which is subject to ERISA, to which the Company or any of the
Subsidiaries makes or ever has made a contribution and in which any
employee of the Company or of any Subsidiary is or has ever been a
participant. With respect to such plans, the Company and each
Subsidiary is in compliance in all material respects with all applicable
provisions of ERISA.
(z) Each of the Company and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's
8
<PAGE>
authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance
with management's authorization and (D) the reported accountability for
its assets is compared with existing assets at reasonable intervals.
(aa) None of the Company or the Subsidiaries will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(bb) The Notes, the Exchange Notes, the Indenture and the
Registration Rights Agreement will conform in all material respects to
the descriptions thereof in the Final Memorandum.
(cc) No holder of securities of the Company will be entitled to
have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement other than as expressly permitted thereby.
(dd) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable
value of the assets of each of the Company and the Subsidiaries (each on
a consolidated basis) will exceed the sum of its stated liabilities and
identified contingent liabilities; none of the Company or the
Subsidiaries (each on a consolidated basis) is, nor will any of the
Company or the Subsidiaries (each on a consolidated basis) be, after
giving effect to the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
(a) left with unreasonably small capital with which to carry on its
business as it is currently or proposed to be conducted, (b) unable to
pay its debts (contingent or otherwise) as they mature or otherwise
become due or (c) otherwise insolvent.
(ee) None of the Company, the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under
the Act) has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
"security" (as defined in the Act) which is or could be integrated with
the sale of the Notes in a manner that would require the registration
under the Act of the Notes or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the Offering or in any
manner involving a public offering within the meaning of Section 4(2) of
the Act. The Company has not distributed and will not distribute any
offering material in connection with the Offering other than the Final
Memorandum and any Preliminary Memorandum. No securities of the same
class as the Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(ff) Assuming the accuracy of the representations and warranties
of the Initial Purchaser in Section 8 hereof, it is not necessary in
connection with the offer, sale and delivery of the Notes to the Initial
Purchaser in the manner contemplated by this
9
<PAGE>
Agreement to register any of the Notes under the Act or to qualify the
Indenture under the TIA.
(gg) No securities of the Company or any Subsidiary are of the
same class (within the meaning of Rule 144A as promulgated under the Act
("Rule 144A")) as the Notes and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system.
(hh) None of the Company or the Subsidiaries has taken, nor will
any of them take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization
or manipulation of the price of the Notes.
(ii) None of the Company or the Subsidiaries, or any person acting
on behalf of any of them (other than the Initial Purchaser) has engaged
in any directed selling efforts (as that term is defined in Regulation S
under the Act ("Regulation S")) with respect to the Notes; the Company
and its respective Affiliates and any person acting on behalf of any of
them (other than the Initial Purchaser or any Affiliate of the Initial
Purchaser) have complied with the offering restrictions requirement of
Regulation S.
(jj) Each of the Preliminary Memorandum and the Final Memorandum,
as of its respective date, contains all of the information that, if
requested by a prospective purchaser of the Notes, would be required to
be provided to such prospective purchaser to Rule 144A(d)(4) under the
Act.
(kk) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Act.
(ll) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any officer or director purporting to act on behalf
of the Company or any of the Subsidiaries has at any time: (i) made any
contributions to any candidate for political office, or failed to
disclose fully any such contributions, in violation of law, (ii) made
any payment of funds to, or received or retained any funds from, any
state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than
payments required or allowed by applicable law, or (iii) engaged in any
transactions, maintained any bank account or used any corporate funds
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Company
and the Subsidiaries.
(mm) Except as disclosed in any Memorandum, there are no material
outstanding loans or advances or material guarantees of indebtedness by
the Company or any of the Subsidiaries to or for the benefit of any of
the officers or directors of the Company or any of the Subsidiaries or
any of the members of the families of any of them.
(nn) Neither the Company nor any affiliate of the Company does
business with the government of Cuba or with any person or affiliate
located in Cuba.
10
<PAGE>
(oo) None of the Company or the Subsidiaries has engaged or
retained any person, other than NatWest Capital Markets Limited as the
Initial Purchaser, to act as a financial advisor, underwriter or
placement agent in connection with the issuance of the Notes and, except
for the fees and expenses payable in connection with the issuance of the
Notes as described in the Final Memorandum, no person has the right to
receive a material amount of financial advisory, underwriting,
placement, finder's or similar fees in connection with, or as a result
of, the issuance of the Notes and the purchase of the Notes by the
Initial Purchaser or the consummation of the other transactions
contemplated hereby.
(pp) The Company, FFMC and FDC have entered into an Asset Purchase
Agreement, dated as of May 5, 1998 (the "Asset Purchase Agreement"),
pursuant to which the Company has agreed to acquire the First Image
Businesses. The Company had all requisite corporate power and authority
to execute and deliver, and has all requisite corporate power and
authority to perform its obligations under, the Asset Purchase
Agreement. The Asset Purchase Agreement has been duly and validly
authorized, executed and delivered by the Company and, to the Company's
knowledge after reasonable investigation, by each of the other parties
thereto and constitutes the valid and legally binding agreement of the
Company and, to the Company's knowledge after reasonable investigation,
of each of the other parties thereto enforceable against each of the
parties thereto in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws now or hereafter in effect relating
to creditors' rights generally, (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought, (iii) the extent that a waiver of rights under any usury laws
may be unenforceable and (iv) limitations on rights to indemnity and
contribution under federal or state securities laws or the public policy
underlying such laws.
(qq) The Company and Southern Micrographix Company LLC ("SMC")
have entered into a letter of intent, dated May 15, 1998, confirming an
agreement in principle between the Company and SMC, pursuant to which
SMC will purchase from the Company the document print and distribution
services segment of the First Image Businesses at a purchase price of
$26.1 million, subject to downward adjustment to an amount not less than
$24.8 million under certain circumstances.
(rr) The Company and Dataplex Corporation ("Dataplex") have
entered into a letter of intent, dated May 21, 1998, confirming an
agreement in principle between the Company and Dataplex, pursuant to
which Dataplex will purchase from the Company the document acquisition
services segment of the First Image Businesses at a purchase price of
$22.0 million, subject to downward adjustment to an amount not less than
$20.9 million under certain circumstances.
(ss) All of the representations and warranties of the Company and,
to the Company's knowledge after reasonable investigation, the other
parties to the Asset Purchase Agreement made in the Asset Purchase
Agreement are true and correct as if made on and as of the date hereof
and the Closing Date.
11
<PAGE>
(tt) The Company has undertaken a comprehensive review of its
computer systems (except with respect to those of the First Image
Businesses) to identify the systems that could be affected by the risk
that the computer hardware and software used by it may be unable to
recognize and properly execute date-sensitive functions involving
certain dates prior to and any dates after December 31, 1999 (the "Year
2000 Problem") and has developed and is implementing a plan to resolve
the issue; the Company believes that the Year 2000 Problem will not have
a Material Adverse Effect and that the costs of implementing and
effectuating such plan will not be material.
(uu) The Company has secured a commitment for the New Revolving
Credit Facility (as defined in the Final Memorandum). The Credit
Agreement (as defined in the Final Memorandum) has been duly and validly
authorized by the Company, and to the Company's knowledge after
reasonable investigation, by each of the other parties thereto, and when
executed and delivered by the Company will constitute a valid and
legally binding agreement of the Company, and to the Company's knowledge
after reasonable investigation, of each of the other parties thereto,
enforceable against the Company, and to the Company's knowledge after
reasonable investigation, enforceable against each of the other parties
thereto, in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought. The Final Memorandum contains a summary of the terms of the
Credit Agreement which is accurate in all material respects.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to the Initial Purchaser or to counsel for the Initial
Purchaser shall be deemed a joint and several representation and warranty by
the Company and each of the Subsidiaries to the Initial Purchaser as to the
matters covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company all of the Notes at 100.037% of their principal
amount. One or more certificates in definitive form for the Notes that the
Initial Purchaser has agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial
Purchaser requests upon notice to the Company at least 36 hours prior to the
Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchaser, against payment by or on behalf of the Initial Purchaser
of the purchase price therefor by wire transfer to such account or accounts
as the Company shall specify prior to the Closing Date, or by such means as
the parties hereto shall agree prior to the Closing Date. Such delivery of
and payment for the Notes shall be made at the offices of White & Case LLP,
1155 Avenue of the Americas, New York, New York at 10:00 A.M., New York time,
on June 18, 1998, or at such other place, time or date as the Initial
Purchaser, on the one hand, and the Company, on the other hand, may agree
upon, such time and date of delivery against payment being herein referred to
as the "Closing Date." The Company will make such certificate or
certificates for the Notes
12
<PAGE>
available for inspection and packaging by the Initial Purchaser at such place
as designated by the Initial Purchaser at least 24 hours prior to the Closing
Date.
4. Offering by the Initial Purchaser. The Initial Purchaser proposes
to make an offering of the Notes at the price and upon the terms set forth in
the Final Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Company and the Subsidiaries. Each of the Company
and the Subsidiaries, jointly and severally, covenants and agrees with the
Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchaser shall not have consented. The Company will
promptly, upon the reasonable request of the Initial Purchaser or counsel
for the Initial Purchaser, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Notes by the Initial
Purchaser.
(b) The Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Notes for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchaser may designate and will continue such qualifications in effect for
as long as may be necessary to complete the resale of the Notes; provided,
however, that in connection therewith, none of the Company or any
Subsidiary shall be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the resale by the
Initial Purchaser of the Notes or the Private Exchange Notes, any event
occurs or information becomes known as a result of which the Final
Memorandum as then amended or supplemented would, in the judgment of the
Company or its counsel or in the reasonable opinion of the Initial
Purchaser or its counsel include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or if for any other reason it is necessary at any time to amend
or supplement the Final Memorandum to comply with applicable law, the
Company and the Subsidiaries will promptly notify the Initial Purchaser
thereof and will prepare, at the expense of the Company and the
Subsidiaries, an amendment or supplement to the Final Memorandum that
corrects such statement or omission or effects such compliance.
(d) The Company and the Subsidiaries will, without charge, provide
to the Initial Purchaser and to counsel for the Initial Purchaser as many
copies of the Preliminary Memorandum and the Final Memorandum or any
amendment or supplement thereto as the Initial Purchaser may reasonably
request.
13
<PAGE>
(e) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) From the Closing Date until the date that no Notes are
outstanding under the Indenture, the Company will furnish to the Initial
Purchaser copies of all reports and other communications (financial or
otherwise) furnished by the Company to the Trustee, or the holders of the
Notes and, as soon as available, copies of any reports or financial
statements furnished to or filed by the Company with the Commission or any
national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Closing Date, the Company and the Subsidiaries will
furnish to the Initial Purchaser, as soon as they have been prepared, a
copy of any unaudited interim financial statements of the Company and the
Subsidiaries for any period subsequent to the period covered by the most
recent financial statements appearing in the Final Memorandum.
(h) None of the Company, the Subsidiaries or any of their Affiliates
will sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any "security" (as defined in the Act) which could be
integrated with the sale of the Notes in a manner which would require the
registration under the Act of the Notes.
(i) None of the Company or the Subsidiaries will engage in any form
of "general solicitation" or "general advertising" (as those terms are used
in Regulation D under the Act) in connection with the Offering or in any
manner involving a public offering of the Notes within the meaning of
Section 4(2) of the Act.
(j) None of the Company, the Subsidiaries, their respective
Affiliates or any person acting on behalf of any of them will engage in any
directed selling efforts (as that term is defined in Regulation S) with
respect to the Notes, and the Company and the Subsidiaries will comply, and
will cause their respective Affiliates and each person acting on behalf of
any of them to comply, with the offering restrictions requirements of
Regulation S.
(k) For so long as any of the Notes remain outstanding, the Company
and the Subsidiaries will make available, upon request, to any seller of
such Notes the information specified in Rule 144A(d)(4) under the Act,
unless the Company and the Subsidiaries are then subject to Section 13 or
15(d) of the Exchange Act.
(l) For a period of 90 days from the date of the Final Memorandum,
the Company and the Subsidiaries will not offer for sale, sell, contract
to sell or otherwise dispose of, directly or indirectly, or file a
registration statement for, or announce any offer, sale, contract for sale
of or other disposition of any debt securities issued or guaranteed by the
Company or any of the Subsidiaries (other than the Notes or the Exchange
Notes or the Private Exchange Notes) without the prior written consent of
the Initial Purchaser;
14
<PAGE>
(m) During the period from the Closing Date until two years after
the Closing Date, without the prior written consent of the Initial
Purchaser, the Company and the Subsidiaries will not, and will not permit
any of their affiliates (as defined in Rule 144 under the Act) to, resell
any of the Notes that have been reacquired by them, except for Notes
purchased by the Company or any of its affiliates and resold in a
transaction registered under the Act;
(n) In connection with the Offering, until the Initial Purchaser
shall have notified the Company of the completion of the resale of the
Notes, the Company and the Subsidiaries will not, and will cause their
affiliated purchasers (as defined in Rule 10b-6 under the Exchange Act)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers
has a beneficial interest, any Notes, or attempt to induce any person to
purchase any Notes; and not to, and to cause its affiliated purchasers not
to, make bids or purchase for the purpose of creating actual, or apparent,
active trading in, or of raising the price of, the Notes;
(o) The Company and the Subsidiaries will not take any action prior
to the execution and delivery of the Indenture which, if taken after such
execution and delivery, would have violated any of the covenants contained
in the Indenture;
(p) The Company and the Subsidiaries will not take any action prior
to Closing Date which would require the Final Memorandum to be amended or
supplemented pursuant to Section 5(c);
(q) Prior to the Closing Date, the Company and the Subsidiaries will
not issue any press release or other communication directly or indirectly
or hold any press conference with respect to the Company, its condition,
financial or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary course of
business and consistent with the past practices of the Company and of which
the Initial Purchaser is notified), without the prior written consent of
the Initial Purchaser, unless in the judgment of the Company and its
counsel, after notification to the Initial Purchasers, such press release
or communication is required by law; and
(r) The Company will use its best efforts to (i) permit the Notes to
be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
(the "NASD") relating to trading in the PORTAL Market and (ii) permit the
Notes to be eligible for clearance and settlement through The Depository
Trust Company.
6. Expenses. The Company agrees to pay all costs and expenses incident to
the performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the
delivery to the Initial Purchaser of copies of the foregoing documents, (iii)
the fees and disbursements of counsel, accountants and any other experts or
advisors retained by the Company, (iv) preparation (including printing),
issuance and delivery
15
<PAGE>
to the Initial Purchaser of the Notes, (v) the qualification of the Notes under
state securities and "Blue Sky" laws, including filing fees and fees and
disbursements of counsel for the Initial Purchaser relating thereto, (vi) the
Company's expenses in connection with any meetings with prospective investors in
the Notes, (vii) fees and expenses of the Trustee including fees and expenses of
counsel, (viii) all expenses and listing fees incurred in connection with the
application for quotation of the Notes on the PORTAL Market, (ix) any fees
charged by investment rating agencies for the rating of the Notes. If the sale
of the Notes provided for herein is not consummated because any condition to the
obligations of the Initial Purchaser set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Initial Purchaser of their
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company agrees to promptly reimburse the Initial
Purchaser upon demand for all out-of-pocket expenses (including all fees,
disbursements and charges of White & Case LLP, counsel for the Initial
Purchaser) that shall have been incurred by the Initial Purchaser in connection
with the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchaser's Obligations. The obligation of
the Initial Purchaser to purchase and pay for the Notes shall, in its sole
discretion, be subject to the satisfaction or waiver of the following conditions
on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Cadwalader, Wickersham & Taft, counsel for the Company, in
form and substance satisfactory to counsel for the Initial Purchaser,
substantially to the effect that:
(i) Each of the Company and the material Subsidiaries is
incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Final Memorandum.
Each of the Company and the material Subsidiaries is duly qualified as
a foreign corporation and is in good standing in the jurisdictions set
forth below such Subsidiaries' name on Schedule A attached to such
opinion.
(ii) All of the outstanding shares of capital stock of the
Company and the material Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and were not issued
in violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the material Subsidiaries are
owned, directly or indirectly, by the Company, free and clear of all
security interests perfected, or otherwise, and free and clear of all
other liens, encumbrances, equities and claims or restrictions on
transferability or voting.
16
<PAGE>
(iii) Except as set forth in the Final Memorandum, to the
knowledge of such counsel, (A) no options, warrants or other rights to
purchase from the Company or any Subsidiary shares of capital stock or
ownership interests in the Company or any Subsidiary are outstanding,
(B) no agreements or other obligations of the Company or any
Subsidiary to issue, or other rights to cause the Company or any
Subsidiary to convert, any obligation into, or exchange any securities
for, shares of capital stock or ownership interests in the Company or
any Subsidiary are outstanding and (C) no holder of securities of the
Company or any Subsidiary is entitled to have such securities
registered under a registration statement filed by the Company or the
Subsidiaries pursuant to the Registration Rights Agreement.
(iv) The Company has all requisite corporate power and authority
to execute, deliver and perform its respective obligations under the
Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Indenture is in sufficient form for qualification under the
TIA; the Indenture has been duly and validly authorized, executed and
delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes the valid
and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
or other similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought, (iii) the extent that a waiver of rights under any usury laws
may be unenforceable and (iv) limitations on rights to indemnity and
contribution under federal or state securities laws or the public
policy underlying such laws.
(v) The Global Note (as such term is defined in the Indenture)
is in the form contemplated by the Indenture. The Global Note has
been duly and validly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and delivery of
the Indenture by the Trustee, the due authentication and delivery of
the Notes by the Trustee in accordance with the Indenture and the
payment therefor by the Initial Purchaser in accordance with the terms
of this Agreement) constitutes the valid and legally binding
obligation of the Company, entitled to the benefits of the Indenture,
and enforceable against the Company in accordance with its terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought, (iii) the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) limitations
on rights to indemnity and contribution under federal or state
securities laws or the public policy underlying such laws.
(vi) The Exchange Notes and the Private Exchange Notes have been
duly and validly authorized by the Company, and when the Exchange
Notes and the Private Exchange Notes have been duly executed and
delivered by the Company in accordance
17
<PAGE>
with the terms of the Registration Rights Agreement and the Indenture
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and the due authentication and delivery of
the Exchange Notes and the Private Exchange Notes by the Trustee in
accordance with the Indenture), will constitute the valid and legally
binding obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought, (iii) the extent that a
waiver of rights under any usury laws may be unenforceable and (iv)
limitations on rights to indemnity and contribution under federal or
state securities laws or the public policy underlying such laws.
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement; the Registration Rights Agreement has
been duly and validly authorized, executed and delivered by the
Company and (assuming due authorization, execution and delivery
thereof by the Initial Purchaser) constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought, (iii) the
extent that a waiver of rights under any usury laws may be
unenforceable and (iv) limitations on rights to indemnity and
contribution under federal or state securities laws or the public
policy underlying such laws.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby
(including the Acquisition); this Agreement and the consummation by
the Company of the transactions contemplated hereby have been duly and
validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company.
(ix) The Indenture, the Notes (when issued, authenticated and
delivered), the Exchange Notes (when issued, authenticated and
delivered) and the Registration Rights Agreement conform in all
material respects to the descriptions thereof contained in the Final
Memorandum.
(x) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which any of the Company or
the material Subsidiaries is a party or to which the property or
assets of the Company or the material Subsidiaries is subject which,
if determined adversely to the Company or such material Subsidiaries,
would result, individually or in the aggregate, in a Material Adverse
Effect, or which seeks to restrain, enjoin, prevent
18
<PAGE>
the consummation of or otherwise challenge the issuance or sale of the
Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum under the caption "Use
of Proceeds."
(xi) None of the Company or any material Subsidiary is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document) or (ii) to the knowledge of such counsel, in
breach or violation of any judgment, decree or order applicable to any
of them or any of their respective properties or assets.
(xii) The execution and delivery of this Agreement, the
Indenture, the Registration Rights Agreement and the consummation of
the transactions contemplated hereby and thereby (including the
Acquisition) will not conflict with or constitute or result in a
breach or a default under (or an event which with notice or passage of
time or both would constitute a default under) or violation of any of
(i) the terms or provisions of any Contract known to such counsel,
(ii) the certificate of incorporation or bylaws (or similar
organizational document) of the Company or any material Subsidiary, or
(iii) (assuming compliance with all applicable state securities or
"Blue Sky" laws and assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation which, in such counsel's
experience, is normally applicable both to general business
corporations which are not engaged in regulated business activities
and to transactions of the type contemplated by the Final Memorandum.
(xiii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchaser or the other
transactions contemplated hereby (including the Acquisition), except
such as are disclosed in the Final Memorandum or as may be required
under Blue Sky laws, as to which such counsel need express no opinion,
and those which have previously been obtained.
(xiv) There are no legal or governmental proceedings involving
or affecting the Company or the Subsidiaries or any of their
respective properties or assets which would be required to be
described in a prospectus pursuant to the Act that are not described
in the Final Memorandum nor are there any material contracts or other
documents which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum.
(xv) None of the Company or the Subsidiaries is, or immediately
after the sale of the Notes to be sold hereunder and the application
of the proceeds from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
19
<PAGE>
(xvi) No registration of the Notes under the Act is required in
connection with the sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer or the effectiveness of the
Shelf Registration Statement, the Indenture is not required to be
qualified under the TIA, in each case assuming (i) that the purchasers
who buy such Notes in the initial resale thereof are (A) qualified
institutional buyers as defined in Rule 144A promulgated under the Act
("QIBs"), (B) accredited investors as defined in Rule 501(a) (1), (2),
(3) or (7) promulgated under the Act ("Accredited Investors"), or (C)
not "U.S. persons" or purchasing for the account or benefit of "U.S.
persons" as defined in Regulation S, and are purchasing Notes in
offshore transactions in accordance with Regulation S, (ii) the
accuracy of the Initial Purchaser's representations in Section 8
hereof and those of the Company contained in this Agreement regarding
the absence of a general solicitation in connection with the sale of
such Notes to the Initial Purchaser and the initial resale thereof and
(iii) the due performance by the Initial Purchaser of the agreements
set forth in Section 8 hereof.
(xvii) Neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.
(xviii) The Company had all requisite corporate power and
authority to execute and deliver, and has all requisite corporate
power and authority to perform its obligations under, the Asset
Purchase Agreement. The Asset Purchase Agreement has been duly and
validly authorized, executed and delivered by the Company and, to the
knowledge of such counsel, the other parties thereto, and constitutes
the valid and legally binding agreement of the Company and, to the
knowledge of such counsel, the other parties thereto, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought, (iii) the extent that a waiver of rights
under any usury laws may be unenforceable and (iv) limitations on
rights to indemnity and contribution under federal or state securities
laws or the public policy underlying such laws.
(xx) The statements contained in the Final Memorandum under the
caption "Certain U.S. Federal Tax Considerations," insofar as such
statements purport to summarize certain federal income tax laws of the
United States, constitute a fair summary of the principal U.S. federal
income tax consequences of an investment in the Notes.
(xxi) The Credit Agreement has been duly and validly authorized,
by the Company and, to the knowledge of such counsel, by each of the
other parties
20
<PAGE>
thereto, and, when duly executed by the Company and the other parties
thereto, will constitute the valid and legally binding agreement of
the Company, and to the knowledge of such counsel, of each of the
other parties thereto, enforceable against the Company and, to the
knowledge of such counsel, each of the other parties thereto, in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought, (iii) the
extent that a waiver of rights under any usury laws may be
unenforceable and (iv) limitations on rights to indemnity and
contribution under federal or state securities laws or the public
policy underlying such laws. The Final Memorandum contains a summary
of the terms of the Credit Agreement which is accurate in all material
respects.
At the time the foregoing opinion is delivered, Cadwalader, Wickersham
& Taft shall additionally state that it has participated in conferences
with officers and other representatives of the Company and the
Subsidiaries, representatives of the independent public accountants for the
Company, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final
Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum, no facts have come to its attention
which lead it to believe that the Final Memorandum, on the date thereof or
at the Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
firm need express no opinion with respect to the financial statements and
related notes thereto and the other financial, statistical and accounting
data included in the Final Memorandum). In rendering such opinion,
Cadwalader, Wickersham & Taft shall have received and may rely upon such
certificates and other documents and information as it may reasonably
request to pass on such matters. The opinion of Cadwalader, Wickersham &
Taft described in this Section shall be rendered to the Initial Purchaser
at the request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser,
dated as of the Closing Date and addressed to the Initial Purchaser, of
White & Case LLP, counsel for the Initial Purchaser, with respect to
certain legal matters relating to this Agreement and such other related
matters as the Initial Purchaser may reasonably require. In rendering such
opinion, White & Case LLP shall have received and may rely upon such
certificates and other documents and information as it may reasonably
request to pass upon such matters.
21
<PAGE>
(c) (i) The Initial Purchaser shall have received from Arthur
Andersen LLP comfort letters dated the date hereof and the Closing Date,
in form and substance satisfactory to counsel for the Initial Purchaser.
(ii) The Initial Purchaser shall have received from Ernst & Young
LLP comfort letters dated the date hereof and the Closing Date, in form and
substance satisfactory to counsel for the Initial Purchaser.
(d) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date; the
statements of the Company's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and
correct on and as of the date made and on and as of the Closing Date; the
Company shall have performed all covenants and agreements and satisfied all
conditions on their part to be performed or satisfied hereunder at or prior
to the Closing Date; and, except as described in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such
Final Memorandum, there shall have been no event or development that,
individually or in the aggregate, has or would be reasonably likely to have
a Material Adverse Effect.
(e) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) The Notes shall have been approved by the NASD for trading in the
PORTAL Market.
(g) There shall not have occurred any invalidation of Rule 144A under
the Act by any court or any withdrawal or proposed withdrawal of any rule
or regulation under the Act or the Exchange Act by the Commission or any
amendment or proposed amendment thereof by the Commission which in the
judgment of the Initial Purchaser would materially impair the ability of
the Initial Purchaser to purchase, hold or effect resales of the Notes as
contemplated hereby.
(h) There shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, of the Company and the
Subsidiaries, taken as a whole, from that set forth in the Final Memorandum
that constitutes a Material Adverse Effect and that makes it, in the
Initial Purchaser's judgment, impracticable to market the Notes on the
terms and in the manner contemplated in the Final Memorandum.
(i) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the conduct of the business and operations of the
Company shall not have been interfered with by strike, fire, flood,
hurricane, accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and, except as otherwise
stated
22
<PAGE>
therein, the properties of the Company shall not have sustained any loss or
damage (whether or not insured) as a result of any such occurrence, except
any such interference, loss or damage which would not, individually or in
the aggregate, have a Material Adverse Effect.
(j) No securities of the Company shall have been downgraded or placed
on any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
(k) The Initial Purchaser shall have received certificates of the
Company, dated the Closing Date, signed by its Chairman of the Board,
President or any Executive or Senior Vice President and by the Chief
Financial Officer, Treasurer or any Assistant Treasurer, to the effect
that:
(i) The representations and warranties of the Company contained
in this Agreement are true and correct as of the date hereof and as of
the Closing Date, and the Company has performed all covenants and
agreements and satisfied all conditions on their part to be performed
or satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has become
known and no condition exists that, individually or in the aggregate,
would have a Material Adverse Effect;
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently); and
(iv) such other information as the Initial Purchaser may
reasonably request.
(l) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement executed by the Company and such
agreement shall be in full force and effect at all times pursuant to its
terms.
(m) On the Closing Date, the Company shall have consummated the
Acquisition.
On or before the Closing Date, the Initial Purchaser and counsel for the
Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company and the
Subsidiaries.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchaser and counsel for the Initial
23
<PAGE>
Purchaser. The Company and the Subsidiaries shall furnish to the Initial
Purchaser such conformed copies of such documents, opinions, certificates,
letters, schedules and instruments in such quantities as the Initial Purchaser
shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. The Initial Purchaser
agrees with the Company that (i) it has not and will not solicit offers for, or
offer or sell, the Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; and (ii) it has and will solicit offers for the Notes only from, and will
offer the Notes only to (A) in the case of offers inside the United States, (x)
persons whom the Initial Purchaser reasonably believes to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchaser that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A or (y) other institutional investors
reasonably believed by the Initial Purchaser to be Accredited Investors that,
prior to their purchase of the Notes, deliver to the Initial Purchaser a letter
containing the representations and agreements set forth in Appendix A to the
Final Memorandum and (B) in the case of offers outside the United States, to
persons other than U.S. persons ("foreign purchasers," which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)); provided, however, that, in the case of this clause (B), in purchasing
such Notes such persons are deemed to have represented and agreed as provided
under the caption "Transfer Restrictions" contained in the Final Memorandum.
The Initial Purchaser represents and warrants that it is a QIB, with such
knowledge and experience in financial and business matters as are necessary in
order to evaluate the merits and risks of an investment in the Notes. The
Initial Purchaser agrees to comply with the applicable provisions of Rule 144A
and Regulation S under the Act. The Initial Purchaser hereby acknowledges that
the Company and, for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to Section 7(a) hereof, counsel to the Company will rely upon
the accuracy and truth of the representations contained in this Section 8 and
the Initial Purchaser hereby consents to such reliance.
9. Indemnification and Contribution. a)" \* MERGEFORMAT (a) The Company
and the Subsidiaries jointly and severally agree to indemnify and hold harmless
the Initial Purchaser and its respective affiliates, directors, officers,
agents, representatives general partners and employees of the Initial Purchaser
or its affiliates, and each other person, if any, who controls the Initial
Purchaser or its affiliates within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, to the full extent lawful against any losses,
claims, damages, expenses or liabilities (or action in respect thereof,
including, without, limitation, shareholder derivative actions and arbitration
proceedings) to which any Initial Purchaser or such other person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other
24
<PAGE>
document, or any amendment or supplement thereto, executed by the Company
or the Subsidiaries or based upon written information furnished by or on
behalf of the Company or the Subsidiaries filed in any jurisdiction in
order to qualify the Notes under the securities or "Blue Sky" laws thereof
or filed with any securities association or securities exchange (each an
"Application");
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading; or
(iii) any breach of any of the representations and warranties of the
Company and the Subsidiaries set forth in this Agreement or the
Registration Rights Agreement,
and will reimburse, as incurred, the Initial Purchaser and each such other
person for any legal or other expenses incurred by the Initial Purchaser or such
other person in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, the Company and the Subsidiaries 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 untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Company by the Initial Purchaser specifically for use therein; provided,
further, that the foregoing indemnity agreement with respect to the any
Memorandum shall not inure to the benefit of the Initial Purchaser and its
respective affiliates, directors, officers, agents, representatives general
partners and employees of the Initial Purchaser or its affiliates or any person
who controls the Initial Purchaser if a copy of the Final Memorandum (as
theretofore amended or supplemented, if the Company shall have timely furnished
sufficient copies of the Final Memorandum as so amended or supplemented to the
Initial Purchaser) was not sent or given by or on behalf of the Initial
Purchaser to the purchaser of Notes asserting such loss, claim, damage or
liability at or prior to the written confirmation of the sale of Notes to such
person, and if the Final Memorandum (as so amended or supplemented) would have
cured the defect giving rise to the claimed loss, claim, damage or liability.
