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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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T/SF COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 8732 73-1341805
(Primary Standard (I.R.S. Employer
(State or Other Industrial Identification Number)
Jurisdictionof Classification Code
Incorporation or Number)
Organization)
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888 SEVENTH AVENUE, 28TH FLOOR, NEW YORK, NEW YORK 10106 (212) 247-5160
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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BRIAN A. MEYER, ESQ.
GENERAL COUNSEL T/SF COMMUNICATIONS CORPORATION 888 SEVENTH AVENUE, 28TH FLOOR
NEW YORK, NEW YORK 10106 (212) 247-5160
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Agent For Service)
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WITH A COPY TO: BERTRAM A. ABRAMS, ESQ. PROSKAUER ROSE LLP 1585 BROADWAY NEW
YORK, NEW YORK 10036-8299
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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10 3/8% Series B Senior
Subordinated Notes Due
2007................. $100,000,000 100% $100,000,000 $30,303.03
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1997
OFFER TO EXCHANGE
ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
OF
T/SF COMMUNICATIONS CORPORATION
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THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
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T/SF Communications Corporation, a Delaware corporation (the "Issuer"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of 10 3/8% Series B Senior Subordinated Notes
Due 2007 of the Issuer (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for each $1,000 principal amount of the outstanding 10 3/8% Senior
Subordinated Notes Due 2007 of the Issuer (the "Old Notes"), of which
$100,000,000 principal amount is outstanding. The New Notes and the Old Notes
are collectively referred to herein as the "Notes."
The Issuer will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1997, unless the Exchange Offer is extended
(the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date, unless previously accepted for payment. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions
which may be waived by the Issuer and to the terms and provisions of the
Registration Rights Agreement (as defined herein). See "The Exchange Offer."
Old Notes may be tendered only in denominations of $1,000 and integral
multiples thereof. The Issuer has agreed to pay the expenses of the Exchange
Offer.
The New Notes will be general unsecured obligations of the Issuer, entitled
to the benefits of the Indenture (as defined herein) relating to the Old Notes,
and ranking subordinate in right of payment to all existing and future Senior
Debt (as defined herein) of the Issuer and senior in right of payment to any
subordinated indebtedness of the Issuer. As of September 30, 1997, after giving
effect to the Transactions (as defined herein) and the issuance of the Old
Notes, the Issuer would have had approximately $3.7 million aggregate principal
amount of Senior Debt outstanding. In addition, the Issuer would have had $25.0
million of additional borrowing availability under the Senior Credit Facility
(as defined herein). The Notes are unconditionally guaranteed, on an unsecured
senior subordinated basis, by certain Guarantors (as defined herein). See
"Description of the Transactions," "Capitalization" and "Description of the New
Notes--Subordination."
(continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1997.
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The indenture under which the Notes are issued (the "Indenture") permits the
Issuer and its subsidiaries to incur additional indebtedness, subject to
certain limitations. The form and terms of the New Notes are identical in all
material respects to the form and terms of the Old Notes except that the New
Notes have been registered under the Securities Act and will not contain terms
with respect to transfer restrictions or interest rate increases as described
herein. In addition, following the completion of the Exchange Offer, none of
the Notes will be entitled to the benefits of the provisions of the Exchange
Offer Registration Rights Agreement (as defined herein) relating to contingent
increases in the interest rates provided for pursuant thereto. See "The
Exchange Offer."
Interest on each New Note will accrue from the last Interest Payment Date (as
defined herein) on which interest was paid on the Old Note tendered in exchange
therefor or, if no interest has been paid on such tendered Old Note, from
October 29, 1997. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from the last Interest Payment
Date or October 29, 1997 (as the case may be) to the date of the issuance of
the New Notes. Interest on the New Notes is payable semi-annually on May 1 and
November 1 of each year, accruing from the last Interest Payment Date or
October 29, 1997 (as the case may be) at a rate of 10 3/8% per annum.
The New Notes will mature on November 1, 2007, unless previously redeemed,
and will not be subject to any sinking fund requirement. The New Notes will be
redeemable in cash at the option of the Issuer, in whole or in part, at any
time on or after November 1, 2002, at the redemption prices set forth herein,
plus accrued and unpaid interest thereon to the date of redemption. Prior to
November 1, 2000, the Issuer, at its option, may redeem in the aggregate up to
35% of the original principal amount of the Notes at 110.375% of the aggregate
principal amount so redeemed plus accrued and unpaid interest thereon to the
redemption date with the Net Proceeds (as defined herein) of one or more Public
Equity Offerings (as defined herein); provided that at least 65% of the
principal amount of the Notes originally issued remain outstanding immediately
after the occurrence of any such redemption and that any such redemption occurs
within 90 days following the closing of any such Public Equity Offering. See
"Description of the New Notes--Redemption--Optional Redemption."
In the event of a Change of Control (as defined herein), holders of the Notes
will have the right to require the Issuer to purchase their Notes at 101% of
the aggregate principal amount thereof plus accrued and unpaid interest thereon
to the purchase date. See "Description of the Notes--Change of Control." In
addition, the Issuer is obligated in certain instances to make offers to
repurchase the Notes at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon to the date of
repurchase with the net cash proceeds of certain asset sales. See "Description
of the New Notes--Certain Covenants--Limitation on Asset Sales."
Based on an interpretation of the Securities Act by the staff of the Division
of Corporate Finance (the "Staff") of the Securities and Exchange Commission
(the "Commission") set forth in several no-action letters to third parties, and
subject to the immediately following sentence, the Issuer believes that the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any purchaser of Notes who is an "affiliate" of the Issuer or who
intends to participate in the Exchange Offer for the purpose of distributing
the New Notes (i) will not be able to rely on the interpretation by the staff
of the Commission set forth in the above referenced no-action letters, (ii)
will not be able to tender Old Notes in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the New Notes, unless
such sale or transfer is made pursuant to an exemption from such requirements.
2
<PAGE>
Each holder of the Old Notes who wishes to exchange Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including that (i) any New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, (ii) such
holder has no arrangements with any person to participate in the distribution
of such New Notes and (iii) such holder is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Issuer or, if such holder is an
affiliate, that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
holder is not a broker-dealer, it will be required to represent that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the holder is a broker-dealer (a "Participating Broker-Dealer") that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it has no arrangements with any person
to participate in the distribution of the New Notes and that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
To date, the Staff has taken the position that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to New Notes
(other than a resale of an unsold allotment from the original sale of the Old
Notes) with this Prospectus. Under the Registration Rights Agreement, the
Issuer is required to allow Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this
Prospectus in connection with the resale of such New Notes. A broker-dealer
which purchased Old Notes from the Issuer may not participate in the Exchange
Offer. The Issuer will not receive any proceeds from the Exchange, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Notes will be new securities for which there currently is no market.
Although First Union Capital Markets Corp. has informed the Issuer that it
currently intends to make a market in the New Notes, it is not obligated to do
so, and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the New Notes. The Issuer does not intend to apply for listing
of the New Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System. The
Notes have been designated for trading in the Private Offering, Resales and
Trading through Automated Linkages ("PORTAL") Market of the National
Association of Securities Dealers, Inc.
3
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TABLE OF CONTENTS
<TABLE>
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PAGE
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Available Information.................................................... i
Incorporation of Certain Documents by Reference.......................... ii
Cautionary Statement Regarding Industry Forecasts........................ ii
Cautionary Statement Regarding Forward Looking Statements................ iii
Summary.................................................................. 1
Risk Factors............................................................. 19
Description of the Transactions.......................................... 25
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Unaudited Pro Forma Consolidated Financial Information................... 28
Selected Historical Consolidated Financial Data.......................... 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
The Exchange Offer....................................................... 45
Business................................................................. 53
Management............................................................... 65
Certain Relationships and Related Transactions........................... 71
Security Ownership of Certain Beneficial Owners and Management........... 71
Description of the Senior Credit Facility................................ 72
Description of the New Notes............................................. 73
Certain U.S. Federal Income Tax Consequences............................. 98
Plan of Distribution..................................................... 100
Legal Matters............................................................ 100
Independent Public Accountants........................................... 100
Index to Financial Statements............................................ F-1
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AVAILABLE INFORMATION
While any Notes remain outstanding, the Issuer will make available upon
request, to any holder and any prospective purchaser of Notes the information
required pursuant to Rule 144A(d)(4) under the Securities Act during any
period in which the Issuer is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any such
request should be directed to the Chief Financial Officer of the Issuer.
The Issuer currently is subject to the informational requirements of the
Exchange Act and the rules and regulations thereunder, and in accordance
therewith files reports and other information with the Commission via EDGAR.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, as well as regional offices of the
Commission at the Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10007. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. Materials filed electronically
with the Commission via EDGAR may also be accessed through the Commission's
home page on the World Wide Web at http://www.sec.gov. The Issuer has delisted
the Common Stock (as defined herein) from the American Stock Exchange (the
"AMEX"), where the trading of shares of Common Stock previously was reported,
and has applied to the Commission to deregister the Common Stock under the
Exchange Act. As of September 4, 1997, there were 1,611,472 shares of Common
Stock publicly held (for purposes of the AMEX) and 273 holders of record of
the shares of Common Stock outstanding. Following the consummation of the
Tender Offer (as defined herein), there were 101,969 shares of Common Stock
publicly held (for purposes of the AMEX) and
i
<PAGE>
approximately 113 holders of record of the shares of Common Stock outstanding.
Pursuant to the AMEX's published guidelines, shares of common stock are not
eligible to be included for listing if, among other things, the number of
shares publicly held falls below 250,000, the number of record and beneficial
holders of shares falls below 300 or the aggregate market value of such
publicly held shares is $1,000,000. Shares held directly or indirectly by an
officer or director of the issuer or by any beneficial owner of more than 5%
of the shares of the issuer ordinarily will not be considered as being
publicly held for this purpose.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed via EDGAR by the Issuer with the Commission
under the Securities Act. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement and the exhibits and schedules thereto and
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Issuer and the
securities offered hereby. Statements contained herein concerning the
provisions of any documents filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in
each instance reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus by reference as of their
respective dates: (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, (ii) Report on Form 10-K/A filed with the Commission on or
about April 29, 1997, and (iii) Quarterly Reports on Form 10-Q for the three
months ended March 31, 1997 and the three months ended June 30, 1997. All
documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document that is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The making of a modifying or superseding statement shall not be deemed an
admission for any purposes that the modified or superseded statement, when
made, constituted a misrepresentation, an untrue statement or a material fact
or an omission to state a material fact that is required to be stated or that
is necessary to make a statement not misleading in light of the circumstances
in which it was made.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the request of such person, a copy of any or
all of the documents incorporated herein by reference (other than exhibits
hereto, unless such exhibits are specifically incorporated by reference into
such documents). Written requests for such copies should be directed to
Corporate Secretary, T/SF Communications Corporation, 888 Seventh Avenue, 28th
Floor, New York, New York 10106. Telephone inquiries may be directed to
Corporate Secretary, at (212) 247-5160.
CAUTIONARY STATEMENT REGARDING INDUSTRY FORECASTS
Market data and certain industry forecasts used throughout this Prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified
and the Issuer does not make any representation as to the accuracy of such
information.
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward-looking statements. When used in this Prospectus, the words
"estimate," "project," "anticipate," "expect," "intend," "believe," "seek,"
"plan," as well as variations of such words and similar expressions, are
intended to identify forward-looking statements. While management believes
these statements are reasonable, prospective purchasers of the Notes should be
aware that actual results could differ materially from those projected by such
forward-looking statements as a result of the risk factors set forth in this
Prospectus, including, without limitation, in "Risk Factors," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," or other factors.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE ISSUER OR THE EXCHANGE AGENT (AS DEFINED HEREIN).
NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
iii
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SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements, including the notes thereto, appearing elsewhere in
this Prospectus. Except as the context otherwise requires, as used in this
Prospectus, all references to the Company refer to T/SF Communications
Corporation, its subsidiaries and, following the Drop-Down Restructuring, the
LLCs (as such terms are defined herein).
THE COMPANY
The Company is a diversified business media company which principally
operates two lines of business: (i) business and professional information
services ("Information Services") and (ii) business to business communications,
publishing and related services ("Business to Business Communications").
Information Services includes: (i) Transportation Information Services, Inc.
("TISI"), which, with its proprietary database, is the leading provider of pre-
employment screening information used by the trucking industry to facilitate
compliance with U.S. Government regulations and (ii) CORSEARCH(R), Inc.
("CORSEARCH"), the second largest provider in the United States of trademark
and trade name research to law firms and corporations. Business to Business
Communications is conducted through several individual businesses, each of
which is characterized by leading competitive positions within specialized
market niches. Business to Business Communications includes: (i) Atwood
Convention Publishing, Inc. ("Atwood"), the largest domestic independent
publisher of exposition and association related publications and directories;
(ii) Galaxy Registration, Inc. ("Galaxy"), the largest independent provider of
trade show and convention registration, exhibitor information and "lead"
management services in the United States and (iii) G.E.M. Communications, Inc.
(together with its subsidiaries and affiliates, "GEM"), which owns and operates
the World Gaming Congress(R), the world's largest trade show catering to the
legalized gaming industry, and publishes trade magazines directed to the
legalized gaming industry, principally IGWB (formerly International Gaming and
Wagering Business), the leading publication catering to gaming industry
executives. On a pro forma basis, the Company's consolidated revenues and
adjusted EBITDA (as defined herein) for the twelve-month period ended September
30, 1997 were approximately $78.9 million and $17.3 million, respectively. Of
such pro forma consolidated revenues, approximately 40% represented Information
Services and approximately 60% represented Business to Business Communications.
Of such pro forma adjusted EBITDA, 55% represented Information Services and 45%
represented Business to Business Communications.
INFORMATION SERVICES
Information Services provides specialized information and database management
services to precise market segments. From October 1, 1992 through September 30,
1997, Information Services' revenues have grown at a compounded annual growth
rate of 22% (without any pro forma adjustment).
TISI, which since 1983 has operated its transportation services business
under the trade name DAC Services ("DAC"), is the leading supplier of
comprehensive pre-employment screening information to the trucking industry and
a provider of driving record-related and other risk assessment and underwriting
information to the insurance industry. DAC, endorsed by the American Trucking
Associations since 1986 and the trucking associations of 41 states, currently
maintains a computer network providing on-line electronic access to a
proprietary employment history database of over 2.6 million job records
concerning over 1.4 million truck drivers. This proprietary database, which is
DAC's key asset, is operated as an information cooperative through which DAC's
approximately 2,000 transportation industry members contribute employment
records in return for an economic credit against DAC services and the ability
to access DAC's employment history database. The Company is not aware of any
comparable databases offered by competitors and believes its large cooperative
membership and proprietary database represent significant competitive
advantages which would take a potential competitor several years to replicate.
1
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Management believes the demand for the information in its DAC database is
driven primarily by federal government regulation, the Company's ability to
provide the information on a timely basis and the Company's success in
marketing to the "truckload" segment of the trucking industry, which
historically exhibits high driver turnover.
DAC is an integral component of the U.S. trucking industry, providing
information services to over 5,600 transportation-related customers, including
its 2,000 members and 93 of the largest 100 U.S. "for hire" carriers. In
addition, 40 of the 41 largest U.S. "truckload" carriers and 30 of the 59
largest "route" carriers are contributing members to DAC's employment records
database. Non-member customers are precluded from accessing the cooperative
employment records database; however, they are provided access to DAC's other
services, including motor vehicles records ("MVRs") and criminal records.