This indemnity agreement will be in addition to any liabilities or obligations
that the Company and the Subsidiaries may otherwise have to such indemnified
parties, including without limitation the indemnification obligations of the
Company pursuant to the NatWest Engagement. The Company and the Subsidiaries
shall not be liable under this Section 9 for any settlement of any claim or
action effected without its prior consent, which shall not be unreasonably
withheld.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company and the Subsidiaries, their directors, their officers and each person,
if any, who controls the Company or the Subsidiaries within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company, the Subsidiaries or any
such director, officer or controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto or any Application,
25
<PAGE>
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or supplement thereto
or any Application, or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning the Initial Purchaser
furnished to the Company or the Subsidiaries by the Initial Purchaser
specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses incurred by the Company, or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Initial Purchaser may otherwise have to
such indemnified parties. The Initial Purchaser shall not be liable under this
Section 9 for any settlement of any claim or action effected without their
written consent, which shall not be unreasonably withheld. The Company and the
Subsidiaries shall not, without the prior written consent of the Initial
Purchaser, effect any settlement or compromise of any pending or threatened
proceeding in respect of which the Initial Purchaser is or could have been a
party, or indemnity could have been sought hereunder by any Initial Purchaser,
unless such settlement (A) includes an unconditional written release of the
Initial Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action for which such indemnified party is
entitled to indemnification under this Section 9, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 9, notify the indemnifying party of the commencement thereof in
writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent 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 paragraphs (a) and (b) above. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that 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 defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the
26
<PAGE>
right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchaser
in the case of paragraph (a) of this Section 9 or either the Company or any of
the Subsidiaries in the case of paragraph (b) of this Section 9, representing
the indemnified parties under such paragraph (a) or paragraph (b), as the case
may be, who are parties to such action or actions) or (ii) the indemnifying
party has authorized in writing the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld), unless such
indemnified party waived in writing its rights under this Section 9, in which
case the indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
Offering or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Company and the Subsidiaries on the one hand and the Initial Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the Offering (net of discounts and commissions and before deducting
expenses) received by the Company and the Subsidiaries bear to the total
discounts and commissions received by the Initial Purchaser. The relative fault
of the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Subsidiaries on the one hand, or the Initial Purchaser on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Initial Purchaser agree that it would not be
equitable if the amount of such
27
<PAGE>
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial Purchaser
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total discounts, commissions and other compensation received by the
Initial Purchaser under this Agreement, less the aggregate amount of any damages
that the Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and 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 paragraph (d), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchaser, and each director of the Company or the Subsidiaries, each
officer of the Company or the Subsidiaries and each person, if any, who controls
the Company or the Subsidiaries within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, shall have the same rights to contribution as
the Company and the Subsidiaries.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, the
Subsidiaries, their respective officers and the Initial Purchaser set forth in
this Agreement or made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, the Subsidiaries, any of their respective officers or
directors, the Initial Purchaser or any other person referred to in Section 9
hereof and (ii) delivery of and payment for the Notes. The respective
agreements, covenants, indemnities and other statements set forth in Sections 6,
9 and 15 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to
the Closing Date in the event that the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on their
respective part to be performed or satisfied hereunder at or prior thereto
or, if at or prior to the Closing any of the following shall have occurred:
(i) any of the Company or the Subsidiaries shall have sustained
any loss or interference with respect to its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute, slow down
or work stoppage or any legal or governmental proceeding, which loss
or interference has had or has a Material Adverse Effect, or there
shall have been, in the sole judgment of the Initial Purchaser, any
event or development that, individually or in the aggregate, has or
could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of the Company or
the Subsidiaries), except in each case as described in the Final
Memorandum (exclusive of any amendment or supplement thereto);
(ii) there shall have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or
28
<PAGE>
operations, of the Company and the Subsidiaries, taken as a whole,
from that set forth in the Final Memorandum that is material and
adverse and that makes it, in the Initial Purchasers' judgment,
impracticable to market the Notes on the terms and in the manner
contemplated in the Final Memorandum.
(iii) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock
Exchange, Inc. or the NASD or the setting of minimum prices for
trading on such exchange or market shall have occurred or trading of
any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market;
(iv) a banking moratorium shall have been declared by New York
or United States authorities;
(v) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States, (C) any material change in the financial
markets of the United States (D) or any other national or
international calamity or emergency which, in the case of (A), (B),
(C) or (D) above and in the sole judgment of the Initial Purchaser,
makes it impracticable or inadvisable to proceed with the Offering or
the delivery of the Notes as contemplated by the Final Memorandum;
(vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs that
has a material adverse effect on the financial markets in the United
States, and would, in the sole judgment of the Initial Purchaser, make
it impracticable or inadvisable to market the Notes;
(vii) the enactment, publication, decree, or other promulgation
of any federal or state statute, regulation, rule order of any court
or other governmental authority which, in your judgment, would have a
Material Adverse Effect;
(viii) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in Section
10 hereof.
12. Information Supplied by the Initial Purchaser. The statements set
forth in the last paragraph on the cover page of the Final Memorandum, and the
third, sixth and seventh paragraphs under the heading "Private Placement" in the
Final Memorandum (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and, if
sent to the Initial Purchaser, shall be mailed or delivered to (i) NatWest
Capital Markets Limited, 135 Bishopgate, London EC2M 3XT, England; with a copy
to White & Case LLP, 1155 Avenue of
29
<PAGE>
the Americas, New York, NY 10036, Attention: Timothy B. Goodell, Esq.; if sent
to the Company, shall be mailed or delivered to the Company at 12365 Crosthwaite
Circle, Poway, CA 92604, Attention: Donald L. Viles with a copy to Cadwalader,
Wickersham & Taft, 100 Maiden Lane, New York, NY 10038, Attention: Michael C.
Ryan, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company and the Subsidiaries contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Company and officers and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Notes from the Initial Purchaser will be deemed a successor
because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
30
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between the Company and the
Initial Purchaser.
Very truly yours,
ANACOMP, INC.
By: /s/ Donald L. Viles
-------------------------------
Name: Donald L. Viles
Title: Executive Vice President
<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
NATWEST CAPITAL MARKETS LIMITED
By:/s/ Alton Irby
-------------------------------------
Name: Alton Irby
Title: Chief Executive
<PAGE>
SCHEDULE 2(b)
SUBSIDIARIES
Percentage
Domestic Subsidiaries Ownership Jurisdiction of Organization
None
Foreign Subsidiaries
Xidex GmbH Germany
Anacomp GmbH Germany
Anacomp Information Management Germany
Services GmbH
Anacomp Holdings Ltd. U.K.
Anacomp Ltd. U.K.
Xidex U.K. Ltd. U.K.
Anacomp B.V. Holland
Anacomp A.B. Sweden
Anacomp A/S Denmark
Anacomp O.Y. Finland
Anacomp A/S Norway
Anacomp S.A. France
Anacomp GesmbH Austria
N.V. Anacomp Belgium S.A. Belgium
Anacomp Italia S.r.l. Italy
COM S.r.l. Italy
Xidex Magnetics S.A. Switzerland
Xidex Corp. S.A.* Switzerland
Anacomp Canada, Inc. Canada
Anacomp do Brazil Ltda. Brazil
Anacomp Japan Ltd. Japan
Anacomp Pty Ltd.* Australia
Xidex New Zealand Ltd.* New Zealand
Data-Ware Development Int'l, Ltd.* Barbados
Anacomp Information Management France
Services S.A.
The Fiche Center Limited* U.K.
Anacomp International N.V.* The Netherlands
Com-Informatic AG Switzerland
- ------------------
* Has substantially no assets and/or in process of being dissolved.
** Has approximately $46,400 in assets
<PAGE>
Exhibit 4.3
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
June 18, 1998
NatWest Capital Markets Limited
135 Bishopsgate
London EC2M 3XT
England
Dear Sirs:
Anacomp Inc., an Indiana corporation (the "Company"), proposes to issue
and sell to you (the "Initial Purchaser"), upon the terms set forth in a
purchase agreement dated June 12, 1998 (the "Purchase Agreement"),
$135,000,000 principal amount of its 10 7/8% Series C Senior Subordinated
Notes due 2004 (the "Securities") which Securities shall be unsecured and
will be subordinated to all existing and future Senior Indebtedness (as
defined in the Indenture) of the Company and will be effectively subordinated
to all obligations of each subsidiary of the Company as may exist from time
to time. Unless otherwise indicated, capitalized terms used but not
specifically defined herein have the respective meanings ascribed thereto in
the Purchase Agreement. As an inducement to the Initial Purchaser to enter
into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Company agrees with you, for the benefit of the
holders of the Securities (including the Initial Purchaser) (the "Holders"),
as follows:
1. Registered Exchange Offer. The Company shall prepare and, not later
than 60 days following the date on which the original Securities were sold to
the Initial Purchaser pursuant to the Purchase Agreement (the "Issue Date"),
shall file with the Securities and Exchange Commission (the "Commission") a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to a proposed offer (the "Registered Exchange
Offer") to the Holders to issue and deliver to such Holders, in exchange for
the Securities, a like aggregate principal amount of debt securities of the
Company (the "Exchange Securities") identical in all material respects to the
Securities, except for the transfer restrictions, registration rights and
liquidated damages relating to the Securities, shall use its reasonable
efforts to cause the Exchange Offer Registration Statement to become
effective under the Securities Act no later than 180 days after the Issue
Date and to cause the Registered Exchange Offer to be consummated no later
than 215 days after the Issue Date, and shall keep the Registered Exchange
Offer open for not less than 20 business days (or longer, if required by
applicable law) commencing the date notice of the Registered Exchange Offer
is mailed to the Holders (such period being called the "Exchange Offer
Registration Period").
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company shall promptly commence the Registered Exchange Offer, it being the
objective of such
<PAGE>
Registered Exchange Offer to enable each Holder electing to exchange
Securities for Exchange Securities (assuming that such Holder (a) is not (i)
an affiliate of the Company within the meaning of the Securities Act or (ii)
an Exchanging Dealer (as defined below) not complying with the requirements
of the next sentence, (b) acquires the Exchange Securities in the ordinary
course of such Holder's business and (c) has no arrangements or
understandings with any person to participate in the distribution of the
Exchange Securities) and to trade such Exchange Securities from and after
their receipt without any limitations or restrictions, except as provided
herein, under the Securities Act and without material restrictions under the
securities laws of the several states of the United States. The Company, the
Initial Purchaser and each Exchanging Dealer acknowledge that, pursuant to
current interpretations of Section 5 of the Securities Act by the
Commission's staff, (i) each Holder which is a broker-dealer electing to
exchange Securities, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Securities (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section, and in Annex C hereto in the "Plan of Distribution" section
of such prospectus in connection with a sale of any such Exchange Securities
received by such Exchanging Dealer pursuant to the Registered Exchange Offer
and (ii) if the Initial Purchaser elects to sell Exchange Securities acquired
in exchange for Securities constituting any portion of an unsold allotment it
is required to deliver a prospectus containing the information required by
Items 507 or 508 of Regulation S-K under the Securities Act, as applicable,
in connection with such a sale.
If, prior to consummation of the Registered Exchange Offer, the Initial
Purchaser does not hold any Securities acquired by it and having the status
of an unsold allotment in the initial distribution, the Company shall, upon
the request of the Initial Purchaser, simultaneously with the delivery of the
Exchange Securities in the Registered Exchange Offer, issue and deliver to
the Initial Purchaser in exchange (the "Private Exchange") for Securities
held by the Initial Purchaser a like principal amount of debt securities of
the Company, that are identical in all material respects to the Exchange
Securities (the "Private Exchange Securities") (and which are issued pursuant
to the same Indenture as the Exchange Securities) except for the placement of
a restrictive legend on such Private Exchange Securities. The Private
Exchange Securities shall if permissible bear the same CUSIP number as the
Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days commencing the date notice of the Registered Exchange
Offer is mailed to the Holders (or longer if required by applicable
law);
(c) utilize the services of a Depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York;
2
<PAGE>
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws applicable to
the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange Offer, as applicable, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer or the Private
Exchange Offer, as applicable;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities or Private Exchange Securities, as
applicable, equal in principal amount to the Securities of such Holder
so accepted for exchange.
The Exchange Securities and the Private Exchange Securities are to be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that (1) the
Exchange Securities shall not be subject to the transfer restrictions set
forth in the Indenture and (2) the Private Exchange Securities shall be
subject to the transfer restrictions set forth in the Indenture. The
Indenture or such indenture shall provide that the Exchange Securities, the
Private Exchange Securities and the Securities shall vote and consent
together on all matters as to which they have the right to vote or consent as
one class and that none of the Exchange Securities, the Private Exchange
Securities or the Securities will have the right to vote or consent as a
separate class on any matter.
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company is not permitted
to effect a Registered Exchange Offer, (ii) the Registered Exchange Offer is
not consummated within 215 days after the Issue Date, (iii) any holder of
Private Exchange Securities so requests at any time after the consummation of
the Private Exchange, or (iv) any Holder (other than the Initial Purchaser)
is not eligible to participate in the Registered Exchange Offer, then the
Company shall promptly deliver to the Holders and the Trustee written notice
thereof to the Trustee and, in the case of clauses (i) and (ii) above, all
Holders, in the case of clause (iii) above, the Holders of the Private
Exchange Securities and, in the case of clause (iv) above, the affected
Holder, and shall file a Shelf Registration pursuant to Section 2 hereof;
provided, however, that in the case of clause (iii) above such Holders shall
pay all reasonable registration expenses of the Company as described in
Section 5 hereof in connection with such Shelf Registration.
The Company shall make available for a period of 90 days after the
consummation of the Registered Exchange Offer, a copy of a prospectus which
meets the requirements of the
3
<PAGE>
Securities Act and forms part of the Exchange Offer Registration Statement to
any broker-dealer for use in connection with any resale of any Exchange
Securities.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which
interest was paid on the Securities surrendered in exchange therefor or, if
no interest has been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in
the distribution of the Exchange Securities within the meaning of the
Securities Act and (iii) such Holder is not an "affiliate" of the Company
within the meaning of Rule 405 of the Securities Act, or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not include, as of the
consummation of the Registered Exchange Offer, an 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.
2. Shelf Registration. If (i) applicable interpretations of the staff
of the Commission do not permit the Company to effect the Registered Exchange
Offer as contemplated by Section 1 hereof, or (ii) any Holder notifies the
Company not more than 15 days after the consummation of the Registered
Exchange Offer that such Holder either (A) was not eligible to participate in
the Registered Exchange Offer or (B) participated in the Registered Exchange
Offer and did not receive freely transferrable Exchange Securities in
exchange for tendered Securities or (iii) for any other reason the Registered
Exchange Offer is not consummated within 215 days after the Issue Date, the
following provisions shall apply:
(a) The Company shall as promptly as practicable file with the
Commission and thereafter shall use its reasonable efforts to cause to be
declared effective a shelf registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined below) by the Holders from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with any
Exchange Offer Registration Statement, a "Registration Statement"); provided,
however, that no Holder of Securities or Exchange Securities (other than the
Initial Purchaser) shall be entitled to have Securities or Exchange
4
<PAGE>
Securities held by it covered by such Shelf Registration Statement unless
such Holder agrees in writing to be bound by all the provisions of this
Agreement applicable to such Holder.
(b) The Company shall use its reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by Holders for a period of two
years from the Issue Date or such shorter period that will terminate when all
the Securities and Exchange Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement (in any
such case, such period being called the "Shelf Registration Period"). The
Company shall be deemed not to have used its reasonable efforts to keep the
Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Securities or
Exchange Securities covered thereby not being able to offer and sell such
Securities or Exchange Securities during that period, unless such action is
required by applicable law; provided, however, that the foregoing shall not
apply to actions taken by the Company in good faith and for valid business
reasons (not including avoidance of its obligations hereunder), including,
without limitation, the acquisition or divestiture of assets, so long as the
Company within 120 days thereafter complies with the requirements of Section
4(i) hereof. Any such period during which the Company fails to keep the
Shelf Registration Statement effective and usable for offers and sales of
Securities and Exchange Securities is referred to as a "Suspension Period."
A Suspension Period shall commence on and include the date that the Company
gives notice that the Shelf Registration Statement is no longer effective or
the prospectus included therein is no longer usable for offers and sales of
Securities and Exchange Securities and shall end on the date when each Holder
of Securities and Exchange Securities covered by such registration statement
either receives the copies of the supplemented or amended prospectus
contemplated by Section 4(i) hereof or is advised in writing by the Company
that use of the prospectus may be resumed. If one or more Suspension Periods
occur, the two-year time period referenced above shall be extended by the
number of days included in each such Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
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.
3. Additional Interest. (a) The parties hereto agree that the
Holders of Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would
not be feasible to ascertain the extent of such damages.
5
<PAGE>
Accordingly, if (i) the applicable Registration Statement is not filed with
the commission on or prior to 60 days after the Issue Date, (ii) the Exchange
Offer Registration Statement is not declared effective within 180 days after
the Issue Date, (iii) the Registered Exchange Offer is not consummated or a
Shelf Registration Statement has not been declared effective on or prior to
215 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the
applicable interpretations of the Commission's Staff, if later, within 60
days after publication of the change in law or interpretation) but shall
thereafter cease to be effective (at any time that the Company is obligated
to maintain the effectiveness thereof) without being succeeded within 60 days
by an additional Registration Statement filed and declared effective (each
such event referred to in clauses (i) through (iii), a "Registration
Default"), then the interest rate borne by the Securities shall be increased
by one-quarter of one percent per annum following such 60-day period in the
case of clause (i) above, following such 180-day period in the case of clause
(ii) above or following such 215-day period in the case of clause (iii)
above, which rate will be increased by an additional one-quarter of one
percent per annum for each 90-day period that any additional interest
continues to accrue; provided, that the aggregate increase in such annual
interest rate may in no event exceed one percent. Upon (A) the filing of the
Exchange Offer Registration Statement after the 60-day period described in
clause (i) above, (B) the effectiveness of the Exchange Offer Registration
Statement after the 180-day period described in clause (ii) above or (C) the
consummation of the Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 215-day period
described in clause (iii) above, the interest rate borne by the Securities
from the date of such filing, effectiveness or consummation, as the case may
be, will be reduced to the original interest rate if the Company is otherwise
in compliance with this Section; provided, however, that if, after any such
reduction in interest rate, a different event specified in clause (i), (ii)
or (iii) above occurs, the interest rate may again be increased and
thereafter reduced pursuant to the foregoing provisions.
Pending the announcement of a material corporate transaction, if the
Company issues a notice that the Shelf Registration Statement is unusable, or
such a notice is required under applicable securities laws to be issued by
the Company and the aggregate number of days in any consecutive twelve-month
period for which all such notices are issued or required to be issued exceeds
30 days in the aggregate, then the interest rate borne by the Securities will
be increased by one-quarter of one percent per annum following the date that
such Shelf Registration Statement ceases to be usable beyond the 30-day
period permitted above, which rate shall be increased by an additional
one-quarter of one percent per annum at the beginning of each subsequent
90-day period that such additional interest continues to accrue; provided,
that the aggregate increase in such annual interest rate may in no event
exceed one percent per annum. Upon the Company declaring that the Shelf
Registration Statement is usable after the period of time described in the
preceding sentence, the interest rate borne by the Securities will be reduced
to the original interest rate if the Company is otherwise in compliance with
this Section; provided, however, that if after any such reduction in interest
rate the Shelf Registration Statement again ceases to be usable beyond the
period permitted above, the interest rate may again be increased and
thereafter reduced pursuant to the foregoing provisions. "Transfer Restricted
Securities" means each Security or Private Exchange Security until (i) the
date on which such Security or Private Exchange Security has been exchanged
for a freely transferrable Exchange Security in the
6
<PAGE>
Registered Exchange Offer, (ii) the date on which such Security or Private
Exchange Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii)
the date on which such Security or Private Exchange Security is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act.
(b) The Company shall notify the Trustee within three business days
after each and every date on which an event occurs in respect of which
additional interest is required to be paid. The Company shall pay the
additional interest due on the Transfer Restricted Securities by depositing
with the Paying Agent (as defined in the Indenture) (which shall not be the
Company for these purposes) for the Transfer Restricted Securities, in trust,
for the benefit of the Holders, prior to 10:00 a.m. on the next interest
payment date specified by the Indenture (or such other indenture), sums
sufficient to pay the additional interest then due. Any amounts of
additional interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of
this Section 4 will be payable to the Holders of affected Notes in cash
semi-annually on each interest payment date specified by the Indenture (or
such other indenture) to the record holders entitled to receive the interest
payment to be made on such date commencing with the first such date occurring
after any such additional interest commences to accrue. The amount of
additional interest will be determined by multiplying the applicable
additional interest rate by the principal amount of the affected Securities
of such Holders, multiplied by a fraction, the numerator of which is the
number of days such additional interest rate was applicable during such
period (determined on the basis of a 360-day year composed of twelve 30-day
months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing thereof
with the Commission, a copy of the Registration Statement and each amendment
thereof and each supplement, if any, to the prospectus included therein and,
in the event that the Initial Purchaser (with respect to any portion of an
unsold allotment from the original offering) is participating in the
Registered Exchange Offer or the Shelf Registration, shall use reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as you reasonably may propose; (ii) if applicable, include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section of
the prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by the Initial Purchaser, include the information required by Items
507 or 508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Company shall advise you and, if requested by the Holders or by
you, confirm such advice in writing (which advice pursuant to clauses
(ii)-(iv) hereof shall be
7
<PAGE>
accompanied by an instruction to suspend the use of the prospectus until the
requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities or
the Exchange Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(iv) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus so that,
as of such date, the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits (including
those incorporated by reference).
(d) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies
of the prospectus (including each preliminary prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consents to the use in
accordance with applicable law of the prospectus or any amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities in connection with the offering and sale of the Transfer
Restricted Securities covered by the prospectus or any amendment or
supplement thereto.
(e) The Company will furnish to each Exchanging Dealer or the Initial
Purchaser, as applicable, which so requests, without charge, at least one
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Exchanging Dealer or Initial Purchaser, as applicable, so requests in
writing, all exhibits (including those incorporated by reference) except
those previously filed by EDGAR.
(f) The Company will, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer or the Initial Purchaser, as
applicable, without charge, as many copies of the prospectus included within
the coverage of the Exchange Offer Registration Statement and any amendment
or supplement thereto as such Exchanging Dealer or
8
<PAGE>
the Initial Purchaser, as applicable, may reasonably request for delivery by
(i) such Exchanging Dealer in connection with a sale of Exchange Securities
received by it pursuant to the Registered Exchange Offer or (ii) the Initial
Purchaser in connection with a sale of Exchange Securities received by it in
exchange for Securities constituting any portion of an unsold allotment; and
the Company consents to the use in accordance with applicable law of the
prospectus or any amendment or supplement thereto by any such Exchanging
Dealer or the Initial Purchaser, as applicable, as aforesaid.
(g) Prior to any public offering of Securities or Exchange Securities
pursuant to any Registration Statement, the Company will use its reasonable
efforts to register or qualify or cooperate with the Holders of Securities
included therein and its counsel in connection with the registration or
qualification of such securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities or Exchange
Securities covered by such Registration Statement; provided, however, that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(h) The Company will cooperate with the Holders of Securities or
Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold
pursuant to any Registration Statement free of any restrictive legends and in
such denominations and registered in such names as Holders may request in
writing prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(i) If (i) any event contemplated by paragraphs (b)(ii) through (iv)
above occurs during the period in which the Company is required to maintain
an effective Registration Statement or (ii) any Suspension Period remains in
effect for more than 120 days after the occurrence thereof, the Company will
promptly prepare a post-effective amendment to the Registration Statement or
a supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities or purchasers
of Exchange Securities from a Holder, the prospectus will not include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(j) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the applicable trustee
with printed certificates for the Securities or Exchange Securities, as the
case may be, in a form eligible for deposit with The Depository Trust
Company, or any successor depositary.
(k) The Company will use its reasonable efforts to comply with all
applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act; provided
that in no event shall such earnings statement be delivered later than 45
days after the end of a 12-month
9
<PAGE>
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statements shall cover
such 12-month period.
(l) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act
as required by applicable law in a timely manner.
(m) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish
to the Company such information regarding the Holder and the distribution of
such Transfer Restricted Securities as the Company may from time to time
reasonably require for inclusion in such Registration Statement, and the
Company may exclude from such registration the Transfer Restricted Securities
of any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(n) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (iv) hereof,
such Holder will discontinue disposition of such Transfer Restricted
Securities and use of the applicable prospectus until such Holder's receipt
of copies of the supplemental or amended prospectus contemplated by Section
4(i) hereof, or until advised in writing (the "Advice") by the Company that
the use of the applicable prospectus may be resumed. If the Company shall
give any notice under Section 4(b)(ii) through (iv) during the period that
the Company is required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by the
number of days during such period from and including the date of the giving
of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have
received (x) the copies of the supplemental or amended prospectus
contemplated by Section 4(i) (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental prospectus is
required).
(o) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Securities by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or cause to be marked, on such Securities that such
Securities are being cancelled in exchange for the Exchange Securities or the
Private Exchange Securities, as the case may be; in no event shall such
Securities be marked as paid or otherwise satisfied.
5. Registration Expenses. (a) All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not the Exchange Offer Registration Statement
or a Shelf Registration Statement is filed or becomes effective, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) fees and expenses of
compliance with
10
<PAGE>
state securities or Blue Sky laws, (ii) printing expenses, including, without
limitation, expenses of printing certificates for Securities or Exchange
Securities in a form eligible for deposit with The Depository Trust Company
or any other Depositary and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if
any, by the Holders of a majority in aggregate principal amount of the
Securities included in any Registration Statement or sold by any Exchanging
Dealer, as the case may be, (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of the Company's independent certified public accountants
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance by or incident
to such performance), (vi) rating agency fees, if any, and any fees
associated with making the Securities or Exchange Securities eligible for
trading through The Depository Trust Company or any other Depositary, (vii)
Securities Act liability insurance, if the Company desires such insurance,
(viii) fees and expenses of all other persons retained by the Company, (ix)
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees of the Company performing legal or
accounting duties), (x) the expense of any annual audit, (ix) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange or any inter-dealer quotation system,
if applicable, and (xii) the expenses relating to printing, word processing
and distributing all Registration Statements, underwriting agreements,
securities sales agreements, indentures and any other documents necessary in
order to comply with this Agreement.
(b) The Company shall (i) reimburse the Holders of the Securities being
registered in a Shelf Registration Statement for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Securities to be included in such Registration Statement and (ii)
reimburse out-of-pocket expenses (other than legal expenses) of Holders of
Securities incurred in connection with the registration and sale of the
Securities pursuant to a Shelf Registration Statement or in connection with
the exchange of Securities pursuant to the Exchange Offer. In addition, the
Company shall reimburse the Initial Purchaser for 50% of the reasonable fees
and expenses of one counsel in connection with the Exchange Offer which shall
be White & Case LLP, and shall not be required to pay any other legal
expenses of the Initial Purchaser in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an
Exchange Offer Registration Statement by an Exchanging Dealer or the Initial
Purchaser, as applicable, the Company shall indemnify and hold harmless each
Holder and Exchanging Dealer, and each of their directors, officers, agents
and employees and each person, if any, who controls such Holder or Exchanging
Dealer within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the directors, officers, agents and employees of such
controlling persons against any and all loss, liability, claim and damage, as
incurred, arising out of any untrue statement or alleged untrue statement of
a material fact contained in any such Registration Statement or any
prospectus forming part thereof or in any amendment or supplements thereto or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and shall reimburse each
11
<PAGE>
Holder promptly upon demand for any and all expenses (including, subject to
Section 6(c) hereof, the fees and disbursements of counsel chosen by the
indemnified party), reasonably incurred as such expenses are incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental or regulatory agency or body,
commenced or threatened, or any claim based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided,
however, that (i) this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with Holders' Information and (ii) this indemnity with respect to
any untrue statement or alleged untrue statement or omission or alleged
omission in any related preliminary prospectus shall not inure to the benefit
of any indemnified party from whom the person asserting any such loss, claim,
damage or liability received Securities or Exchange Securities if such
persons did not receive a copy of the final prospectus at or prior to the
confirmation of the sale of such Securities or Exchange Securities to such
person in any case where such delivery is required by the Securities Act and
the untrue statement or omission of material fact contained in the related
preliminary prospectus was corrected in the final prospectus unless such
failure to deliver the final prospectus was a result of noncompliance by the
Company with Sections 4(c), 4(d), 4(e) or 4(f).
(b) In the event of a Shelf Registration Statement, each Holder and
Exchanging Dealer agrees to indemnify and hold harmless the Company, its
directors, officers, agents and employees and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act and the directors, officers, agents and
employees of such controlling persons against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section
6(a) hereof, as incurred, arising out of or based upon any untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment or supplement thereto) in reliance
on and in conformity with Holders' Information furnished to the Company by
such Holder or Exchanging Dealer; provided, however, that no such Holder or
Exchanging Dealer shall be liable for any indemnity claims hereunder in
excess of the amount of net proceeds received by such Holder or Exchanging
Dealer from the sale of Securities or Exchange Securities pursuant to the
Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any claim or action commenced
against it in respect of which indemnity may be sought hereunder; provided,
however, that failure to so notify an indemnifying party shall not relieve
such indemnifying party from any obligation that it may have pursuant to this
Section except to the extent that it has been materially prejudiced (through
the forfeiture of substantive rights or defenses) by such failure; provided
further, however, that the failure to notify an indemnifying party shall not
relieve it from any liability that it may have to an indemnified party
otherwise than on account of this indemnity agreement. If any such claim or
action shall be brought against an indemnified party, the indemnified party
shall notify the indemnifying party thereof, and the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
to assume the defense of such
12
<PAGE>
claim or action, the indemnifying party shall not be liable to the
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party
has reasonably concluded (based on the written advice of counsel) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based on the written advice of
counsel to the indemnified party) between the indemnified party and
indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel for the
indemnified party will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm of attorneys (in addition to any local
counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent, but if settled with its written consent
or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) If a claim by an indemnified party for indemnification under this
Section 6 is unenforceable even though the express provisions hereof provide
for indemnification in such case, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions,
statements or omissions that resulted in such losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied
by, such indemnifying party or indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any losses shall be deemed to include, subject to the
limitations set forth in Section 6(c) herein, any legal or other
13
<PAGE>
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, an indemnifying
party that is a holder of Transfer Restricted Securities or Exchange
Securities shall not be required to contribute any amount in excess of the
amount by which the total price at which the Transfer Restricted Securities
or Exchange Securities sold by such indemnifying party and distributed to the
public were offered to the public exceeds the amount of any damages that such
indemnifying party would have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
10(f) of the Securities Act) shall be entitled to any contribution from any
person who was not guilty of such fraudulent misrepresentation.
7. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of Holders of a majority in
aggregate principal amount of the Securities and the Exchange Securities,
taken as a single class. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of the Holders of Securities or Exchange Securities
whose Securities or Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities or Exchange Securities being sold by such
Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 7(b), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to NatWest Capital Markets
Limited;
(2) if to you, initially at your address set forth in the
Purchase Agreement; and
(3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
14
<PAGE>
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) and
by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED 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.
(g) No Inconsistent Agreements. The Company has not and shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions
hereof. The Company has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person. Without limiting the generality of the
foregoing, without the written consent of the holders of a majority in
aggregate principal amount of the then outstanding Transfer Restricted
Securities, the Company shall not grant to any person the right to request
the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of the Agreement.
(h) No Piggyback on Registrations. Neither the Company, nor any of its
security holders (other than the holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(i) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
15
<PAGE>
(j) Remedies. In the event of a breach by the Company, or by any
holder of Transfer Restricted Securities, of any of their obligations under
this Agreement, each holder of Transfer Restricted Securities or the Company,
as the case may be, in addition to being entitled to exercise all rights
granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each holder of Transfer Restricted Securities
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense
that a remedy at law would be adequate.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Very truly yours,
ANACOMP, INC.
By: /s/ Donald L. Viles
-------------------------------------
Name: Donald L. Viles
Title: CFO
<PAGE>
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written:
NATWEST CAPITAL MARKETS LIMITED
By: /s/ Alton Irby
--------------------------
Name: Alton Irby
Title: Chief Executive
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan
of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account
in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of
Exchange Securities received in exchange for Securities where such Securities
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
In addition, until _______________, 199_, all dealers effecting transactions
in the Exchange Securities may be required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broke
r-dealers for their own account pursuant to the Registered Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of optio ns on the
Exchange Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly
to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for
its own account pursuant to the Registered Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Secur ities and any commission or
concessions received by any such persons may b e deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Registered Exchange Offer (including the expenses of
one counsel for the Holders of the Securities) other than commissions or
concessions of any broker-
- ---------------------
(1) In addition, the legend required by Item 502(e) of Regulation S-K
will appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
2
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
----------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Securities that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Securities; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.4
================================================================================
ANACOMP, INC.
TO
IBJ SCHRODER BANK & TRUST COMPANY, TRUSTEE
__________________________
FIRST SUPPLEMENTAL INDENTURE
__________________________
Dated as of June 12, 1998
Supplement to Indenture,
dated as of March 24, 1997
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of June 12, 1998, between ANACOMP,
INC., a corporation duly organized and existing under the laws of the State of
Indiana (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a banking
corporation duly organized and existing under the laws of the State of New York,
as Trustee under the Indenture referred to below (the "Trustee")
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Trustee are parties to the Indenture, dated as
of March 24, 1997 (the "Indenture"), pursuant to which the Company has issued
certain Securities that remain outstanding as of the date hereof; and
WHEREAS, Section 10.1 of the Indenture provides that the Company and the
Trustee may amend the Indenture without notice to or consent of any
Securityholder to cure any ambiguity, omission, defect or inconsistency,
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of Section 10.1 of the Indenture;
WHEREAS, there are certain ambiguities and defects in the Indenture which
the Company and the Trustee wish to correct;
WHEREAS, the Company has delivered to the Trustee the Opinion of Counsel
and Officers' Certificate referred to above; and
WHEREAS, the Company, pursuant to the foregoing authority, proposes in and
by this First Supplemental Indenture to amend and supplement the Indenture in
certain respects.
NOW, THEREFORE, the Company and the Trustee hereby agree as follows:
Article I
AMENDMENTS
----------
SECTION 1.01. AMENDMENT TO SECTION 1.1 OF THE INDENTURE. The definition of
(a) Credit Agreement in Section 1.1 of the Indenture is hereby amended by
appending the words ", as the same may be amended, restated, supplemented or
otherwise modified from time to time, and includes any agreement renewing,
refinancing or replacing all or any portion of the Indebtedness under such
agreement" at the end thereof , and (b) Permitted Liens in Section 1.1 of the
Indenture is hereby amended by replacing the words "Section 4.4(b)(ii)" in
clause (xiii)(B) thereof with the words "Section 4.4(b)(vii)".
<PAGE>
SECTION 1.02. AMENDMENT OF SECTION 4.7 OF THE INDENTURE. Section
4.7(a)(iv)(A) of the Indenture is hereby amended by replacing the words "the
Senior Secured Notes" with the words "Indebtedness under the Credit Agreement".
SECTION 1.03. AMENDMENT TO SECTION 4.20 OF THE INDENTURE. Section 4.20 of
the Indenture is hereby amended by replacing the words "the Senior Indenture"
with the words "any agreement governing Senior Indebtedness".
SECTION 1.04. AMENDMENT TO SECTION 9.2 OF THE INDENTURE. Section
9.2(b)(ii) of the Indenture is hereby amended and restated as follows:
the Company or the Trustee receives a notice of such default or event
of default from (A) the holders of a majority of such Senior Indebtedness
or (B) the trustee or agent, if any, representing the holders in respect of
such Senior Indebtedness; 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.
SECTION 1.05. AMENDMENT TO SECTION 9.6 OF THE INDENTURE. Section 9.6 of
the Indenture is hereby amended by replacing the words "under the Senior
Indenture" with the words "or agent, if any, under the Senior Indebtedness".
Article II
MISCELLANEOUS
-------------
SECTION 2.01. DEFINED TERMS. For all purposes of this First Supplemental
Indenture, except as otherwise stated herein, capitalized terms used but not
defined in this First Supplemental Indenture shall have the respective meanings
assigned to them in the Indenture.
SECTION 2.02. TRUSTEE'S RIGHTS, DUTIES AND IMMUNITIES. All of the
provisions of the Indenture with respect to the rights, duties and immunities of
the Trustee shall be applicable in respect hereof as fully and with like effect
as if set forth herein in full.
SECTION 2.03. RECITALS. The recitals herein shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 2.04. GOVERNING LAW. This First Supplemental Indenture 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.
-2-
<PAGE>
SECTION 2.05. COUNTERPARTS. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of which together shall constitute but one and
the same instrument.
SECTION 2.06. RATIFICATION AND CONFIRMATION. As amended and modified by
this First Supplemental Indenture, the Indenture is in all respects ratified and
confirmed, and the Indenture and this First Supplemental Indenture shall be
read, taken and construed as one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, all as of the day and year first above written.
ANACOMP, INC.
By: /s/ Donald L. Viles
--------------------------------
Name: Donald L. Viles
Title: Executive Vice President
and Chief Financial Officer
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Terence Rawlins
--------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
REVOLVING CREDIT AGREEMENT
dated as of June 15, 1998
among
ANACOMP, INC.
BANKBOSTON, N.A. and the other lending institutions set forth on Schedule 1
hereto
and
BANKBOSTON, N.A., as Agent
with
BANCBOSTON SECURITIES INC. having acted as Arranger
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION.......................................1
1.1. Definitions............................................................1
1.2. Rules of Interpretation...............................................17
2. THE REVOLVING CREDIT FACILITY................................................18
2.1. Commitment to Lend....................................................18
2.2. Commitment Fee........................................................19
2.3. Reduction of Total Commitment.........................................19
2.4. The Revolving Credit Notes............................................19
2.5. Interest on Revolving Credit Loans....................................20
2.6. Requests for Revolving Credit Loans...................................20
2.7. Conversion Options....................................................21
2.7.1. Conversion to Different Type of Revolving Credit Loan.........21
2.7.2. Continuation of Type of Revolving Credit Loan.................21
2.7.3. Eurocurrency Rate Loans.......................................22
2.8. Funds for Revolving Credit Loan.......................................22
2.8.1. Funding Procedures............................................22
2.8.2. Advances by Agent.............................................22
2.9. Optional Currencies...................................................23
2.9.1. Request for Optional Currency.................................23
2.9.2. Exchange Rate.................................................24
2.9.3. Multiple Denominations........................................24
2.9.4. Repayment.....................................................24
2.9.5. Funding.......................................................25
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.....................................25
3.1. Maturity.............................................................25
3.2. Mandatory Repayments of Revolving Credit Loans.......................25
3.3. Optional Repayments of Revolving Credit Loans........................26
4. LETTERS OF CREDIT...........................................................26
4.1. Letter of Credit Commitments.........................................26
4.1.1. Commitment to Issue Letters of Credit........................26
4.1.2. Letter of Credit Applications................................27
4.1.3. Terms of Letters of Credit...................................27
4.1.4. Reimbursement Obligations of Banks...........................27
4.1.5. Participations of Banks......................................27
4.2. Reimbursement Obligation of the Borrower.............................27
4.3. Letter of Credit Payments. .........................................28
4.4. Obligations Absolute.................................................29
4.5. Reliance by Issuer...................................................29
4.6. Letter of Credit Fee.................................................30
5. CERTAIN GENERAL PROVISIONS..................................................30
5.1. Closing Fee..........................................................30
5.2. Agent's Fee..........................................................30
5.3. Funds for Payments...................................................30
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
5.3.1. Payments to Agent............................................30
5.3.2. No Offset, etc...............................................31
5.4. Computations.........................................................31
5.5. Inability to Determine Eurocurrency Rate.............................31
5.6. Illegality...........................................................32
5.7. Additional Costs, etc................................................32
5.8. Capital Adequacy.....................................................33
5.9. Certificate..........................................................34
5.10. Indemnity............................................................34
5.11. Interest After Default...............................................35
5.11.1. Overdue Amounts.............................................35
5.11.2. Amounts Not Overdue.........................................35
6. COLLATERAL SECURITY AND GUARANTIES..........................................35
6.1. Security of Borrower.................................................35
6.2. Guaranties and Security of Subsidiaries..............................35
7. REPRESENTATIONS AND WARRANTIES..............................................35
7.1. Corporate Authority..................................................36
7.1.1. Incorporation; Good Standing.................................36
7.1.2. Authorization................................................36
7.1.3. Enforceability...............................................36
7.2. Governmental Approvals...............................................36
7.3. Title to Properties; Leases..........................................37
7.4. Financial Statements and Projections.................................37
7.4.1. Fiscal Year..................................................37
7.4.2. Financial Statements.........................................37
7.4.3. Projections..................................................37
7.4.4. Solvency.....................................................38
7.5. No Material Changes, etc.............................................38
7.6. Franchises, Patents, Copyrights, etc.................................38
7.7. Litigation...........................................................38
7.8. No Materially Adverse Contracts, etc.................................38
7.9. Compliance with Other Instruments, Laws, etc.........................39
7.10. Tax Status...........................................................39
7.11. No Event of Default..................................................39
7.12. Holding Company and Investment Company Acts..........................39
7.13. Absence of Financing Statements, etc.................................39
7.14. Perfection of Security Interest......................................39
7.15. Certain Transactions.................................................40
7.16. Employee Benefit Plans...............................................40
7.16.1. In General..................................................40
7.16.2. Terminability of Welfare Plans..............................40
7.16.3. Guaranteed Pension Plans....................................40
7.16.4. Multiemployer Plans.........................................41
7.17. Use of Proceeds......................................................41
7.17.1. General.....................................................41
7.17.2. Regulations U and X.........................................41
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
7.17.3. Ineligible Securities.......................................41
7.18. Environmental Compliance.............................................42
7.19. Subsidiaries, etc....................................................43
7.20. Bank Accounts........................................................43
7.21. Disclosure...........................................................43
7.22. Status of Loans as Senior Debt.......................................44
7.23. Subordinated Debt Documents..........................................44
7.24. Designation of Senior Debt...........................................44
7.25. No Withholding.......................................................44
7.26. No Filings Required..................................................44
7.27. Chief Executive Office...............................................45
7.28. Delivery of Certain Documents........................................45
7.29. Insurance............................................................45
7.30. Year 2000 Problem....................................................45
8. AFFIRMATIVE COVENANTS OF THE BORROWER.......................................45
8.1. Punctual Payment.....................................................45
8.2. Maintenance of Office................................................46
8.3. Records and Accounts.................................................46
8.4. Financial Statements, Certificates and Information...................46
8.5. Notices..............................................................47
8.5.1. Defaults.....................................................47
8.5.2. Environmental Events.........................................48
8.5.3. Notification of Claim against Collateral.....................48
8.5.4. Notice of Litigation and Judgments...........................48
8.6. Corporate Existence; Maintenance of Properties.......................48
8.7. Insurance............................................................49
8.8. Taxes................................................................49
8.9. Inspection of Properties and Books, etc..............................49
8.9.1. General......................................................49
8.9.2. Appraisals...................................................49
8.9.3. Communications with Accountants..............................50
8.10. Compliance with Laws, Contracts, Licenses, and Permits...............50
8.11. Employee Benefit Plans...............................................50
8.12. Use of Proceeds......................................................50
8.13. Fair Labor Standards Act.............................................51
8.14. Guarantors...........................................................51
8.15. Subordinated Guarantees..............................................51
8.16. Status of Loans as Senior Debt.......................................51
8.17. Additional Subsidiaries..............................................52
8.18. Interest Rate Protection.............................................52
8.19. Further Assurances...................................................52
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER..................................52
9.1. Restrictions on Indebtedness.........................................52
9.2. Restrictions on Liens................................................53
9.3. Restrictions on Investments..........................................54
9.4. Distributions........................................................55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
iv
TABLE OF CONTENTS
-----------------
<S> <C>
9.5. Merger, Consolidation and Disposition of Assets......................55
9.5.1. Mergers and Acquisitions.....................................55
9.5.2. Disposition of Assets........................................57
9.6. Sale and Leaseback...................................................58
9.7. Compliance with Environmental Laws...................................58
9.8. Subordinated Debt....................................................58
9.9. Employee Benefit Plans...............................................58
9.10. Business Activities..................................................59
9.11. Fiscal Year..........................................................59
9.12. Transactions with Affiliates.........................................59
9.13. Modification of Documents and Charter................................59
9.14. Upstream Limitations.................................................60
9.15. Inconsistent Agreements..............................................60
9.16. Senior Debt..........................................................60
9.17. Limitations on Foreign Exchange Arrangements.........................60
10. FINANCIAL COVENANTS OF THE BORROWER.........................................60
10.1. Leverage Ratio.......................................................60
10.2. Interest Coverage Ratio..............................................61
10.3. Minimum EBITDA.......................................................61
10.4. Capital Expenditures.................................................61
11. CLOSING CONDITIONS..........................................................61
11.1. Loan Documents etc...................................................61
11.1.1. Loan Documents..............................................61
11.1.2. Subordinated Debt Documents.................................61
11.2. Certified Copies of Charter Documents................................61
11.3. Corporate, Action....................................................61
11.4. Incumbency Certificate...............................................62
11.5. Validity of Liens....................................................62
11.6. Perfection Certificates and UCC Search Results.......................62
11.7. Landlord Consents....................................................62
11.8. Certificates of Insurance............................................62
11.9. Solvency Certificate.................................................62
11.10. Opinion of Counsel...................................................62
11.11. Payment of Fees......................................................62
11.12. Payoff Letter........................................................63
11.13. Disbursement Instructions............................................63
11.14. Consents and Approvals...............................................63
11.15. Designation of Agent as Trustee......................................63
11.16. Receipt of Audited Financial Information.............................63
11.17. Relocation Cost Analysis.............................................63
12. CONDITIONS TO ALL BORROWINGS................................................63
12.1. Representations True; No Event of Default............................63
12.2. No Legal Impediment..................................................64
12.3. Governmental Regulation..............................................64
12.4. Proceedings and Documents............................................64
12.5. Exchange Limitations.................................................64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
v
TABLE OF CONTENTS
-----------------
<S> <C>
12.6. Incurrence Test......................................................64
13. EVENTS OF DEFAULT; ACCELERATION; ETC........................................64
13.1. Events of Default and Acceleration...................................64
13.2. Termination of Commitments...........................................68
13.3. Remedies.............................................................68
13.4. Exchange Rate........................................................69
13.5. Distribution of Collateral Proceeds..................................69
14. SETOFF......................................................................70
15. THE AGENT...................................................................71
15.1. Authorization........................................................71
15.2. Employees and Agents.................................................72
15.3. No Liability.........................................................72
15.4. No Representations...................................................72
15.4.1. General.....................................................72
15.4.2. Closing Documentation, etc..................................73
15.5. Payments.............................................................73
15.5.1. Payments to Agent...........................................73
15.5.2. Distribution by Agent.......................................73
15.5.3. Delinquent Banks............................................73
15.6. Holders of Revolving Credit Notes....................................74
15.7. Indemnity............................................................74
15.8. Agent as Bank........................................................74
15.9. Resignation..........................................................74
15.10. Notification of Defaults and Events of Default.......................75
15.11. Duties in the Case of Enforcement....................................75
16. EXPENSES AND INDEMNIFICATION................................................75
16.1. Expenses.............................................................75
16.2. Indemnification......................................................76
16.3. Survival.............................................................77
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION...............................77
17.1. Sharing of Information with Section 20 Subsidiary....................77
17.2. Confidentiality......................................................77
17.3. Prior Notification...................................................77
17.4. Other................................................................78
18. SURVIVAL OF COVENANTS, ETC..................................................78
19. ASSIGNMENT AND PARTICIPATION; ACCESSION.....................................78
19.1. Conditions to Assignment and Accession...............................78
19.1.1. Assignment by Banks.........................................78
19.1.2. Accession...................................................79
19.2. Certain Representations and Warranties; Limitations; Covenants.......80
19.3. Register.............................................................81
19.4. New Revolving Credit Notes...........................................81
19.5. Participations.......................................................82
19.6. Disclosure...........................................................82
19.7. Assignee or Participant Affiliated with the Borrower.................82
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
vi
TABLE OF CONTENTS
-----------------
<S> <C>
19.8. Miscellaneous Assignment Provisions..................................83
19.9. Assignment by Borrower...............................................83
20. NOTICES, ETC................................................................83
21. GOVERNING LAW...............................................................84
22. HEADINGS....................................................................84
23. COUNTERPARTS................................................................84
24. ENTIRE AGREEMENT, ETC.......................................................85
25. WAIVER OF JURY TRIAL........................................................85
26. CONSENTS, AMENDMENTS, WAIVERS, ETC..........................................85
27. SEVERABILITY................................................................86
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of June 15, 1998, by and among
ANACOMP, INC. (the "Borrower"), an Indiana corporation having its principal
place of business at 12365 Crosthwaite Circle, Poway, California 92064,
BANKBOSTON, N.A., a national banking association and the other lending
institutions listed on Schedule 1 and BANKBOSTON, N.A. as agent for itself and
such other lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. Definitions. The following terms shall have the meanings set forth in
this Section 1 or elsewhere in the provisions of this Credit Agreement referred
to below:
Acceding Bank. See Section 19.1.2.
Adjustment Date. The first day of the month immediately following the month
in which a Compliance Certificate is to be delivered by the Borrower pursuant to
Section 8.4(c) hereof.
Affiliate. Any Person that would be considered to be an affiliate of the
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent's Head Office. The Agent's head office located at 100 Federal Street,
Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Banks.
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may be
approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date through
the date immediately preceding the next Adjustment Date (each a "Rate Adjustment
Period"), the Applicable Margin shall be the applicable margin set forth below
with respect to the Leverage Ratio, as determined for the period ending on the
fiscal quarter ended immediately preceding the first day of the applicable Rate
Adjustment Period.
<PAGE>
2
<TABLE>
<CAPTION>
BASE LETTER OF
RATE EUROCURRENCY CREDIT COMMITMENT
LEVEL LEVERAGE RATIO LOANS RATE LOANS FEES FEE RATE
----- -------------- ----- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
I Greater than or equal to
3.50:1.00 0.75% 2.00% 2.00% 0.375%
II Less than 3.50:1.00 but greater
than or equal to 3.00:1.00 0.25% 1.50% 1.50% 0.375%
III Less than 3.00:1.00 but greater
than or equal to 2.50:1.00 0.00% 1.25% 1.25% 0.250%
IV Less than 2.50:1.00 0.00% 1.00% 1.00% 0.250%
</TABLE>
Notwithstanding the foregoing, (a) for Revolving Credit Loans
outstanding, the Letter of Credit Fees and the commitment fees payable during
the period commencing on the Closing Date through December 15, 1998, the
Applicable Margin shall be at Level 2 set forth above and on December 15,
1998 shall, until the next Adjustment Date to occur after December 31, 1998,
be at the Level based on the September 30, 1998 Compliance Certificate, and
(b) if the Borrower fails to deliver any Compliance Certificate pursuant to
Section 8.4(c) hereof prior to the first day of the Adjustment Date next
commencing following the date such Compliance Certificate was required to be
delivered then, for the period commencing on such next Adjustment Date to
occur subsequent to such failure through the date immediately following the
date on which such Compliance Certificate is delivered, the Applicable Margin
shall be the highest Applicable Margin set forth above.
Applicable Pension Legislation. At any time, any pension or retirement
benefits legislation (be it federal, provincial, territorial or otherwise) then
applicable to the Borrower or any of its Subsidiaries.
Asset Sale. Any one or series of related transactions in which any
applicable Person conveys, sells, transfers or otherwise disposes of, directly
or indirectly, any of its properties, businesses or assets (including the sale
or issuance of capital stock of a Subsidiary), whether owned on the Closing Date
or thereafter acquired.
Assignment and Acceptance. See Section 19.1.
Balance Sheet Date. September 30, 1997.
Banks. BKB and the other lending institutions listed on Schedule 1 hereto
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to Section 19.
Base Rate. The higher of (a) the annual rate of interest announced from time
to time by BKB at its head office in Boston, Massachusetts, as its "base rate"
and (b) one-half of one percent (1/2%) above the Federal Funds Effective Rate.
For the purposes of this definition, "Federal Funds Effective Rate" shall mean
for any day,
<PAGE>
3
the rate per annum equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Agent from three funds brokers of recognized standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a national
banking association, in its individual capacity.
Borrower. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston, Massachusetts
and the state of California, are open for the transaction of banking business
and, in addition, (a) if Eurocurrency Rate Loans denominated in Dollars are
involved, a day which is also a day in which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith; and (b) if Eurocurrency Rate Loans denominated
in an Optional Currency are involved, a day on which dealings and exchange in
Dollars and the relevant Optional Currency can be carried on in the relevant
Eurocurrency Interbank Market and Dollar settlements of such dealings may be
effected in Boston, Massachusetts and London, and also a day on which dealings
and exchange in Dollars and in the relevant Optional Currency can be carried on
in the principal financial center of the country in which such currency is legal
tender and in London, England.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the Borrower
or any of its Subsidiaries in connection with (a) the purchase or lease by the
Borrower or any of its Subsidiaries of Capital Assets that would be required to
be capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles or (b) the lease of any assets by the
Borrower or any of its Subsidiaries as lessee under any Synthetic Lease to the
extent that such assets would have been Capital Assets had the Synthetic Lease
been treated for accounting purposes as a Capitalized Lease.
<PAGE>
4
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See Section 7.18(a).
Closing Date. The first date on which the conditions set forth in Section 11
have been satisfied or waived in writing by the Majority Banks and the Agent and
any Revolving Credit Loans are to be made or any Letter of Credit is to be
issued hereunder.
Code. The Internal Revenue Code of 1986.
Collateral. All of the property, rights and interests of the Borrower and
its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrower, as the same may be modified pursuant to
Section 19.1.2 hereof, and as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Commitment Fee Rate. The applicable rate per annum set forth in the chart
contained in the definition of Applicable Margin under the heading "Commitment
Fee Rate".
Commitment Percentage. With respect to each Bank, the percentage set forth
on Schedule 1 hereto (as such Schedule 1 may be amended from time to time
pursuant to an Assignment and Acceptance or Instrument of Accession pursuant to
which any Bank acceded to its Commitment as a result of such assignment) as such
Bank's percentage of the aggregate Commitments of all of the Banks.
Compliance Certificate. See Section 8.4(c).
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income (or Deficit). With respect to the Borrower and its
Subsidiaries for any period, the consolidated net income (or deficit) of the
Borrower and its Subsidiaries, determined in accordance with generally accepted
accounting principles, after eliminating therefrom all extraordinary
nonrecurring items of income.
<PAGE>
5
Consolidated Total Interest Expense. For any period, the aggregate amount of
interest required to be paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the Borrower and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of any Capitalized Lease, or any
Synthetic Lease, the imputed interest on the Borrower's SKC trade Indebteness
(calculated consistently with past practices), interest associated with the
Borrower's deferred compensation plans, and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.
Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Revolving Credit Loan in accordance
with Section 2.7.
Credit Agreement. This Revolving Credit Agreement, including the Schedules
and Exhibits hereto.
DAS Business. That portion of the business acquired in the FIMCO Acquisition
which conducts document acquisition services such as outsourced health care and
insurance claims entry and data capture services.
Default. See Section 12.1.
Delinquent Bank. See Section 15.5.3.
Distribution. The declaration or payment of any dividend on or in respect of
any shares of any class of capital stock of the Borrower, other than dividends
payable solely in shares of capital stock of the Borrower of the same class; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
Dollar Equivalent. On any particular day, with respect to any amount
denominated in Dollars, such amount of Dollars, and with respect to any amount
denominated in a currency other than Dollars, the amount (as conclusively
ascertained by the Agent absent manifest error) of Dollars which could be
purchased by the Agent (in accordance with its normal banking practices) in the
London foreign currency deposit market with such amount of such currency at the
spot rate of exchange prevailing at or about 10:00 a.m. (London time) on such
date.
Dollars or $. Dollars in lawful currency of the United States of America.
<PAGE>
6
Domestic Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
Domestic Subsidiary. Any Subsidiary which is not a Foreign Subsidiary.
DPDS Business. That portion of the business acquired in the FIMCO
Acquisition which conducts document print and distribution services such as
laser print and mail and demand publishing services.
Drawdown Date. The date on which any Revolving Credit Loan is made or is to
be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with Section 2.7.
EBITDA. With respect to the Borrower and its Subsidiaries for any fiscal
period, an amount equal to Consolidated Net Income for such period, plus, to the
extent deducted in the calculation of Consolidated Net Income and without
duplication, (a) depreciation and amortization for such period, (b) other
noncash charges for such period, (c) income tax expense for such period, and (d)
Consolidated Total Interest Expense paid or accrued during such period, and
minus, to the extent added in computing Consolidated Net Income and without
duplication, all noncash gains (including income tax benefits) for such period,
all as determined in accordance with generally accepted accounting principles.
Eligible Assignee. Any of (a) a commercial bank or finance company organized
under the laws of the United States, or any State thereof or the District of
Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and
loan association or savings bank organized under the laws of the United States,
or any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with generally accepted accounting
principles; (c) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, provided that such bank is acting through a
branch or agency located in the country in which it is organized or another
country which is also a member of the OECD; (d) the central bank of any country
which is a member of the OECD; and (e) if, but only if, any Event of Default has
occurred and is continuing, any other bank, insurance company, commercial
finance company or other financial institution or other Person approved by the
Agent, such approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA or other Applicable Pension Legislation, maintained or
contributed to by the Borrower or any ERISA Affiliate, other than a Guaranteed
Pension Plan or a Multiemployer Plan.
Environmental Laws. See Section 7.18(a).
<PAGE>
7
EPA. See Section 6.18(b).
Equity Issuance. The sale or issuance by the Borrower or any of its
Subsidiaries of any of its capital stock or equity interests or any warrants,
rights or options to acquire its capital stock or equity interests.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under Section 414 of the Code or under any Applicable Pension
Legislation.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
"Euro" or "Euro" Currency. The use of the term "Euro" in this Credit
Agreement relates to the establishment of the "Euro" as a single currency
pursuant to the Treaty Establishing the European Economic Community, as amended
by the Treaty on the European Union (the Maastrict Treaty), and the conversion
(pursuant to the requirements of such Treaty) of any Obligations under the Loan
Documents from an Optional Currency of a country that is a member of the
European Union into Euro. As of the date that any such Optional Currency is no
longer the lawful currency of its respective country, all payment Obligations
under the Loan Documents that would otherwise be in such Optional Currency shall
thereafter be satisfied in the "Euro" Currency. For the avoidance of doubt, the
parties hereto affirm and agree that neither the fixing of a conversion rate of
any such Optional Currency against the Euro, nor the mandatory conversion of
such Obligations into Euro, in each case pursuant to such Treaty, shall require
the early termination of this Credit Agreement or any Interest Period with
respect to any Revolving Credit Loan or the prepayment of any amount due under
the Loan Documents or create any liability of one party to another party for any
direct or consequential loss otherwise arising from any of such events to the
extent required by such Treaty.
Eurocurrency Interbank Market. Any lawful recognized market in which
deposits of Dollars and the relevant Optional Currencies are offered by
international banking units of United States banking institutions and by foreign
banking institutions to each other and in which foreign currency and exchange
operations or eurocurrency funding operations are customarily conducted.
Eurocurrency Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurocurrency Rate Loans.
Eurocurrency Offered Rate. With respect to the Interest Period for any
Eurocurrency Rate Loan denominated in an Optional Currency, the rate per annum
(rounded upwards to the nearest 1/16 of one percent) equal to the rate at which
the Reference Bank is offered deposits in Dollars or the relevant Optional
Currency, as
<PAGE>
8
the case may be, two (2) Business Days prior to the beginning of such Interest
Period in the Eurocurrency Interbank Market where the foreign currency and
exchange operations or eurocurrency funding operations of the Agent are
customarily conducted at or about 10:00 a.m. (London time) for delivery on the
first day of such Interest Period and for the number of days comprised therein
and in an amount equal (as nearly as may be) to the Reference Bank's Commitment
Percentage of such Eurocurrency Rate Loan to which such Interest Period applies.
Eurocurrency Rate. With respect to amounts denominated in Dollars, the
Eurodollar Rate, and with respect to amounts denominated in any Optional
Currency, the International Eurocurrency Rate.
Eurocurrency Rate Loans. Revolving Credit Loans bearing interest calculated
by reference to a Eurocurrency Rate.
Eurocurrency Reserve Rate. For any day with respect to a Eurocurrency Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Rate. For any Interest Period with respect to a Eurocurrency Rate
Loan denominated in Dollars, the rate of interest equal to (a) the rate per
annum (rounded upwards to the nearest 1/16 of one percent) at which the
Reference Bank's Eurocurrency Lending Office is offered Dollar deposits two (2)
Business Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such Eurocurrency Lending Office are customarily conducted, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurocurrency
Rate Loan denominated in Dollars of the Reference Bank to which such Interest
Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency
Reserve Rate, if applicable.
Event of Default. See Section 12.1.
Exchange Offer. The offer by the Borrower to exchange the Subsequent
Subordinated Notes issued pursuant to the Subsequent Subordinated Indenture for
a new issue of Subsequent Subordinated Notes (with terms substantially identical
to those of the Subsequent Subordinated Notes originally issued pursuant to the
Subsequent Subordinated Indenture) pursuant to a registration statement (the
"Registration Statement") to be filed with the Securities and Exchange
Commission within 60 days after the date of original issuance of the Subsequent
Subordinated Notes.
<PAGE>
9
Fee Letter. The fee letter, dated on or prior to the Closing Date, between
the Borrower and the Agent, as the same may be amended, modified or supplemented
from time to time.
FIMCO Acquisition. As defined in Section.9.5.1 hereto.
Foreign Subsidiary. Any Subsidiary which conducts substantially all of its
business in countries other than the United States of America and that is
organized under the laws of a jurisdiction other than the United States of
America and the States (or the District of Columbia) thereof.
generally accepted accounting principles. (a) When used in ss.10, whether
directly or indirectly through reference to a capitalized term used therein,
means (i) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on the Balance Sheet Date, and (ii) to the
extent consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the year ended on the Balance Sheet
Date, and (b) when used in general, other than as provided above, means
principles that are (i) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (ii) consistently applied with past financial statements of
the Borrower adopting the same principles, provided that in each case referred
to in this definition of "generally accepted accounting principles" a certified
public accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section.3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantor. Each Person which is required to be or become guarantors from
time to time pursuant to Section.8.14 hereof.
Guaranty. The Guaranty, dated a date subsequent to the Closing Date, made by
each Guarantor in favor of the Banks and the Agent pursuant to which each
Guarantor guaranties to the Banks and the Agent the payment and performance of
the Obligations and substantially in form of Exhibit J hereto.
Hazardous Substances. See Section.7.18(b).
Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
<PAGE>
10
(a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses,
(c) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person,
(d) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
are being contested in good faith),
(e) every obligation of such Person under any Capitalized Lease,
(f) every obligation of such Person under any lease (a "Synthetic
Lease") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes or
treated similarly by the relevant taxing authority of a non-U.S.
jurisdiction,
(g) all sales by such Person of (i) accounts or general intangibles for
money due or to become due, (ii) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (iii) other
receivables (collectively "receivables"), whether pursuant to a purchase
facility or otherwise, other than in connection with the disposition of the
business operations of such Person relating thereto or a disposition of
defaulted receivables for collection and not as a financing arrangement, and
together with any obligation of such Person to pay any discount, interest,
fees, indemnities, penalties, recourse, expenses or other amounts in
connection therewith,
(h) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights,
(i) every obligation of such Person under any forward contract, futures
contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices,
<PAGE>
11
(j) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(k) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(a) through (j) (the "primary obligation") of another Person (the "primary
obligor"), in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (i) to purchase or pay (or
advance or supply funds for the purchase of) any security for the payment of
such primary obligation, (ii) to purchase property, securities or services
for the purpose of assuring the payment of such primary obligation, or (iii)
to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (y) any Synthetic Lease shall be the
stipulated loss value, termination value or other equivalent amount and (z) any
equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt in
by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
Initial Indenture Trustee. IBJ Schroder Bank & Trust Company, as trustee
under the Subordinated Indenture.
Initial Subordinated Notes. The 10 7/8% Senior Subordinated Notes due 2004,
Series B issued by the Borrower in the aggregate principal amount of
$200,000,000 pursuant to the Subordinated Indenture.
<PAGE>
12
Insolvency Event. Any of the following events or circumstances: (a) the
Borrower or any of its Subsidiaries organized in the United Kingdom shall be
deemed unable to pay its debts within the meaning of section 123(1) (a), (b), or
(b) of the Insolvency Act 1986 (United Kingdom) or shall otherwise become
insolvent or stop or suspend making payments (whether of principal or interest)
with respect to all or any class of its Indebtedness or announce an intention to
do so, (b) a meeting shall be convened by the Borrower or any of its
Subsidiaries for the purpose of passing any resolution to purchase, reduce or
redeem any of its capital stock or to comply with section 142 of the Companies
Act 1985 (England), (c) any petition shall be presented or other step taken for
the purpose of the appointment of an administrator or the winding up of the
Borrower or any of its Subsidiaries (not being, in the case of a winding up, a
petition which such Person can demonstrate to the reasonable satisfaction of the
Agent, by providing an opinion of leading counsel to that effect, is frivolous,
vexatious or an abuse of the process of the court or relates to a claim to which
such Person has a good defense and which is being vigorously contested by such
Person) or an order shall be made or resolution passed for the winding up of the
Borrower or any of its Subsidiaries or a notice shall be issued by convening a
meeting for the purpose of passing any such resolution (except for the purpose
of a solvent amalgamation or reconstitution which shall have been approved by
the Agent), or (d) any steps shall be taken, or negotiations commenced by the
Borrower or any of its Subsidiaries or by any of their respective creditors with
a view to proposing any kind of composition, compromise or arrangement involving
such Person and any of its creditors or for the presentation of a petition for
the appointment of an administrator.
Instrument of Accession. See Section 19.1.2.
Instrument of Adherence. See Section 9.5.1.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of the
calendar quarter with respect to interest accrued during such calendar quarter,
including, without limitation, the calendar quarter which includes the Drawdown
Date of such Base Rate Loan; and (b) as to any Eurocurrency Rate Loan in respect
of which the Interest Period is (i) three (3) months or less, the last day of
such Interest Period and (ii) more than three (3) months, the date that is three
(3) months from the first day of such Interest Period and, in addition, the last
day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (a) initially,
the period commencing on the Drawdown Date of such Revolving Credit Loan and
ending on the last day of one of the periods set forth below, as selected by the
Borrower in a Loan Request or as otherwise required by the terms of this Credit
Agreement (i) for any Base Rate Loan, the last day of the calendar quarter; and
(ii) for any Eurocurrency Rate Loan, 1, 2, 3 or 6 months; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Revolving Credit Loan and ending on the last day of one of
the periods set forth
<PAGE>
13
above, as selected by the Borrower in a Conversion Request; provided that all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(a) if any Interest Period with respect to a Eurocurrency Rate Loan
would otherwise end on a day that is not a Business Day, that Interest
Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in ss.2.7,
the Borrower shall be deemed to have requested a conversion of the affected
Eurocurrency Rate Loan to a Base Rate Loan and the continuance of all Base
Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurocurrency Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of a calendar
month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date shall end on the Revolving Credit Loan
Maturity Date.
International Eurocurrency Rate. With respect to all Eurocurrency Rate Loans
denominated in an Optional Currency for any Interest Period, the annual rate of
interest, rounded to the nearest 1/16th of one percent (1%), determined by the
Agent for such Interest Period in accordance with the following formula:
Eurocurrency Offered Rate
International Eurocurrency Rate = 1 - Eurocurrency Reserve Rate
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is
<PAGE>
14
paid; (c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit. See Section 4.1.1.
Letter of Credit Application. See Section 4.1.2.
Letter of Credit Fee. See Section 4.6.
Letter of Credit Participation. See Section 4.1.4.
Leverage Ratio. As at any date of determination, the ratio of (a) Total
Funded Indebtedness of the Borrower and its Subsidiaries outstanding on such
date to (b) EBITDA of the Borrower and its Subsidiaries for the Reference Period
ended on such date (or, if such date is not a fiscal quarter end date, the
period of four consecutive fiscal quarters most recently ended); provided,
however, when calculating the Leverage Ratio for any period in which a Permitted
Acquisition has occurred, the calculation of the Leverage Ratio shall be made on
a Pro Forma Basis.
Loan Documents. This Credit Agreement, the Revolving Credit Notes, the
Letter of Credit Applications, the Letters of Credit, the Fee Letter and the
Security Documents.
Loan Request. See Section 2.6.
Majority Banks. As of any date, the Banks holding at least fifty one percent
(51%) of the outstanding principal amount of the Revolving Credit Notes on such
date; and if no such principal is outstanding, the Banks whose aggregate
Commitments constitutes at least fifty one percent (51%) of the Total
Commitment.
Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries
may at any time draw under outstanding Letters of Credit, as such aggregate
amount may be reduced from time to time pursuant to the terms of the Letters of
Credit.
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Net Cash Proceeds. With respect to any Equity Issuance, the excess of the
gross cash proceeds received by such Person from such Equity Issuance after
deduction of customary transaction expenses (including, without limitation,
<PAGE>
15
underwriting discounts and commissions) actually incurred in connection with the
Equity Issuance and which the Borrower, acting in good faith, deems to be
reasonable.
Net Cash Sale Proceeds. The net cash proceeds received by the Borrower and
its Subsidiaries in respect of any Asset Sale, less all out-of-pocket fees,
commissions and other expenses which the Borrower, acting in good faith, deems
to be reasonable and are incurred in connection with such Asset Sale, including
the amount (estimated in good faith by such Person) of income, franchise, sales
and other applicable taxes required to be paid by such Person in connection with
such Asset Sale.
Obligations. All indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Revolving Credit Loans made or Reimbursement Obligations incurred or any of the
Revolving Credit Notes, Letter of Credit Application, Letter of Credit, or
arising or incurred in connection with any interest rate protection arrangements
contemplated by Section 8.18 or any documents, agreements or instruments
executed in connection therewith, or other instruments at any time evidencing
any thereof.
OC Notice. See Section 2.9.
Open Market Purchases. The purchase by the Borrower of all or any portion of
the Subordinated Notes from the holders thereof so long as (a) the total,
cumulative amount of the consideration paid for all such purchases from and
after the Closing Date does not exceed, in the aggregate, (i) $25,000,000 to the
extent the Leverage Ratio calculated on a pro forma basis immediately prior to
and after giving effect to such purchase is equal to or greater than 2.00:1.00
and (ii) $50,000,000 to the extent the Leverage Ratio calculated on a pro forma
basis immediately prior to and after giving effect to such purchase is less than
2.00:1.00; and the Subordinated Notes so purchased in each case are promptly
cancelled by the Borrower and (b) the total amount of the consideration paid for
any Subordinated Note does not exceed the fair market value of such Subordinated
Note (determined by reference to the public market at the date of such purchase.
Optional Currency. Any currency other than Dollars selected by the Borrower
and including the "Euro" which is (a) freely convertible into Dollars; and (b)
traded on any recognized Eurocurrency Interbank Market selected by the Agent in
good faith.
outstanding. With respect to the Revolving Credit Loans, the aggregate
unpaid principal thereof as of any date of determination.
<PAGE>
16
Overnight Rate. For any day, (a) as to Revolving Credit Loans denominated in
Dollars, the weighted average interest rate paid by the Agent for federal funds
acquired by the Agent, and (b) as to Revolving Credit Loans denominated in an
Optional Currency, the rate of interest per annum at which overnight deposits in
the applicable Optional Currency, in an amount approximately equal to the amount
with respect to which such rate is being determined, would be offered for such
day by the Agent to major banks in the London interbank market.
Patent Assignment. The Patent Assignment, dated or to be dated on or prior
to the Closing Date, made by the Borrower in favor of the Agent and
substantially in form of Exhibit G hereto.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA
and any successor entity or entities having similar responsibilities.
Perfection Certificate. The Perfection Certificate as defined in the
Security Agreement.
Permitted Acquisition. As defined in Section 9.5.1.
Permitted Liens. Liens, security interests and other encumbrances permitted
by Section 9.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pro Forma Basis. With respect to any Reference Period during which a
Permitted Acquisition has occurred, the Total Funded Indebtedness (or, in the
case of Consolidated Total Interest Expense, all Indebtedness) and EBITDA for
such Reference Period shall be calculated after giving effect on a pro forma
basis to such Permitted Acquisition and assuming that such Permitted Acquisition
had been consummated at the beginning of such Reference Period in the manner
described in (i), (ii) and (iii) below:
(i) all Indebtedness (whether under this Credit Agreement or otherwise) and
any other balance sheet adjustments incurred or made in connection with
the Permitted Acquisition shall be deemed to have been incurred or made
on the first day of the Reference Period, and all Indebtedness of the
Person acquired or to be acquired in such Permitted Acquisition which
was or will have been repaid in connection with the consummation of the
Permitted Acquisition will be deemed to have been repaid concurrently
with the incurrence of the Indebtedness incurred in connection with the
Permitted Acquisition;
<PAGE>
17
(ii) all Indebtedness assumed to have been incurred pursuant to the
preceding clause (i) shall be deemed to have borne interest at the sum
of (a) the arithmetic mean of (x) the Eurocurrency Rate for
Eurocurrency Rate Loans having an Interest Period of one month in
effect on the first day of the Reference Period and (y) the
Eurocurrency Rate for Eurocurrency Rate Loans having an Interest Period
of one month in effect on the last day of the Reference Period plus (b)
the Applicable Margin for Revolving Credit Loans then in effect (after
giving effect to the Permitted Acquisition on a Pro Forma Basis); and
(iii) other reasonable cost savings, expenses and other income statement or
operating statement adjustments which are attributable to the change in
ownership and/or management resulting from such Permitted Acquisition
as may be approved by the Agent in writing shall be deemed to have been
realized on the first day of the Reference Period.
Rate Adjustment Period. As defined in the definition of Applicable Margin.
RCRA. See Section 7.18(a).
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Revolving Credit Note, or the continuation of
such grid, or any other similar record, including computer records, maintained
by any Bank with respect to any Revolving Credit Loan referred to in such
Revolving Credit Note.
Reference Bank. BKB.
Reference Period. The period of four (4) consecutive fiscal quarters of the
Borrower ending on the relevant date (or, if such date is not a fiscal quarter
end date, the period of four (4) consecutive fiscal quarters most recently
ended).
Register. See Section 19.3.
Registration Rights Agreement. That certain Exchange and Registration Rights
Agreement dated as of March 24, 1997 between the Borrower and NatWest Capital
Markets Limited, as initial purchaser, a copy of which has been delivered to the
Agent on or prior to the Closing Date.
Reimbursement Obligation. The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in Section 4.2.
<PAGE>
18
Restricted Payment. In relation to the Borrower and its Subsidiaries, any
(a) Distribution; (b) payment by the Borrower or any of its Subsidiaries to any
Affiliate other than payments to such Affiliates for goods and services in the
ordinary course of business on terms equivalent to those obtainable in arms
length transactions
Revolving Credit Loan Maturity Date. June 15, 2003.
Revolving Credit Loans. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to Section 2.
Revolving Credit Notes. See Section 2.4.
SARA. See Section 7.18(a).
Same Day Funds. With respect to disbursements and payments in (a) Dollars,
immediately available funds, and (b) an Optional Currency, same day or other
funds as may be determined by the Agent to be customary in the place of
disbursement or payment for the settlement of international banking transactions
in the relevant Optional Currency.
Section 20 Subsidiary. A Subsidiary of the bank holding company controlling
any Bank, which Subsidiary has been granted authority by the Federal Reserve
Board to underwrite and deal in certain Ineligible Securities.
Security Agreement. The Security Agreement, dated or to be dated on or prior
to the Closing Date, between the Borrower and the Agent and substantially in the
form of Exhibit F hereto.
Security Documents. The Guaranty, the Security Agreement, the Patent
Assignment, the Trademark Assignment, the Stock Pledge Agreement and all other
instruments and documents, including without limitation Uniform Commercial Code
financing statements, required to be executed or delivered pursuant to any
Security Document.
Stock Pledge Agreement. Collectively, the various foreign share pledge
agreements and the Stock Pledge Agreement, dated or to be dated on or prior to
the Closing Date, between the Borrower and the Agent and in form and substance
satisfactory to the Banks and the Agent.
Subordinated Debt. Unsecured Indebtedness of the Borrower or any of its
Subsidiaries that is expressly subordinated and made junior to the payment and
performance in full of the Obligations, and evidenced as such by the
Subordinated Debt Documents.
Subordinated Debt Documents. The Subordinated Purchase Agreement, the
Subordinated Indenture Amendment, the Subordinated Indenture, the Registration
Rights Agreement, the Initial Subordinated Notes, the Subsequent Subordinated
<PAGE>
19
Purchase Agreement, the Subsequent Subordinated Indenture, the Subsequent
Registration Rights Agreement and the Subsequent Subordinated Notes.
Subordinated Indenture. The Indenture dated as of March 24, 1997 between the
Borrower and the Initial Indenture Trustee, and in the form delivered to the
Agent on or prior to the Closing Date, and as the same may be amended by the
Subordinated Indenture Amendment.
Subordinated Indenture Amendment. That certain First Supplemental Indenture
dated as of a date after the Closing Date among the Borrower and the Initial
Indenture Trustee, with such amendment being in form and substance satisfactory
to the Agent and the Majority Banks.
Subordinated Notes. Collectively, (a) the Initial Subordinated Notes and (b)
the Subsequent Subordinated Notes.
Subordinated Purchase Agreement. The Purchase Agreement, dated as of March
24, 1997, between the Company and NatWest Capital Markets Limited, as initial
purchaser, relating to the issuance and sale by the Borrower of the Subordinated
Notes.
Subsequent Indenture Trustee. IBJ Schroder Bank & Trust Company, as trustee
under the Subsequent Subordinated Indenture.
Subsequent Subordinated Indenture. The Indenture to be entered into after
the Closing Date between the Borrower and the Subsequent Indenture Trustee and
any such documents, instruments, or agreements issued pursuant to the Exchange
Offer, and each to be in form and substance acceptable to the Agent and the
Majority Banks.
Subsequent Subordinated Purchase Agreement. The Purchase Agreement to be
entered into after the Closing Date between the Borrower and NatWest Capital
Markets Limited, as initial purchaser, relating to the issuance and sale by the
Borrower of the Subsequent Subordinated Notes.
Subsequent Registration Rights Agreement. That certain Exchange and
Registration Rights Agreement pertaining to the Subsequent Subordinated Notes to
be entered into after the Closing Date by and between the Borrower and NatWest
Capital Markets Limited as initial purchaser, in substantially the form
delivered to the Agent on or prior to the Closing Date.
Subsequent Subordinated Notes. Collectively, the 10 7/8% Series C Senior
Subordinated Notes due 2004 and the 10 7/8% Series D Senior Subordinated Notes
due 2004 issued by the Borrower pursuant to the Subsequent Subordinated
Indenture in the aggregate principal amount necessary to produce gross proceeds
of not more than $140,000,000 which are issued for the purpose of using the
proceeds of such issuance to finance all or a portion of the FIMCO Acquisition,
the fees and
<PAGE>
20
expenses incurred in connection therewith and general corporate powers of the
Borrower.
Subsidiary. Any corporation, association, trust, or other business entity of
which the designated parent shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of votes) of the
outstanding Voting Stock.
Synthetic Lease. As such term is defined in subparagraph (f) of the
definition of "Indebtedness".
Total Commitment. The sum of the Commitments of the Banks (as the same may
be modified pursuant to Section 19.1.2 hereof), as in effect from time to time.
Total Funded Indebtedness. All Indebtedness of the Borrower and its
Subsidiaries for borrowed money (including, without limitation, all guarantees
by such Person of Indebtedness of others for borrowed money), purchase money
Indebtedness and with respect to Capitalized Leases and Synthetic Leases,
determined on a consolidated basis in accordance with generally accepted
accounting principles.
Trademark Assignment. The Trademark Assignment, dated or to be dated on or
prior to the Closing Date, made by the Borrower in favor of the Agent and
substantially in the of Exhibit H hereto.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
Eurocurrency Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the
Borrower does not reimburse the Agent and the Banks on the date specified in,
and in accordance with, Section 4.2.
Voting Stock. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. Rules of Interpretation.
<PAGE>
21
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time
in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts, have the meanings
assigned to them therein, with the term "instrument" being that defined
under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation of periods
of time from a specified date to a later specified date, the word "from"
means "from and including," the words "to" and "until" each mean "to but
excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are, however,
cumulative and are to be performed in accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others,
the Agent and the Borrower and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the
other Loan Documents are not intended to be construed against the Agent or
any of the Banks merely on account of the Agent's or
<PAGE>
22
any Bank's involvement in the preparation of such documents.
2. THE REVOLVING CREDIT FACILITY.
2.1. Commitment to Lend. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
from the Closing Date up to but not including the Revolving Credit Loan
Maturity Date upon notice by the Borrower to the Agent given in accordance
with Section 2.6, such sums in Dollars and/or at the Borrower's option from
time to time, subject to Section 2.9 hereof, in an Optional Currency, as are
requested by the Borrower up to a maximum aggregate amount outstanding (after
giving effect to all amounts requested) at any one time equal to such Bank's
Commitment minus such Bank's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations, provided that the
sum of the outstanding amount of the Revolving Credit Loans (after giving
effect to all amounts requested) plus the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations shall not at any time exceed the Total
Commitment (except as expressly permitted by Section 2.9.4 hereof). The
Revolving Credit Loans shall be made pro rata in accordance with each Bank's
Commitment Percentage. Each request for a Revolving Credit Loan hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in Section 11 and Section 12, in the case of the initial
Revolving Credit Loans to be made on the Closing Date, and Section 12, in the
case of all other Revolving Credit Loans, have been satisfied or waived in
writing by the Majority Banks and the Agent on the date of such request. Each
Base Rate Loan shall be denominated in Dollars. Each Eurocurrency Rate Loan
shall be denominated in Dollars or, subject to Section 2.9 hereof, in an
Optional Currency.
2.2. Commitment Fee. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of the Commitment Fee Rate per annum on
the average daily amount during each calendar quarter or portion thereof from
the Closing Date to the Revolving Credit Loan Maturity Date by which the Total
Commitment minus the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the outstanding amount of Revolving Credit
Loans during such calendar quarter. The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Revolving Credit Maturity
Date or any earlier date on which the Commitments shall terminate.
2.3. Reduction of Total Commitment. The Borrower shall have the right at any
time and from time to time upon five (5) Business Days prior written notice to
the Agent to reduce by $5,000,000 or an integral multiple of $1,000,000 in
excess thereof or terminate entirely the Total Commitment, whereupon the
Commitments
<PAGE>
23
of the Banks shall be reduced pro rata in accordance with their respective
Commitment Percentages of the amount specified in such notice or, as the case
may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this Section 2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any commitment fee then accrued on the amount of the reduction.
No reduction or termination of the Commitments may be reinstated.
2.4. The Revolving Credit Notes. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Record reflecting the making of such
Revolving Credit Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Credit Loans set forth on such Bank's Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Bank's Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. Interest on Revolving Credit Loans. Except as otherwise provided in
Section 5.11,
(a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest
Period with respect thereto at the rate per annum equal to the Base Rate
plus the Applicable Margin with respect to Base Rate Loans as in effect from
time to time.
(b) Each Eurocurrency Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
Eurocurrency Rate determined for such Interest Period plus the Applicable
Margin with respect to Eurocurrency Rate Loans as in effect from time to
time.
(c) The Borrower promises to pay interest on each Revolving Credit Loan
in arrears on each Interest Payment Date with respect thereto.
<PAGE>
24
2.6. Requests for Revolving Credit Loans. The Borrower shall give to the
Agent written notice in the form of Exhibit B hereto (or telephonic notice
confirmed in a writing in the form of Exhibit B hereto) of each Revolving
Credit Loan requested hereunder (a "Loan Request") no less than (a) one (1)
Business Day prior to the proposed Drawdown Date of any Base Rate Loan and
(b) three (3) Business Days prior to the proposed Drawdown Date of any
Eurocurrency Rate Loan, provided that any such notice requesting a Revolving
Credit Loan denominated in an Optional Currency must comply with the
requirements of this Section 2.6 and the requirements of an OC Notice
pursuant to Section 2.9(a). Each such notice shall specify (i) the principal
amount of the Revolving Credit Loan requested, stated either in Dollars or,
subject to Section 2.9.1 hereof, in an Optional Currency (ii) the proposed
Drawdown Date of such Revolving Credit Loan, (iii) the Interest Period for
such Revolving Credit Loan and (iv) the Type of such Revolving Credit Loan.
To the extent the Agent receives such notice by 11:00 a.m. (Boston time) on
any day, it shall provide the Banks with notice on such date, or, if the
Agent receives notice after 11:00 a.m. (Boston time), it shall provide the
Banks with notice on the next Business Day. Promptly upon receipt of any such
notice, the Agent shall notify each of the Banks thereof. Each Loan Request
shall be irrevocable and binding on the Borrower and shall obligate the
Borrower to accept the Revolving Credit Loan requested from the Banks on the
proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate
amount of $1,000,000 or an integral multiple of $500,000 in excess thereof.
2.7. Conversion Options.
2.7.1. Conversion to Different Type of Revolving Credit Loan. The
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan denominated in Dollars to a Revolving Credit Loan of another
Type denominated in Dollars, provided that (a) with respect to any such
conversion of a Revolving Credit Loan to a Base Rate Loan, the Borrower
shall give the Agent at least one (1) Business Day prior written notice of
such election; (b) with respect to any such conversion of a Base Rate Loan
to a Eurocurrency Rate Loan, the Borrower shall give the Agent at least
three (3) Business Days prior written notice of such election; (c) with
respect to any such conversion of a Eurocurrency Rate Loan into a Revolving
Credit Loan of another Type, such conversion shall only be made on the last
day of the Interest Period with respect thereto and (d) no Revolving Credit
Loan may be converted into a Eurocurrency Rate Loan when any Default or
Event of Default has occurred and is continuing. To the extent the Agent
receives such notice by 11:00 a.m. (Boston time) on any day, it shall
provide the Banks with notice on such date, or, if the Agent receives notice
after 11:00 a.m. (Boston time), it shall provide the Banks with notice on
the next Business Day. On the date on which such conversion is being made
each Bank shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or
its Eurocurrency Lending Office, as the case may be. All or any part
<PAGE>
25
of outstanding Revolving Credit Loans denominated in Dollars of any Type may
be converted into a Revolving Credit Loan of another Type as provided
herein, provided that any partial conversion shall be in an aggregate
principal amount of $1,000,000 or an integral multiple of $500,000 in excess
thereof. Each Conversion Request relating to the conversion of a Revolving
Credit Loan to a Eurocurrency Rate Loan shall be irrevocable by the
Borrower.
2.7.2. Continuation of Type of Revolving Credit Loan. Any Revolving
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower with the notice provisions contained in
Section 2.7.1; provided that (a) as to any Eurocurrency Rate Loan
denominated in Dollars, no such Eurocurrency Rate Loan may be continued as
such when any Default or Event of Default has occurred and is continuing,
but shall be automatically converted to a Base Rate Loan on the last day of
the first Interest Period relating thereto ending during the continuance of
any Default or Event of Default of which officers of the Agent active upon
the Borrower's account have actual knowledge; and (b) as to any Eurocurrency
Rate Loan denominated in an Optional Currency, no such Eurocurrency Rate
Loan may be continued as such when (i) a Default of Event of Default has
occurred or is continuing or (ii) the provisions of Section 2.9 hereof have
not or cannot be met at the time of such continuation, but shall be repaid
by the Borrower on the last day of the Interest Period relating thereto. In
the event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurocurrency Rate Loan as such, then (a) such
Eurocurrency Rate Loan denominated in Dollars shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto; and (b) as to any Eurocurrency Rate Loan denominated in an
Optional Currency, shall be repaid on the last day of the Interest Period
relating thereto. The Agent shall notify the Banks promptly when any such
automatic conversion contemplated by this Section 2.7 is scheduled to occur.
2.7.3. Eurocurrency Rate Loans. Any conversion to or from Eurocurrency
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurocurrency Rate Loans having the same Interest Period shall not be less
than $1,000,000 or a whole multiple of $500,000 (or, in the case of a
Eurocurrency Rate Loan denominated in an Optional currency, that whole
number which is nearest to the Dollar Equivalent of $1,000,000 or $500,000,
as the case may be, rounded to the nearest one thousandth) in excess
thereof.
2.8. Funds for Revolving Credit Loan.
2.8.1. Funding Procedures. Not later than 11:00 a.m. (Boston time) on
the proposed Drawdown Date of any Revolving Credit Loans, each of the
<PAGE>
26
Banks will make available to the Agent to credit to the Borrower's account
in Same Day Funds, the amount of such Bank's Commitment Percentage of the
amount of the requested Revolving Credit Loan and (a) in the case of a
Revolving Credit Loan denominated in Dollars, at the Agent's Head Office,
and (b) in the case of a Revolving Credit Loan denominated in an Optional
Currency, at the place specified in the notice delivered by the Borrower
pursuant to Section 2.9 hereof in Same Day Funds in the country in which
such Optional Currency is legal tender. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by Sections 11 and 12 and
the satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate
amount of such Revolving Credit Loans made available to the Agent by the
Banks. The failure or refusal of any Bank to make available to the Agent at
the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Revolving Credit Loans shall not
relieve any other Bank from its several obligation hereunder to make
available to the Agent the amount of such other Bank's Commitment Percentage
of any requested Revolving Credit Loans.
2.8.2. Advances by Agent. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the Overnight Rate for each day
included in such period, times (b) the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans, times (c) a fraction, the
numerator of which is the number of days that elapse from and including such
Drawdown Date to the date on which the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans shall become immediately available
to the Agent, and the denominator of which is 365. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing to the
Agent by such Bank. If the amount of such Bank's Commitment Percentage of
such Revolving Credit Loans is not made available to the Agent by such Bank
within three (3) Business Days following such Drawdown Date, the Agent shall
be entitled to recover such amount from the Borrower on demand, with
interest thereon at the rate per annum applicable to the Revolving Credit
Loans made on such Drawdown Date.