DAC provides comprehensive information which is used by transportation
industry customers to satisfy current U.S. Department of Transportation ("DOT")
pre-employment screening requirements. Due to public safety concerns, DOT
regulations currently require trucking companies to investigate the driving
history, previous three-year employment history and, since 1995, previous drug
and alcohol test results of prospective drivers, but do not require previous
employers to respond to such inquiries. If certain proposed DOT regulations,
which would require previous employers to respond to such inquiries, are
adopted, management believes there could be greater demand for DAC's services.
In addition to providing MVRs to the transportation industry, TISI supplies
MVRs to the insurance industry for the screening of insurance applications.
TISI, endorsed by the Professional Insurance Agents' Association, provides over
5,000 insurance industry customers access to TISI's computer network to request
MVRs and other information. Approximately 85% of these customers are insurance
agents, with the remaining 15% representing branch offices, managing general
agents, brokers and a small number of regional and home office locations. These
customers primarily utilize TISI's data in assessing insurance underwriting
risk and also purchase TISI's workers' compensation and credit report
information.
CORSEARCH, acquired by the Company in 1996, is the second largest provider of
trademark and trade name search services in the United States. CORSEARCH
provides comprehensive trademark and trade name searches for over 1,100 law
firm and corporate clients. Management believes the increase in recent filings
of applications for new trademarks and trade names, a greater corporate
emphasis on protecting existing trademarks and trade names, growing Internet
usage and the increased international expansion of U.S. companies collectively
have created greater demand for CORSEARCH's services, and provide significant
opportunities to expand CORSEARCH's database operations. The U.S. Patent and
Trade Office ("PTO") estimates that the number of domestic trademark filings
will increase at a rate of 12% per annum through the year 2000. The number of
basic trademark and trade name searches executed by CORSEARCH grew from 13,795
in 1992 to 19,491 in 1996, a 41% increase.
CORSEARCH's highly trained, industry-focused researchers use CORSEARCH's
proprietary software, proprietary CORBASE(R) and CORSTATE(R) databases, third
party databases and, to a lesser extent, published resources for completing
customer searches. Although the majority of the information contained in
CORSEARCH's databases is publicly available from governmental authorities and
others, management believes that because of the cycle of intellectual property
registration renewals, it likely would take a new competitor several years to
compile a database containing the state registration information currently
maintained by CORSEARCH and its two primary competitors. New competitors may
purchase the federal database from the PTO, but significant computer
programming would be needed to make it usable. Management believes that
CORSEARCH, which competes primarily on the quality, accuracy and timeliness of
its data, provides a consistently high level of service to its clients.
BUSINESS TO BUSINESS COMMUNICATIONS
Business to Business Communications, through several individual businesses,
provides a wide range of business to business communications, publishing and
related services.
2
<PAGE>
Atwood, founded in 1982, is the leading independent publisher of daily trade
show and convention newspapers, directories and related publishing products
that are directed to the attendees of U.S. trade shows and conventions. During
1996, Atwood provided publishing, communications or promotional services to
approximately 7,000 exhibitors at approximately 207 trade shows and
conventions, including 44 of the "Tradeshow 200" exhibitions as named by the
1997 Tradeshow Week Data Book. Of the 207 trade shows Atwood provided services
to in 1996, 81% represented trade shows served by Atwood in 1995. Atwood also
publishes the trade journal EXPO(R), The Magazine for Exposition Management
("EXPO"), the official publication of the International Association for
Exposition Management.
Galaxy, founded in 1982, markets its comprehensive registration services,
automated "lead" management products and information services on an exclusive
basis to trade associations, promoters, exhibitors and attendees of
expositions, trade shows and conventions. Multiple versions of Galaxy's
"ExpoCards" (magnetic stripe or "smartcards") are utilized in the registration
process to allow convention and trade show exhibitors to digitally capture and
manipulate attendee information for "lead" management and follow-up. Galaxy can
provide the attendee information collected by its proprietary systems either in
the form of customized reports or digitally, so that the data can be
manipulated by its customers to meet their individual requirements. In 1996,
Galaxy provided services to 41 of the "Tradeshow 200" exhibitions, including
four of the top five such exhibitions. Of the 211 trade shows Galaxy provided
services to in 1996, 84% represented trade shows served by Galaxy in 1995.
Management believes that Galaxy, from its experience servicing a wide variety
of expositions, has developed a unique set of organizational skills and
technical expertise which provides Galaxy with competitive advantages.
To date, Atwood and Galaxy have focused primarily on North American trade
shows, which during 1996 represented approximately 4,300 shows, in excess of
101 million attendees and 1.25 million exhibiting companies. According to the
Center for Exhibition Industry Research, the number of trade shows and
attendees in North America is forecasted to increase to approximately 4,500 and
approximately 140 million, respectively, by the year 2000.
GEM, founded in 1986 as BMT Publications, Inc., is the leading global
provider of business information and marketing resources for the legalized
gaming industry. GEM owns and operates the World Gaming Congress, the largest
legalized gaming industry trade show in the world and the only trade show
endorsed by the American Gaming Association as the organization's official
trade show. In 1996, the World Gaming Congress sold over 185,000 square feet of
exhibition space and included over 21,700 attendees, an increase from 117,000
square feet and 17,500 attendees in 1994. GEM also publishes IGWB, which, with
a controlled circulation of over 26,000, is the leading trade journal directed
to the worldwide legalized gaming industry.
BUSINESS AND OPERATING STRATEGIES
Management has significant experience in the information services, exposition
services and publishing businesses and has developed a business and operating
strategy to: (i) maximize the strengths of the Company's core businesses; (ii)
expand into new products, services and geographic markets; (iii) expand through
selective acquisitions to enhance the Company's established business platforms
and (iv) improve operating efficiencies.
INFORMATION SERVICES
Management believes that both TISI and CORSEARCH have been successful because
they target well defined market niches and possess competitive advantages
through their proprietary databases, value added information products and
superior customer service. Management's growth strategy for expanding upon
these existing business platforms consists of:
3
<PAGE>
. Broadening TISI's Customer Focus into Additional Trucking and
Transportation Segments. TISI has historically enjoyed success with
"truckload" carriers due to the high employee turnover rates associated
with this segment of the trucking industry. Management intends to
continue capitalizing on this success, but believes the employment
history database can be more aggressively marketed to the other segments
of the U.S. trucking and transportation industry. Specifically,
management intends to expand marketing of its database services to
"private fleet" carriers, which include approximately 14,000 trucking
companies. Management believes that, by expanding the number of
employment records contained in the DAC database, TISI will increase
revenues and profits through higher customer "hit rates" per search.
. Expanding DAC's Business Model to Other Industries. Management believes
that there are opportunities to expand the successful DAC pre-employment
screening business model and core competencies to other industries that
tend to raise public safety concerns, involve substantial financial
risks for employers or have high employee turnover rates. Management
plans to build employment history databases and market pre-employment
screening services to employers in industries possessing these
characteristics.
. Enhancing CORSEARCH's International Search Capabilities. CORSEARCH has
historically focused on providing domestic searches for U.S. and foreign
based clients. With the growing presence of global businesses and the
proliferation of Internet usage, there is a growing customer need for
international trademark database searches. As a result, CORSEARCH is in
the process of identifying international trademark and trade name
information sources and building databases similar to those used in its
domestic operations.
. Broadening CORSEARCH's On-Line Product Offering. Management believes
that by expanding CORSEARCH's on-line and Internet products to allow
customers to perform pre-screening searches, CORSEARCH can increase
revenues from existing customers who are currently utilizing these
products from competitors and attract new customers.
. Expanding into Patent Search Services. Management intends to expand its
product offering to include patent searches, likely through
acquisitions. Such acquisitions would provide the Company with greater
breadth of products for the intellectual property market and an
increased ability to serve its existing client base.
BUSINESS TO BUSINESS COMMUNICATIONS
Management believes that each of the business units comprising Business to
Business Communications is a leader in its respective markets and that there
are numerous opportunities to enhance the value of these existing franchises.
. Cross-Selling and Product Bundling Opportunities between Atwood and
Galaxy. Galaxy and Atwood have traditionally been operated as separate
entities and currently have only 13 mutual clients among the 75 clients
which Galaxy and Atwood collectively serve within the "Tradeshow 200."
Management intends to capitalize on the loyal customer base of both
Atwood and Galaxy by marketing both unit's products on a packaged basis
to position Atwood and Galaxy as a comprehensive provider of multiple
media, information and exhibitor services to their customers.
. Expanding Atwood's Custom Publishing Customer Base. Atwood historically
has focused its custom publishing activities on the exposition and trade
association markets. Management has identified additional markets, such
as corporate publishing and corporate gatherings, where Atwood can
capitalize on its custom publishing capabilities.
. Augmenting Galaxy's Exhibitor Products and Services. Management intends
to expand the scope and level of information gathered with respect to
attendees to create additional value-added information products for
exhibitors and trade show managers. For example, Galaxy provided Sony
Electronics, Inc.
4
<PAGE>
("Sony") with a series of sophisticated electronic "lead" management
tools at the 1997 National Association of Broadcasters ("NAB") trade
show, which, according to TradeShow & Exhibit Manager magazine, enabled
Sony to increase the number of booth visitors it "qualified" to 12,000
from 5,000 during the 1996 NAB show, representing an increase of 140%.
. Expanding Galaxy's Services to the European Marketplace. According to
1996 M&A Exhibition Directory, the exposition and trade show marketplace
in Europe is approximately five times as large as that in the U.S.
(based on total square footage of exhibition space). Galaxy has
historically provided registration and "lead" management services to the
European exposition marketplace through a licensee, Galaxy Expocard
Europe. The Company acquired 73% of Galaxy Expocard Europe in 1997 and
management intends to enhance Galaxy's international capabilities by
more aggressively marketing products to European exposition managers
through Galaxy Expocard Europe.
. Pursuing Selective Acquisitions of Exposition Services
Companies. Management believes that the exposition services industry is
highly fragmented and plans to pursue opportunistic acquisitions to
enhance Galaxy's existing service offerings so that Galaxy, in concert
with Atwood, can become a comprehensive provider of exposition media
services.
. Leveraging Key GEM Franchises. GEM's leading position in the legalized
gaming market is a direct result of its strong brand names. IGWB and the
World Gaming Congress are widely recognized domestically and
internationally as the leading sources of business information regarding
the legalized gaming market. Management intends to utilize this position
to increase revenues through (i) launching or acquiring additional
gaming related trade publications targeting specific high-growth gaming
markets (e.g., slot machines and bingo), (ii) exploring the acquisition
or launch of trade shows complementary to the World Gaming Congress and
(iii) working closer with the American Gaming Association to develop
ancillary revenue sources.
. Rationalizing GEM's Overhead Costs. IGWB, GEM's flagship publication,
was formerly part of a group of five trade magazines, four of which were
sold in 1994 and 1995. Following this sale, IGWB continued to occupy the
same office space, although the organization's publishing revenue had
been reduced by approximately 71%. Management has identified
opportunities for cost savings through integration with other
publications.
. Expanding GEM to New Gaming Markets. Management believes portions of the
world's gaming markets are relatively immature and underserved. As a
result, management plans to capitalize on trade show and publishing
opportunities in Europe, Latin America, Asia and Sub-Saharan Africa. As
a first step, the Company recently purchased a 49% ownership stake in
Gaming for Africa, the leading trade show and magazine targeting the
legalized gaming industry in South Africa, one of the world's growing
gaming markets. Management intends to seek other acquisitions and joint
venture opportunities for worldwide expansion.
THE EQUITY INVESTORS
After giving effect to the Recapitalization (as defined below), VS&A-T/SF,
L.L.C. ("VS&A-T/SF") and The Fir Tree Value Fund, L.P. and its affiliates
(collectively, "Fir Tree" and together with VS&A-T/SF, the "Equity Investors")
will own 64% and 36% of the Common Stock, respectively. VS&A-T/SF is
controlled by VS&A Communications Partners II, L.P. ("VS&A Fund II), a private
equity fund affiliated with Veronis, Suhler & Associates, Inc. ("VS&A"), an
investment banking and research firm specializing in the media and
communications industry. Other investors in VS&A-T/SF include two
institutional investors and an affiliate of Ian L. M. Thomas, the new
President and Chief Executive Officer of the Issuer.
Since its founding in 1981, VS&A has provided investment banking services to
media and communications companies in over 360 completed transactions totaling
approximately $20.0 billion in aggregate transaction value. The objective of
VS&A's private equity funds is to capitalize on the industry knowledge and
transactional
5
<PAGE>
experience of VS&A's professionals in order to enhance the value of
acquisitions and generate substantial capital appreciation. VS&A's first
private equity fund, VS&A Communications Partners, L.P. ("VS&A Fund I"), was a
$57.0 million fund formed in 1987. VS&A Fund I invested in eight entities in
the consumer and trade magazine publishing, television and radio broadcasting
and cable television industries and sold its last investment in 1996. According
to Venture Economics, VS&A Fund I's performance placed it in the top 10% of
peer equity funds during its time period. VS&A Fund II was formed in 1995 with
a capital commitment of $330.0 million. As of September 30, 1997, VS&A Fund II
had invested or committed approximately $185.0 million in eight entities in the
trade magazine, exposition, cable television, information services, radio
broadcasting and advertising directories publishing industries.
Fir Tree has been an investor in the Issuer since 1994 and prior to the
Recapitalization owned 14.6% of the Issuer's common stock (the "Common Stock").
In connection with the Recapitalization, Fir Tree maintained its existing
ownership interest (the "Fir Tree Rollover") which, after the Recapitalization,
will constitute 36% of the Common Stock. Fir Tree is a private investment firm
formed in 1994 by Jeffrey D. Tannenbaum. Mr. Tannenbaum previously was an
investment professional with Kohlberg & Co.
The Equity Investors believe their collective transactional experience,
coupled with VS&A's specialized knowledge of media and communications and Fir
Tree's history with the Company, will provide the unique ability to identify
opportunities to grow the Company's core businesses.
THE TRANSACTIONS
The Recapitalization. Pursuant to a tender offer (the "Tender Offer")
completed on October 9, 1997 by the Issuer for its Common Stock, a purchase,
consummated on October 9, 1997 (the "Stock Purchase") by a subsidiary of VS&A-
T/SF of 881,988 shares of Common Stock, the repurchase, consummated on October
9, 1997 by the Issuer of certain employee stock options (the "Option
Repurchase"), a merger or reverse stock split (the "Second Step Transaction")
which has not yet occurred, and the Drop Down Restructuring described below,
the Company will be recapitalized and VS&A-T/SF and Fir Tree will own 64% and
36% of the Common Stock, respectively. The Tender Offer, Stock Purchase, Option
Repurchase, Second Step Transaction and Drop Down Restructuring are
collectively referred to herein as the "Recapitalization." See "Description of
the Transactions."