<PAGE>
27
2.9. Optional Currencies.
2.9.1. Request for Optional Currency. Subject to the limitations set
forth in Section 2.1., the Borrower may, upon at least three (3) Business
Days' notice to the Agent (an "OC Notice"), request that one or more
Revolving Credit Loans be made in an Optional Currency, provided that any
Revolving Credit Loan proposed to be made under this Section 2.9.1 shall be
in an amount not less than $1,000,000, or a greater amount which is an
integral multiple of $500,000 in excess thereof, or the Dollar Equivalent in
an Optional Currency. Each OC Notice requesting a Revolving Credit Loan in
an Optional Currency shall be by written notice (or telephonic notice
confirmed in writing by the Borrower), specifying (a) the Revolving Credit
Loan to be made, (b) the requested Drawdown Date of the proposed borrowing
of such Revolving Credit Loan, (c) the requested Optional Currency in which
the Revolving Credit Loan is to be made, and (d) the initial Interest Period
for the Revolving Credit Loan to be borrowed. To the extent the Agent
receives such notice by 11:00 a.m. (Boston time) on any day, it shall
provide the Banks with notice on such date, or, if the Agent receives notice
after 11:00 a.m. (Boston time), it shall provide the Banks with notice on
the next Business Day. If any Bank, on or prior to any Drawdown Date,
determines (which determination shall be conclusive) that the requested
Optional Currency is not freely transferable and convertible into Dollars or
that it will be impracticable for such Bank to fund the Revolving Credit
Loan in such Optional Currency, then such Bank shall immediately so notify
the Agent, which notification shall be given immediately by the Agent to the
Borrower, and such Bank's portion of the requested Revolving Credit Loan
shall instead be denominated in Dollars. In the event that the Borrower
repays such portion of a Revolving Credit Loan denominated in Dollars in
accordance with Section 3 hereof and such repayment, and the fluctuation of
currency exchange rates, results in Revolving Credit Loans being then
outstanding that are not in Dollar Equivalent amounts held pro rata in
accordance with the Commitment Percentages, then all subsequent principal
repayments denominated in the Optional Currency which the applicable Bank
did not advance shall be made by the Borrower to the Agent for the
respective accounts of the Banks other than such Bank on a pro rata basis
until such time as the Revolving Credit Loans are outstanding on a pro rata
basis. Subject to the foregoing and to the satisfaction of the terms and
conditions of Section 11 (in the case of such Revolving Credit Loans to be
made on the Closing Date) and Section 12, each Revolving Credit Loan
requested to be made in an Optional Currency will be made on the Drawdown
Date specified therefor in the OC Notice, in the currency requested in the
OC Notice and, upon being so made, will have the Interest Period requested
in the OC Notice.
2.9.2. Exchange Rate. For purposes of this Credit Agreement the amount
in one Optional Currency which shall be equivalent on any particular date to
a specified amount in another Optional Currency shall be
<PAGE>
28
that amount (as conclusively ascertained by the Agent by its normal banking
practices, absent manifest error) in the first Optional Currency which is or
could be purchased by the Agent (in accordance with normal banking
practices) with such specified amount in the second Optional Currency in any
recognized Eurocurrency Interbank Market selected by the Agent in good faith
for delivery on such date at the spot rate of exchange prevailing at 10:00
a.m. (London time) (or as soon thereafter as practicable) on such date.
2.9.3. Multiple Denominations. In the event that any portion of the
funds available under the terms of this Credit Agreement is denominated in
one or more Optional Currencies, the Dollar Equivalent of such portion of
the funds shall be calculated pursuant to the definition of "Dollar
Equivalent". The amount so determined shall then be added to the amount
already outstanding in Dollars for the purpose of determining the remaining
availability of funds under Section 2.1 and Section 2.9.1 hereof and any
required repayments under the following Section 2.9.4.
2.9.4. Repayment. If at any time prior to the Revolving Credit Loan
Maturity Date, the Dollar Equivalent of the aggregate principal amount
outstanding of all Revolving Credit Loans hereunder shall exceed the Total
Commitment as a result of fluctuations in respective currency conversion
rates for three (3) or more consecutive Business Days, the Borrower shall
pay or cause to be paid immediately, upon demand made by the Agent, such
amounts as are sufficient to eliminate such excess and to reduce the
aggregate principal amount outstanding to the Dollar Equivalent in the
applicable currencies of the Total Commitment.
2.9.5. Funding. Each Bank may make any Revolving Credit Loan
denominated in an Optional Currency by causing its Eurocurrency Lending
Office or any of its foreign branches or foreign affiliate to make such
Revolving Credit Loan (whether or not such lending office, branch or
affiliate is named as a lending office on the signature pages hereof);
provided that in such event the obligation of the Borrower to repay such
Revolving Credit Loan shall nevertheless be to such Bank and shall, for all
purposes of this Credit Agreement (including without limitation for purposes
of the definition of the term "Majority Banks") be deemed made by such Bank
to the extent of such Revolving Credit Loan, for the account of such
applicable lending office, branch or affiliate.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. Maturity. The Borrower promises to pay on the Revolving Credit Loan
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
<PAGE>
29
3.2. Mandatory Repayments of Revolving Credit Loans. If at any time the
outstanding amount of the Revolving Credit Loans, the Maximum Drawing Amount
and all Unpaid Reimbursement Obligations exceeds the Total Commitment, then
the Borrower shall immediately pay the amount of such excess to the Agent for
the respective accounts of the Banks for application: first, to any Unpaid
Reimbursement Obligations; second, to the Revolving Credit Loans; and third,
to provide to the Agent cash collateral for Reimbursement Obligations as
contemplated by Section 4.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to each
Reimbursement Obligation or (as the case may be) the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments to
the extent practicable to equalize any prior payments or repayments not
exactly in proportion. In addition, in the event the Borrower or any of its
Subsidiaries receives any (a) Net Cash Sale Proceeds from the sale or other
disposition of assets (other than the sale or disposition of assets in the
ordinary course of business consistent with past practices) permitted by
Section 9.5 which have not been reinvested by the Borrower or such Subsidiary
in replacement assets in which the Agent shall have a first priority
perfected security interest for the benefit of the Agent and the Banks within
270 days of receipt by the Borrower or such Subsidiary; (b) proceeds of
insurance claims which have not been reinvested by the Borrower or such
Subsidiary in replacement assets or to repair the asset so damaged, as the
case may be, within 270 days of receipt by such Person of such proceeds or
(c) Net Cash Proceeds from any Equity Issuance by the Borrower or its
Subsidiaries (other than Net Cash Proceeds received so long as no Event of
Default has occurred and is continuing and provided 100% of the aggregate
amount of such Net Cash Proceeds are used within 180 days after the receipt
thereof to finance all or any portion of a Permitted Acquisition), the
Borrower shall, (1) as to Section 3.2(a) and (b), immediately upon the
expiration of the 270 days after receipt thereof, and (2) as to Section
3.2(c), immediately upon the receipt thereof (in the case of Net Cash
Proceeds which are not to be used to finance all or any portion of a
Permitted Acquisition) or immediately upon the expiration of 180 days after
receipt thereof (in the case of Net Cash Proceeds the borrower intends to use
for such Permitted Acquisitions), as the case may be, repay the outstanding
Revolving Credit Loans in an amount equal to 100% of such Net Cash Sale
Proceeds or Net Cash Proceeds, as the case may be, in each case to the extent
not previously applied by the Borrower to the repayment of Revolving Credit
Loans (as certified by the Borrower to the Agent); provided, however, in the
event the Borrower sells or otherwise disposes of the DAS Business or DPDS
Business pursuant to Section 9.5.2(b), so long as no Default or Event of
Default has occurred and is continuing or would exist as a result of such
sale, the Borrower shall be permitted to use the Net Cash Sale Proceeds from
the sale of the DAS Business and/or the DPDS Business to repay a portion of
the Subordinated Notes and for general working capital and corporate purposes.
3.3. Optional Repayments of Revolving Credit Loans. The Borrower shall have
the right, at its election, to repay the outstanding amount of the Revolving
Credit Loans, as a whole or in part, at any time without penalty or premium (but
<PAGE>
30
subject to Section 5.10). The Borrower shall give the Agent, no later than 10:00
a.m., Boston time, at least one (1) Business Day prior written notice of any
proposed prepayment pursuant to this Section 3.3 of Base Rate Loans, and three
(3) Business Days notice of any proposed prepayment pursuant to this Section 3.3
of Eurocurrency Rate Loans, in each case specifying the proposed date of
prepayment of Revolving Credit Loans and the principal amount to be prepaid. The
Agent shall promptly notify the Banks of this proposed prepayment. Each such
partial prepayment of the Revolving Credit Loans shall be in an integral
multiple of $1,000,000 (or the Dollar Equivalent), shall be accompanied by the
payment of accrued interest on the principal prepaid to the date of prepayment
and shall be applied, in the absence of instruction by the Borrower, first to
the principal of Base Rate Loans and then to the principal of Eurocurrency Rate
Loans. Each partial prepayment shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Bank's Revolving Credit Note, with adjustments to the extent practicable
to equalize any prior repayments not exactly in proportion.
4. LETTERS OF CREDIT.
4.1. Letter of Credit Commitments.
4.1.1. Commitment to Issue Letters of Credit. Subject to the terms
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance
upon the agreement of the Banks set forth in Section 4.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees,
in its individual capacity, to issue, extend and renew for the account of
the Borrower one or more standby or documentary letters of credit
denominated in Dollars (individually, a "Letter of Credit"), in such form
as may be requested from time to time by the Borrower and agreed to by
the Agent; provided, however, that, after giving effect to such request,
(a) the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $15,000,000 at any one time
and (b) the sum of (i) the Maximum Drawing Amount on all Letters of
Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the Dollar
Equivalent of the amount of all Revolving Credit Loans outstanding shall
not exceed the Total Commitment. Notwithstanding the foregoing, the Agent
shall have no obligation to issue any Letter of Credit to support or
secure any Indebtedness of the Borrower or any of its Subsidiaries to the
extent that such Indebtedness was incurred prior to the proposed issuance
date of such Letter of Credit, unless in any such case the Borrower
demonstrates to the satisfaction of the Agent that (x) such prior
incurred Indebtedness were then fully secured by a prior perfected and
unavoidable security interest in collateral provided by the Borrower or
such Subsidiary to the proposed beneficiary of such Letter of Credit or
(y) such prior incurred Indebtedness were then secured or supported by a
letter of credit issued for the account of
<PAGE>
31
the Borrower or such Subsidiary and the reimbursement obligation with
respect to such letter of credit was fully secured by a prior perfected and
unavoidable security interest in collateral provided to the issuer of such
letter of credit by the Borrower or such Subsidiary. The Agent shall notify
the Banks of the issuance of a Letter of Credit promptly after issuance
thereof.
4.1.2. Letter of Credit Applications. Each Letter of Credit Application
shall be completed to the satisfaction of the Agent. In the event that any
provision of any Letter of Credit Application shall be inconsistent with any
provision of this Credit Agreement, then the provisions of this Credit
Agreement shall, to the extent of any such inconsistency, govern.
4.1.3. Terms of Letters of Credit. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for the
payment of sight drafts for honor thereunder when presented in accordance
with the terms thereof and when accompanied by the documents described
therein, and (b) have an expiry date no later than the date which is
fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer
or otherwise provides for one or more nominated persons, forty-five (45)
days) prior to the Revolving Credit Loan Maturity Date. Each Letter of
Credit so issued, extended or renewed shall be subject to the Uniform
Customs.
4.1.4. Reimbursement Obligations of Banks. Each Bank severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Commitment Percentage, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the Borrower
pursuant to Section 4.2 (such agreement for a Bank being called herein the
"Letter of Credit Participation" of such Bank).
4.1.5. Participations of Banks. Each such payment made by a Bank shall
be treated as the purchase by such Bank of a participating interest in the
Borrower's Reimbursement Obligation under Section 4.2 in an amount equal to
such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to Section 4.2.
4.2. Reimbursement Obligation of the Borrower. In order to induce the Agent
to issue, extend and renew each Letter of Credit and the Banks to participate
therein, the Borrower hereby agrees to reimburse or pay to the Agent, for the
account of the Agent or (as the case may be) the Banks, with respect to each
Letter of Credit issued, extended or renewed by the Agent hereunder,
(a) except as otherwise expressly provided in Section 4.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored by
the Agent, or the Agent otherwise makes a payment with respect thereto, (i)
the
<PAGE>
32
amount paid by the Agent under or with respect to such Letter of Credit, and
(ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Agent or any Bank in connection with any payment
made by the Agent or any Bank under, or with respect to, such Letter of
Credit,
(b) upon the reduction (but not termination) of the Total Commitment to
an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the
Banks and the Agent as cash collateral for all Reimbursement Obligations,
and
(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with Section 13, an amount equal to the then Maximum Drawing
Amount on all Letters of Credit, which amount shall be held by the Agent
for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this Section 5.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 4.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Agent on demand at the rate specified in
Section 5.11 for overdue principal on the Revolving Credit Loans.
4.3. Letter of Credit Payments. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft
or honor such demand for payment. If the Borrower fails to reimburse the
Agent as provided in Section 4.2 on or before the date that such draft is
paid or other payment is made by the Agent, the Agent shall at any time
thereafter notify the Banks of the amount of any such Unpaid Reimbursement
Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Agent, at the Agent's Head Office, in Same Day Funds, such Bank's Commitment
Percentage of such Unpaid Reimbursement Obligation, together with an amount
equal to the product of (a) the average, computed for the period referred to
in clause (c) below, of the weighted average interest rate paid by the Agent
for federal funds acquired by the Agent during each day included in such
period, times (b) the amount equal to such Bank's Commitment Percentage of
such Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of
which is the number of days that elapse from and including the date the Agent
paid the draft presented for honor or otherwise made payment to the date on
which such Bank's Commitment Percentage of such Unpaid Reimbursement
obligation shall become immediately available to the Agent, and the
denominator of which is 360. The
<PAGE>
33
responsibility of the Agent to the Borrower and the Banks shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.
4.4. Obligations Absolute. The Borrower's obligations under this ss.4
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the Agent, any Bank
or any beneficiary of a Letter of Credit. The Borrower further agrees with
the Agent and the Banks that the Agent and the Banks shall not be responsible
for, and the Borrower's Reimbursement Obligations under Section 4.2 shall not
be affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even if such documents should in fact prove
to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee. The Agent and the
Banks shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, so long as the same
does not result from the Agent's gross negligence or willful misconduct. The
Borrower agrees that any action taken or omitted by the Agent or any Bank
under or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith and in the absence of the Agent's gross
negligence, shall be binding upon the Borrower and shall not result in any
liability on the part of the Agent or any Bank to the Borrower.
4.5. Reliance by Issuer. To the extent not inconsistent with Section 4.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Credit Agreement unless it shall first have received such advice or
concurrence of the Majority Banks as it reasonably deems appropriate or it
shall first be indemnified to its reasonable satisfaction by the Banks
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Credit Agreement in accordance with a request of the Majority Banks, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
<PAGE>
34
4.6. Letter of Credit Fee. The Borrower shall pay a fee (in each case, a
"Letter of Credit Fee") to the Agent (a) in respect of each standby Letter of
Credit issued pursuant to this Credit Agreement, calculated at the applicable
rate set forth in the definition of Applicable Margin under the column headed
"Letter of Credit Fees" per annum on the face amount of each such Letter of
Credit, which shall be for the accounts of the Banks in accordance with their
respective Commitment Percentages, plus an amount equal to 0.125% per annum of
the face amount of such standby Letter of Credit shall be for the account of the
Agent as an issuing fee and (b) in respect of each documentary Letter of Credit
issued pursuant to this Credit Agreement, calculated at the applicable rate set
forth in the definition of Applicable Margin under the column headed "Letter of
Credit Fees" per annum on the face amount of each such Letter of Credit, which
shall be for the accounts of the Banks in accordance with their respective
Commitment Percentages, plus an amount equal to 0.125% per annum of the face
amount of such documentary Letter of Credit shall be for the account of the
Agent as an issuing fee. The Letter of Credit Fees for each Letter of Credit
shall be payable quarterly in advance, commencing on the date such Letter of
Credit is issued, renewed or extended hereunder. In respect of each Letter of
Credit, the Borrower shall also pay to the Agent for the Agent's own account, on
the date of any issuance, extension, renewal or amendment of any Letter of
Credit, or at such other time or times as such charges are customarily made by
the Agent, the Agent's customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.
5. CERTAIN GENERAL PROVISIONS.
5.1. Closing Fee. The Borrower agrees to pay to the Agent on the Closing
Date the closing fees as set forth in the Fee Letter.
5.2. Agent's Fee. The Borrower shall pay to the Agent an Agent's fee (the
"Agent's Fee") at the times and in the amounts as provided in the Fee Letter.
5.3. Funds for Payments.
5.3.1. Payments to Agent. Except as set forth in the immediately
succeeding sentence, all payments of principal, interest, Reimbursement
Obligations, commitment fees, Letter of Credit Fees, the closing fee and the
Agent's Fee and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of
the Banks and the Agent, at the Agent's Head Office or at such other
location in the Boston, Massachusetts, area that the Agent may from time to
time designate, in each case in Same Day Funds. All payments of principal of
and interest made on Revolving Credit Loans made to the Borrower which are
denominated in an Optional Currency or Currencies and all other fees due
hereunder by any local branch or affiliate of the Agent or any Bank located
outside of the United States shall be made in Same Day Funds, for the
account of such Bank or the Agent, as the case may be, at a depository
designated by such Bank in the country in which such Optional Currency is
<PAGE>
35
legal tender. Each payment in respect of any Revolving Credit Loan made by
the Borrower shall be made in the same currency in which such Revolving
Credit Loan was made unless otherwise agreed to by such Bank.
5.3.2. No Offset, etc. All payments by the Borrower hereunder and under
any of the other Loan Documents shall be made without setoff or counterclaim
and free and clear of and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied
by any jurisdiction or any political subdivision thereof or taxing or other
authority therein (a "Governmental Authority") (excluding net income taxes
and franchise taxes imposed in lieu of net income taxes imposed on the Agent
or any Bank as a result of a present or former connection between the
jurisdiction of the Governmental Authority imposing such tax and the Agent
or such Bank (except a connection arising solely from the Agent or such Bank
having executed, delivered or performed its obligations or received a
payment under, or enforced, this Credit Agreement or the Notes)) unless the
Borrower is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower with respect to any amount
payable by it hereunder or under any of the other Loan Documents, the
Borrower will pay to the Agent, for the account of the Banks or (as the case
may be) the Agent, on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks or the Agent to receive
the same net amount which the Banks or the Agent would have received on such
due date had no such obligation been imposed upon the Borrower. The Borrower
will deliver promptly to the Agent certificates or other valid vouchers for
all taxes or other charges deducted from or paid with respect to payments
made by the Borrower hereunder or under such other Loan Document. In
addition, to the extent any Bank receives a refund in respect of any taxes
to which it has been indemnified by the Borrower pursuant to this ss.5.3
(and such Bank can determine, in its sole discretion and using any method
which such Bank deems appropriate that all or any portion of such refund is
allocable to any takes paid or indemnified by the Borrower under the Credit
Agreement), it shall promptly repay such refund to the Borrower (to the
extent of amounts that have been paid by the Borrower under this ss.5.3 with
respect to such refund) of such Bank and without interest; provided,
however, that the Borrower, upon the request of such Bank, agrees to return
such refund (plus penalties, interest or other charges) to such Bank in the
event such Bank is required to repay such refund for any reason whatsoever.
Nothing contained in this Section 5.3 shall (a) entitle the Borrower to
inspect or review any books or records of any Bank or the Agent; (b) require
any Bank or the Agent to disclose any information concerning its tax
position or any other information determined by any Bank or the Agent, in
its sole discretion to be confidential or proprietary, (c) require any Bank
or the Agent to establish procedures for allocating to
<PAGE>
36
specific transactions any tax savings or benefits attributable to payments
in respect of taxes of the type described in this Section 5.3 or (d) require
any Bank or the Agent to disclose or detail the basis of any calculation of
the amount of any tax savings or benefit obtained by such Bank or the Agent
or the basis of any determination made by such Bank under this paragraph.
5.4. Computations. All computations of interest on the Revolving Credit
Loans and of commitment fees, Letter of Credit Fees or other fees shall, unless
otherwise expressly provided herein, be based on a 360-day year and paid for the
actual number of days elapsed. Except as otherwise provided in the definition of
the term "Interest Period" with respect to Eurocurrency Rate Loans, whenever a
payment hereunder or under any of the other Loan Documents becomes due on a day
that is not a Business Day, the due date for such payment shall be extended to
the next succeeding Business Day, and interest shall accrue during such
extension. The outstanding amount of the Revolving Credit Loans as reflected on
the Records from time to time shall be considered correct and binding on the
Borrower unless within five (5) Business Days after receipt of any notice by the
Agent or any of the Banks of such outstanding amount, the Agent or such Bank
shall notify the Borrower to the contrary.
5.5. Inability to Determine Eurocurrency Rate. In the event, prior to the
commencement of any Interest Period relating to any Eurocurrency Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate (for Loans
denominated in Dollars) or the International Eurocurrency Rate (for any Loan
denominated in an Optional Currency) applicable to a Revolving Credit Loan
denominated in a particular Optional Currency, as the case may be, that would
otherwise determine the rate of interest to be applicable to any Eurocurrency
Rate Loan during any Interest Period, the Agent shall forthwith give notice of
such determination (which shall be conclusive and binding on the Borrower and
the Banks) to the Borrower and the Banks. In such event (a) any Loan Request or
Conversion Request with respect to Eurocurrency Rate Loans shall be
automatically withdrawn and, in the case of Revolving Credit Loans denominated
in Dollars, shall be deemed a request for Base Rate Loans to be denominated in
Dollars and in the case of any Eurocurrency Rate Loan denominated in an Optional
Currency, shall be withdrawn, (b) each Eurocurrency Rate Loan denominated in
Dollars will automatically, on the last day of the then current Interest Period
relating thereto, become a Base Rate Loan and each Eurocurrency Rate Loan
denominated in any Optional Currency will be required to be repaid on the last
day of the then current Interest Period relating thereto, and (c) the
obligations of the Banks to make Eurocurrency Rate Loans shall be suspended
until the Agent or the Majority Banks determine that the circumstances giving
rise to such suspension no longer exist, whereupon the Agent or, as the case may
be, the Agent upon the instruction of the Majority Banks, shall so notify the
Borrower and the Banks. Notwithstanding the foregoing, to the extent such
inability to determine the International Eurocurrency Rate is specific to a
particular Optional Currency, nothing contained herein shall
<PAGE>
37
require the Borrower to repay any Eurocurrency Rate Loan denominated in any
other Optional Currency.
5.6. Illegality. Notwithstanding any other provisions herein, if any present
or future law, regulation, treaty or directive or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
Eurocurrency Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurocurrency Rate Loans or convert Revolving
Credit Loans of another Type to Eurocurrency Rate Loans or to make Revolving
Credit Loans in any Optional Currency shall forthwith be suspended and (b) such
Bank's Revolving Credit Loans then outstanding as Eurocurrency Rate Loans, if
any, shall (i) if comprising a Revolving Credit Loan denominated in Dollars, be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurocurrency Rate Loans or within such earlier period
as may be required by law and (ii) if comprising a Revolving Credit Loan
denominated in an Optional Currency, be immediately repaid. The Borrower hereby
agrees promptly to pay the Agent for the account of such Bank, upon demand by
such Bank, any additional amounts necessary to compensate such Bank for any
costs incurred by such Bank in making any conversion in accordance with this
Section 5.6 including any interest or fees payable by such Bank to lenders of
funds obtained by it in order to make or maintain its Eurocurrency Rate Loans
hereunder.
5.7. Additional Costs, etc. If any change in, or change in the application
or interpretation of, any present or future applicable law, which expression, as
used herein, includes statutes, rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter (or, as to any Person which becomes a Bank
hereunder after the Closing Date, such date on which such Person becomes a Bank
hereunder) made upon or otherwise issued to any Bank or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not having the
force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Revolving Credit Loans (other than taxes based upon
or measured by the income or profits of such Bank or any branch or lending
office thereof or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Revolving Credit Loans or any other amounts payable to
any Bank or the Agent under this Credit Agreement or any of the other Loan
Documents, or
<PAGE>
38
(c) impose or increase or render applicable (other than to the extent
specifically provided for or specifically excluded elsewhere in this Credit
Agreement) any special deposit, reserve, assessment, liquidity, capital
adequacy or other similar requirements (whether or not having the force of
law) against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of an office of any Bank,
or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Revolving Credit Loans, such Bank's
Commitment, or any class of loans, letters of credit or commitments of which
any of the Revolving Credit Loans or such Bank's Commitment forms a part,
and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Revolving Credit Loans or
such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Commitment, any Letter of Credit or any of
the Revolving Credit Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Bank or
the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank
or (as the case may be) the Agent at any time and from time to time and as
often as the occasion therefor may arise, and without duplication for any
amounts paid pursuant to Section 5.3 hereof, pay to such Bank or the Agent
such additional amounts as will be sufficient to compensate such Bank or the
Agent for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum.
5.8. Capital Adequacy. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Revolving Credit Loans
<PAGE>
39
to a level below that which such Bank or the Agent could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's or
the Agent's then existing policies with respect to capital adequacy and assuming
full utilization of such entity's capital) by any amount deemed by such Bank or
(as the case may be) the Agent to be material, then such Bank or the Agent may
notify the Borrower of such fact. To the extent that the amount of such
reduction in the return on capital is not reflected in the Base Rate, the
Borrower and such Bank shall thereafter attempt to negotiate in good faith,
within thirty (30) days of the day on which the Borrower receives such notice,
an adjustment payable hereunder that will adequately compensate such Bank in
light of these circumstances. If the Borrower and such Bank are unable to agree
to such adjustment within thirty (30) days of the date on which the Borrower
receives such notice, then commencing on the date of such notice (but not
earlier than the effective date of any such increased capital requirement), the
fees payable hereunder shall increase by an amount that will, in such Bank's
reasonable determination, provide adequate compensation. Each Bank shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
5.9. Certificate. A certificate setting forth any additional amounts payable
pursuant to Sections 5.7 or 5.8 and a brief explanation of such amounts which
are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
5.10. Indemnity. The Borrower agrees to indemnify each Bank and to hold each
Bank harmless from and against any loss, cost or expense (excluding loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any interest on
any Eurocurrency Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurocurrency Rate Loans, (b)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
relating thereto in accordance with Section 2.6 or Section 2.7 or (c) the making
of any payment of a Eurocurrency Rate Loan or the making of any conversion of
any such Revolving Credit Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Revolving Credit Loans.
5.11. Interest After Default.
5.11.1. Overdue Amounts. Overdue principal and (to the extent permitted
by applicable law) interest on the Revolving Credit Loans and all other
overdue amounts payable hereunder or under any of the other Loan Documents
shall bear interest compounded monthly and payable on demand at a rate per
annum equal to two percent (2%) above the highest rate of interest otherwise
applicable to such Revolving Credit Loans pursuant to Section 2.5 until such
amount shall be paid in full (after as well as before judgment).
<PAGE>
40
5.11.2. Amounts Not Overdue. During the continuance of a Default or an
Event of Default the principal of the Revolving Credit Loans not overdue
shall, until such Default or Event of Default has been cured or remedied or
such Default or Event of Default has been waived by the Majority Banks
pursuant to Section 26, bear interest at a rate per annum equal to two
percent (2%) above the highest rate of interest otherwise applicable to such
Revolving Credit Loans pursuant to Section 2.5.
6. COLLATERAL SECURITY AND GUARANTIES.
6.1. Security of Borrower. The Obligations shall be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in substantially all of the assets of the
Borrower, whether now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which the Borrower is a party (other than any assets as to
which the Agent, in its sole and absolute discretion, has determined that such
security interests are not, in view of the value of such assets or the
difficulty or costs of obtaining such security interest, appropriate),
including, without limitation, a pledge by the Borrower of 100% of the capital
stock of each Domestic Subsidiary and, so long as no Default or Event of Default
has occurred and is continuing, 65% of the capital stock of each Foreign
Subsidiary owned by the Borrower.
6.2. Guaranties and Security of Subsidiaries. To the extent permitted by the
terms of the Indenture, the Obligations shall also be guaranteed pursuant to the
terms of the Guaranty. To the extent permitted by the Indenture, the obligations
of the Guarantors under the Guaranty shall be in turn secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in substantially all of the assets of each such
Guarantor, whether now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which such Subsidiary is a party (other than any assets as
to which the Agent, in its sole and absolute discretion, has determined that
such security interests are not, in view of the value of such assets or the
difficulty or costs of obtaining such security interest, appropriate),
including, without limitation, a pledge by such Guarantor of 100% of the capital
stock of each Domestic Subsidiary of such Guarantor and, so long as no Default
or Event of Default has occurred and is continuing, 65% of the capital stock of
each Foreign Subsidiary of such Guarantor.
7. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as follows:
7.1. Corporate Authority.
7.1.1. Incorporation; Good Standing. Each of the Borrower and its
Subsidiaries (a) is a corporation (or similar business entity) duly
organized, validly existing and, if applicable in the jurisdiction of
incorporation or organization, in good standing under the laws of its state
or country of
<PAGE>
41
incorporation or formation, (b) has all requisite corporate or
similar power to own its property and conduct its business as now conducted
and as presently contemplated, and (c) is in good standing as a foreign
corporation (or similar business entity) and is duly authorized to do
business in each jurisdiction where such qualification is necessary except
where a failure to be so qualified would not have a materially adverse
effect on the business, assets or financial condition of the Borrower or
such Subsidiary.
7.1.2. Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which the Borrower or any
of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate (or similar)
authority of such Person, (b) have been duly authorized by all necessary
corporate (or similar organizational) proceedings, (c) do not conflict with
or result in any breach or contravention of any provision of law, statute,
rule or regulation to which the Borrower or any of its Subsidiaries is
subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower or any of its Subsidiaries and (d) do not
conflict with any provision of the corporate charter or bylaws of, or the
Subordinated Debt Documents or any agreement or other instrument binding
upon, the Borrower or any of its Subsidiaries.
7.1.3. Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally
binding obligations of such Person enforceable against it in accordance with
the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
7.2. Governmental Approvals. The execution, delivery and performance by the
Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is or is to become a
party and the transactions contemplated hereby and thereby (including, but not
limited to the making by the Borrower of any borrowing contemplated by this
Credit Agreement or the obtaining by the Borrower of any Letters of Credit) do
not require the approval, consent, order, authorization or license by, or giving
of notice to, or taking of any action with respect to, any governmental agency
or authority of any jurisdiction, or other fiscal, monetary or other authority,
under any provisions of any laws or governmental rules, regulations, orders or
decrees of any jurisdiction or the central bank of any jurisdiction or other
fiscal, monetary or other authority, under any provision of any laws or
governmental rules, regulations, orders or
<PAGE>
42
decrees of any jurisdiction applicable to or binding on the Borrower or any of
its Subsidiaries, other than those already obtained.
7.3. Title to Properties; Leases. Except as indicated on Schedule 7.3
hereto, the Borrower and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
7.4. Financial Statements and Projections.
7.4.1. Fiscal Year. The Borrower and each of its Subsidiaries has a
fiscal year which is the twelve months ending on September 30 of each
calendar year.
7.4.2. Financial Statements. There has been furnished to each of the
Banks a consolidated balance sheet of the Borrower and its Subsidiaries as
at the Balance Sheet Date, and a consolidated statement of income of the
Borrower and its Subsidiaries for the fiscal year then ended, certified by
Arthur Andersen LLP. Such balance sheet and statement of income have been
prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Borrower as at the close of
business on the date thereof and the results of operations for the fiscal
year then ended. There are no contingent liabilities of the Borrower or any
of its Subsidiaries as of such date involving material amounts, known to the
officers of the Borrower, which were not disclosed in such balance sheet and
the notes related thereto.