As part of the Recapitalization, VS&A-T/SF and Fir Tree caused the Company to
contribute to T/SF Holdings, LLC ("Holdings LLC") substantially all of the
assets and liabilities of Atwood, Galaxy and GEM in exchange for a $45.0
million preferred equity interest in Holdings LLC. VS&A-T/SF and Fir Tree
contributed $4.5 million to acquire the common equity interests in Holdings LLC
in the same proportion as their ownership of the Common Stock immediately
following the consummation of the Recapitalization. The preferred equity
interest held by the Issuer carries an 11% annual distribution rate and gives
the Issuer voting, operational and management control of Holdings LLC. Holdings
LLC has contributed the assets of Galaxy, Atwood and GEM (together with the
Company's contribution of such Assets to Holdings LLC, the "Drop Down
Restructuring") into three wholly-owned limited liability companies (the
"Operating LLCs"). Holdings LLC and the Operating LLCs are collectively
referred to herein as the "LLCs." As a result of the control of the LLCs
directly or indirectly, by the Issuer, the financial results of the LLCs will
be included in the consolidated financial statements of the Company. Each of
the LLCs has jointly and severally unconditionally guaranteed, on an unsecured
senior subordinated basis, the payment of principal, premium, if any, and
interest on the Notes, which guarantees are subordinated to all Senior Debt of
the LLCs and the other Guarantors. After giving effect to the Recapitalization,
the Company's organizational structure will be as shown on the following chart:
6
<PAGE>
LOGO
The Financing Plan. The Offering (as defined herein) was part of a plan
designed to enable the Issuer to finance the Recapitalization. In connection
with the Recapitalization, the Issuer: (i) borrowed $20.0 million under a $25.0
million revolving senior credit facility (the "Senior Credit Facility") with
First Union National Bank ("FUNB"), an affiliate of the Initial Purchaser (as
defined herein); (ii) issued $80.0 million aggregate principal amount of notes
pursuant to a facility (the "Bridge Financing Facility") provided by First
Union Corporation, an affiliate of the Initial Purchaser; (iii) maintained Fir
Tree's ownership interest through the Fir Tree Rollover valued at approximately
$19.6 million and (iv) received $40.0 million(/1/) of equity contributions (the
"Equity Contributions") from VS&A-T/SF and Fir Tree. The Recapitalization, the
borrowings under the Senior Credit Facility and the Bridge Financing Facility,
the Fir Tree Rollover and the Equity Contributions are collectively referred to
herein as the "Transactions." The net proceeds of the notes sold pursuant to
the Offering were applied to repay indebtedness incurred in connection with the
Recapitalization under the Senior Credit Facility and the Bridge Financing
Facility.
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (dollars in thousands).
<TABLE>
<CAPTION>
SOURCES OF FUNDS:
- -----------------
<S> <C>
Senior Credit Facility (1).. $ 20,000
Bridge Financing Facility... 80,000
Equity Contributions (2).... 40,000
Fir Tree Rollover........... 19,600
--------
Total sources............. $159,600
========
</TABLE>
<TABLE>
<CAPTION>
USES OF FUNDS:
- --------------
<S> <C>
Share repurchase and other (1).................................... $130,067
Fir Tree Rollover................................................. 19,600
Fees and expenses (3)............................................. 8,250
Working capital................................................... 1,683
--------
Total uses...................................................... $159,600
========
</TABLE>
- --------
(1) Reflects consideration paid to repurchase shares pursuant to the Tender
Offer, Option Repurchase and Second Step Transaction, as well as severance
and bonus expenses associated with the Recapitalization. The amounts drawn
on the Senior Credit Facility and used to repurchase shares, as well as
certain related expenses, were drawn and used in connection with
transactions in both October 1997 (i.e., the Tender Offer and Option
Repurchase) and January 1998 (i.e., the Second Step Transaction).
(2) The Equity Contributions consist of $35.5 million contributed by VS&A-T/SF
to the Issuer and $4.5 million contributed to Holdings LLC as part of the
Drop Down Restructuring. Of the $4.5 million contributed to Holdings LLC,
VS&A-T/SF and Fir Tree contributed approximately $2.9 million and $1.6
million, respectively.
(3) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
7
<PAGE>
OFFERING OF THE OLD NOTES
On October 29, 1997, the Issuer completed the private sale to First Union
Capital Markets Corp. (the "Initial Purchaser") of $100.0 million principal
amount of the Old Notes at a price of 97% of the principal amount thereof. The
Initial Purchaser resold the Old Notes to a limited number of qualified
institutional buyers at an initial price to investors of 100% of the principal
amount thereof, with net proceeds to the Issuer of $97.0 million (the
"Offering"). The Offering was a private placement transaction exempt from the
registration requirements of the Securities Act pursuant to Rule 144A and
Section 4 thereof.
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $100,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be obligations of the Issuer entitled to the
benefits of the Indenture relating to the Old Notes. The form and terms of the
New Notes are identical in all material respects to the form and terms of the
Old Notes except that the New Notes have been registered under the Securities
Act and will not contain terms with respect to transfer restrictions or
interest rate increases as described herein. In addition, following the
completion of the Exchange Offer, none of the Notes will be entitled to the
benefits of the provisions of the Exchange Offer Registration Rights Agreement
relating to contingent increases in the interest rates provided for pursuant
thereto. See "Description of the New Notes."
The Exchange Offer...... $1,000 principal amount of New Notes will be issued
in exchange for each $1,000 principal amount of Old
Notes validly tendered pursuant to the Exchange
Offer. As of the date hereof, $100,000,000 in
aggregate principal amount of Old Notes are
outstanding. The Issuer will issue the New Notes to
tendering holders of Old Notes on or promptly after
the Expiration Date.
Resale.................. The Issuer believes that the New Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except that any of its
"affiliates" or any "dealer," as such terms are
defined under the Securities Act, that exchanges Old
Notes held for its own account (a "Restricted
Holder") may be required to deliver copies of this
Prospectus in connection with any resale of the New
Notes issued in exchange for such Old Notes (the
"Prospectus Delivery Requirement"). A broker-dealer
will be required to acknowledge that it has no
arrangements with any person to participate in the
distribution of the New Notes. A broker-dealer which
purchased Old Notes from the Issuer may not
participate in the Exchange Offer. See "The Exchange
Offer--General" and "Plan of Distribution."
Expiration Date......... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended See "The
Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the Interest on each New Note will accrue from the last
New Notes and the Old Interest Payment Date on which interest was paid on
Notes.................. the Old Note tendered in exchange therefor or, if no
interest has been paid on such tendered Old Note,
from October 29, 1997. Holders of Old Notes whose Old
Notes are accepted for exchange will be deemed to
have waived the right to receive any payment
in respect of interest on such Old Notes accrued from
the last Interest
8
<PAGE>
Payment Date or October 29, 1997 (as the case may be)
to the date of the issuance of the New Notes.
Consequently, holders who exchange their Old Notes
for New Notes will receive the same interest payment
on the same Interest Payment Date that they would
have received had they not accepted the Exchange
Offer. See "The Exchange Offer--Interest on the New
Notes."
Termination of the
Exchange Offer......... The Issuer may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, any new law,
statute, rule or regulation or any interpretation of
the staff of the Commission of any existing law,
statute, rule or regulation. Holders of Old Notes
will have certain rights against the Issuer under the
Registration Rights Agreement if the Issuer fails to
consummate the Exchange Offer. See "The Exchange
Offer--Termination." No federal or state regulatory
requirements must be complied with or approvals
obtained in connection with the Exchange Offer, other
than applicable requirements under federal and state
securities laws.
Procedures for Each holder of Old Notes wishing to accept the
Tendering Old Notes.... Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the Old
Notes to be exchanged and any other required
documentation to IBJ Schroder Bank & Trust Company,
as Exchange Agent, at the address set forth herein
and therein or effect a tender of Old Notes pursuant
to the procedures for book-entry transfer as provided
for herein. See "The Exchange Offer--Procedures for
Tendering. "
Special Procedures for Any beneficial holder whose Old Notes are registered
Beneficial Holders..... in the name of his broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on his behalf. If such
beneficial holder wishes to tender on his own behalf,
such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering
his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Holders of Old Notes who wish to tender their Old
Procedures.............. Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
who cannot complete the procedure for book-entry
transfer on a timely basis) and a properly completed
Letter of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date may tender their Old
Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
9
<PAGE>
Withdrawal Rights....... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer--
Withdrawal of Tenders."
Acceptance of Old Notes
and Delivery of New Subject to certain conditions (as summarized above in
Notes.................. "Termination of the Exchange Offer" and described
more fully in "The Exchange Offer--Termination"), the
Issuer will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer--
General."
Certain Tax The exchange pursuant to the Exchange Offer will
Consequences............ generally not be a taxable event for federal income
tax purposes. See "Certain U.S. Federal Income Tax
Consequences."
Exchange Agent..........
IBJ Schroder Bank & Trust Company, the Trustee under
the Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer. The mailing address of the Exchange Agent is:
IBJ Schroder Bank & Trust Company of New York, P.O.
Box 84, Bowling Green Station, New York, NY 10274-
0084, Attention: Reorganization Operations
Department; and deliveries by hand or overnight
courier should be addressed to IBJ Schroder Bank &
Trust Company of New York, One State Street, New
York, NY 10004, Attention: Securities Processing
Window, Subcellar One (SC-1). For information with
respect to the Exchange Offer and confirmation of
facsimile transmissions, the telephone number for the
Exchange Agent is (212) 858-2103 and the facsimile
number for the Exchange Agent is (212) 858-2611.
Use of Proceeds......... There will be no cash proceeds payable to the Issuer
from the issuance of the New Notes pursuant to the
Exchange Offer. The Company incurred $80.0 million of
indebtedness under the Bridge Financing Facility and
borrowed $20.0 million (including amounts drawn in
January 1998 in connection with the Second Step
Transaction) pursuant to the Senior Credit Facility
pending the issuance and sale of the Old Notes. The
Company applied the net proceeds from the sale of the
Old Notes to repay the indebtedness incurred under
the Bridge Financing Facility and the Senior Credit
Facility in connection with the Recapitalization. The
Bridge Financing Facility bore interest at the rate
of 10.25% per annum. An affiliate of the Initial
Purchaser was the lender under the Bridge Financing
Facility.
10
<PAGE>
THE NEW NOTES
Securities Offered...... $100.0 million principal amount of 10 3/8% Series B
Senior Subordinated Notes Due 2007.
Maturity Date........... November 1, 2007.
Interest Payment Each May 1 and November 1, commencing May 1, 1998.
Dates..................
Optional Redemption..... The Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or after
November 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon to
the date of redemption.
Prior to November 1, 2000, the Issuer, at its option,
may redeem in the aggregate up to 35% of the original
principal amount of the Notes at 110.375% of the
aggregate principal amount so redeemed, plus accrued
and unpaid interest thereon to the redemption date,
with the Net Proceeds of one or more Public Equity
Offerings; provided that at least 65% of the
principal amount of Notes originally issued remain
outstanding immediately after the occurrence of any
redemption and that any such redemption occurs within
90 days following the closing of any such Public
Equity Offering. See "Description of the New Notes--
Redemption--Optional Redemption."
Change of Control....... In the event of a Change of Control, holders of the
Notes will have the right to require the Issuer to
purchase the Notes at a purchase price equal to 101%
of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the date of
purchase. See "Description of the New Notes--Change
of Control."
Ranking................. The New Notes will be general unsecured obligations
of the Issuer, subordinated in right of payment to
all existing and future Senior Debt of the Issuer and
senior in right of payment to any subordinated
indebtedness of the Issuer. As of September 30, 1997,
after giving effect to the Transactions and the
issuance of the Old Notes, the Issuer would have had
(i) approximately $3.7 million aggregate principal
amount of Senior Debt outstanding and (ii) $25.0
million of borrowing availability under the Senior
Credit Facility. See "Description of the New Notes--
Subordination."
Guarantees.............. The Notes are unconditionally guaranteed, on an
unsecured senior subordinated basis, as to the
payment of principal, premium, if any, and interest,
jointly and severally (collectively, the
"Guarantees"), by each of the Issuer's subsidiaries
and each of the LLCs (collectively, the
"Guarantors"). The Guarantees are subordinated to all
Senior Debt of the Guarantors. See "Description of
the New Notes--Guarantees."
Asset Sale Proceeds..... The Issuer is obligated in certain instances to make
offers to repurchase the Notes at a purchase price in
cash equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon to the date
of repurchase, with the net cash proceeds of certain
asset sales. See "Description of the New Notes--
Certain Covenants--Limitation on Asset Sales."
11
<PAGE>
Certain Covenants....... The Indenture (as defined herein), under which the
Notes will be issued, will contain covenants for the
benefit of the holders of the Notes that, among other
things, will restrict the ability of the Issuer and
the Guarantors to: (i) incur additional indebtedness;
(ii) pay dividends, distributions and other
restricted payments; (iii) issue stock of or other
interests in subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create
certain liens; (vii) enter into certain transactions
with affiliates; (viii) merge or consolidate the
Issuer or any Guarantor and (ix) transfer or sell
assets. These covenants are subject to a number of
important qualifications and exceptions, including
the permitting of Permitted Tax Distributions (as
defined therein) by the LLCs. See "Description of the
New Notes--Certain Covenants."
Registration Rights.....
Pursuant to a Registration Rights Agreement among the
Issuer, the Guarantors and the Initial Purchaser (the
"Exchange Offer Registration Rights Agreement"), the
Issuer and the Guarantors agreed to use their best
efforts to file within 30 days, and cause to become
effective within 150 days, of the date of the
original issuance of the Old Notes (the "Issue
Date"), an Exchange Offer Registration Statement (as
defined herein) with respect to an offer to exchange
the Old Notes for notes of the Issuer with terms
(other than those with respect to restrictions on
transfer) substantially identical to those of the Old
Notes. The Issuer, upon the Exchange Offer
Registration Statement becoming effective, will be
obligated to commence the Exchange Offer and to cause
the Exchange Offer to remain open for acceptance for
not less than 20 business days after the date of
commencement. In addition, under certain
circumstances the Issuer may be required to file a
Shelf Registration Statement (as defined herein).
Among other provisions, in the event that: (i) the
Exchange Offer Registration Statement or Shelf
Registration Statement has not been filed with the
Commission within 30 days after the Issue Date; (ii)
the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective
within 150 days after the Issue Date or (iii) the
Exchange Offer is not consummated within 30 days
after the Exchange Offer Registration Statement is
declared effective (each such event referred to in
clauses (i) through (iii) above is a "Registration
Default"), the sole remedy available to holders of
the Notes will be immediate assessment of additional
interest ("Additional Interest") as follows: the per
annum interest rate on the Notes will increase by
0.5% and the per annum interest rate will increase by
an additional 0.25% for each subsequent 90-day period
during which the Registration Default remains
uncured, up to a maximum additional interest rate of
2% in excess of the initial 10 3/8% interest rate per
annum except that such Additional Interest shall not
be payable under certain circumstances. All
Additional Interest will be payable to holders of the
Notes in cash on each May 1 and November 1,
commencing with the first such date occurring after
any such Additional Interest commences to accrue, and
continuing until such Registration Default is cured.
After the date on which such Registration Default is
cured, the interest rate on the Notes will revert to
the interest rate originally borne by the Notes. See
"The Exchange Offer."
12
<PAGE>
Trading................. The Notes have been designated for trading on the
Private Offerings, Resales and Tradings through
Automated Linkages ("PORTAL") Market.
THE ISSUER
T/SF Communications Corporation is a Delaware corporation. The Issuer's
principal executive offices currently are located at 888 Seventh Avenue, 28th
floor, New York, New York 10106 and its telephone number is (212) 247-5160.
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the specific
matters set forth under "Risk Factors" as well as the other information and
data included in this Prospectus in evaluating an investment in the Notes.
13
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma statement of operations data of the
Company give effect to, among other things, the Transactions and the Offering,
as if they had occurred at January 1, 1996. The following unaudited pro forma
condensed balance sheet data of the Company give effect to, among other things,
the Transactions and the Offering, as if they had occurred on September 30,
1997. Certain management assumptions and adjustments relating to the
Transactions and this Offering are described in the accompanying notes hereto
and elsewhere in this Prospectus. This pro forma information is not necessarily
indicative of the results that would have occurred had the Transactions and the
Offering been completed on the dates indicated or the Company's actual or
future results or financial position. The summary unaudited pro forma statement
of operations, balance sheet and other financial data should be read in
conjunction with the information contained in the financial statements of the
Company and the notes thereto, "Unaudited Pro Forma Consolidated Financial
Information," "Selected Historical Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED ------------------ TWELVE MONTHS ENDED
DECEMBER 31, 1996 1996 1997 SEPTEMBER 30, 1997
----------------- -------- -------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues
Business to Business
Communications........ $45,594 $28,464 $29,825 $46,955
Information Services... 28,838 21,629 24,388 31,597
Corporate and other in-
come.................. 23 438 749 334
------- -------- -------- -------
Total revenues........ 74,455 50,531 54,962 78,886
------- -------- -------- -------
Expenses
Operating costs........ 43,900 30,868 33,684 46,716
General and administra-
tive expenses......... 16,203 11,510 12,889 17,582
Depreciation and amor-
tization.............. 4,895 3,662 3,643 4,876
------- -------- -------- -------
Total expenses........ 64,998 46,040 50,216 69,174
------- -------- -------- -------
Operating income....... 9,457 4,491 4,746 9,712
Interest expense....... 11,498 8,630 8,477 11,345
------- -------- -------- -------
Loss before income tax-
es.................... (2,041) (4,139) (3,731) (1,633)
Income tax benefit..... 913 1,519 1,221 615
------- -------- -------- -------
Net loss............... $(1,128) $ (2,620) $ (2,510) $(1,018)
======= ======== ======== =======
OTHER FINANCIAL DATA:
Pro forma EBITDA (1)
(2)................... $14,352 $ 8,153 $ 8,389 $14,588
Pro forma EBITDA margin
(1) (2)............... 19.3% 16.1% 15.3% 18.5%
Adjusted pro forma
EBITDA (1) (3) ....... $17,171 $ 10,277 $10,377 $17,271
Adjusted pro forma
EBITDA margin (1) (3)
...................... 23.1% 20.3% 18.9% 21.9%
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL RATIOS:
<S> <C>
Ratio of net debt to adjusted pro forma EBITDA (4)........................ 5.5x
Ratio of adjusted pro forma EBITDA to cash interest expense (5) .......... 1.6x
</TABLE>
AS OF
SEPTEMBER 30, 1997
------------------
BALANCE SHEET
DATA:
Cash and
equivalents.. $ 8,577
Total assets.. 74,612
Total long-
term debt.... 103,656
Stockholders'
deficit...... (53,088)
14
<PAGE>
- --------
(1) Historical EBITDA, as shown below, represents operating income plus
depreciation and amortization. EBITDA is included because management
understands that such information is considered by certain investors to be
an additional basis on which to evaluate the Company's ability to pay
interest expense, repay debt and make capital expenditures. Excluded from
EBITDA are interest expense, income taxes, depreciation and amortization,
each of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's
financial performance. EBITDA is not intended to represent and should not
be considered more meaningful than, or an alternative to, measures of
operating performance as determined in accordance with generally accepted
accounting principles.
(2) Pro forma EBITDA, as presented, reflects the following pro forma
adjustments and does not reflect additional anticipated cost savings
related to management's business and operating strategy, which is currently
planned. Pro forma EBITDA margin represents pro forma EBITDA as a
percentage of total pro forma revenues.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Historical EBITDA (1)............................... $14,046
Pro forma adjustments:
Acquisitions of CORSEARCH, Casino Publishing and
Galaxy Expocard Europe (a)......................... (260)
Non-operating gain on sale of real estate (b)....... (316)
General and administrative expenses and other (c)... 1,118
-------
Total pro forma adjustments......................... 542
-------
Pro forma EBITDA.................................... $14,588
=======
</TABLE>
--------
(a) This adjustment gives effect to the acquisition of Casino Publishing
Co. in February 1997 and Galaxy Expocard Europe B.V. in May 1997 as if
they occurred at the beginning of the period indicated.
(b) Represents the elimination of $316,000 gain on the sale of certain
Company assets, consisting mainly of real estate.
(c) Pro forma adjustments to general and administrative and other expenses
are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
VS&A management fee................................. $ (90)
Elimination of management position (i).............. 353
Nonrecurring write-down of investment (ii).......... 575
Other (iii)......................................... 280
------
$1,118
======
</TABLE>
--------
(i) Represents the elimination of salary, bonus, payroll taxes and
employee benefits associated with one management position which was
principally devoted to nonoperational tasks including the
Transactions. Management eliminated this position as part of the
Transactions.
(ii) Represents a nonrecurring charge associated with the write-down of
Midwest Energy Companies, Inc. ("MECI") common stock received in
exchange for land sold to MECI in March 1995 and a write-off of an
investment in a vendor used by the Company who filed for
bankruptcy.
(iii) Represents (a) the elimination of certain general and
administrative costs, mainly transactional consulting fees, during
the year ended December 31, 1996 and the nine months ended
September 30, 1997 and (b) the elimination of amortization income
associated with covenants-not-to-compete arising from the sale of
the New York Shopper (as defined herein) and trade journal
operations.
15
<PAGE>
(3) Management believes the following additional adjustments are relevant to
evaluating the future operating performance of the Company. The following
additional adjustments, which eliminate the impact of certain items which
management believes are nonrecurring and also reflects the estimated impact
of management's business and operating strategy, are based on estimates and
assumptions made and believed to be reasonable by management and are
inherently uncertain and subject to change. Pro forma adjusted EBITDA
margin represents pro forma adjusted EBITDA as a percentage of total pro
forma revenues. The following calculation should not, therefore, be viewed
as indicative of actual or future results. The following table reflects the
effect of these items:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro forma EBITDA...................................... $14,588
Additional adjustments:
Net personnel costs (a)............................... 1,271
Reorganization of loss-producing magazines (b)........ 616
Excess information acquisition costs (c).............. 196
Shut down of business operations (d).................. 418
Other net savings (e)................................. 182
-------
Total additional adjustments.......................... 2,683
-------
Adjusted pro forma EBITDA............................. $17,271
=======
</TABLE>
--------
(a) Represents the net reduction in personnel costs for: (i) elimination of
the Tulsa, Oklahoma corporate office and the related compensation and
benefits for 13 individuals; (ii) addition of new management team
located at a new corporate office in New York and the related
compensation, benefits, occupancy and administrative costs; (iii)
addition of short-term consulting agreement expenses with former
officers to aid the new management in the transition phase and (iv)
elimination of non-recurring costs related to the search for and hiring
of research oriented personnel at CORSEARCH.
(b) Represents losses incurred by the Company during the periods presented
in connection with two magazine operations: IGWB and Casino Executive.
While these publications are projected to be profitable in fiscal 1998,
in the event that such publications continue to generate losses,
management expects to take one or more of the following actions: (i)
reorganize the publications to reduce costs; (ii) merge the
publications with another party; (iii) enter into strategic alliances
or partnerships with a third party or (iv) other alternatives.
Management expects a decision regarding this segment will be made
during fiscal 1998.
(c) Effective for fiscal 1997, CORSEARCH changed the terms of a contract
with one of its database vendors. This adjustment reflects information
acquisition costs during the nine months ended September 30, 1997 under
a variable pricing structure consistent with an August 1, 1997
amendment to that agreement with that vendor.
(d) Represents losses in TISI's NESS division, a high-end employment
screening service which was abandoned by the Company in fiscal 1997.
(e) During fiscal 1996 and 1997, certain consulting costs were incurred in
connection with one-time acquisition searches and one-time executive
searches; a system evaluation project that was never completed; a
satellite office study that was not implemented and an option and study
of the feasibility of a new publication. In addition, severance costs
for the officer of a closed division were incurred.
(4) The ratio of net debt to adjusted pro forma EBITDA represents total pro
forma long-term debt, including current maturities, less pro forma cash and
cash equivalents divided by adjusted pro forma EBITDA.
(5) The ratio of adjusted pro forma EBITDA to cash interest expense represents
adjusted pro forma EBITDA divided by the sum of the cash interest expense
associated with the Notes plus actual cash interest paid by the Company.
16
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary historical financial data for each of
the five years in the period ended December 31, 1996 that have been derived
from the audited consolidated financial statements of the Company. The
statements of operations and changes in stockholders' equity and statements of
cash flows for each of the three years in the period ended December 31, 1996
and the notes thereto appear elsewhere in this Prospectus. The summary
historical balance sheet data as of September 30, 1997 and the summary
historical statement of operations data for the nine months ended September 30,
1997 and 1996 of the Company have been derived from unaudited financial
statements, which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim periods. Results for the
nine months ended September 30, 1997 and 1996 are not necessarily indicative of
results that may be expected for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenues
Information Services
(a)................... $ 13,643 $ 14,499 $ 15,091 $ 17,950 $ 24,273 $ 17,064 $ 24,388
Business to Business
Communications (b).... 80,643 42,911 39,665 53,089 42,891 26,313 29,323
Corporate and other.... 1,020 1,570 2,163 1,039 1,478 1,728 955
-------- -------- -------- -------- -------- -------- --------
Total revenues........ 95,306 58,980 56,919 72,078 68,642 45,105 54,666
-------- -------- -------- -------- -------- -------- --------
Expenses
Operating costs........ 64,613 49,658 35,069 39,665 40,314 27,549 33,474
General and
administrative
expenses.............. 21,341 15,361 11,862 11,841 15,207 10,289 13,000
Depreciation and
amortization.......... 7,378 3,779 3,118 3,601 4,018 2,843 3,564
-------- -------- -------- -------- -------- -------- --------
Total expenses........ 93,332 68,798 50,049 55,107 59,539 40,681 50,038
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ 1,974 (9,818) 6,870 16,971 9,103 4,424 4,628
Interest expense....... 2,692 1,921 736 859 581 413 401
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and other
items................. (718) (11,739) 6,134 16,112 8,522 4,011 4,227
Unusual gain (2)....... 24,412 -- -- -- -- -- --
Income tax (provision)
benefit............... (10,569) 4,097 (2,589) (58) (3,101) (1,578) (1,803)
Minority interest in
consolidated
subsidiaries.......... (3,983) 1,929 (981) (266) -- -- --
Discontinued
operations, net (3)... (790) (4,800) (2,816) 37 -- -- --
Extraordinary loss, net
of tax of $340 (4).... -- (560) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 8,352 $(11,073) $ (252) $ 15,825 $ 5,421 $ 2,433 $ 2,424
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding.... 4,208 3,801 3,733 3,766 3,543 3,537 3,564
EARNINGS (LOSS) PER
SHARE:
Continuing operations.. $ 2.17 $ (1.54) $ 0.65 $ 4.19 $ 1.53 $ 0.69 $ 0.68
Discontinued
operations............ (0.19) (1.26) (0.75) .01 -- -- --
Extraordinary loss..... -- (0.15) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
$ 1.98 $ (2.95) $ (0.10) $ 4.20 $ 1.53 $ 0.69 $ 0.68
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA
(1):
Capital expenditures... $ 1,402 $ 5,564 $ 4,382 $ 2,589 $ 2,641 $ 1,955 $ 5,460
EBITDA (5)............. 9,352 (6,039) 9,988 20,572 13,121 7,267 8,192
EBITDA margin (5)...... 9.8% (10.2)% 17.5% 28.5% 19.1% 16.1% 15.0%
Ratio of earnings to
fixed charges (6)..... 9.8x -- 9.3x 19.8x 15.7x 10.7x 11.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1997
------------------
<S> <C>
BALANCE SHEET DATA:
Cash and equivalents........................................ $ 6,894
Total assets................................................ 62,828
Total debt.................................................. 4,862
Stockholders' equity........................................ 39,628
</TABLE>
17
<PAGE>
- --------
(1) In the merger of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab Fox"),
then the owner of 78% of the Common Stock, with and into the Issuer on May
25, 1995, the Issuer was the surviving entity, from a legal standpoint.
However, from an accounting standpoint, the transaction was treated as a
downstream merger. Thus, for financial reporting purposes, the transaction
was treated as a recapitalization of Tribune/Swab-Fox, with Tribune/Swab-
Fox as the survivor. Accordingly, the historical financial statements of
the Company, as the surviving legal entity, are those historical financial
statements of Tribune/Swab-Fox prior to the merger. In addition, the
Company was a party to several events/transactions which affect the
comparability of the historical information presented above. See the Notes
to Consolidated Financial Statements for additional information on certain
of these events/transactions.
--------
(a)With respect to Information Services, the Company acquired CORSEARCH in
August 1996.
(b) With respect to Business to Business Communications, the Company: (i)
ceased publishing "The Tulsa Tribune" in September 1992 as a result of
the termination of a joint operating agreement; (ii) sold the operating
assets of Marks-Roiland Communications, Inc. (the "New York Shopper"),
one of the Company's shopper-newspaper operations, in November 1993;
(iii) acquired the stock of Galaxy in March 1994; (iv) sold the assets
of Shopper's Guide, Inc. (the "New Jersey Shopper"), its other shopper-
newspaper operation, in April 1994; (v) sold three trade journals and
related assets in July 1995; (vi) acquired Casino Publishing Co.
effective February 1, 1997 and (vii) acquired Galaxy Expocard Europe,
B.V. in May 1997.
(2) Gain from early termination of newspaper joint operating agreement between
the Company's newspaper and World Publishing Company, net of termination
costs.
(3) Restated to reflect real estate as a discontinued operation as of November
30, 1994.
(4) Prepayment penalty on early retirement of long-term debt.
(5) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that such
information is considered by certain investors to be an additional basis on
which to evaluate the Company's ability to pay interest expense, repay debt
and make capital expenditures. Excluded from EBITDA are interest expense,
income taxes, depreciation and amortization, unusual gain, minority
interest in consolidated subsidiaries, discontinued operations, net and
extraordinary loss, net of tax, each of which can significantly affect the
Company's results of operations and liquidity and should be considered in
evaluating the Company's financial performance. EBITDA is not intended to
represent and should not be considered more meaningful than, or an
alternative to, measures of operating performance as determined in
accordance with generally accepted accounting principles. EBITDA margin
represents EBITDA as a percentage of total revenues.
(6) In computing the ratio of earnings to fixed charges: (a) earnings have been
based on income from continuing operations before income taxes and fixed
charges and (b) fixed charges consist of interest and amortization of debt
discount and expense. The coverage deficiency for the year ended December
31, 1993 was approximately $11.7 million.