7.4.3. Projections. The projections of the annual operating budgets of
the Borrower and its Subsidiaries on a consolidated basis, balance sheets
and cash flow statements for the 1998 to 2002 fiscal years, copies of which
have been delivered to each Bank, disclose all assumptions made with respect
to general economic, financial and market conditions used in formulating
such projections. To the knowledge of the Borrower or any of its
Subsidiaries, no facts exist that (individually or in the aggregate) would
result in any material change in any of such projections. The projections
are based upon reasonable estimates and assumptions, have been prepared on
the basis of the assumptions stated therein and reflect the reasonable
estimates of the Borrower and its Subsidiaries of the results of operations
and other information projected therein.
7.4.4. Solvency. The Borrower and its Subsidiaries, on a consolidated
and consolidating basis, both before and after giving effect to the
transactions contemplated by this Credit Agreement and the other Loan
Documents (a) are solvent; (b) have assets having a fair value in excess of
<PAGE>
43
their liabilities; (c) have assets having a fair value in excess of the
amount required to pay their liabilities on existing debts as such debts
become absolute and matured, and (d) have, and expect to continue to have,
access to adequate capital for the conduct of their business and the ability
to pay their debts from time to time incurred in connection with the
operation of their business as such debts mature.
7.5. No Material Changes, etc. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or business of
the Borrower and its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date,
or the consolidated statement of income for the fiscal year then ended, other
than changes in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business or
financial condition of the Borrower or any of its Subsidiaries. Since the
Balance Sheet Date, the Borrower has not made any Distributions.
7.6. Franchises, Patents, Copyrights, etc. Each of the Borrower and its
Subsidiaries owns, licenses or otherwise has rights to all franchises, patents,
copyrights, trademarks, trade names, licenses and permits, and rights in respect
of the foregoing, adequate in all material respects for the conduct of its
business substantially as now conducted without known conflict with any rights
of others, except as disclosed on Schedule 7.7.
7.7. Litigation. Except as set forth in Schedule 7.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or, to the
best of the Borrower's knowledge, threatened against the Borrower or any of its
Subsidiaries before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of the Borrower and its Subsidiaries or materially impair the right of
the Borrower and its Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial liability
not adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any of
the other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.
7.8. No Materially Adverse Contracts, etc. Neither the Borrower nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower or any of its Subsidiaries.
Neither the Borrower nor any of its Subsidiaries is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's officers,
to have any materially adverse effect on the business of the Borrower or any of
its Subsidiaries.
<PAGE>
44
7.9. Compliance with Other Instruments, Laws, etc. Neither the Borrower nor
any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of the Borrower or any of its Subsidiaries.
7.10. Tax Status. The Borrower and its Subsidiaries (a) have made or filed
all federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
7.11. No Event of Default. No Default or Event of Default has occurred and
is continuing.
7.12. Holding Company and Investment Company Acts. Neither the Borrower nor
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
7.13. Absence of Financing Statements, etc. Except with respect to Permitted
Liens, there is no financing statement, security agreement, chattel mortgage,
real estate mortgage or other document filed or recorded with any filing
records, registry or other public office, that purports to cover, affect or give
notice of any present or possible future lien on, or security interest in, any
assets or property of the Borrower or any of its Subsidiaries or any rights
relating thereto.
7.14. Perfection of Security Interest. Upon the filing of the financing
statements and other documents required by the Security Documents, all filings,
assignments, pledges and deposits of documents or instruments shall have been
made and all other actions shall have been taken that are necessary or
advisable, under applicable law, to establish and perfect the Agent's security
interest in the Collateral. The Collateral and the Agent's rights with respect
to the Collateral are not subject to any setoff, claims, withholdings or other
defenses. The Borrower or Guarantor party to one of the Security Agreements is
the owner of the Collateral
<PAGE>
45
free from any lien, security interest, encumbrance and any other claim or
demand, except for Permitted Liens.
7.15. Certain Transactions. Except for arm's length transactions pursuant to
which the Borrower or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Borrower or such
Subsidiary could obtain from third parties, none of the officers, directors, or
employees of the Borrower or any of its Subsidiaries is presently a party to any
material transaction with the Borrower or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
7.16. Employee Benefit Plans.
7.16.1. In General. Each Employee Benefit Plan and each Guaranteed
Pension Plan has been maintained and operated in compliance in all material
respects with the provisions of ERISA and/or all Applicable Pension
Legislation and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions and
the bonding of fiduciaries and other persons handling plan funds as required
by Section 412 of ERISA. The Borrower has heretofore delivered to the Agent
the most recently completed annual report, Form 5500, with all required
attachments, and actuarial statement required to be submitted under
Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan.
7.16.2. Terminability of Welfare Plans. [Other than severance paid
plans], no Employee Benefit Plan, which is an employee welfare benefit plan
within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, provides
benefit coverage subsequent to termination of employment, except as required
by Title I, Part 6 of ERISA or the applicable state insurance laws. The
Borrower may terminate each such Plan at any time (or at any time subsequent
to the expiration of any applicable bargaining agreement) in the discretion
of the Borrower without liability to any Person other than for claims
arising prior to termination.
7.16.3. Guaranteed Pension Plans. Each contribution required to be made
to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan, and
neither the Borrower nor any ERISA Affiliate is obligated to or has posted
<PAGE>
46
security in connection with an amendment to a Guaranteed Pension Plan
pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code. No
liability to the PBGC (other than required insurance premiums, all of which
have been paid) has been incurred by the Borrower or any ERISA Affiliate
with respect to any Guaranteed Pension Plan and there has not been any ERISA
Reportable Event (other than an ERISA Reportable Event as to which the
requirement of 30 days notice has been waived), or any other event or
condition which presents a material risk of termination of any Guaranteed
Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the date
of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and assets of
any Guaranteed Pension Plan with assets in excess of benefit liabilities.
7.16.4. Multiemployer Plans. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a
result of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or is at risk of entering
reorganization or becoming insolvent, or that any Multiemployer Plan intends
to terminate or has been terminated under Section 4041A of ERISA.
7.17. Use of Proceeds.
7.17.1. General. The proceeds of the Revolving Credit Loans shall be
used to refinance and replace the "Senior Secured Debt" (as such term is
defined in the Subordinated Indenture) of the Borrower and for other general
corporate purposes. The Borrower will obtain Letters of Credit solely for
working capital and general corporate purposes.
7.17.2. Regulations U and X. No portion of any Revolving Credit Loan is
to be used, and no portion of any Letter of Credit is to be obtained, for
the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.17.3. Ineligible Securities. No portion of the proceeds of any
Revolving Credit Loans is to be used, and no portion of any Letter of Credit
is to be obtained, for the purpose of (a) knowingly purchasing, or providing
credit support for the purchase of, Ineligible Securities from a Section 20
Subsidiary during any period in which such Section 20 Subsidiary makes a
<PAGE>
47
market in such Ineligible Securities, (b) knowingly purchasing, or providing
credit support for the purchase of, during the underwriting or placement
period, any Ineligible Securities being underwritten or privately placed by
a Section 20 Subsidiary, or (c) making, or providing credit support for the
making of, payments of principal or interest on Ineligible Securities
underwritten or privately placed by a Section 20 Subsidiary and issued by or
for the benefit of the Borrower or any Subsidiary or other Affiliate of the
Borrower.
7.18. Environmental Compliance. The Borrower has taken all necessary steps
to investigate the past and present condition and usage of the Real Estate and
the operations conducted thereon and, based upon such diligent investigation,
has determined that, except as set forth on Schedule 7.18 hereto:
(a) none of the Borrower, its Subsidiaries or any operator of the Real
Estate or any operations thereon is in violation, or alleged violation, of
any judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment or
any other applicable law, regulation, ordinance, order or decree in any
other counry, province or jurisdiction applicable to the Borrower or any of
its Subsidiaries (hereinafter "Environmental Laws"), which violation would
have a material adverse effect on the environment or the business, assets or
financial condition of the Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal,
state or local governmental authority, (i) that any one of them has been
identified by the United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any
hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which any one
of them has generated, transported or disposed of has been found at any site
at which a federal, state or local agency or other third party has conducted
or has ordered that any Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or
<PAGE>
48
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages of
any kind whatsoever in connection with the release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in accordance
with applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on any
portion of the Real Estate; (ii) in the course of any activities conducted
by the Borrower, its Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being used on the Real
Estate except in accordance with applicable Environmental Laws; (iii) there
have been no releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of the Borrower or its
Subsidiaries, which releases would have a material adverse effect on the
value of any of the Real Estate or adjacent properties or the environment;
(iv) to the best of the Borrower's knowledge, there have been no releases
on, upon, from or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may have come to be
located on, and which would have a material adverse effect on the value of,
the Real Estate; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have been transported offsite only
by carriers having an identification number issued by the EPA (or by a
similar agency in other jurisdictions, if applicable), treated or disposed
of only by treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental Laws;
and
(d) None of the Borrower and its Subsidiaries or any of the Real Estate
is subject to any applicable environmental law requiring the performance of
Hazardous Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any governmental agency or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any other
transactions contemplated hereby.
7.19. Subsidiaries, etc. Schedule 7.19(a) sets forth the Subsidiaries of the
Borrower and each Subsidiary as of the Closing Date. Except as set forth on
Schedule 7.19(b) hereto, neither the Borrower nor any Subsidiary of the Borrower
is engaged in any joint venture or partnership with any other Person.
<PAGE>
49
7.20. Bank Accounts. Schedule 7.20 sets forth the account numbers and
location of all bank accounts of the Borrower or any of its Domestic
Subsidiaries as of the Closing Date.
7.21. Disclosure. There is no fact known to the Borrower or any of its
Subsidiaries which materially adversely affects, or which is reasonably likely
in the future to materially adversely affect, the business, assets, financial
condition or prospects of the Borrower or any of its Subsidiaries, exclusive of
effects resulting from changes in general economic conditions, legal standards
or regulatory conditions.
7.22. Status of Loans as Senior Debt. All Obligations of each of the
Borrower and its Subsidiaries to the Banks and the Agent in respect of the
Revolving Credit Loans and the Reimbursement Obligations constitute "Senior
Indebtedness" (or the analogous terms used therein) under the terms of each of
the Subordinated Debt Documents or of any other instrument evidencing or
pursuant to which there is issued Indebtedness which purports to be Subordinated
Debt of any Borrower or any Subsidiary.
7.23. Subordinated Debt Documents. Each of the representations and
warranties made by the Company and its Subsidiaries in any of the Subordinated
Debt Documents was true and correct in all material respects when made and
continue to remain true and correct in all material respects on the Closing
Date, except to the extent that any of such representations and warranties
relate, by the express terms thereof, solely to a date falling prior to the
Closing Date, and except to the extent that any of such representations and
warranties may have been affected by the consummation of the transactions
contemplated and permitted or required by the Subordinated Debt Documents or the
Loan Documents.
7.24. Designation of Senior Debt. The Company (a) has not designated any
Person as the trustee representing holders of Senior Indebtedness of the
Borrower or any of its Subsidiaries, other than the Agent, and (b) the
Obligations hereunder constitute all of the "Senior Indebtedness" under each of
the Subordinated Indenture and the Subsequent Subordinated Indenture and there
is no other "Senior Indebtedness" thereunder.
7.25. No Withholding. Neither this Credit Agreement nor any of the other
Loan Documents is subject to any registration or stamp tax or any other similar
or like taxes payable in any jurisdiction.
7.26. No Filings Required. No filing, recording or enrolling of this Credit
Agreement or any other Loan Document is required to ensure the legality,
validity, enforceability or admissibility in evidence of this Credit Agreement
or any other Loan Document.
7.27. Chief Executive Office. The Company's chief executive office is at
12365 Crosthwaite Circle, Poway, California 92064, at which location its books
and
<PAGE>
50
records are kept. Each of the Guarantors' chief executive office or registered
office, as applicable, is as set forth in the Security Agreement to which it is
a party.
7.28. Delivery of Certain Documents. The Company has delivered to the Agent
true and complete copies of all of the Subordinated Debt Documents as well as
the FIMCO Acquisition Documents (including any amendments thereto). Each of the
representations and warranties made by the Borrower and any of its Subsidiaries
in any of the Subordinated Debt Documents and FIMCO Acquisition Documents was
true and correct in all material respects when made and continues to be true and
correct in all material respects on the Closing Date, except to the extent that
any of such representations and warranties relate, by the express terms thereof,
solely to a date falling prior to the Closing Date, and except to the extent
that any of such representations and warranties may have been affected by the
consummation of the transactions contemplated and permitted or required by the
Loan Documents.
7.29. Insurance. The Borrower and each of its Subsidiaries maintains with
financially sound and reputable insurers insurance with respect to its
properties and businesses against such casualties and contingencies as are in
accordance with sound business practices.
7.30. Year 2000 Problem. The Borrower and each of its Subsidiaries has
reviewed the areas within their businesses and operations which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the "Year 2000 Problem" (i.e. the risk that computer
applications used by the Borrower or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999). Based upon such review, the
Borrower reasonably believes that the "Year 2000 Problem" will not have any
material adverse effect on the assets, business or financial condition of the
Borrower and its Subsidiaries.
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note
is outstanding or any Bank has any obligation to make any Revolving Credit Loans
or the Agent has any obligation to issue, extend or renew any Letters of Credit:
8.1. Punctual Payment. The Borrower will duly and punctually pay or cause to
be paid the principal and interest on the Revolving Credit Loans, all
Reimbursement Obligations, the Letter of Credit Fees, the commitment fees, the
Agent's fee and all other amounts provided for in this Credit Agreement and the
other Loan Documents to which the Borrower or any of its Subsidiaries is a
party, all in accordance with the terms of this Credit Agreement and such other
Loan Documents.
<PAGE>
51
8.2. Maintenance of Office. The Borrower will maintain its chief executive
office in Poway, California, or at such other place in the United States of
America as the Borrower shall designate upon prior written notice to the Agent,
where notices, presentations and demands to or upon the Borrower in respect of
the Loan Documents to which the Borrower is a party may be given or made.
8.3. Records and Accounts. The Borrower will (a) keep, and cause each of its
Subsidiaries to keep, true and accurate records and books of account in which
full, true and correct entries will be made in accordance with generally
accepted accounting principles, (b) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (c) at all times engage Arthur Andersen
LLP or other independent certified public accountants satisfactory to the Agent
as the independent certified public accountants of the Borrower and its
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm's (or any successor firm's) engagement as the
independent certified public accountants of the Borrower and its Subsidiaries
and the appointment in such capacity of a successor firm as shall be
satisfactory to the Agent.
8.4. Financial Statements, Certificates and Information. The Borrower will
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than 105 days
after the end of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries and the consolidating balance
sheet of the Borrower and its Subsidiaries, each as at the end of such year,
and the related consolidated statement of income and consolidated statement
of cash flow and consolidating statement of income and consolidating
statement of cash flow for such year, each setting forth in comparative form
the figures for the previous fiscal year and all such consolidated and
consolidating statements to be in reasonable detail, prepared in accordance
with generally accepted accounting principles, and as to the consolidated
statements, certified without qualification by Arthur Andersen LLP or by
other independent certified public accountants satisfactory to the Agent,
together with a written statement from such accountants to the effect that
they have read a copy of this Credit Agreement, and that, in making the
examination necessary to said certification, they have obtained no knowledge
of any Default or Event of Default, or, if such accountants shall have
obtained knowledge of any then existing Default or Event of Default they
shall disclose in such statement any such Default or Event of Default;
provided that such accountants shall not be liable to the Banks for failure
to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than sixty (60)
days after the end of each of the fiscal quarters of the Borrower, copies of
the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries
<PAGE>
52
and the unaudited consolidating balance sheet of the Borrower and its
Subsidiaries, each as at the end of such quarter, and the related
consolidated statement of income and consolidated statement of cash flow and
consolidating statement of income and consolidating statement of cash flow
for the portion of the Borrower's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof (subject
to year-end adjustments);
(c) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the Borrower in substantially
the form of Exhibit C hereto (the "Compliance Certificate") and setting
forth in reasonable detail computations evidencing compliance with the
covenants contained in Section 10 and (if applicable) reconciliations to
reflect changes in generally accepted accounting principles since the
Balance Sheet Date, together with evidence that the Borrower has met and
continues to meet the minimum coverage test for incurring additional Senior
Indebtedness (as such term is defined in each of the Subordinated Indenture
and the Subsequent Subordinated Indenture) set forth in (a) Section 4.3(a)
(i) of the Subordinated Indenture and (b) the Subsequent Subordinated
Indenture and a certification that no default or event of default has
occurred and is continuing under each of the Subordinated Indenture and the
Subsequent Subordinated Indenture;
(d) contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of the Borrower;
(e) from time to time upon request of the Agent, projections of the
Borrower and its Subsidiaries updating those projections delivered to the
Banks and referred to in Section 7.4.2 or, if applicable, updating any later
such projections delivered in response to a request pursuant to this
Section 8.4(e); and
(j) from time to time such other financial data and information
(including accountants, management letters) as the Agent or any Bank may
reasonably request.
8.5. Notices.
8.5.1. Defaults. The Borrower will promptly notify the Agent and each
of the Banks in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower
<PAGE>
53
or any of its Subsidiaries is a party or obligor, whether as principal,
guarantor, surety or otherwise, the Borrower shall forthwith give written
notice thereof to the Agent and each of the Banks, describing the notice or
action and the nature of the claimed default.
8.5.2. Environmental Events. The Borrower will promptly give notice to
the Agent and each of the Banks (a) of any violation of any Environmental
Law that the Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (b) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any federal, state or local
environmental agency or board, that has the potential to materially affect
the assets, liabilities, financial conditions or operations of the Borrower
or any of its Subsidiaries, or the Agent's security interests pursuant to
the Security Documents.
8.5.3. Notification of Claim against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the Collateral, or the Agent's rights with respect to the Collateral, are
subject.
8.5.4. Notice of Litigation and Judgments. The Borrower will, and will
cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its Subsidiaries
that could reasonably be expected to have a materially adverse effect on the
Borrower or any of its Subsidiaries and stating the nature and status of
such litigation or proceedings. The Borrower will, and will cause each of
its Subsidiaries to, give notice to the Agent and each of the Banks, in
writing, in form and detail satisfactory to the Agent, within ten (10) days
of any judgment not covered by insurance, final or otherwise, against the
Borrower or any of its Subsidiaries in an amount in excess of [$500,000].
8.6. Corporate Existence; Maintenance of Properties. The Borrower will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied
<PAGE>
54
with all necessary equipment, (b) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (c) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this Section 8.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrower, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis.
8.7. Insurance. The Borrower will, and will cause each of its Subsidiaries
to, maintain with financially sound and reputable insurers insurance with
respect to its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreements.
8.8. Taxes. The Borrower will, and will cause each of its Subsidiaries to,
duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
8.9. Inspection of Properties and Books, etc.
8.9.1. General. The Borrower shall permit the Banks, through the Agent
or any of the Banks' other designated representatives, to visit and inspect
any of the properties of the Borrower or any of its Subsidiaries, to examine
the books of account of the Borrower and its Subsidiaries (and to make
copies thereof and extracts therefrom), and to discuss the affairs, finances
and accounts of the Borrower and its Subsidiaries with, and to be advised as
to the same by, its and their officers, all at such reasonable times and
intervals as the Agent or any Bank may reasonably request.
<PAGE>
55
8.9.2. Appraisals. If an Event of Default shall have occurred and be
continuing, upon the request of the Agent, the Borrower will obtain and
deliver to the Agent appraisal reports in form and substance and from
appraisers satisfactory to the Agent, stating (a) the then current fair
market, orderly liquidation and forced liquidation values of all or any
portion of the equipment or real estate owned by the Borrower or any of its
Subsidiaries and (b) the then current business value of each of the Borrower
and its Subsidiaries. All such appraisals shall be conducted and made at the
expense of the Borrower.
8.9.3. Communications with Accountants. The Borrower authorizes the
Agent and, if accompanied by the Agent, the Banks to communicate directly
with the Borrower's independent certified public accountants and authorizes
such accountants to disclose to the Agent and the Banks any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of the Borrower or any of its
Subsidiaries; provided that unless consented to by the Borrower, such
communications shall only be made in the presence of an authorized officer
of the Borrower. At the request of the Agent, the Borrower shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this Section 8.9.3.
8.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower
will, and will cause each of its Subsidiaries to, comply with (a) the applicable
laws and regulations wherever its business is conducted, including all
Environmental Laws, (b) the provisions of its charter documents and by-laws, (c)
all agreements and instruments by which it or any of its properties may be bound
and (d) all applicable decrees, orders, and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Borrower
or any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Subsidiary is a party,
the Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
8.11. Employee Benefit Plans. The Borrower will (a) promptly upon filing the
same with the Department of Labor or Internal Revenue Service, furnish to the
Agent a copy of the most recent actuarial statement required to be submitted
under Section 103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan, (b) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under Sections 4041A, 4202, 4219, 4242, or
<PAGE>
56
4245 of ERISA, and (c) furnish to the Agent (at such time as such reports are
prepared in order to comply with Applicable Pension Legislation) copies of all
actuaries' reports in relation to the employee Benefit Plans operated by it from
time to time.
8.12. Use of Proceeds. The Borrower will use the proceeds of the Revolving
Credit Loans solely (a) to refinance existing Indebtedness of the Borrower; and
(b) for working capital and general corporate purposes (including to finance all
or any portion of a Permitted Acquisition). The Borrower will obtain Letters of
Credit solely for working capital and general corporate purposes.
8.13. Fair Labor Standards Act. The Borrower shall, and shall require each
Subsidiary to, at all times operate its business in compliance with all material
applicable provisions of the Fair Labor Standards Act of 1938, as amended. None
of the inventory of the Borrower or any of its Subsidiaries are or will be
produced by employees of (a) the Borrower or any of its Subsidiaries, or (b) to
the best knowledge of the Borrower, by employees of suppliers, who are, in each
case, employed in violation of any applicable minimum wage or maximum hour
provisions of the Fair Labor Standards Act (29 U.S.C. Sections 206 and 207) or
any applicable regulations promulgated thereunder, in each case, as in effect
from time to time.
8.14. Guarantors. To the extent permitted by the terms of the Indenture, the
Borrower will cause each Domestic Subsidiary created, acquired or existing on or
after the Closing Date or any other Subsidiary which is otherwise required to
become a guarantor under the Subordinated Indenture or the Subsequent
Subordinated Indenture, to become a Guarantor immediately and shall cause such
Subsidiary to execute and deliver to the Agent for the benefit of the Agent and
the Banks (a) a Guaranty (or an Instrument of Adherence to the Guaranty executed
on the Closing Date), and (b) further Security Documents or other instruments
and documents as the Agent may reasonably require in order to grant to the Agent
a first priority perfected security interest in such Subsidiary's assets,
together with legal opinions in form and substance reasonably satisfactory to
the Agent to be delivered to the Agent and the Banks opining as to the
authorization, validity and enforceability of such Guaranty or Instrument of
Adherence and Security Documents and (as to the applicable Security Documents)
the perfection of such security interests.
8.15. Subordinated Guarantees. The Company will promptly advise the Agent of
any guarantee entered into in connection with the Subordinated Indenture or the
Subsequent Subordinated Indenture, identifying the guarantor thereunder.
8.16. Status of Loans as Senior Debt. The Company shall, on the Closing Date
and at such other times as may reasonably be requested by the Agent, deliver to
the Agent an officer's certificate satisfactory in form and substance to the
Agent and, if requested by the Agent or Majority Banks, a legal opinion
satisfactory in form and substance to the Agent, evidencing that the
Indebtedness of the Borrower
<PAGE>
57
and its Subsidiaries to the Agent and the Banks in respect of the Revolving
Credit Loans and Reimbursement Obligations constitutes "Senior Indebtedness" (or
the analogous term used therein) under the terms of each of the Subordinated
Debt Documents or of any other instrument evidencing or pursuant to which there
is issued indebtedness which purports to be Subordinated Debt of the Borrower or
any of its Subsidiaries and that (a) up to $80,000,000 of the Obligations under
this Credit Agreement are permitted pursuant to Section 4.3(a)(ii)(B) of the
Subordinated Indenture and the applicable provisions of the Subsequent
Subordinated Indenture and (b) all other Obligations under this Credit Agreement
would constitute Senior Indebtedness under the Subordinated Debt Documents.
8.17. Additional Subsidiaries. If, after the Closing Date, the Borrower or
any of its Subsidiaries creates or acquires, either directly or indirectly, any
Subsidiary, it will immediately notify the Agent and the Banks if such creation
or acquisition, as the case may be, and provide the Agent and the Banks with an
updated Schedule 7.19(a) hereof and take all other actions required by Section
8.14 and Section 9.5.1 hereof.
8.18. Interest Rate Protection. The Borrower will, not later than ninety
(90) days after the date on which more than fifty percent (50%) of the
Borrower's Total Funded Indebtedness is bearing interest at a floating rate,
purchase an interest rate cap or swap or effect other interest rate protection
arrangements for a minimum period of three years applicable to that portion of
the outstanding Indebtedness bearing interest at a floating rate which causes
more than fifty percent (50%) of the Borrower's Total Funded Indebtedness to
bear interest at a floating rate, on terms and conditions satisfactory to the
Agent and the Banks.
8.19. Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note
is outstanding or any Bank has any obligation to make any Revolving Credit Loans
or the Agent has any obligations to issue, extend or renew any Letters of
Credit:
9.1. Restrictions on Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
<PAGE>
58
(b) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(c) Subordinated Debt under the Subordinated Notes and the Subsequent
Subordinated Notes;
(d) Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by the Borrower or such
Subsidiary or under any Capitalized Lease, or Indebtedness incurred by any
Subsidiary for working capital purposes, provided that the aggregate
principal amount of such Indebtedness of the Borrower and its Subsidiaries
shall not exceed the aggregate amount of $15,000,000 at any one time;
(e) Indebtedness existing on the date hereof and listed and described
on Schedule 9.1 hereto;
(f) Indebtedness of a Guarantor to the Borrower or another Guarantor
and Indebtedness of the Borrower to any Guarantor;
(g) Indebtedness of the Borrower in respect of interest rate protection
arrangements required to be maintained by ss.8.18 or in respect of currency
swap arrangements or other interest rate protection arrangements so long as
such arrangements are in the ordinary course of business and are not for
speculative purposes;
(h) unsecured Indebtedness of any Foreign Subsidiary to the Borrower
provided (i) no Default or Event of Default has occurred and is continuing
or would exist as a result thereof; and (ii) such Indebtedness is evidenced
by an intercompany note in form and substance acceptable to the Agent, and
such note is pledged by the Borrower to the Agent to secure the Borrower's
Obligations hereunder; and
(i) Indebtedness of a Foreign Subsidiary not otherwise provided for in
this Section 9.1, provided that the aggregate principal amount of all such
Indebtedness for all Foreign Subsidiaries shall not exceed at any one time
an amount equal to $5,000,000
provided, however, notwithstanding the foregoing provisions of this
Section 9.1, all such Indebtedness must in any event qualify at all times as
"Indebtedness" (as such term is defined in the Subordinated Indenture and
the Subsequent Subordinated Indenture) permitted to be incurred pursuant to
(a) ss.4.3 of the Subordinated Indenture and (b) the Subsequent Subordinated
Indenture.
9.2. Restrictions on Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, (a) create or incur or suffer to be created or incurred
or to exist
<PAGE>
59
any lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits therefrom; (b)
transfer any of such property or assets or the income or profits therefrom for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to payment of its general creditors; (c)
acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (d) suffer to exist for a period of more than thirty (30)
days after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; (e)
sell, assign, pledge or otherwise transfer any "receivables" as defined in
clause (g) of the definition of the term "Indebtedness," with or without
recourse; or (f) enter into or permit to exist any arrangement or agreement,
enforceable under applicable law, which directly or indirectly prohibits the
Borrower or any of its Subsidiaries from creating or incurring any lien,
encumbrance, mortgage, pledge, charge, restriction or other security interest
other than in favor of the Agent for the benefit of the Banks and the Agent
under the Loan Documents and other than customary anti-assignment provisions in
leases and licensing agreements entered into by the Borrower or such Subsidiary
in the ordinary course of its business, provided that the Borrower or any of its
Subsidiaries may create or incur or suffer to be created or incurred or to
exist:
(a) liens in favor of the Borrower on all or part of the assets of
Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of
the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims
for labor, material or supplies in respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(d) liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
(e) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties, in existence less than 120 days from the
date of creation thereof in respect of obligations not overdue;
<PAGE>
60
(f) encumbrances on Real Estate consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens under
leases to which the Borrower or a Subsidiary of the Borrower is a party, and
other minor liens or encumbrances none of which in the opinion of the
Borrower interferes materially with the use of the property affected in the
ordinary conduct of the business of the Borrower and its Subsidiaries, which
defects do not individually or in the aggregate have a materially adverse
effect on the business of the Borrower individually or of the Borrower and
its Subsidiaries on a consolidated basis;
(g) liens existing on the date hereof and listed on Schedule 9.2
hereto;
(h) purchase money security interests in or purchase money mortgages on
real or personal property acquired after the date hereof to secure purchase
money Indebtedness of the type and amount permitted by Section 9.1(d),
incurred in connection with the acquisition of such property, which security
interests or mortgages cover only the real or personal property so acquired;
(i) liens granted by a Foreign Subsidiary to secure Indebtedness of
such Foreign Subsidiary of the type and amount permitted by Section 9.1(i);
and
(j) liens in favor of the Agent for the benefit of the Banks and the
Agent under the Loan Documents.