18
<PAGE>
RISK FACTORS
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes not exchanged for New Notes pursuant to the Exchange
Offer will remain subject to the existing restrictions upon transfer of such
Old Notes. Additionally, holders of any Old Notes not tendered in the Exchange
Offer prior to the Expiration Date will not be entitled to require the Issuer
to file the Shelf Registration Statement and the stated interest rate on such
Old Notes will remain at its initial level of 10 3/8%.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the Transactions
and the issuance of the Old Notes. As of September 30, 1997, after giving pro
forma effect to the Transactions and the issuance of the Old Notes, the
Company would have had outstanding indebtedness of $103.7 million. The
Company's leveraged financial position poses substantial consequences to
holders of the Notes, including the risks that: (i) a substantial portion of
the Company's cash flow from operations will be dedicated to the payment of
interest on the Notes and the payment of amounts due under the Senior Credit
Facility; (ii) the Company's leveraged position may impede its ability to
obtain financing in the future for working capital, capital expenditures and
general corporate purposes and (iii) the Company's highly leveraged financial
position may make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures. Management believes that it will
have sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that
the future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. In addition, the Senior Credit Facility
contemplates that all borrowings thereunder will become due by 2004. If the
Company is unable to generate sufficient cash flow from operations in the
future to service its indebtedness and to meet its other commitments, the
Company will be required to adopt one or more alternatives, such as
refinancing or restructuring its indebtedness, selling material assets or
operations or seeking to raise additional debt or equity capital. There can be
no assurance that any of these actions could be effected, or that if they are
effected, that they could be effected on a timely basis or on satisfactory
terms, or that these actions would enable the Company to continue to satisfy
its capital requirements. In addition, the terms of existing or future debt
agreements, including the Indenture and the Senior Credit Facility, may
prohibit the Company from adopting any of these alternatives. Management's
strategy contemplates strategic acquisitions, and a portion of the cost of
such acquisitions may be financed through the incurrence of additional
indebtedness. There can be no assurance that financing will continue to be
available on terms acceptable to the Company or at all. In the absence of such
financing, the Company's ability to respond to changing business and economic
conditions, to fund scheduled investments and capital expenditures, to make
future acquisitions and to absorb adverse operating results may be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of the
Senior Credit Facility," "Business--Business and Operating Strategies" and
"Description of the New Notes."
DEPENDENCE UPON DISTRIBUTIONS FROM SUBSIDIARIES AND LLCS
The ability of the Issuer to perform its obligations with respect to the
Notes will be dependent on several factors. The Issuer will be dependent on
its subsidiaries and the LLCs for funds with which to pay principal and
interest on the Notes. The terms of the Guarantees, the Indenture and the
Senior Credit Facility expressly permit the Issuer's subsidiaries and the LLCs
to make certain distributions to the Issuer in connection with the Issuer's
obligations with respect to the Notes. There can be no assurance, however,
that the Issuer's subsidiaries or the LLCs will be profitable such that such
entities are able to make distributions to the Issuer sufficient for the
payment of the Issuer's obligations with respect to the Notes. Subject to the
considerations described below under "Risk of Fraudulent Transfer," the
Guarantees will provide the holders of the Notes with a direct claim against
the Guarantors.
19
<PAGE>
FULL IMPLEMENTATION OF BUSINESS AND OPERATING STRATEGY
Following the consummation of the Tender Offer and Stock Purchase, the
Company employed a new senior management team and adopted a refined business
and operating strategy. See "Business--Business and Operating Strategies" and
"Management." This business and operating strategy includes the implementation
of certain intended operating improvements and the adoption of new strategies.
There can be no assurance that the Company will be able to implement fully this
new business and operating strategy or that the anticipated results of this
strategy will be realized. In addition, after gaining experience with the
Company's operations under its new strategy, the Company and the new senior
management team may decide to alter or discontinue certain aspects of this
strategy. Implementation of this strategy could also be affected adversely by a
number of factors beyond the Company's control, such as operating difficulties,
increased operating costs, regulatory developments, general economic conditions
or increased competition. Any such failure to implement this strategy could
have a material adverse effect on the Company's ability to service its
indebtedness, including principal and interest payments on the Notes.
The Company has reflected on a pro forma basis for the year ended December
31, 1996 and the nine-month periods ended September 30, 1996 and 1997 the
anticipated benefits from the operating improvements and cost reduction
measures included in management's business and operating strategy. These
adjustments are based on a number of estimates and assumptions that, while
considered reasonable by management, should not be viewed as indicative of the
results that would actually have occurred had the Company's business and
operating strategy been implemented on the dates indicated or of the Company's
actual or future results or financial position. Prospective purchasers of the
Notes are cautioned not to place undue reliance on these adjustments. See
"Unaudited Pro Forma Consolidated Financial Information."
SUBORDINATION OF NOTES
The Notes will be unsecured and subordinated to the prior right of payment of
all existing and future Senior Debt of the Issuer, including obligations under
the Senior Credit Facility. The indebtedness under the Senior Credit Facility
will also become due prior to the time the principal obligations under the
Notes become due. Subject to certain limitations, the Indenture will permit the
Issuer to incur additional Senior Debt. See "Description of the Notes--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness." As a result of
the subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency, the assets of the Issuer will be available to pay
obligations on the Notes only after all Senior Debt has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on any or all
of the Notes then outstanding. In addition, substantially all of the assets of
the Issuer and its subsidiaries may in the future be pledged to secure other
indebtedness of the Company. See "Description of the Senior Credit Facility"
and "Description of the New Notes."
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE
The Senior Credit Facility and the Indenture impose certain operating and
financial restrictions on the Company. The Senior Credit Facility requires the
Company to maintain specified financial ratios and tests, among other
obligations, including a maximum leverage ratio, a maximum senior leverage
ratio, a minimum interest coverage ratio and a minimum fixed charge coverage
ratio, each as defined in the Senior Credit Facility. In addition, the Senior
Credit Facility restricts, among other things, the Issuer's ability to: (i)
declare dividends or redeem or repurchase capital stock; (ii) prepay, redeem or
purchase debt; (iii) incur liens and engage in sale-leaseback transactions;
(iv) make loans and investments; (v) issue more debt; (vi) amend or otherwise
alter debt and other material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales; (ix) transact with
affiliates and (x) alter its lines of business. A failure to comply with the
restrictions contained in the Senior Credit Facility could lead to an event of
default thereunder which could result in an acceleration of such indebtedness.
Such an acceleration would constitute an event of default under the Indenture.
In addition, the Indenture restricts, among other things, the Company's ability
to: (i) incur additional indebtedness; (ii) pay dividends, distributions and
other restricted payments; (iii) issue stock of or other interests
20
<PAGE>
in subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi)
create certain liens; (vii) enter into certain transactions with affiliates;
(viii) merge or consolidate the Issuer or any Guarantor and (ix) transfer or
sell assets. A failure to comply with the restrictions in the Indenture could
result in an event of default under the Indenture. See "Description of the
Senior Credit Facility" and "Description of the New Notes."
VARIABILITY OF OPERATING RESULTS
The Company's revenues and operating results may vary significantly from
quarter to quarter and from year to year as a result of a number of factors.
The Company's Business to Business Communications segment is affected by the
timing of conventions and trade shows, with most shows operating during March
to May and September to November. In addition, many conventions and trade shows
are held only in certain years (e.g., bi-annually, tri-annually, etc.), which
affects the comparability of the Company's revenues and other operating results
from year to year. World Gaming Congress, the Company's largest owned trade
show, traditionally is held in the fourth quarter of each year, and the results
of the Business to Business Communications segment are significantly impacted
by this timing. As a result of these variances, the Company's results of
operations are subject to significant fluctuations and its results of
operations for any particular quarter or year may not be indicative of results
of operations for future periods.
COMPETITION
Certain of the business lines in which the Company is engaged are highly
competitive and certain of the Company's competitors are larger and have
greater financial resources than the Company. There can be no assurance that
the Company will be able to continue to compete successfully or that such
competition will not have a material adverse effect on the Company's business
or financial results. See "Business--Competition."
CONTROLLING EQUITYHOLDER
The Common Stock currently is held approximately 60% by VS&A-T/SF and 33% by
Fir Tree. It is anticipated that the Common Stock will be held 64% by VS&A-T/SF
and 36% by Fir Tree following the consummation of the Second Step Transaction.
As a result, VS&A-T/SF currently has the ability to control the policies and
operations of the Company. Circumstances may occur in which the interests of
VS&A-T/SF, as the principal equity holder of the Issuer, could be in conflict
with the interests of the holders of the Notes. In addition, the equity
investors may have an interest in pursuing acquisitions, divestitures or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might involve risks to the holders of the Notes.
See "Security Ownership of Certain Beneficial Owners and Management."
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Issuer will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest thereon and Additional Interest, if any,
thereon to the repurchase date. Certain events involving a Change of Control
may result in an event of default under the Senior Credit Facility or other
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Issuer to
repurchase the Notes would cause an event of default under the Senior Credit
Facility (and may cause an event of default under such other indebtedness),
even if the Change of Control does not. The Issuer's obligations under this
provision of the Indenture could delay, deter or prevent a sale of the Issuer
or the Guarantors which might otherwise be advantageous to the holders of the
Notes. Finally, there can be no assurance that the Issuer will have the
financial resources necessary to repurchase the Notes upon a Change of Control.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of the New
Notes--Change of Control."
UNCERTAIN IMPACT OF ACQUISITION PLANS
The Company intends to implement its business and operating strategy of
targeted expansion through the acquisition of compatible businesses and product
lines and the formation of strategic alliances, joint ventures and other
business combinations. There can be no assurance that the Company can
successfully complete or finance any future acquisition. Should the Company
complete any material acquisition, the Company's success or failure in
integrating the operations of the acquired business may have a material impact
on the future growth or success of the Company.
21
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The success of the Company's operations will depend, in part, on the success
of the assimilation of Mr. Thomas, Steven J. Hunt, the new Chief Financial
Officer of the Company, Brian A. Meyer, the new General Counsel of the Company
and the new management team (some of whom have limited experience in certain
of the specific businesses in which the Company is engaged) into the Company's
organization, the ability of the Company to retain other managers of the
Company's businesses and its ability to attract additional experienced
managers as its businesses expand and it pursues the implementation of its new
business and operating strategy. Mr. Thomas has entered into an employment
agreement which provides for his employment as President, Chief Executive
Officer and a Director for a five-year term. Mr. Hunt and Mr. Meyer have each
entered into employment agreements which provide for their employment as Chief
Financial Officer and General Counsel, respectively, for five-year terms. On
the closing date of the Tender Offer, the Company entered into interim
consulting agreements with three senior executives of the Company. Although
the Company believes it could replace key employees in an orderly fashion
should the need arise, the loss of key personnel could have a material adverse
effect on the Company. The Company will not maintain key person insurance for
any of its officers, employees or directors. See "Management."
GOVERNMENT REGULATION
As a "consumer reporting agency," the Company's TISI subsidiary is subject
to the provisions of the Fair Credit Reporting Act (the "FCRA") and similar
acts existing in the states and is regulated by the Federal Trade Commission
(the "FTC") under the Federal Trade Commission Act. All TISI reports are
treated by TISI as consumer reports for purposes of the FCRA. The FCRA
provides for civil liabilities sanctions against a consumer reporting agency
by a consumer for willful or negligent noncompliance with the FCRA. The FCRA
was amended in 1997, effective October 1, 1997. Such amendments require DAC's
customers to increase their compliance activities and may limit, under certain
circumstances, their ability to access certain information sold by DAC, in
particular certain criminal records over seven years old. While the effect of
such amendments is not expected by DAC to impact materially its business or
prospects, primarily because further amendments to the FCRA are anticipated
(and draft legislation of such amendments has been submitted to the U.S.
Congress), the need for customers to revamp procedures and for the industry to
adjust to the new regulations thus far has had a negative impact on the use of
DAC's services and such negative impact may, if the foregoing further
amendments are not adopted, are adopted materially later than anticipated by
management, or are adopted in materially different form than previously
proposed, have a material and adverse effect on the use of DAC's services and
on its results of operations. It is not possible at this time to predict
accurately the extent of such effect.
The Americans with Disabilities Act (the "ADA") contains pre-employment
inquiry and confidentiality restrictions designed to prevent discrimination
against individuals in the hiring process. Although TISI's business is not
directly regulated by the ADA, the use by its customers of certain information
sold to them by TISI, such as workers' compensation histories or drug and
alcohol test results, is regulated, both with respect to the type of
information and the timing of its use. Similar state laws also affect TISI's
business. Some states have human rights laws that provide more protection than
the ADA. A large number of states also regulate the type of information which
can be made available to the public or to a third party or impose conditions
to the release of the information.
In the 14 years it has been in business, TISI has not been found liable for
any violations of the FCRA, the ADA or similar state laws. The Company did
settle one case out of court for a nominal amount to avoid litigation
expenses. There can be no assurance, however, that the Company will not be
found liable for any such violations and that, if found so liable, the Company
will not be subject to adverse judgments in substantial amounts. Although
management believes that TISI's treatment of its reports as consumer reports
for purposes of the FCRA is appropriate and valid, there can be no assurance
that such position would withstand legal challenge. The 1997 amendments to the
FCRA require TISI's customers to increase their compliance activities and may,
under certain circumstances, limit their ability to access certain information
sold by TISI, in particular certain criminal records
22
<PAGE>
more than seven years old. In addition, there can be no assurance that the
FCRA, the ADA or similar state laws will not be amended or subjected to
different judicial or administrative interpretation in the future. It is not
possible at this time to predict the impact that any such change might have on
the Company's results of operations, financial condition or liquidity.
The DOT is in the process of proposing and promulgating revised regulations
which, among other things, concern the requirements for pre-employment
screening of truck drivers. Although it is not possible at this time to predict
the impact that such regulations, if adopted, might have on the Company's
results of operations, financial condition or liquidity, management believes
that the regulations are not likely to have an adverse effect on the foregoing.
See "Business--Government Regulation" and "--Information Services--TISI."
RISK OF FRAUDULENT TRANSFER
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if the Issuer, at
the time it issued the Notes, or any of the Guarantors, at the time it incurred
the indebtedness represented by the Guarantees: (i) incurred such indebtedness
with intent to hinder, delay or defraud creditors or (ii)(a) received less than
reasonably equivalent value or fair consideration for incurring such
indebtedness and (b)(1) was insolvent at the time of incurrence, (2) was
rendered insolvent by reason of such incurrence (and the application of the
proceeds thereof), (3) was engaged or was about to engage in a business or
transaction for which the assets remaining with such entity constituted
unreasonably small capital to carry on its businesses or (4) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they mature, then, in each case, a court of competent jurisdiction could void,
in whole or in part, the Notes or the Guarantee, as the case may be, or, in the
alternative, subordinate the Notes or the Guarantee, as the case may be, to
existing and future indebtedness of the Issuer or the applicable Guarantor, as
the case may be. The measure of insolvency for purposes of the foregoing will
vary depending upon the law applied in such case. Generally, however, an entity
would be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at fair valuation or if the
present fair saleable value of its assets was less than the amount that would
be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature.
Management believes that, for purposes of the U.S. Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Notes are being issued, and the
Guarantees entered into, without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith and that each of the Issuer
and the Guarantors, after the issuance of the Notes and the application of the
proceeds thereof, will be solvent, will have sufficient capital for carrying on
its business and will be able to pay its debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.
LACK OF PUBLIC MARKET
The New Notes will be a new issue of securities for which there is currently
no trading market. The New Notes have been designated for trading in the PORTAL
Market. The Company has been advised by the Initial Purchaser that it currently
intends to make a market in the New Notes, but that it is not obligated to do
so and, if such market making is commenced, it may be discontinued at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and may be limited during the Exchange Offer
and the pendency of any Shelf Registration Statement. Although the Notes have
been designated for trading in the PORTAL Market, there can be no assurance as
to the development or liquidity of any market for the Notes. If a market were
to exist, the Notes could trade at prices that may be lower than the initial
offering price thereof, depending on many factors, including prevailing
interest rates and the markets for similar securities, general economic
conditions and the financial condition and performance of, and prospects for,
the Company. The Company does not intend to apply for listing or quotation of
the Notes on any securities exchange or stock market. Prospective investors in
the Notes should be aware that they may be required to bear the financial risks
of such investment for an indefinite period of time. See "Description of the
New Notes."
23
<PAGE>
APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law (the "GCL"),
appraisal rights are not available for the shares of any class or series of
stock which, at the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of stockholders to act upon
the agreement of merger, were either (i) listed on a national securities
exchange or designated as a national market system security on an inter-dealer
quotation system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 stockholders, unless the holders of
such class or series of stock are required by the terms of such agreement to
accept for such stock anything except (w) shares of stock of the corporation
surviving or resulting from such merger, (x) shares of stock of any other
corporation which at the effective date of the merger will be either listed on
a national securities exchange or designated as a national market system
security on an inter-dealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 stockholders,
(y) cash in lieu of fractional shares of the corporations described in clauses
(w) and (x) or (z) any combination of the shares of stock and cash in lieu of
fractional shares described in clauses (w), (x) and (y).
In the event a merger of the Issuer is effected as the Second Step
Transaction, Section 262 provides that any stockholder of record of the Issuer
that does not tender its shares and objects to the merger may elect to have
its shares appraised under the procedures of the GCL and to be paid the
appraised value of such shares, which, pursuant to Section 262 of the GCL,
will be the shares' "fair value exclusive of any element of value arising from
the accomplishment or expectation" of the merger, "together with a fair rate
of interest, if any, to be paid upon the amount determined to be the fair
value." While management believes that $40.25 in cash per share of Common
Stock (the price per share paid in the Tender Offer, Option Repurchase and the
merger) is the fair value thereof, an appraisal proceeding, if any, may result
in a determination of fair value less than or greater than the merger price of
$40.25 in cash per share of Common Stock.
24
<PAGE>
DESCRIPTION OF THE TRANSACTIONS
THE RECAPITALIZATION
The Recapitalization will be effected by a series of transactions, including
the Tender Offer, Stock Purchase, Option Repurchase, Second Step Transaction
and Drop Down Restructuring, as described below.
The Tender Offer
On September 8, 1997, the Issuer commenced the Tender Offer to purchase all
of its outstanding shares of Common Stock for $40.25 in cash per share of
Common Stock. On October 9, 1997, the Issuer consummated the purchase of
2,742,092 shares of Common Stock pursuant to the Tender Offer. After the
consummation of the Tender Offer, shareholders of the Issuer other than VS&A-
T/SF and Fir Tree owned an aggregate of 102,048 shares of the Common Stock.
The Stock Purchase
Pursuant to a Stock Purchase Agreement, dated as of August 15, 1997 (the
"Stock Purchase Agreement"), among the Issuer, VS&A Fund II and VS&A-T/SF,
simultaneously with the consummation of the Tender Offer on October 9, 1997,
the Issuer consummated the Stock Purchase and sold to VS&A-T/SF 881,988 newly-
issued shares of Common Stock for $40.25 in cash per share (or an aggregate
purchase price of $35.5 million).
The Option Repurchase
As a result of the consummation of the Tender Offer, the holder of each
outstanding employee stock option to purchase Common Stock granted under the
Issuer's 1994 Incentive Stock Plan (other than Richard Wimbish with respect to
options to purchase 16,750 shares) and the Issuer's Incentive Stock Option
Plan, which in the aggregate total options with respect to 343,750 shares of
Common Stock, exercised such options and received an amount equal to (i) the
product of the number of shares of Common Stock issuable upon exercise of such
options, multiplied by $40.25, less (ii) the exercise price of such options.
Accordingly, no shares of Common Stock will be issued with respect to these
options. The Issuer's Incentive Stock Plan will be terminated following the
closing of the Tender Offer. The Issuer's 1994 Incentive Stock Plan was not
terminated because of the survival of certain options held by Mr. Wimbish
issuable under such plan. The plan will survive solely with respect to such
options. No further options are outstanding, or will be granted, under such
plan. See "Management."
The Second-Step Transaction
After giving effect to the consummation of the Tender Offer and the Stock
Purchase, VS&A-T/SF and Fir Tree beneficially owned approximately 60% and 33%
of the outstanding Common Stock, respectively.
VS&A-T/SF and Fir Tree have agreed to cause the Issuer, as soon as
practicable following consummation of the Tender Offer and the Stock Purchase,
to consummate the Second Step Transaction by either (i) a merger or (ii) a
reverse stock split of the Common Stock, pursuant to which each then
outstanding share of Common Stock (other than shares owned by VS&A-T/SF and
Fir Tree and any shares held by stockholders who perfect appraisal rights
therefor) would be converted into the right to receive $40.25 in cash for each
share of Common Stock. Upon consummation of the Second-Step Transaction, the
Common Stock outstanding will be held 64% by VS&A-T/SF and 36% by Fir Tree.
The Drop Down Restructuring
As part of the Recapitalization, VS&A-T/SF and Fir Tree caused the Issuer to
effect the Drop Down Restructuring by contributing substantially all of the
assets and liabilities of Atwood, Galaxy and GEM to Holdings LLC in exchange
for a $45.0 million preferred equity interest in Holdings LLC. The common
equity interests in Holdings LLC are owned by VS&A-T/SF and Fir Tree in the
same proportion as their
25
<PAGE>
ownership of the Common Stock will be immediately following the consummation
of the Second Step Transaction. The preferred interest held by the Issuer
carries an 11% annual distribution rate and gives the Issuer voting,
operational and management control of Holdings LLC. Holdings LLC in turn
contributed the assets of Galaxy, Atwood and GEM into the Operating LLCs. As a
result of the control of the LLCs, directly or indirectly, by the Issuer, the
financial results of the LLCs will be included in the consolidated financial
statements of the Company. Each of the LLCs has jointly and severally
unconditionally guaranteed, on an unsecured senior subordinated basis, the
payment of principal, premium, if any, and interest on the Notes, which
guarantees are subordinated to all Senior Debt of the LLCs and the other
Guarantors. As part of the Drop-Down Restructuring, VS&A-T/SF and Fir Tree
contributed to Holdings LLC $2.9 million and $1.6 million, respectively, for
their common interests in Holdings LLC.
THE FINANCING PLAN
The Offering was part of a plan designed to enable the Issuer to finance the
Recapitalization. In connection with the Recapitalization, the Issuer: (i)
borrowed $20.0 million under the Senior Credit Facility; (ii) issued $80.0
million aggregate principal amount of notes pursuant to the Bridge Financing
Facility; (iii) maintained Fir Tree's ownership interest through the Fir Tree
Rollover valued at approximately $19.6 million and (iv) received $40.0 million
in Equity Contributions from VS&A-T/SF and Fir Tree. The net proceeds of the
Old Notes sold pursuant to the Offering were applied to repay indebtedness
incurred under the Senior Credit Facility and the Bridge Financing Facility in
connection with the Recapitalization.
The following table sets forth the sources and uses of funds in connection
with the Recapitalization (dollars in thousands).
<TABLE>
<CAPTION>
SOURCES OF FUNDS:
-----------------
<S> <C>
Senior Credit Facility (1).. $ 20,000
Bridge Financing Facility... 80,000
Equity Contributions (2).... 40,000
Fir Tree Rollover........... 19,600
--------
Total sources............. $159,600
========
</TABLE>
<TABLE>
<CAPTION>
USES OF FUNDS:
--------------
<S> <C>
Share repurchase and other (1).................................. $130,067
Fir Tree Rollover............................................... 19,600
Fees and expenses............................................... 8,250
Working capital................................................. 1,683
--------
Total uses.................................................... $159,600
========
</TABLE>
- --------
(1) Reflects consideration paid to repurchase shares pursuant to the Tender
Offer, Option Repurchase and Second Step Transaction as well as severance
and bonus expenses associated with the Recapitalization. The amounts drawn
on the Senior Credit Facility and used to repurchase shares, as well as
certain related expenses, were drawn and used in connection with
transactions in both October 1997 (i.e., the Tender Offer and Option
Repurchase) and January 1998 (i.e., the Second Step Transaction).
(2) The Equity Contributions consisted of $35.5 million contributed by VS&A-
T/SF to the Issuer and $4.5 million contributed to Holdings LLC as part of
the Drop Down Restructuring. Of the $4.5 million contributed to Holdings
LLC, VS&A-T/SF and Fir Tree contributed approximately $2.9 million and
$1.6 million, respectively.
(3) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
26
<PAGE>
USE PROCEEDS
The Issuer will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Issuer will receive in exchange Old Notes
in like principal amount, the terms of which are identical in all material
respects to the New Notes (except that the New Notes have been registered
under the Securities Act and will not contain terms with respect to transfer
restrictions or interest rate increases as described herein). The Old Notes
surrendered in exchange for the New Notes will be retired and cancelled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Issuer. The Company incurred $80.0
million of indebtedness under the Bridge Financing Facility and borrowed $20.0
million pursuant to the Senior Credit Facility pending the issuance and sale
of the Old Notes. The Company applied the net proceeds from the sale of the
Old Notes to repay the indebtedness incurred under the Bridge Financing
Facility and the Senior Credit Facility in connection with the
Recapitalization. The Bridge Financing Facility bore interest at the rate of
10.25% per year. An affiliate of the Initial Purchaser was the lender under
the Bridge Financing Facility.
CAPITALIZATION
The following table sets forth the capitalization of the Issuer as of
September 30, 1997: (i) on a historical basis, (ii) on a pro forma basis to
give effect to the Transactions and (iii) as adjusted to give pro forma effect
to both the Transactions and this Offering. The information in this table
should be read in conjunction with "Unaudited Pro Forma Consolidated Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and related notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------
PRO FORMA
FOR THE PRO FORMA
ACTUAL TRANSACTIONS AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT (INCLUDING CURRENT PORTION):
Senior Credit Facility (1).................. $ -- $ 20,000 $ --
Bridge Financing Facility................... -- 80,000 --
Notes....................................... -- -- 100,000
Other long-term debt........................ 4,862 3,656 3,656
------- --------- ---------
Total long-term debt...................... 4,862 103,656 103,656
------- --------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $10.00 par value; 1,000
shares authorized; no shares outstanding at
September 30, 1997......................... -- -- --
Common Stock, $0.10 par value; 10,000 shares
authorized; 3,332 shares outstanding at
September 30, 1997 (4,214 on a pro
forma basis)............................... 331 421 421
Additional paid-in capital.................. 12,773 48,185 48,185
Retained earnings........................... 26,524 19,128 19,128
Less: Treasury stock, 2,844 shares at cost.. -- (120,822) (120,822)
------- --------- ---------
Total stockholders' equity (deficit)...... 39,628 (53,088) (53,088)
------- --------- ---------
Total capitalization.................... $44,490 $ 50,568 $ 50,568
======= ========= =========
</TABLE>
- --------
(1) The Senior Credit Facility provides for a $25.0 million revolving credit
facility. On a pro forma as adjusted basis, as of September 30, 1997, the
Company would have had $25.0 million of borrowing availability under the
Senior Credit Facility.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information of the Company (the "Pro Forma Financial Information") has been
prepared to give effect to the Transactions and the Offering. The pro forma
adjustments presented are based upon available information and certain
assumptions that management believes are reasonable under the circumstances.
The unaudited pro forma condensed consolidated balance sheet of the Company
as of September 30, 1997 (the "Pro Forma Balance Sheet") gives effect to the
Transactions and the Offering, assuming that the realization and application
of the net proceeds had occurred on September 30, 1997. The unaudited pro
forma condensed consolidated statements of operations of the Company for the
year ended December 31, 1996 and the nine months ended September 30, 1996 and
1997 (the "Pro Forma Statements of Operations") give effect to the
Transactions and the Offering as if they had occurred as of January 1, 1996,
and January 1, 1997, respectively.
The Transactions have been accounted for as leveraged recapitalization which
will have no impact on the historical basis of the Company's assets and
liabilities. The Pro Forma Financial Information should be read in conjunction
with "Use of Proceeds," "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of the
Company and notes thereto all included elsewhere in this Prospectus. The Pro
Forma Financial Information and related notes are provided for informational
purposes only and do not purport to be indicative of the Company's financial
condition or results of operations that would have actually been obtained had
the Transactions and this Offering been consummated as of the assumed dates
and for the periods presented, nor are they indicative of the Company's
financial condition or results of operations for any future period.
28
<PAGE>
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR THE
----------------------- PRO FORMA
HISTORICAL TRANSACTIONS OFFERING AS ADJUSTED
---------- ------------ -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 6,894 $ 1,683 (a) $ -- (a) $ 8,577
Accounts receivable....... 11,275 -- -- 11,275
Deferred tax assets....... 674 6,476 (b) -- 7,150
Current contract
receivables and other
current assets........... 3,096 -- -- 3,096
------- -------- -------- --------
Total current assets.... 21,939 8,159 -- 30,098
------- -------- -------- --------
CONTRACT AND NOTES
RECEIVABLE AND
INVESTMENTS................ 1,116 -- -- 1,116
PROPERTY, PLANT AND
EQUIPMENT, net............. 7,414 -- -- 7,414
INTANGIBLES AND OTHER
ASSETS, net................ 32,359 3,625 (c) -- 35,984
------- -------- -------- --------
Total assets............ $62,828 $ 11,784 $ -- $ 74,612
======= ======== ======== ========
CURRENT LIABILITIES:
Notes payable............. $ 20 -- -- $ 20
Accounts payable.......... 4,903 -- -- 4,903
Accrued liabilities....... 3,081 -- -- 3,081
Deferred revenue.......... 9,010 -- -- 9,010
Current portion of long-
term debt................ 1,149 -- -- 1,149
------- -------- -------- --------
Total current
liabilities............ 18,163 -- -- 18,163
SENIOR CREDIT FACILITY...... -- 20,000 (d) (20,000)(d) --
BRIDGE FINANCING FACILITY... -- 80,000 (e) (80,000)(e) --
NOTES OFFERED HEREBY........ -- -- 100,000 (f) 100,000
OTHER LONG-TERM DEBT........ 3,713 (1,206)(g) -- 2,507
DEFERRED CONTRACT
LIABILITIES AND CREDITS.... 1,324 1,206 (g) -- 2,530
------- -------- -------- --------
Total liabilities....... 23,200 100,000 -- 123,200
MINORITY INTEREST........... -- 4,500(h) -- 4,500
STOCKHOLDERS' EQUITY........ 39,628 (92,716)(i) -- (53,088)
------- -------- -------- --------
Total liabilities and
stockholders' equity... $62,828 $ 11,784 $ -- $ 74,612
======= ======== ======== ========
</TABLE>
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(a) The net increase in cash reflects the following (dollars in thousands):
<TABLE>
<CAPTION>
TRANSACTIONS OFFERING
------------ --------
<S> <C> <C>
SOURCES:
Senior Credit Facility............................ $ 20,000 $ --
Bridge Financing Facility......................... 80,000 --
Notes offered hereby.............................. -- 100,000
Equity Contributions (1).......................... 40,000 --
Fir Tree Rollover................................. 19,600 --
-------- --------
$159,600 $100,000
======== ========
USES:
Senior Credit Facility............................ $ -- $ 20,000
Bridge Financing Facility......................... -- 80,000
Share repurchase and other........................ 130,067 --
Fir Tree Rollover................................. 19,600 --
Estimated fees and expenses (2)................... 8,250 --
-------- --------
$157,917 $100,000
======== ========
Net increase in cash............................ $ 1,683 $ --
======== ========
</TABLE>
-------
(1) Includes $35.5 million contributed by VS&A-T/SF to the Issuer and $4.5
million contributed by VS&A-T/SF and Fir Tree to Holdings LLC as part
of the Drop Down Restructuring.