9.3. Restrictions on Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make or permit to exist or to remain outstanding any
Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks or banks organized
under the laws of any country which is a member of the OECD, having
total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Service, Inc., and not less than "A 1" if
rated by Standard and Poor's Rating Group;
<PAGE>
61
(d) Investments existing on the date hereof and listed on Schedule 9.3
hereto;
(e) Investments with respect to Indebtedness permitted by ss.9.1(f) so
long as such entities remain Subsidiaries of the Borrower and a Guarantor
hereunder and other Investments by the Borrower in Foreign Subsidiaries (and
which Investments would not consitute Indebtedness of such Foreign
Subsidiary (collectively the "Equity Investments")) provided the aggregate
amount of all such Equity Investments does not exceed $5,000,000 in the
aggregate;
(f) Investments consisting of the Guaranty;
(g) Investments with respect to Indebtedness permitted by Section
9.1(h) so long as such entities remain Subsidiaries of the Borrower and so
long as such Investments are in the form of an intercompany loan, with the
note evidencing such loan being pledged to the Agent, and Investments with
respect to an equity contribution made by the Borrower to Subsidiaries in an
aggregate amount not to exceed $15,000,000;
(h) Investments consisting of promissory notes, deferred payment
obligations or similar arrangements, received as proceeds of asset
dispositions permitted by Section 9.5.2;
(i) Investments consisting of Permitted Acquisitions;
(j) Investments in respect of Open Market Purchases permitted to be
made pursuant to Section 9.4;
(k) Investments consisting of repurchase agreements collateralized by
securities described in paragraphs (a), (b) or (c) above; and
(l) Investment in joint ventures or Persons in which the Borrower or
any Subsidiary holds a minority equity interest, provided the aggregate
amount of all such Investments does not exceed $5,000,000 and no single
Investment or series of related Investments in the same joint venture or
Person exceeds $2,500,000;
provided, however, that (a) with the exception of demand deposits referred to in
Section 9.3(b), such Investments will be considered Investments permitted by
this Section 9.3 only if all actions have been taken to the satisfaction of the
Agent to provide to the Agent, for the benefit of the Banks and the Agent, a
first priority perfected security interest in all of such Investments free of
all encumbrances other than Permitted Liens; and (b) all Investments made
pursuant to this Section 9.3 must be permitted to be made pursuant to the
Subordinated Indenture and the Subsequent Subordinated Indenture.
<PAGE>
62
9.4. Distributions. The Borrower and its Subsidiaries will not make any
Restricted Payments; provided, however, any Subsidiary shall be permitted to
make a Distribution to any Guarantor or the Borrower.
9.5. Merger, Consolidation and Disposition of Assets.
9.5.1. Mergers and Acquisitions. The Borrower will not, and will not
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than acquisitions in the ordinary course of business,
consistent with past practices) except, so long as no Default or Event of
Default has occurred and is continuing or would exist after giving effect
thereto:
(a) the merger or consolidation of one or more of the Subsidiaries of
the Borrower with and into the Borrower or a Guarantor hereunder and
provided the Borrower or the Guarantor, as the case may be, has taken or
caused to be taken all action necessary to grant to the Agent a first
priority perfected security interest in the Borrower's or such other
Guarantor's assets after such merger or consolidation to the same extent as
in the assets of parties to the merger prior thereto; and
(b) (i) the acquisition of the assets of, and assumption of certain
liabilities of First Image Management Company (the "FIMCO Acquisition"),
provided (1) no Default or Event of Default has occurred and is continuing
or would exist as a result of such acquisition, (2) the Borrower has
delivered to the Agent copies of all documents, instruments and agreements
to be entered into in connection therewith (the "FIMCO Acquisition
Documents"), and all such documents, instruments and agreements are in form
and substance satisfactory to the Agent; (3) the Agent is reasonably
satisfied with the results of any reasonable due diligence investigations
conducted by the Agent or the Borrower in connection with the FIMCO
Acquisition and consistent with the requirements of the FIMCO Acquisition
Documents, (4) the Agent is reasonably satisfied with financing sources (and
all terms and conditions contained in any documentation evidencing the
foregoing) used to fund such FIMCO Acquisition, (5) the aggregate purchase
price (including the assumption of any Indebtedness, leases and contingent
obligations) does not exceed $155,000,000; and (6) the Borrower has
demonstrated to the Agent compliance with Section 9.5.1(b)(ii)(1)-(4),
(6)-(7), (9) and (10), and (ii) other asset or stock acquisitions of Persons
in the same or a similar line of business as the Borrower and its
Subsidiaries (each, a "Permitted Acquisition") where (1) the Borrower has
provided the Agent with written notice of such Permitted Acquisition, which
notice shall include a reasonably detailed description of such Permitted
Acquisition and copies of all acquisition documents in connection therewith;
(2) the business to be acquired would not subject the Agent or the Banks to
any additional regulatory or third party approvals in connection with the
exercise of its
<PAGE>
63
rights and remedies under this Credit Agreement or any other Loan Document;
(3) no contingent liabilities or liabilities will be incurred or assumed in
connection with such Permitted Acquisition which could reasonably be
expected to have a material adverse effect on the business, assets or
financial condition of the Borrower and its Subsidiaries, and any
Indebtedness incurred or assumed in connection with such Permitted
Acquisition (A) shall have been permitted to be incurred or assumed pursuant
to Section 9.1 hereof; (B) shall be secured only by Permitted Liens; and (C)
shall be on terms and conditions satisfactory to the Agent; (4) the Borrower
has provided the Agent with such other information as was reasonably
requested by the Agent; (5) after the consummation of the Permitted
Acquisition, to the extent such acquisition was a stock acquisition, either
(A) the Person so acquired is merged with and into the Borrower, with the
Borrower being the survivor of such merger or (B) to the extent such Person
is not merged with and into the Borrower, the aggregate amount of the
purchase price attributable to all such Persons acquired and not merged into
the Borrower during the term of this Credit Agreement plus the aggregate
amount of all Investments to be made in all such Persons by the Borrower or
any Subsidiary shall not exceed $20,000,000 in the aggregate; (6) the
Borrower shall take, or shall cause to be taken, all necessary action to
grant to the Agent a first priority perfected lien in all assets and stock
acquired in connection with such Permitted Acquisition, provided, however,
the Borrower or any Guarantor, as the case may be, shall only be required to
pledge 65% of the capital stock of any Foreign Subsidiary or any other
Person not incorporated or otherwise organized in the United States of
America (a "Foreign Entity"), and such Foreign Entity shall not be required
to grant a lien on its assets to secure the Obligations of the Borrower or
any Guarantor; (7) the Borrower has demonstrated to the satisfaction of the
Agent, based on a pro forma Compliance Certificate, compliance with ss.10
hereof immediately prior to and immediately after giving effect to such
Permitted Acquisition and has demonstrated to the satisfaction of the Agent
that, immediately after giving effect to the Permitted Acquisition, the
outstanding amount of the sum of all Revolving Credit Loans, Maximum Drawing
Amount of all Letters of Credit and all Unpaid Reimbursement Obligations is
less than the Total Commitment minus $5,000,000; (8) the aggregate purchase
price for any single Permitted Acquisition (or series of related
acquisitions) shall not exceed (A) $25,000,000 to the extent the Leverage
Ratio, calculated on a pro forma basis after giving effect to such Permitted
Acquisition) is equal to or greater than 3.00:1.00 and (B) $50,000,000 to
the extent the Leverage Ratio, calculated on a pro forma basis after giving
effect to such Permitted Acquisition) is less than 3.00:1.00, and the
aggregate purchase price for all Permitted Acquisitions shall not exceed
$100,000,000 during the term of this Credit Agreement; (9) the board of
directors and the shareholders (if required by applicable law), or the
equivalent, of each of the Borrower and the Person to be acquired has
approved such merger, consolidation or acquisition and such Permitted
Acquisition is otherwise considered
<PAGE>
64
"friendly"; and (10) the Borrower has delivered to the Agent a certificate
of the chief financial officer of the Borrower to the effect that (A) the
Borrower and its Subsidiaries, on a consolidated and consolidating basis,
will be solvent upon the consummation of the Permitted Acquisition; (B) the
pro forma Compliance Certificate fairly presents the financial condition of
the Borrower and its Subsidiaries as of the date thereof and after giving
effect to such Permitted Acquisition; and (C) no Default or Event of Default
then exists or would result after giving effect to the Permitted Acquisition
In the event any new Domestic Subsidiary is formed or acquired as a
result of or in connection with any acquisition, to the extent permitted
under the Indenture, such new Domestic Subsidiary shall, immediately upon
its creation or acquisition, execute and deliver to the Agent for the
benefit of the Agent and the Banks, an Instrument of Adherence in
substantially the form of Exhibit I hereto (an "Instrument of Adherence")
and the Loan Documents shall be amended and/or supplemented as necessary to
make the terms and conditions of the Loan Documents applicable to such
Domestic Subsidiary. Such Domestic Subsidiary shall become a Guarantor
hereunder and shall become party to the Guaranty and the Security Agreement
and shall execute and deliver to the Agent any and all other agreements,
documents, instruments and financing statements necessary to grant to the
Agent a first priority perfected lien in such Domestic Subsidiary's assets
to the extent required by the Loan Documents. The Borrower and its
Subsidiaries shall, immediately upon the creation or acquisition of such
Domestic Subsidiary, pledge all of such Domestic Subsidiary's capital stock
to the Agent for the benefit of the Agent and the Banks. In addition, the
Borrower and its Subsidiaries shall, immediately upon the creation or
acquisition of such Foreign Subsidiary, pledge 65% of such Foreign
Subsidiary's capital stock to the Agent for the benefit of the Agent and the
Banks.
9.5.2. Disposition of Assets. The Borrower will not, and will not
permit any of its Subsidiaries to, become a party to or agree to or effect
any Asset Sale or other disposition of assets, other than (a) the sale of
inventory, the sale of lease agreements, the licensing of intellectual
property and the disposition of obsolete assets, in each case in the
ordinary course of business consistent with past practices; (b) the sale or
other disposition of the DAS Business and the DPDS Business (with only such
assets as exist in each such business on the Closing Date) in an arms-length
transaction transactions for fair and reasonable value, provided that, with
respect to this clause (b), (i) no Default or Event of Default shall have
occurred and be continuing at the time of such sale and no Default or Event
of Default will exist after giving effect to such Asset Sale; (ii) at least
seventy five percent (75%) of the purchase price for such assets is received
in cash and the Net Cash Sale Proceeds from such sales are applied as
provided in Section 3.2 hereof, (iii) any promissory note or other
instrument received by the Borrower or any of its Subsidiaries in connection
with such sale is an Investment permitted by Section 9.3 hereof, and the
<PAGE>
65
Borrower or such Subsidiary, as the case may be, has delivered such
promissory note or other instrument to the Agent to be held in pledge for
the benefit of itself and the Banks in accordance with the terms of the Loan
Documents; (iv) the Borrower shall have complied with all applicable
provisions contained in Section 4.7 of the Subordinated Indenture and in the
the Subsequent Subordinated Indenture pertaining to Asset Sales; and (v) the
Borrower shall have delivered to the Agent on the date of such sale a
certificate signed by an authorized officer of the Borrower and evidence
satisfactory to the Agent showing compliance with the provisions of clauses
(i) through (iv) of this Section 9.5.2 and (c) the sale of assets in
arms-length transactions for fair and reasonable value, provided that, with
respect to this clause (c), (i) no Default or Event of Default shall have
occurred and be continuing at the time of such sale and no Default or Event
of Default will exist after giving effect to such Asset Sale; (ii) at least
seventy five percent (75%) of the purchase price for such assets is received
in cash and the Net Cash Sale Proceeds from such sales are applied as
provided in Section 3.2 hereof, (iii) any promissory note or other
instrument received by the Borrower or any of its Subsidiaries in connection
with such sale is an Investment permitted by Section 9.3 hereof, and the
Borrower or such Subsidiary, as the case may be, has delivered such
promissory note or other instrument to the Agent to be held in pledge for
the benefit of itself and the Banks in accordance with the terms of the Loan
Documents; (iv) the aggregate value of all assets sold in any Asset Sale
(other than the sale of the DPDS Business and the DAS Business) is not more
than $25,000,000 in any fiscal year; (v) the Borrower shall have complied
with all applicable provisions contained in Section 4.7 of the Subordinated
Indenture and in the applicable provisions of the Subsequent Subordinated
Indenture pertaining to Asset Sales; and (vi) the Borrower shall have
delivered to the Agent on the date of such sale a certificate signed by an
authorized officer of the Borrower and evidence satisfactory to the Agent
showing compliance with the provisions of clauses (i) through (v) of this
Section 9.5.2.
9.6. Sale and Leaseback. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property or lease
other property that the Borrower or any Subsidiary of the Borrower intends to
use for substantially the same purpose as the property being sold or
transferred.
9.7. Compliance with Environmental Laws. The Borrower will not, and will not
permit any of its Subsidiaries to, except to the extent that the same does not
and could not reasonably be expected to have a material adverse effect on the
business, assets or financial condition of the Borrower and its Subsidiaries,
(a) use any of the Real Estate or any portion thereof for the handling,
processing, storage or disposal of Hazardous Substances, (b) cause or permit to
be located on any of the Real Estate any underground tank or other underground
storage receptacle for Hazardous Substances, (c) generate any Hazardous
Substances on any of the Real Estate, (d) conduct any activity at any Real
Estate or use any Real Estate in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous
<PAGE>
66
Substances on, upon or into the Real Estate or (e) otherwise conduct any
activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law.
9.8. Subordinated Debt. The Borrower will not, and will not permit any of
its Subsidiaries to, amend, supplement or otherwise modify the terms of any of
the Subordinated Debt Documents or prepay, redeem or repurchase (or offer to
prepay, redeem or repurchase) any of the Subordinated Debt, except as expressly
permitted by Section 3.2 hereof; provided, however, so long as no Default or
Event of Default has occurred and is continuing and none would exist after
giving effect thereto, the Borrower shall be permitted to make Open Market
Purchases, to the extent permitted by each of the Subordinated Indenture and the
Subsequent Subordinated Indenture.
9.9. Employee Benefit Plans. Neither the Borrower nor any ERISA Affiliate
will
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, whether or not
such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to Section 302(f) or Section
4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to Section 307 of ERISA or Section 401(a)(29)
of the Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of
any such Plan with assets in excess of benefit liabilities.
9.10. Business Activities. The Borrower will not, and will not permit any of
its Subsidiaries to, engage directly or indirectly (whether through Subsidiaries
or
<PAGE>
67
otherwise) in any type of business other than the businesses conducted by them
on the Closing Date and in related or similar businesses.
9.11. Fiscal Year. The Borrower will not, and will not permit any of its
Subsidiaries to, change the date of the end of its fiscal year from that set
forth in Section 7.4.1.
9.12. Transactions with Affiliates. Except as set forth on Schedule 9.12
hereto, the Borrower will not, and will not permit any of its Subsidiaries to,
engage in any transaction with any Affiliate (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such Affiliate or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any such Affiliate has
a substantial interest or is an officer, director, trustee or partner, on terms
more favorable to such Person than would have been obtainable on an arm's-length
basis in the ordinary course of business.
9.13. Modification of Documents and Charter. Neither the Borrower nor any of
its Subsidiaries will consent to or agree to any amendment, supplement or other
modification, or amend or permit to be amended its certificate of incorporation
or bylaws, or similar organizational documents unless such change or amendment
is immaterial and ministerial in nature and would not have any material adverse
effect on the Agent's or the Banks' rights under the Loan Documents or the
Borrower's or any of its Subsidiaries' obligations under the Loan Documents.
9.14. Upstream Limitations. Neither the Borrower nor any of its Subsidiaries
will enter into, or permit any of its Subsidiaries to enter into, any agreement,
contract or arrangement (other than the Credit Agreement and the other Loan
Documents and other than restrictions in agreements evidencing Indebtedness
permitted by Section 9.1(c) or (d) hereof) restricting the ability of any
Subsidiary to pay or make dividends or distributions in cash or kind, to make
loans, advances or other payments of whatsoever nature or to make transfers or
distributions of all or any part of its assets to the Borrower or any Guarantor.
9.15. Inconsistent Agreements. Neither the Borrower nor any of its
Subsidiaries will, nor will they permit their Subsidiaries to, enter into any
agreement containing any provision which would be violated or breached by the
performance by the Borrower or such Subsidiary of its obligations hereunder or
under any of the Loan Documents.
9.16. Senior Debt. The Borrower and its Subsidiaries will not (a) in any
manner designate (or permit to exist) any Person as the trustee representing
holders of Senior Indebtedness of the Borrower or any of its Subsidiaries for
purposes of either the Subordinated Indenture or the Subsequent Subordinated
Indenture, other than the Agent under this Credit Agreement, (b) permit any
other Indebtedness
<PAGE>
68
(other than the Obligations hereunder) which would constitute "Senior
Indebtedness" under either the Subordinated Indenture or the Subsequent
Subordinated Indenture.
9.17. Limitations on Foreign Exchange Arrangements. The Borrower will not
and will not permit any of its Subsidiaries to enter into any interest rate
hedging or risk protection arrangements, foreign exchange risk protection
arrangements, or currency risk protection arrangements which are not in the
ordinary course of business or are for speculative purposes.
10. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note
is outstanding or any Bank has any obligation to make any Revolving Credit Loans
or the Agent has any obligation to issue, extend or renew any Letters of Credit:
10.1. Leverage Ratio. The Borrower will not as of the end of any fiscal
quarter ending during any period described in the table set forth below permit
the Leverage Ratio to exceed the ratio set forth opposite such period in such
table:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Period Ratio
------ -----
- ------------------------------------------------------------------------------
<S> <C>
Closing Date - December 30, 2000 4:00:1.00
- ------------------------------------------------------------------------------
December 31, 2000 - December 30, 2001 3.75:1.00
- ------------------------------------------------------------------------------
any time thereafter 3.50:1.00
- ------------------------------------------------------------------------------
</TABLE>
10.2. Interest Coverage Ratio. The Borrower will not, as of the end of any
fiscal quarter or at any time permit the ratio of EBITDA for the Reference
Period most recently ended to Consolidated Total Interest Expense for such
Reference Period to be less than 2.00:1.00.
10.3. Minimum EBITDA. The Borrower will not as of the end of any fiscal
quarter permit EBITDA for the Reference Period ending on such date to be less
than the sum of (a) $65,000,000 plus (b) eighty percent (80%) of the EBITDA
(calculated on a pro forma basis) of any Person acquired pursuant to Section
9.5.1 hereof (including the EBITDA attributable to any continued operations)
but in no event shall the minimum EBITDA for any Reference Period be greater
than the amount of the Total Commitment as in effect on such date.
10.4. Capital Expenditures. The Borrower will not make, or permit any
Subsidiary of the Borrower to make, Capital Expenditures in any fiscal year that
exceed, in the aggregate, $25,000,000 for such fiscal year; provided, however,
if actual Capital Expenditures are less than $25,000,000 for any fiscal year,
such
<PAGE>
69
unutilized amount up to $6,250,000 may be utilized in the next succeeding fiscal
year and not in any subsequent fiscal year.
11. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Revolving Credit Loans and
of the Agent to issue any initial Letters of Credit shall be subject to the
satisfaction of the following conditions precedent:
11.1. Loan Documents etc.
11.1.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of
the Banks. Each Bank shall have received a fully executed copy of each such
document.
11.1.2. Subordinated Debt Documents. Each of the Subordinated Debt
Documents other than the Subsequent Subordinated Indenture and documents
executed in connection therewith shall have been duly executed and delivered
by the respective parties thereto, shall be in full force and effect and
shall be in form and substance satisfactory to each of the Banks. The Agent
shall have received a fully executed copy of each such document.
11.2. Certified Copies of Charter Documents. Each of the Banks shall have
received from the Borrower and each of its Subsidiaries a copy, certified by a
duly authorized officer of such Person to be true and complete on the Closing
Date, of each of (a) its charter or other incorporation documents as in effect
on such date of certification, and (b) its by-laws as in effect on such date.
11.3. Corporate Action. All corporate action necessary for the valid
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
11.4. Incumbency Certificate. Each of the Banks shall have received from the
Borrower and each of its Subsidiaries party to any Loan Documents an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of the Borrower or such Subsidiary, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of each of the Borrower of such Subsidiary, each of the Loan
Documents to which the Borrower or such Subsidiary is or is to become a party;
(b) in the case of the Borrower, to make Loan Requests and Conversion Requests
and to apply for Letters of Credit; and (c) to give notices and to take other
action on its behalf under the Loan Documents.
<PAGE>
70
11.5. Validity of Liens. The Security Documents shall be effective to create
in favor of the Agent a legal, valid and enforceable first (except for Permitted
Liens entitled to priority under applicable law) security interest in and lien
upon the Collateral. All filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent shall
have received evidence thereof in form and substance satisfactory to the Agent.
11.6. Perfection Certificates and UCC Search Results. The Agent shall have
received from each of the Borrower and the Guarantors a completed and fully
executed Perfection Certificate and, as to the Borrower and all Subsidiaries,
the results of UCC searches and all applicable lien searches with respect to the
Collateral, indicating no liens other than Permitted Liens and otherwise in form
and substance satisfactory to the Agent.
11.7. Landlord Consents. The Borrower and its Subsidiaries shall have
delivered to the Agent all landlord consents as the Agent may reasonably
request.
11.8. Certificates of Insurance. The Agent shall have received a certificate
of insurance from an independent insurance broker dated as of the Closing Date,
identifying insurers, types of insurance, insurance limits, and policy terms,
and otherwise describing the insurance obtained in accordance with the
provisions of the Security Agreements.
11.9. Solvency Certificate. Each of the Banks shall have received an
officer's certificate of the Borrower dated as of the Closing Date as to the
solvency of the Borrower and its Subsidiaries following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the
Banks.
11.10. Opinion of Counsel. Each of the Banks and the Agent shall have
received a favorable legal opinion addressed to the Banks and the Agent, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from Cadwalader, Wickersham & Taft, counsel to the Borrower and its
Subsidiaries.
11.11. Payment of Fees. The Borrower shall have paid to the Banks or the
Agent, as appropriate, the closing fee and Agent's Fee as contemplated by the
Fee Letter.
11.12. Payoff Letter. The Agent shall have received a payoff letter from The
First National Bank of Chicago, as administrative agent, indicating the amount
of the loan obligations of the Borrower the lenders under the $80,000,000 Credit
and Guarantee Agreement dated as of February 28, 1997 to be discharged on the
Closing Date and an acknowledgment by The First National Bank of Chicago, as
administrative agent that upon receipt of such funds it will forthwith execute
and deliver to the Agent for filing all termination statements and take such
other actions as may be necessary to discharge all mortgages, deeds of trust and
security interests
<PAGE>
71
granted by the Borrower or any of its Subsidiaries in favor of The First
National Bank of Chicago, as administrative agent.
11.13. Disbursement Instructions. The Agent shall have received disbursement
instructions from the Borrower, indicating that a portion of the proceeds of the
Revolving Credit Loans, in an amount equal to the aggregate loan obligations of
the Borrower to The First National Bank of Chicago, as Administrative Agent, are
paid to The First National Bank of Chicago, as Adminstrative Agent.
11.14. Consents and Approvals. The Agent shall have received evidence that
all consents and approvals necessary to complete the transactions contemplated
hereby have been obtained.
11.15. Designation of Agent as Trustee. The Agent shall have received
evidence that the Borrower has taken all necessary action under the Subordinated
Indenture to designate the Agent as trustee of the Senior Indebtedness for
purposes of the subordination provisions of the Subordinated Indenture.
11.16. Receipt of Audited Financial Information. The Agent shall have
received copies of the Borrower's audited financial statements for the fiscal
year ended September 30, 1997, which audited statements shall be in form and
substance satisfactory to the Agent and the Banks.
12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Revolving Credit Loan and of the
Agent to issue, extend or renew any Letter of Credit, in each case whether on or
after the Closing Date, shall also be subject to the satisfaction of the
following conditions precedent:
12.1. Representations True; No Event of Default. Each of the representations
and warranties of any of the Borrower and its Subsidiaries contained in this
Credit Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Credit Agreement shall be true
as of the date as of which they were made and shall also be true at and as of
the time of the making of such Revolving Credit Loan or the issuance, extension
or renewal of such Letter of Credit, with the same effect as if made at and as
of that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
12.2. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of
<PAGE>
72
any Bank would make it illegal for such Bank to make such Revolving Credit
Loan or to participate in the issuance, extension or renewal of such Letter of
Credit or in the reasonable opinion of the Agent would make it illegal for the
Agent to issue, extend or renew such Letter of Credit.
12.3. Governmental Regulation. Each Bank shall have received such statements
in substance and form reasonably satisfactory to such Bank as such Bank shall
require for the purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
12.4. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
12.5. Exchange Limitations. There exists no reason whatsoever, including
without limitation, by reason of the application of any so-called "currency
exchange" laws or regulations (as in effect at the time of any proposed
borrowing hereunder) which could reasonably be expected to interfere with the
Borrower satisfying any of its Obligations hereunder in full at such time as
such Obligations become due and payable pursuant to the terms hereof.
12.6. Incurrence Test. To the extent the Total Commitment is in excess of
$80,000,000, the Borrower has demonstrated to the satisfaction of the Agent and
the Banks on a pro forma basis that after giving effect to any requested
Revolving Credit Loan or issuance of any Letter of Credit, the Borrower has
satisfied each of (a) the minimum coverage test set forth in Section 4.3(a)(ii)
of the Subordinated Indenture and (b) any other debt incurrence test set forth
in the Subsequent Subordinated Indenture.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
13.1. Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Revolving
Credit Loans or any Reimbursement Obligation when the same shall become due
and payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Revolving Credit
Loans, the commitment fee, any Letter of Credit Fee, the Agent's fee, or
other
<PAGE>
73
sums due hereunder or under any of the other Loan Documents within three (3)
Business Days after the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in Section 8.1, 8.4, 8.5.1, 8.6, 8.9.1, 8.12, 8.16, 8.18, 9 or 10;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this Section 13.1) for
thirty (30) days after written notice of such failure has been given to the
Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement, any of the other Loan Documents, any
of the Subordinated Debt Documents or in any other document or instrument
delivered pursuant to or in connection with this Credit Agreement or the
Subordinated Debt Documents shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases in
a principal amount in excess of $2,500,000, or fail to observe or perform
any material term, covenant or agreement contained in any agreement by which
it is bound, evidencing or securing borrowed money or credit received or in
respect of any Capitalized Leases in a principal amount in excess of
$2,500,000, for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its Subsidiaries or of any
substantial part of the assets of the Borrower or any of its Subsidiaries or
shall commence any case or other proceeding relating to the Borrower or any
of its Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law
of any jurisdiction, now or hereafter in effect or any Insolvency Event
shall occur, or shall take any action to authorize or in furtherance of any
of the foregoing, or if any such petition or
<PAGE>
74
application shall be filed or any such case or other proceeding shall be
commenced against the Borrower or any of its Subsidiaries and the Borrower
or any of its Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition or application shall not
have been dismissed within forty-five (45) days following the filing
thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case
or other proceeding, or a decree or order for relief is entered in respect
of the Borrower or any Subsidiary of the Borrower in an involuntary case
under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, against the Borrower or any of
its Subsidiaries exceeds in the aggregate $2,500,000;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or the
Subordinated Debt shall be (or shall be required at such to be) prepaid,
redeemed or repurchased in whole or in part; or the Borrower or any of its
Subsidiaries shall be or become required under the Subordinated Indenture or
the Subsequent Subordinated Indenture to prepay, redeem or repurchase (or
shall be or become required thereunder to offer to prepay, redeem or
repurchase) all or any part of the Subordinated Debt;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents shall be commenced by or on behalf of
the Borrower or any of its Subsidiaries party thereto or any of their
respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(l) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an
aggregate amount exceeding $2,500,000, or the Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA by
a Multiemployer Plan requiring aggregate annual payments exceeding
$2,500,000, or any of the following occurs with respect to a Guaranteed
Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required
<PAGE>
75
installment or other payment (within the meaning of Section 302(f)(1) of
ERISA), provided that the Agent determines in its reasonable discretion that
such event (A) could be expected to result in liability of the Borrower or
any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $2,500,000 and (B) could constitute grounds for
the termination of such Guaranteed Pension Plan by the PBGC, for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan or for the imposition of a lien in
favor of such Guaranteed Pension Plan; or (ii) the appointment by a United
States District Court of a trustee to administer such Guaranteed Pension
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
(m) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than thirty (30)
days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen (15)
consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(o) there shall occur the loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by the
Borrower or any of its Subsidiaries if such loss, suspension, revocation or
failure to renew would have a material adverse effect on the business or
financial condition of the Borrower or such Subsidiary;
(p) the Borrower or any of its Subsidiaries shall be indicted for a
state or federal crime, or any civil or criminal action shall otherwise have
been brought against the Borrower or any of its Subsidiaries, a punishment
for which in any such case could include the forfeiture of any assets of the
Borrower or such Subsidiary having a fair market value in excess of
$5,000,000;
(q) a Change of Control (as such term is defined in the Subordinated
Indenture) occurs or an "Event of Default" (as such terms are defined in the
Subordinated Indenture) occurs;
<PAGE>
76
(r) a Change of Control (as such term is defined in the Subsequent
Subordinated Indenture) occurs or an "Event of Default" (as such terms are
defined in the Subsequent Subordinated Indenture) occurs;
(s) the Borrower shall at any time, legally or beneficially directly or
indirectly own less than 100% of the capital stock of each of its
Subsidiaries (other than directors' qualifying shares); or
(t) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended) other than Magten
Asset Management Corp. shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under said Act) of twenty percent (20%) or more of the outstanding shares of
common stock of the Borrower; or, during any period of twelve consecutive
calendar months, individuals who were directors of the Borrower on the first
day of such period shall cease to constitute a majority of the board of
directors of the Borrower;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Revolving Credit Notes and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that in the
event of any Event of Default specified in Sections 13.1(g), 13.1(h) or 13.1(j),
all such amounts shall become immediately due and payable automatically and
without any requirement of notice from the Agent or any Bank.
13.2. Termination of Commitments. If any one or more of the Events of
Default specified in Section 13.1(g), Section 13.1(h) or Section 13.1(j) shall
occur, any unused portion of the credit hereunder shall forthwith terminate and
each of the Banks shall be relieved of all further obligations to make Revolving
Credit Loans to the Borrower and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. If any other Event of
Default shall have occurred and be continuing, or if on any Drawdown Date or
other date for issuing, extending or renewing any Letter of Credit the
conditions precedent to the making of the Revolving Credit Loans to be made on
such Drawdown Date or (as the case may be) to issuing, extending or renewing
such Letter of Credit on such other date are not satisfied, the Agent may and,
upon the request of the Majority Banks, shall, by notice to the Borrower,
terminate the unused portion of the credit hereunder, and upon such notice being
given such unused portion of the credit hereunder shall terminate immediately
and each of the Banks shall be relieved of all further obligations to make
Revolving Credit Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve the Borrower or any of its Subsidiaries of any of
the Obligations.
<PAGE>
77
13.3. Remedies. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Revolving Credit Loans pursuant to Section
13.1, each Bank, if owed any amount with respect to the Revolving Credit
Loans or the Reimbursement Obligations, may, with the consent of the Majority
Banks but not otherwise, proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Credit
Agreement and the other Loan Documents or any instrument pursuant to which
the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such
Bank. No remedy herein conferred upon any Bank or the Agent or the holder of
any Revolving Credit Note or purchaser of any Letter of Credit Participation
is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
any other provision of law.