(2) Includes fees and expenses related to the Transactions and the Offering
(including the Initial Purchaser's discount).
(b) Reflects deferred tax benefits related to tax deductible expenses
including severance, bonus and related payroll taxes, deferred stock
option expense, transaction structuring fees and deferred financing costs
at an effective corporate tax rate of 38%.
(c) Reflects deferred financing costs of $3.6 million associated with the
Company's financing of the Recapitalization.
(d) Reflects the indebtedness incurred under the Senior Credit Facility in
connection with the Recapitalization and the subsequent repayment of such
indebtedness from the net proceeds of this Offering. On a pro forma basis,
after giving effect to the Transactions and the Offering at September 30,
1997, the Company would have no borrowings under the Senior Credit
Facility, and the Company's unused availability under the Senior Credit
Facility would have been $25.0 million.
(e) Reflects the indebtedness incurred under the Bridge Financing Facility in
connection with the Recapitalization and the subsequent repayment of such
indebtedness from the net proceeds of the Offering.
(f) Represents gross proceeds of $100.0 million from issuance of the Notes.
(g) Reflects the reclassification of certain acquisition contingent
consideration from other long-term debt to deferred contract liabilities
at September 30, 1997.
(h) Reflects the Company's distribution of certain net assets comprising its
Business to Business Communications segment to Holdings LLC. In exchange
for the net assets distributed, the Issuer received a $45.0 million
preferred interest in Holdings LLC with a cumulative annual distribution
of 11%. The preferred interest includes features which provide the Company
with effective control of Holdings LLC and, therefore, Holdings LLC is
included in the consolidated financial statements of the Company. The
minority interest represents the $4.5 million of equity contributions from
VS&A-T/SF and Fir Tree to Holdings LLC.
(i) The pro forma adjustment to stockholders' equity reflects the following
(dollars in thousands):
<TABLE>
<S> <C>
Share repurchase and other..................................... $(130,067)
Equity Contribution............................................ 35,500
Estimated transactional fees and expenses...................... (4,625)
Tax effect of certain fees and expenses........................ 6,476
---------
$ (92,716)
=========
</TABLE>
30
<PAGE>
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Business to Business Communications..... $29,323 $ 74 (b) $29,825
428 (d)
Information Services.................... 24,388 -- 24,388
Corporate and other..................... 955 (206)(e) 749
------- ------- -------
Total revenues........................ 54,666 296 54,962
------- ------- -------
COSTS AND EXPENSES:
Operating costs......................... 33,474 47 (b) 33,684
163 (d)
General and administrative.............. 13,000 50 (b) 12,889
335 (d)
(496)(j)
Depreciation and amortization........... 3,564 7 (b) 3,643
72 (d)
------- ------- -------
Total expenses........................ 50,038 178 50,216
------- ------- -------
Operating income (loss)................. 4,628 118 4,746
Interest................................ 401 8,067 (k) 8,477
9 (d)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES......... 4,227 (7,958) (3,731)
INCOME TAX BENEFIT (PROVISION)............ (1,803) 3,024 (l) 1,221
------- ------- -------
NET INCOME (LOSS) (m)..................... $ 2,424 $(4,934) $(2,510)
======= ======= =======
NET INCOME (LOSS) PER SHARE............... $ 0.68 $ (1.83)
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.............................. 3,564 1,369
======= =======
OTHER DATA:
EBITDA (n).............................. $ 8,192 $ 8,389
EBITDA margin (o)....................... 15.0% 15.3%
Adjusted pro forma EBITDA (p)........... $10,377
Adjusted pro forma EBITDA margin (o).... 18.9%
</TABLE>
31
<PAGE>
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Business to Business Communications..... $26,313 $ 679 (b) $28,464
1,472 (d)
Information Services.................... 17,064 4,565 (c) 21,629
Corporate and other..................... 1,728 (677)(e) 438
(240)(g)
(373)(h)
------- ------- -------
Total revenues........................ 45,105 5,426 50,531
------- ------- -------
COSTS AND EXPENSES:
Operating costs......................... 27,549 502 (b) 30,868
2,121 (c)
696 (d)
General and administrative.............. 10,289 487 (b) 11,510
680 (c)
565 (d)
(511)(j)
Depreciation and amortization........... 2,843 5 (b) 3,662
595 (c)
219 (d)
------- ------- -------
Total expenses........................ 40,681 5,359 46,040
------- ------- -------
Operating income (loss)................. 4,424 67 4,491
Interest................................ 413 36 (d) 8,630
114 (i)
8,067 (k)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES......... 4,011 (8,150) (4,139)
INCOME TAX BENEFIT (PROVISION)............ (1,578) 3,097 (l) 1,519
------- ------- -------
NET INCOME (LOSS) (m)..................... $ 2,433 $(5,053) $(2,620)
======= ======= =======
NET INCOME (LOSS) PER SHARE............... $ 0.69 $ (1.91)
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.............................. 3,537 1,369
======= =======
OTHER DATA:
EBITDA (n).............................. $ 7,267 $ 8,153
EBITDA margin (o)....................... 16.1% 16.1%
Adjusted pro forma EBITDA (p)........... $10,277
Adjusted pro forma EBITDA margin (o).... 20.3%
</TABLE>
32
<PAGE>
T/SF COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS (A) FORMA
---------- --------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Business to Business Communications... $42,891 $ 996 (b) $ 45,594
1,707 (d)
Information Services.................. 24,273 4,565 (c) 28,838
Corporate and other................... 1,478 (526)(e) 23
(316)(f)
(240)(g)
(373)(h)
------- -------- --------
Total revenues...................... 68,642 5,813 74,455
------- -------- --------
COSTS AND EXPENSES:
Operating costs....................... 40,314 685 (b) 43,900
2,121 (c)
780 (d)
General and administrative............ 15,207 (1,188)(j) 16,203
656 (b)
680 (c)
848 (d)
Depreciation and amortization......... 4,018 14 (b) 4,895
595 (c)
268 (d)
------- -------- --------
Total expenses...................... 59,539 5,459 64,998
------- -------- --------
Operating income...................... 9,103 354 9,457
Interest.............................. 581 10,754 (k) 11,498
49 (d)
114 (i)
------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... 8,522 (10,563) (2,041)
INCOME TAX BENEFIT (PROVISION).......... (3,101) 4,014 (l) 913
------- -------- --------
NET INCOME (LOSS) (m)................... $ 5,421 $ (6,549) $ (1,128)
======= ======== ========
NET INCOME (LOSS) PER SHARE............. $ 1.53 $ (0.82)
======= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 3,543 1,369
======= ========
OTHER DATA:
EBITDA (n)............................ $13,121 $ 14,352
EBITDA margin (o)..................... 19.1% 19.3%
Adjusted pro forma EBITDA (p)......... $ 17,171
Adjusted pro forma EBITDA margin (o).. 23.1%
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(a) The pro forma adjustments exclude approximately $10.1 million of estimated
transaction fees and expenses and other acquisition considerations
incurred in connection with the Transactions and the Offering. These fees
and expenses are non-recurring and will be recorded in the consolidated
statement of operations during the period in which the Transactions are
consummated.
(b) Reflects the consolidation of the Company's purchase of an additional 69%
of Casino Publishing's common stock in February 1997. Subsequent to this
purchase, the Company owned approximately 88% of Casino Publishing. This
adjustment reflects the purchase as if it had occurred on January 1, 1996.
(c) Reflects the consolidation of the Company's acquisition of CORSEARCH in
August 1996. This adjustment reflects the acquisition as if it had
occurred on January 1, 1996.
(d) Reflects the consolidation of the Company's acquisition of Galaxy Expocard
Europe B.V. in May 1997. This adjustment reflects the purchase as if it
had occurred on January 1, 1996.
(e) Represents the elimination of amortization income associated with
covenants-not-to-compete arising from the sale of Marks-Roiland and trade
journal operations in 1993 and 1995, respectively.
(f) Represents the elimination of $316,000 gain on the sale of certain Company
assets, consisting mainly of real estate.
(g) Represents the elimination of other income associated with the elimination
of a reserve related to the 1995 sale of the operations of three trade
journals of GEM.
(h) Reflects the elimination of investment income on cash which was used in
the August 1996 acquisition of CORSEARCH as if such cash had been used
assuming CORSEARCH was acquired on January 1, 1996.
(i) Reflects the incremental interest expense in 1996 associated with the
August 1996 acquisition of CORSEARCH assuming CORSEARCH was acquired on
January 1, 1996. The Company incurred debt of $900,000 and $327,000 at
7.5% and 8.5%, respectively, in conjunction with the acquisition.
(j) Pro forma adjustments to general and administrative expenses are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------ YEAR ENDED
1997 1996 DECEMBER 31, 1996
-------- -------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
VS&A and Fir Tree management fee..... $ 68 $ 68 $ 90
Elimination of management position
(1)................................. (237) (174) (290)
Nonrecurring write-off of receivable
(2)................................. -- (405) (405)
Nonrecurring write-down of investment
(3)................................. -- -- (575)
Other adjustments (4)................ (327) -- (8)
-------- -------- -------
Total adjustments.................. $ (496) $ (511) $(1,188)
======== ======== =======
</TABLE>
--------
(1) Represents the elimination of salary, bonus, payroll taxes and employee
benefits associated with one management position which was principally
devoted to nonoperational tasks including the Transactions. Management
intends to eliminate this position as part of the Transactions.
(2) Represents a nonrecurring charge associated with the write-off recorded
in 1996 of a receivable recorded in conjunction with the Company's sale
of the assets of Shopper's Guide, Inc. in April 1994.
(3) Represents a nonrecurring charge associated with the write-down of MECI
common stock received in exchange for land sold to MECI in March 1995
and a write-off of an investment in a vendor used by the Company who
filed for bankruptcy.
(4) Represents the elimination of certain general and administrative costs,
mainly transactional consulting fees, during the year ended December
31, 1996 and the six months ended June 30, 1997. These costs are
considered by the Company to be directly attributable to the
Transactions and, therefore, nonrecurring in nature.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(k) Reflects the interest expense on indebtedness incurred by the Company in
connection with the Transactions and the Offering, as if the Transactions
and the Offering had been consummated as of the beginning of the periods
presented, based on the borrowings and their rates expected to be in
effect at the offering date, as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------- YEAR ENDED
RATE AMOUNT 1997 1996 DECEMBER 31, 1996
------ -------- -------- -------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Notes offered hereby.... 10.375% $100,000 $ 7,782 $ 7,782 $10,375
Amortization of financ-
ing costs.............. 285 285 379
-------- -------- -------
Interest expense...... $ 8,067 $ 8,067 $10,754
======== ======== =======
</TABLE>
(1) Reflects the pro forma income tax benefit associated with the pro forma
adjustments at an assumed corporate tax rate of 38.0%.
(m) The net income of Holdings LLC was less than the amount of distributions
payable for the periods on the preferred interest held by the Company.
Accordingly, no minority interest in the net income of Holdings LLC has
been reflected.
(n) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that such
information is considered by certain investors to be an additional basis
on which to evaluate the Company's ability to pay interest expense, repay
debt and make capital expenditures. Excluded from EBITDA are interest
expense, income taxes, and depreciation and amortization, each of which
can significantly affect the Company's results of operations and liquidity
and should be considered in evaluating the Company's financial
performance. EBITDA is not intended to represent and should not be
considered more meaningful than, or an alternative to, measures of
operating performance as determined in accordance with generally accepted
accounting principles.
(o) EBITDA margin and adjusted EBITDA margin represent EBITDA and adjusted
EBITDA as percentages of total revenues.
(p) Management believes the following additional adjustments to pro forma
EBITDA are relevant to evaluating the future operating performance of the
Company. The following additional adjustments, which eliminate the impact
of certain nonrecurring charges and reflect the estimated impact of
management's business and operating strategy, are based on estimates and
assumptions made and believed to be reasonable by management and are
inherently uncertain and subject to change. The following calculation
should not be viewed as indicative of actual or future results. The
following table reflects the effects of these items.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------- YEAR ENDED
1997 1996 DECEMBER 31, 1996
-------- -------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Pro forma EBITDA....................... $ 8,389 $ 8,153 $14,352
Additional adjustments:
Net personnel costs (1)................ 599 529 1,201
Reorganization of loss-producing
magazines (2)......................... 874 1,005 747
Excess information acquisition costs
(3)................................... 196 -- --
Shut down of business operations (4)... 156 234 496
Other net savings (5).................. 163 356 375
-------- -------- -------
Total additional adjustments........... 1,988 2,124 2,819
-------- -------- -------
Adjusted pro forma EBITDA.............. $ 10,377 $ 10,277 $17,171
======== ======== =======
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
--------
(1) Represents the net reduction in personnel costs for: (i) elimination of
the Tulsa, Oklahoma corporate office and the related compensation and
benefits for 13 individuals; (ii) addition of new management team
located at a new corporate office in New York and the related
compensation, benefits, occupancy and administrative costs; (iii)
addition of short-term consulting agreement expenses with former
officers to aid the new management in the transition phase and (iv)
elimination of non-recurring costs related to the search for and hiring
of research oriented personnel at CORSEARCH.
(2) Represents losses incurred by the Company during the periods presented
in connection with two magazine operations: IGWB and Casino Executive.
While these publications are projected to be profitable in fiscal 1998,
in the event that such publications continue to generate losses,
management expects to take one or more of the following actions: (a)
reorganize the publications to reduce costs; (b) merge the publications
with another party; (c) enter into strategic alliances or partnerships
with a third party or (d) other alternatives. Management expects a
decision regarding this segment will be made during fiscal 1998.
(3) Effective for fiscal 1997, CORSEARCH changed the terms of a contract
with one of its database vendors. This adjustment reflects information
acquisition costs during the nine months ended September 30, 1997 under
a variable pricing structure consistent with an August 1, 1997
amendment to that agreement with that vendor.
(4) Represents losses in TISI's NESS division, a high-end employment
screening service which was abandoned by the Company in fiscal 1997.
(5) During fiscal 1996 and 1997, certain consulting costs were incurred in
connection with one-time acquisition and executive searches; a system
evaluation project that was never completed; a satellite office study
that was not implemented and an option and study of the feasibility of
a new publication. In addition, severance costs for the officer of a
closed division were incurred.
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated historical financial data
for each of the five years in the period ended December 31, 1996 that have
been derived from the audited consolidated financial statements of the
Company. The statements of operations and changes in stockholders' equity and
statements of cash flows for each of the three years in the period ended
December 31, 1996 and the notes thereto appear elsewhere in this Prospectus.