13.4. Exchange Rate. If, for the purpose of obtaining judgment in any court
or obtaining an order enforcing a judgment, it becomes necessary for any Bank to
convert any amount due to such Bank under this Credit Agreement in Dollars or in
any other currency (hereinafter in this Section 13.4 called the "first
currency") into any other currency (hereinafter in this Section 13.4 called the
"second currency"), then the conversion shall be made at such Bank's spot rate
of exchange for buying the first currency with the second currency prevailing at
such Bank's close of business on the Business Day next preceding the day on
which the judgment is given or (as the case may be) the order is made. Any
payment made to any Bank pursuant to this Credit Agreement in the second
currency shall constitute a discharge of the obligations of the Borrower to pay
to such Bank any amount originally due to such Bank in the first currency under
this Credit Agreement only to the extent of the amount of the first currency
which such Bank is able, on the date of the actual receipt by it of such payment
in any second currency, to purchase, in accordance with such Bank's normal
banking procedures, with the amount of such second currency so received. If the
amount of the first currency falls short of the amount originally due to such
Bank in the first currency under this Credit Agreement, the Borrower hereby
agrees that it will indemnify such Bank against and save such Bank harmless from
any shortfall so arising. This indemnity shall constitute an obligation of the
Borrower separate and independent from the other obligations contained in this
Credit Agreement, shall give rise to a separate and independent cause of action
and shall continue in full force and effect notwithstanding any judgment or
order for a liquidated sum or sums in respect of amounts due to such Bank under
this Credit Agreement or under any such judgment or order. Any such shortfall
shall be deemed to constitute a loss suffered by such Bank and the Borrower
shall not be entitled to require any proof or evidence of any actual loss. The
covenant contained in this ss.13.4 shall survive the payment in full of all of
the other obligations of the Borrower under this Credit Agreement.
<PAGE>
78
13.5. Distribution of Collateral Proceeds. In the event that following the
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the reimbursement
of the Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Agent in connection with the collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of all or any of the
rights, remedies, powers and privileges of the Agent under this Credit
Agreement or any of the other Loan Documents or in respect of the Collateral
or in support of any provision of adequate indemnity to the Agent against
any taxes or liens which by law shall have, or may have, priority over the
rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as the
Majority Banks may determine; provided, however, that (i) distributions
shall be made (A) pari passu among Obligations with respect to the Agent's
fee payable pursuant to Section 5.2 and all other Obligations and (B) with
respect to each type of Obligation owing to the Banks, such as interest,
principal, fees and expenses, among the Banks pro rata, and (ii) the Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.
14. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (a) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Revolving Credit Notes held by such
<PAGE>
79
Bank or constituting Reimbursement Obligations owed to such Bank, such amount
shall be applied ratably to such other Indebtedness and to the Indebtedness
evidenced by all such Revolving Credit Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, and (b) if such Bank shall receive
from the Borrower, whether by voluntary payment, exercise of the right of
setoff, counterclaim, cross action, enforcement of the claim evidenced by the
Revolving Credit Notes held by, or constituting Reimbursement Obligations owed
to, such Bank by proceedings against the Borrower at law or in equity or by
proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Revolving Credit Note or Revolving Credit Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Revolving Credit
Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Revolving Credit Notes held by it or Reimbursement obligations
owed it, its proportionate payment as contemplated by this Credit Agreement;
provided that if all or any part of such excess payment is thereafter recovered
from such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
15. THE AGENT.
15.1. Authorization.
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that of
an independent contractor. The use of the term "Agent" is for convenience
only and is used to describe, as a form of convention, the independent
contractual relationship between the Agent and each of the Banks. Nothing
contained in this Credit Agreement nor the other Loan Documents shall be
construed to create an agency, trust or other fiduciary relationship between
the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Agent is nevertheless a "representative"
of the Banks, as that term is defined in Article 1 of the Uniform Commercial
Code, for purposes of actions for the benefit of the
<PAGE>
80
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation of
the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
15.2. Employees and Agents. The Agent may exercise its powers and execute
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
15.3. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. No Representations.
15.4.1. General. The Agent shall not be responsible for the execution
or validity or enforceability of this Credit Agreement, the Revolving Credit
Notes, the Letters of Credit, any of the other Loan Documents or any
instrument at any time constituting, or intended to constitute, collateral
security for the Revolving Credit Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of
any such amounts owing with respect to the Revolving Credit Notes, or for
any recitals or statements, warranties or representations made herein or in
any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of the Borrower or any of its
Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein
or in any instrument at any time constituting, or intended to constitute,
collateral security for the Revolving Credit Notes or to inspect any of the
properties, books or records of the Borrower or any of its Subsidiaries. The
Agent shall not be bound to ascertain whether any notice, consent, waiver or
request delivered to it by the Borrower or any holder of any of the
Revolving Credit Notes shall have been duly authorized or is true, accurate
and complete. The Agent has not made nor does it now make any
representations or warranties,
<PAGE>
81
express or implied, nor does it assume any liability to the Banks, with
respect to the credit worthiness or financial conditions of the Borrower or
any of its Subsidiaries. Each Bank acknowledges that it has, independently
and without reliance upon the Agent or any other Bank, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement.
15.4.2. Closing Documentation, etc. For purposes of determining
compliance with the conditions set forth in Section 11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or BancBoston Securities Inc.,
as arranger to such Bank for consent, approval, acceptance or satisfaction,
or required thereunder to be to be consent to or approved by or acceptable
or satisfactory to such Bank, unless an officer of the Agent or BancBoston
Securities Inc. active upon the Borrower's account shall have received
notice from such Bank not less than two (2) days prior to the Closing Date
specifying such Bank's objection thereto and such objection shall not have
been withdrawn by notice to the Agent or BancBoston Securities Inc. to such
effect on or prior to the Closing Date.
15.5. Payments.
15.5.1. Payments to Agent. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
15.5.2. Distribution by Agent. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under
the Revolving Credit Notes or under any of the other Loan Documents might
involve it in liability, it may refrain from making distribution until its
right to make distribution shall have been adjudicated by a court of
competent jurisdiction. If a court of competent jurisdiction shall adjudge
that any amount received and distributed by the Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay
to the Agent its proportionate share of the amount so adjudged to be repaid
or shall pay over the same in such manner and to such Persons as shall be
determined by such court.
15.5.3. Delinquent Banks. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (a) to make available to the Agent its pro rata share of any
Revolving Credit Loan or to purchase any Letter of Credit Participation or
(b) to comply with the provisions of Section 14 with respect to making
dispositions
<PAGE>
82
and arrangements with the other Banks, where such Bank's share of any
payment received, whether by setoff or otherwise, is in excess of its pro
rata share of such payments due and payable to all of the Banks, in each
case as, when and to the full extent required by the provisions of this
Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall
be deemed a Delinquent Bank until such time as such delinquency is
satisfied. A Delinquent Bank shall be deemed to have assigned any and all
payments due to it from the Borrower, whether on account of outstanding
Revolving Credit Loans, Unpaid Reimbursement Obligations, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Revolving
Credit Loans and Unpaid Reimbursement Obligations. The Delinquent Bank
hereby authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all outstanding
Revolving Credit Loans and Unpaid Reimbursement Obligations. A Delinquent
Bank shall be deemed to have satisfied in full a delinquency when and if, as
a result of application of the assigned payments to all outstanding
Revolving Credit Loans and Unpaid Reimbursement Obligations of the
nondelinquent Banks, the Banks' respective pro rata shares of all
outstanding Revolving Credit Loans and Unpaid Reimbursement Obligations have
returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
15.6. Holders of Revolving Credit Notes. The Agent may deem and treat the
payee of any Revolving Credit Note or the purchaser of any Letter of Credit
Participation as the absolute owner or purchaser thereof for all purposes hereof
until it shall have been furnished in writing with a different name by such
payee or by a subsequent holder, assignee or transferee.
15.7. Indemnity. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has
not been reimbursed by the Borrower as required by Section 16), and
liabilities of every nature and character arising out of or related to this
Credit Agreement, the Revolving Credit Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or thereby, or
the Agent's actions taken hereunder or thereunder, except to the extent that
any of the same shall be directly caused by the Agent's willful misconduct or
gross negligence.
15.8. Agent as Bank. In its individual capacity, BKB shall have the same
obligations and the same rights, powers and privileges in respect to its
Commitment and the Revolving Credit Loans made by it, and as the holder of any
of the Revolving Credit Notes and as the purchaser of any Letter of Credit
Participations, as it would have were it not also the Agent.
<PAGE>
83
15.9. Resignation. The Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks, with the consent of the Borrower (so long as no
Default or Event of Default shall have occurred and be continuing), which
consent is not be unreasonably withheld, shall have the right to appoint a
successor Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's Rating
Service. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
15.10. Notification of Defaults and Events of Default. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 15.10 it shall promptly
notify the other Banks of the existence of such Default or Event of Default.
15.11. Duties in the Case of Enforcement. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
16. EXPENSES AND INDEMNIFICATION.
16.1. Expenses. The Borrower agrees to pay (a) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
<PAGE>
84
the other agreements and instruments mentioned herein, (b) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's, any Bank's or any such
Bank's lending office or branch's net income) on or with respect to the
transactions contemplated by this Credit Agreement (the Borrower hereby agreeing
to indemnify the Agent and each Bank with respect thereto), (c) the reasonable
fees, expenses and disbursements of the Agent's Special Counsel or any local
counsel to the Agent incurred in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, any amendments, modifications,
approvals, consents or waivers hereto or hereunder, or the cancellation of any
Loan Document upon payment in full in cash of all of the Obligations or pursuant
to any terms of such Loan Document for providing for such cancellation, (d) the
fees, expenses and disbursements of the Agent or any of its affiliates incurred
by the Agent or such affiliate in connection with the preparation, syndication
or interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and appraisal charges; (e) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Bank or the Agent, and
reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Bank or the Agent in connection
with (i) the enforcement of or preservation of rights under any of the Loan
Documents against the Borrower or any of its Subsidiaries or the administration
thereof after the occurrence of a Default or Event of Default and (ii) any
litigation, proceeding or dispute whether arising hereunder or otherwise, in any
way related to any Bank's or the Agent's relationship with the Borrower or any
of its Subsidiaries pursuant to the Loan Documents and (f) all reasonable fees,
expenses and disbursements of any Bank or the Agent incurred in connection with
UCC searches, UCC filings or mortgage recordings.
16.2. Indemnification. The Borrower agrees to indemnify and hold harmless
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Revolving Credit Loans or Letters of Credit; (b) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of the Borrower or any of its Subsidiaries comprised in the
Collateral; (c) the Borrower or any of its Subsidiaries entering into or
performing this Credit Agreement or any of the other Loan Documents; or (d) with
respect to the Borrower and its Subsidiaries and their respective properties and
assets, the violation of any Environmental Law, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release or threatened release
of any Hazardous Substances or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances
<PAGE>
85
(including, but not limited to, claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated
costs of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor,
the Banks and the Agent and its affiliates shall be entitled to select their
own counsel and, in addition to the foregoing indemnity, the Borrower agrees
to pay promptly the reasonable fees and expenses of such counsel. If, and to
the extent that the obligations of the Borrower under this Section 16.2 are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law.
16.3. Survival. The covenants contained in this ss.16 shall survive payment
or satisfaction in full of all other Obligations.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
17.1. Sharing of Information with Section 20 Subsidiary. The Borrower
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in each case, that any such Section 20
Subsidiary receiving such information shall be bound by the confidentiality
provisions of this Credit Agreement. Such authorization shall survive the
payment and satisfaction in full of all of Obligations.
17.2. Confidentiality. Each of the Banks and the Agent agrees, on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
(a) after such information shall have become public other than through a
violation of this Section 17, (b) to the extent required by statute, rule,
regulation or judicial process, (c) to counsel for any of the Banks or the
Agent, (d) to bank examiners or any other regulatory authority having
jurisdiction over any Bank or the Agent, or to auditors or accountants, (e) to
the Agent, any Bank or any Section 20 Subsidiary, (f) in connection with any
litigation to which any one or more of the Banks, the Agent or any Section 20
Subsidiary is a party, or in
<PAGE>
86
connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (g) to a Subsidiary or affiliate of such Bank as provided
in Section 17.1 or (h) to any assignee or participant (or prospective assignee
or participant) so long as such assignee or participant agrees to be bound by
the provisions of Section 19.6.
17.3. Prior Notification. Unless specifically prohibited by applicable law
or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such
non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
17.4. Other. In no event shall any Bank or the Agent be obligated or
required to return any materials furnished to it or any Section 20 Subsidiary
by the Borrower or any of its Subsidiaries. The obligations of each Bank
under this Section 17 shall supersede and replace the obligations of such
Bank under any confidentiality letter in respect of this financing signed and
delivered by such Bank to the Borrower prior to the date hereof and shall be
binding upon any assignee of, or purchaser of any participation in, any
interest in any of the Revolving Credit Loans or Reimbursement Obligations
from any Bank.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Revolving Credit Notes, in any of the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Revolving Credit Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Revolving Credit Notes or any of the other Loan Documents remains
outstanding or any Bank has any obligation to make any Revolving Credit Loans or
the Agent has any obligation to issue, extend or renew any Letter of Credit, and
for such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION; ACCESSION.
19.1. Conditions to Assignment and Accession.
19.1.1. Assignment by Banks. Except as provided herein, each Bank may
assign to one or more Eligible Assignees all or a portion of its interests,
<PAGE>
87
rights and obligations under this Credit Agreement (including all or a
portion of its Commitment Percentage and Commitment and the same portion of
the Revolving Credit Loans at the time owing to it, the Revolving Credit
Notes held by it and its participating interest in the risk relating to any
Letters of Credit); provided that (a) each of the Agent and, unless a
Default or Event of Default shall have occurred and be continuing, the
Borrower shall have given its prior written consent to such assignment,
which consent, in the case of the Agent and the Borrower, will not be
unreasonably withheld, (b) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Bank's rights and obligations
under this Credit Agreement, (c) each assignment shall be in an amount that
is a whole multiple of $5,000,000 and (d) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, substantially in the
form of Exhibit D hereto (an "Assignment and Acceptance"), together with any
Revolving Credit Notes subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof, (i) the
assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder, and (ii) the assigning Bank shall, to the extent provided in such
assignment and upon payment to the Agent of the registration fee referred to
in Sections 19.3, be released from its obligations under this Credit
Agreement.
19.1.2. Accession. Except as otherwise provided herein, Eligible
Assignees (each such Eligible Assignee, an "Acceding Bank") may, at the
request of the Borrower and with the consent of the Agent and the Majority
Banks, become party to this Credit Agreement by entering into an Instrument
of Accession in substantially the form of Exhibit E hereto (an "Instrument
of Accession") with the Borrower, the Majority Banks and the Agent and
assuming thereunder a Commitment, in an amount to be agreed upon by the
Borrower, such Acceding Bank, the Majority Banks and the Agent, to make
Revolving Credit Loans and participate in the risk relating to the Letters
of Credit pursuant to the terms hereof, and the Total Commitment shall
thereupon be increased by an amount of such Acceding Bank's Commitment;
provided, however, that (a) the Agent and the Majority Banks shall have
given its prior written consent to such accession; (b) the Borrower shall
have offered to each Bank, through the Agent, the initial right to increase
such Bank's Commitment by its pro rata share prior to granting such right to
another Bank or an Eligible Assignee all on the terms set forth below; (c)
in no event shall the Total Commitment be increased under any one or more of
such Instruments of Accession so as to exceed, in the aggregate,
$120,000,000; (d) no Default or Event of Default has occurred and is
continuing hereunder or would exist as a result of such an accession and
increase in the Total Commitment, and no default or event of default exists
under any other
<PAGE>
88
material agreement, instrument or document to which the Borrower or any
Subsidiary is a party, or would exist as a result of such an accession; and
(e) the Borrower shall have demonstrated to the satisfaction of the Agent
and the Majority Banks that the Total Commitment, as increased pursuant to
such accession, will be permitted under Section 4.3 of the Subordinated
Indenture and under the applicable provisions of the Subsequent Subordinated
Indenture and will constitute "Senior Indebtedness" as such term is defined
in each of the Subordinated Indenture and the Subsequent Subordinated
Indenture, and the Borrower shall have delivered to the Agent and the Banks,
if requested, a legal opinion satisfactory in form and substance to the
Agent, to the effect that the Indebtedness of the Borrower and its
Subsidiaries to the Agent and the Banks in respect of the Revolving Credit
Loan sand Reimbursement Obligations constitutes "Senior Indebtedness" under
the terms of each of the Subordinated Debt Documents (subject to such
assumptions and qualifications as may be satisfactory to the Agent). At such
time as the Borrower elects to increase the Total Commitment pursuant to
this Section 19.1.2, the Borrower shall provide the Agent with a written
notice of the amount by which it requests such an increase and the Agent
shall forthwith provide such notice to each Bank. Each Bank shall provide
the Agent with written notice, within three (3) Business Days of having
received such offer, of its decision (and with no response being deemed a
refusal by such Bank of such offer) as to whether to increase its
Commitment, and by the amount such Bank is offering to increase its
Commitment. The requested increase amount shall be allocated ratably among
the Banks electing to increase their Commitments, with any unallocated
portion, if any, then no longer being subject to any rights and first
refusal and being capable of being assumed by an Eligible Assignee. On the
effective date specified in any Instrument of Accession, Schedule 1 hereto
shall be deemed to be amended to reflect (a) the name, address, Commitment
and Commitment Percentage of such Acceding Bank, (b) the total Commitment as
increased by such Acceding Bank's Commitment, and (c) the changes to the
other Banks' respective Commitment Percentages and any changes to the other
Banks' respective Commitments (in the event such Bank is also the Acceding
Bank) resulting from such assumption and such increased Total Commitment.
19.2. Certain Representations and Warranties; Limitations; Covenants. By
executing and delivering an Assignment and Acceptance or Instrument of
Accession, as the case may be, the parties to the assignment thereunder confirm
to and agree with each other and the other parties hereto as follows:
(a) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of
any adverse claim, the assigning Bank makes no representation or warranty,
express or implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Credit Agreement or the execution, legality, validity, enforceability,
<PAGE>
89
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or mortgage,
(b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
and its Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations, or the performance or observance by the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their obligations
under this Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
(c) such assignee or Acceding Bank, as the case may be, confirms that
it has received a copy of this Credit Agreement, together with copies of the
most recent financial statements referred to in Section 7.4 and Section 8.4
and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance or Instrument of Accession, as the case may be;
(d) such assignee or Acceding Bank, as the case may be, will,
independently and without reliance upon the assigning Bank, the Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Credit Agreement;
(e) such assignee or Acceding Bank, as the case may be, represents and
warrants that it is an Eligible Assignee;
(f) such assignee or Acceding Bank, as the case may be, appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Credit Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto;
(g) such assignee or Acceding Bank, as the case may be, agrees that it
will perform in accordance with their terms all of the obligations that by
the terms of this Credit Agreement are required to be performed by it as a
Bank;
(h) such assignee or Acceding Bank, as the case may be, represents and
warrants that it is legally authorized to enter into such Assignment and
Acceptance or Instrument of Accession, as the case may be; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
<PAGE>
90
19.3. Register. The Agent shall maintain a copy of each Assignment and
Acceptance and Instrument of Accession delivered to it and a register or similar
list (the "Register") for the recordation of the names and addresses of the
Banks and the Commitment Percentage of, and principal amount of the Revolving
Credit Loans owing to and Letter of Credit Participations purchased by, the
Banks from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation, the assigning
Bank agrees to pay to the Agent a registration fee in the sum of $3,500.00.
19.4. New Revolving Credit Notes. Upon its receipt of an Assignment and
Acceptance or Instrument of Accession, as the case may be, executed by the
parties to such assignment, together with each Revolving Credit Note subject to
such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Revolving Credit Note, a new Revolving
Credit Note to the order of such Eligible Assignee or Acceding Bank, as the case
may be, in an amount equal to the amount assumed by such Eligible Assignee or
Acceding Bank, as the case may be, pursuant to such Assignment and Acceptance or
Instrument of Accession and, if the assigning Bank has retained some portion of
its obligations hereunder, a new Revolving Credit Note to the order of the
assigning Bank in an amount equal to the amount retained by it hereunder. Such
new Revolving Credit Notes shall provide that they are replacements for the
surrendered Revolving Credit Notes, shall be in an aggregate principal amount
equal to the aggregate principal amount of the surrendered Revolving Credit
Notes, shall be dated the effective date of such in Assignment and Acceptance
and shall otherwise be substantially the form of the assigned Revolving Credit
Notes. The surrendered Revolving Credit Notes shall be cancelled and returned to
the Borrower.
19.5. Participations. Each Bank may sell participations to one or more banks
or other entities in all or a portion of such Bank's rights and obligations
under this Credit Agreement and the other Loan Documents; provided that (a) each
such participation shall be in an amount of not less than $1,000,000, (b) any
such sale or participation shall not affect the rights and duties of the selling
Bank hereunder to the Borrower and (c) the only rights granted to the
participant pursuant to such participation arrangements with respect to waivers,
amendments or modifications of the Loan Documents shall be the rights to approve
waivers, amendments or modifications that would reduce the principal of or the
interest rate on any Revolving Credit Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment
<PAGE>
91
fees or Letter of Credit Fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest.
19.6. Disclosure. The Borrower agrees that in addition to disclosures made
in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge other than as a result of a
breach of any confidentiality obligation of any Person, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
19.7. Assignee or Participant Affiliated with the Borrower. If any
assignee Bank or Acceding Bank is an Affiliate of the Borrower, then any such
assignee Bank or Acceding Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or other
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 13.1 or Section 13.2, and the determination
of the Majority Banks shall for all purposes of this Credit Agreement and the
other Loan Documents be made without regard to such assignee Bank's or
Acceding Bank's interest in any of the Revolving Credit Loans or
Reimbursement Obligations. If any Bank sells a participating interest in any
of the Revolving Credit Loans or Reimbursement Obligations to a participant,
and such participant is the Borrower or an Affiliate of the Borrower, then
such transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 13.1 or Section 13.2 to the extent that such
participation is beneficially owned by the Borrower or any Affiliate of the
Borrower, and the determination of the Majority Banks shall for all purposes
of this Credit Agreement and the other Loan Documents be made without regard
to the interest of such transferor Bank in the Revolving Credit Loans or
Reimbursement Obligations to the extent of such participation.
19.8. Miscellaneous Assignment Provisions. Any assigning Bank shall retain
its rights to be indemnified pursuant to ss.16 with respect to any claims or
actions arising prior to the date of such assignment. If any assignee Bank or
Acceding Bank is not incorporated under the laws of the United States of America
or any state thereof, it shall, prior to the date on which any interest or fees
are payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification in form and substance
reasonably satisfactory to the Borrower as to its full exemption from deduction
or
<PAGE>
92
withholding of any United States federal income taxes. If the Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Majority Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this Section 19 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Revolving Credit Notes) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
19.9. Assignment by Borrower. The Borrower shall not assign or transfer any
of its rights or obligations under any of the Loan Documents without the prior
written consent of each of the Banks.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all notices
and other communications made or required to be given pursuant to this Credit
Agreement or the Revolving Credit Notes or any Letter of Credit Applications
shall be in writing and shall be delivered in hand, mailed by United States
registered or certified first class mail, postage prepaid, sent by overnight
courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by
delivery via courier or postal service, addressed as follows:
(a) if to the Borrower, at 12365 Crosthwaite Circle, Poway, California
92064, Attention: Chief Financial Officer, or at such other address for
notice as the Borrower shall last have furnished in writing to the Person
giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Jay L. Massimo, Director, or such other address for
notice as the Agent shall last have furnished in writing to the Person
giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(b) if sent by registered or certified first-class mail, postage prepaid, on the
third Business Day following the mailing thereof.
<PAGE>
93
21. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 20. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
22. HEADINGS.
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Section 26.
25. WAIVER OF JURY TRIAL.
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Revolving Credit Notes or any of the other Loan Documents, any
rights or obligations hereunder or thereunder or the performance of which rights
and
<PAGE>
94
obligations. Except as prohibited by law, the Borrower hereby waives any
right it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement,
the other Loan Documents or any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by the Borrower or
any of its Subsidiaries of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event
of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the written consent of the Majority Banks.
Notwithstanding the foregoing, a decrease in the rate of interest on the
Revolving Credit Notes (other than interest accruing pursuant to Section
5.11.2 following the effective date of any waiver by the Majority Banks of
the Default or Event of Default relating thereto), the amount of the
Commitments of the Banks (other than changes which are contemplated and
permitted by Section 19.1.2 hereof), and the amount of commitment fee or
Letter of Credit Fees hereunder may not be changed without the written
consent of the Borrower and the written consent of each Bank affected
thereby; the Revolving Credit Loan Maturity Date may not be postponed without
the written consent of each Bank affected thereby; this Section 26 and the
definition of Majority Banks may not be amended, without the written consent
of all of the Banks; and the amount of the Agent's Fee or any Letter of
Credit Fees payable for the Agent's account and Section 15 may not be amended
without the written consent of the Agent. No waiver shall extend to or affect
any obligation not expressly waived or impair any right consequent thereon.
No course of dealing or delay or omission on the part of the Agent or any
Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect
<PAGE>
95
such clause or provision in any other jurisdiction, or any other clause or
provision of this Credit Agreement in any jurisdiction.
<PAGE>
96
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement
as a sealed instrument as of the date first set forth above.
ANACOMP, INC.
By: /s/ Gary L. Bilsland
-----------------------------------------
Name: Gary L. Bilsland
Title: Assistant Treasurer
BANKBOSTON, N.A., individually and as Agent
By: /s/ Jay L. Massimo
-----------------------------------------
Name: Jay L. Massimo
Title: Director
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-19061) pertaining to the 1996 Restructure Recognition
Incentive Plan, 1996 Long-term Incentive Plan, 1996 Stock Options to
Non-employee Directors, 1996 Non-employee Director Stock Option Plan, and 1997
Qualified Employee Stock Purchase Plan of Anacomp, Inc. of our report dated
April 30, 1998 (except for note 15, as to which the date is May 5, 1998), with
respect to the financial statements of First Image Management Company (a
division of First Data Corporation) included in this Current Report on
Form 8-K dated June 24, 1998, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Atlanta, Georgia
June 24, 1998
<PAGE>
Exhibit 99.1
HOLD FOR RELEASE
- ----------------
ANACOMP AND FIRST DATA FINALIZE TRANSFER
OF FIRST IMAGE MANAGEMENT COMPANY
- ANACOMP ALSO ANNOUNCES INTENTION TO SELL DAS AND DPDS BUSINESS UNITS -
SAN DIEGO, California and HACKENSACK, New Jersey (June 18, 1998) --
Anacomp-Registered Trademark-, Inc. (Nasdaq: ANCO) and First Data Corporation
(NYSE: FDC) today announced the completion of Anacomp's purchase of First Image
Management Company, a division of First Data Corporation. Anacomp additionally
announced its intention to sell two of First Image's business units to third
parties.
Anacomp financed the $150 million purchase price through the successful
placement of an additional $135 million offering of its 10 7/8% Senior
Subordinated Notes, which were priced at 104%, plus available cash reserves.
First Image is a leading provider of COM (Computer Output to Microfilm)
services, a business synergistic with the COM, CD, and Internet solutions
offered by Anacomp through its nationwide network of service centers. As a
result of the acquisiton, Anacomp will gain entry into 20 new markets in the
United States. Anacomp also provides its customers with information management
consulting services, analog and digital systems, and comprehensive maintenance
and technical support.
"We're extremely pleased to welcome First Image clients and associates to
Anacomp," commented Anacomp President and Chief Executive Officer Ralph W.
Koehrer. "The addition of First Image's COM services business significantly
expands our presence in the marketplace, as well as providing us with
opportunities to improve our service offerings, enhance the value of what we
offer to customers, and increase our efforts to offer clients a migration path
to newer technologies."
(more)
<PAGE>
ANACOMP AND FIRST DATA ANNOUNCE COMPLETION OF FIRST IMAGE TRANSACTION
JUNE 18, 1998
PAGE 2
"First Data has taken another key step which strengthens the company's position
for continued leadership in our critical set of interrelated businesses," said
Ric Duques, chief executive officer of First Data Corporation. "The completed
divestiture of our imaging business sharpens management's focus on the company's
single strategic objective -- to help make electronic payments the payment
method of choice worldwide."
Anacomp also announced its intention to sell First Image's Document Acquisition
Services (DAS) business unit, which provides data entry and capture services,
and its Document Print and Distribution Services (DPDS) business unit, which
provides print-and-mail and demand publishing services. Anacomp is currently in
negotiations with interested third parties, but emphasized that until DAS and
DPDS are sold, it expects to operate the two business units as usual without any
disruption to clients or employees.
Anacomp additionally announced a new $80 million senior secured credit facility
arranged by BankBoston Securities Inc. The new facility replaces a $55 million
term loan and $25 million revolving facility, and it offers Anacomp greater
financial flexibility, a lower interest rate, and a longer maturity.
Hackensack, N.J.-based First Data Corporation is a global leader in payment
systems, electronic commerce, and information management products and services.
First Data and its principal operating units process the information that allows
millions of consumers to pay for goods and services by credit, debit, or smart
card at the point of sale or over the Internet, by check, or by wire money. For
further information about First Data, please visit the company on the Internet
at www.firstdatacorp.com.
Serving customers throughout the world, Anacomp provides products and services
that manage corporate information throughout its life cycle. For more
information about Anacomp, please visit the company's web site at
www.anacomp.com.
###
<TABLE>
<S> <C>
ANACOMP MEDIA CONTACT: ANACOMP ANALYST CONTACT:
Jeff Withem, Communications Nancy Vandeventer, Investor Relations
</TABLE>
<PAGE>
ANACOMP AND FIRST DATA ANNOUNCE COMPLETION OF FIRST IMAGE TRANSACTION
JUNE 18, 1998
PAGE 3
<TABLE>
<S> <C>
Phone: (619) 848-5545 Phone: (800) 350-3044
Email: [email protected] Email: [email protected]
FIRST DATA MEDIA CONTACT: FIRST DATA ANALYST CONTACT:
Colleen D'Alessandro, Communications Don Sharp, Investor Relations
Phone: (770) 857-7188 Phone: (770) 857-7118
Email: [email protected] Email: [email protected]
</TABLE>
The information in this news release may contain forward-looking statements
under the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to known and unknown risks,
uncertainties, and other factors that may cause actual results to be materially
different from those contemplated by the forward-looking statements.
Anacomp's news releases are distributed through PR Newswire and can be accessed
via the Internet (www.anacomp.com or www.prnewswire.com) or by fax-on-demand
(800-758-5804, ext. 054532). First Data's news releases also are distributed
through through PR Newswire and can be accessed via the internet
(www.firstdatacorp.com or www.prnewswire.com) or by fax-on-demand (800-758-5804,
ext. 103364).
Anacomp is a registered trademark of Anacomp, Inc.