The selected historical statement of operations and balance sheet data as of
and for the nine months ended September 30, 1997 and 1996 have been derived
from unaudited financial statements, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the unaudited interim
periods. Results for the nine months ended September 30, 1997 and 1996 are not
necessarily indicative of results that may be expected for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenues
Information Services
(a)................... $ 13,643 $ 14,499 $ 15,091 $ 17,950 $ 24,273 $ 17,064 $ 24,388
Business to Business
Communications (b).... 80,643 42,911 39,665 53,089 42,891 26,313 29,323
Corporate and other.... 1,020 1,570 2,163 1,039 1,478 1,728 955
-------- -------- -------- -------- -------- -------- --------
Total revenues........ 95,306 58,980 56,919 72,078 68,642 45,105 54,666
-------- -------- -------- -------- -------- -------- --------
Expenses
Operating costs........ 64,613 49,658 35,069 39,665 40,314 27,549 33,474
General and
administrative
expenses.............. 21,341 15,361 11,862 11,841 15,207 10,289 13,000
Depreciation and
amortization.......... 7,378 3,779 3,118 3,601 4,018 2,843 3,564
-------- -------- -------- -------- -------- -------- --------
Total expenses........ 93,332 68,798 50,049 55,107 59,539 40,681 50,038
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ 1,974 (9,818) 6,870 16,971 9,103 4,424 4,628
Interest expense....... 2,692 1,921 736 859 581 413 401
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and other
items................. (718) (11,739) 6,134 16,112 8,522 4,011 4,227
Unusual gain (2)....... 24,412 -- -- -- -- -- --
Income tax (provision)
benefit............... (10,569) 4,097 (2,589) (58) (3,101) (1,578) (1,803)
Minority interest in
consolidated
subsidiaries.......... (3,983) 1,929 (981) (266) -- -- --
Discontinued
operations, net (3)... (790) (4,800) (2,816) 37 -- -- --
Extraordinary loss, net
of tax of $340 (4).... -- (560) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 8,352 $(11,073) $ (252) $ 15,825 $ 5,421 $ 2,433 $ 2,424
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding.... 4,208 3,801 3,733 3,766 3,543 3,537 3,564
Earnings (loss) per
share:
Continuing
operations........... $ 2.17 $ (1.54) $ 0.65 $ 4.19 $ 1.53 $ 0.69 $ 0.68
Discontinued
operations........... (0.19) (1.26) (0.75) .01 -- -- --
Extraordinary loss.... -- (0.15) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
$ 1.98 $ (2.95) $ (0.10) $ 4.20 $ 1.53 $ 0.69 $ 0.68
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA
(1):
Capital expenditures... $ 1,402 $ 5,564 $ 4,382 $ 2,589 $ 2,641 $ 1,955 $ 5,460
EBITDA (5)............. 9,352 (6,039) 9,988 20,572 13,121 7,267 8,192
EBITDA margin (5)...... 9.8% (10.2)% 17.5% 28.5% 19.1% 16.1% 15.0%
Ratio of earnings to
fixed charges (6)..... 9.8x -- 9.3x 19.8x 15.7x 10.7 11.1x
BALANCE SHEET DATA:
Cash and equivalents... $ 9,763 $ 2,808 $ 4,585 $ 13,383 $ 2,257 $ 5,236 $ 6,894
Total assets........... 88,102 60,059 53,581 53,444 55,982 59,354 62,828
Total debt............. 20,913 11,153 6,156 5,795 4,626 4,657 4,862
Stockholders' equity... 38,288 26,450 23,855 32,486 38,186 35,004 39,628
</TABLE>
37
<PAGE>
--------
(1) In the merger of Tribune/Swab-Fox then the owner of 78% of the Common
Stock, with and into the Issuer on May 25, 1995, the Issuer was the
surviving entity from a legal standpoint. However, from an accounting
standpoint, the transaction was treated as a downstream merger. Thus,
for financial reporting purposes, the transaction was treated as a
recapitalization of Tribune/Swab-Fox, with Tribune/Swab-Fox as the
survivor. Accordingly, the historical financial statements of the
Company, as the surviving legal entity, are those historical financial
statements of Tribune/Swab-Fox prior to the merger. In addition, the
Company was a party to several events/transactions which affect the
comparability of the historical information presented above. See the
Company's Notes to Consolidated Financial Statements for additional
information on certain of these events/transactions.
--------
(a) With respect to Information Services, the Company acquired
CORSEARCH in August 1996.
(b) With respect to Business to Business Communications, the Company:
(i) ceased publishing "The Tulsa Tribune" in September 1992 as a
result of the termination of a joint operating agreement; (ii) sold
the operating assets of the "New York Shopper," one of the
Company's shopper-newspaper operations, in November 1993; (iii)
acquired the stock of Galaxy in March 1994; (iv) sold the assets of
the "New Jersey Shopper", its other shopper-newspaper operation, in
April 1994; (v) sold three trade journals and related assets in
July 1995; (vi) acquired Casino Publishing Co. effective February
1, 1997 and (vii) acquired Galaxy Expocard Europe, B.V. in May
1997.
(2) Gain from early termination of newspaper joint operating agreement
between the Company's newspaper and World Publishing Company, net of
termination costs.
(3) Restated to reflect real estate as a discontinued operation as of
November 30, 1994.
(4) Prepayment penalty on early retirement of long-term debt.
(5) EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that
such information is considered by certain investors to be an additional
basis on which to evaluate the Company's ability to pay interest
expense, repay debt and make capital expenditures. Excluded from EBITDA
are interest expense, income taxes, depreciation and amortization,
unusual gain, minority interest in consolidated subsidiaries,
discontinued operations, net and extraordinary loss, net of tax, each
of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's
financial performance. EBITDA is not intended to represent and should
not be considered more meaningful than, or an alternative to, measures
of operating performance as determined in accordance with generally
accepted accounting principles. EBITDA margin represents EBITDA as a
percentage of total revenues.
(6) In computing the ratio of earnings to fixed charges: (a) earnings have
been based on income from continuing operations before income taxes and
fixed charges and (b) fixed charges consist of interest and
amortization of debt discount and expense. The coverage deficiency for
the year ended December 31, 1993 was approximately $11.7 million.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a diversified business media company which principally
operates two lines of business: (i) business and professional information
services and (ii) business to business communications, publishing and related
services. On May 25, 1995, Tribune/Swab-Fox, parent of the Issuer, merged with
and into the Issuer. Though the Issuer was the surviving legal entity in the
merger because Tribune/Swab-Fox owned 78% of the Issuer's Common Stock prior
to the merger, the transaction is accounted for as a recapitalization of
Tribune/Swab-Fox with Tribune/Swab-Fox as the survivor (i.e., a downstream
merger). Accordingly, the historical financial statements of the Company, as
the surviving legal entity, are those historical financial statements of
Tribune/Swab-Fox.
In February 1997, the Issuer increased its ownership in Casino Publishing
Company, publisher of the trade journal, Casino Executive, to 88%, which is
included in the Issuer's consolidated operations since that date. Effective
May 1, 1997, the Issuer acquired a majority ownership in Galaxy Expocard
Europe B.V. and increased its ownership to 73% effective July 1, 1997. On
August 15, 1996, the Issuer acquired 100% of the outstanding capital stock of
CORSEARCH, which has been accounted for as a purchase. CORSEARCH provides
trademark and trade name research and is included in the Issuer's consolidated
operations since that date.
PROFITABILITY
The following table summarizes the Company's historical results of
operations as a percentage of revenue for the years ended December 31, 1994,
1995 and 1996 and for the nine month periods ended September 30, 1996 and
1997:
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------
1994 1995 1996 1996 1997
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Information Services........... 26.5% 24.9% 35.4% 37.8% 44.6%
Business to Business
Communications................ 69.7 73.7 62.5 58.4 53.7
Corporate and other............ 3.8 1.4 2.1 3.8 1.7
-------- -------- -------- ------ ------
Total revenues............... 100.0 100.0 100.0 100.0 100.0
Expenses:
Operating costs................ 61.6 55.0 58.7 61.1 61.2
General and administrative
expenses...................... 20.8 16.4 22.2 22.8 23.8
Depreciation and amortization.. 5.5 5.0 5.8 6.3 6.5
-------- -------- -------- ------ ------
Total expenses............... 87.9 76.4 86.7 90.2 91.5
-------- -------- -------- ------ ------
Operating Income................. 12.1% 23.6% 13.3% 9.8% 8.5%
======== ======== ======== ====== ======
EBITDA........................... 17.5% 28.5% 19.1% 16.1% 15.0%
======== ======== ======== ====== ======
</TABLE>
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 Versus Nine Months Ended September 30,
1996
Revenues. Revenues of $54.7 million for the nine months ended September 30,
1997 were $9.6 million, or 21.2%, higher than the nine months ended September
30, 1996. Information Services revenue increased approximately $7.3 million,
or 42.9%, for the nine months ended September 30, 1997 as compared with the
nine months ended September 30, 1996, of which approximately $4.6 million is
attributable to CORSEARCH
39
<PAGE>
and $2.7 million is attributable to continued growth in TISI's employment
histories volume and criminal record volume, and higher average prices from
MVRs attributable to a continued increase in the volume of TISI's premium
service, "MVR Express." Business to Business Communications revenue increased
$3.0 million, or 11.4%, for the nine months ended September 30, 1997 as
compared with the nine months ended September 30, 1996, consisting mainly of
an increase in trade show directories produced during the second quarter of
1997, the effect of higher fees effective in early 1996 for exhibitor
services, and Casino Executive trade journal revenue from the date that a
majority of Casino Publishing Company was acquired by the Issuer, reduced by
lower registration services due to a higher number of bi-annual trade shows in
1996, fewer pages of advertising in IGWB due to the loss of several large
advertisers in the lottery segment of the gaming industry and elimination of
two trade shows in 1997.
Interest and other income for the nine months ended September 30, 1997 was
approximately $0.8 million, or 44.7%, lower than the nine months ended
September 30, 1996, which is substantially all attributable to the reduction
in interest earned in 1997 since the cash and short-term investments in 1996
were used to acquire CORSEARCH, partially offset by equity earnings in 1997
from the Issuer's interest in Gaming for Africa and interest income related to
an income tax refund.
Operating Costs. Operating costs for the nine months ended September 30,
1997 were $5.9 million, or 21.5%, higher than the nine months ended September
30, 1996. Information Services costs increased approximately $3.3 million, or
34.0%, for the nine months ended September 30, 1997 as compared with the nine
months ended September 30, 1996, which consists of $2.2 million related to
CORSEARCH, with substantially all of the remainder related to the criminal
records volume increase and new product costs. Business to Business
Communications costs increased approximately $2.7 million, or 14.9%, during
the nine months ended September 30, 1997 as compared with the nine months
ended September 30, 1996, attributable to the direct costs of the increase in
directories published during the nine months ended September 30, 1997,
additional payroll costs in 1997 related to the increase in operating
personnel throughout 1996 and early 1997, and Casino Executive costs in 1997,
reduced by lower trade show costs due to the elimination in 1997 of two trade
shows.
General and Administrative Expenses. General and administrative expenses
were $2.7 million, or 26.3%, higher for the nine months ended September 30,
1997, as compared with the nine months ended September 30, 1996, substantially
all of which is attributable to CORSEARCH and Casino Executive. Information
Services expenses, exclusive of CORSEARCH, were approximately $0.3 million, or
16.0%, higher in the nine months ended September 30, 1997 as compared with the
nine months ended September 30, 1996, primarily attributable to growth.
Included in the nine months ended September 30, 1996 was a $0.3 million
provision for losses on prepaid production costs for Business to Business
Communications that had been paid to a digital information vendor during 1995
and early 1996 and a $0.4 million loss on the remaining receivables from the
sale of the Shopper's Guide assets in 1994.
Depreciation and Amortization. Depreciation and amortization were $0.7
million, or 25.4%, higher for the nine months ended September 30, 1997, as
compared with the nine months ended September 30, 1996, substantially all
related to CORSEARCH, including amortization of goodwill related to this
acquisition.
Interest Expense. Interest expense did not change significantly during the
nine months ended September 30, 1997, as compared with the nine months ended
September 30, 1996, because the decrease in interest expense attributable to a
reduction in debt from principal payments during the past year was offset by
interest on new debt incurred related to the acquisition of CORSEARCH.
Year Ended December 31, 1996 Versus Year Ended December 31, 1995
General. Operations for the year ended December 31, 1996 have two major
variations from the same period ended December 31, 1995. First, operations of
CORSEARCH, which was acquired on August 15, 1996, are included in Information
Services in 1996 from the acquisition date. Second, the sale of three trade
journals by GEM, effective July 1, 1995, resulted in a pre-tax gain of $11.7
million in 1995 and, as a result of such sale, GEM operations for the last
half of 1995 for the Business to Business Communications segment includes only
IGWB, the related conference and trade show, World Gaming Congress, and
related activities.
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Revenues. Revenues of $68.6 million for 1996 were $3.4 million, or 4.7%,
lower than for 1995. If the $11.7 million pre-tax gain in 1995 is excluded,
revenues increased $8.3 million, or 13.8%, in 1996 as compared with 1995.
Information Services revenue increased $6.3 million, or 35.2%, in 1996 as
compared with 1995, consisting of $2.7 million of CORSEARCH revenue for the
four and one-half months in 1996 that it was owned by the Issuer and $1.0
million from increases in employment histories due to increased volumes; $1.6
million from criminal records due to increased volumes and a regional provider
of criminal records acquired in 1996; $0.5 million of motor vehicle reports
primarily from the higher revenue product MVR Express; and most other pre-
employment screening products also had higher volumes and revenues in 1996, as
compared with 1995. Business to Business Communications revenue increased
approximately $1.5 million, or 3.6%, in 1996 as compared with 1995, mainly
consisting of increases in registration services, data management services and
trade show publishing for several large bi-annual trade shows and conventions;
an increase in price for data management services in mid-1995 resulting in an
average increase in data management services revenue of approximately 30% in
1996 as compared with 1995; and an increase in the number of trade show
directories in 1996 as compared with 1995 from both bi-annual trade shows and
other new trade shows reduced by lower revenue of approximately $5.5 million
related to the sale of three trade journals effective July 1, 1995. An
increase in advertising pages and revenue for the remaining trade journal
partially offset the loss of revenue in 1996 as compared with 1995 from the
three trade journals sold.
Operating Costs. Operating costs were $0.6 million, or 1.5%, higher in 1996,
as compared with 1995. Information Services operating costs were $1.9 million,
or 17.3%, higher in 1996, as compared with 1995, consisting of $1.0 million of
CORSEARCH operating costs for the four and one-half months in 1996 that it was
owned by the Issuer, $0.7 million of cost increases attributable to criminal
record volume increases and cost increases attributable to higher volumes of
other pre-employment screening products. Business to Business Communications
costs were $1.2 million, or 4.3%, lower in 1996, as compared with 1995, since
the increase in number of trade shows (both bi-annual and annual) for
registration services, data management services, convention publishing
services and directory publishing were more than offset by the decrease in
costs of $3.6 million in 1996 related to the three publications sold in 1995.
General and Administrative Expenses. General and administrative expenses
were $3.4 million, or 28.8%, higher in 1996, as compared with 1995.
Information Services' general and administrative expenses increased $1.8
million, or 88.7%, as compared with 1995, which includes CORSEARCH expenses of
$1.0 million for the four and one-half months that it was owned by the Issuer
and an increase in expenses of pre-employment screening services of $0.8
million, which mainly represent a full year of personnel costs and related
expenses for employees added throughout 1995. Business to Business
Communications' general and administrative expenses increased $0.5 million, or
7.5%, in 1996 as compared with 1995, attributable to additional employee costs
(both full year costs for employees added in 1995 and new employees in 1996)
and related expenses required for the continued growth in number of trade
shows, conventions and services and products net of the decrease in costs
attributable to the three trade journals sold in 1995. Corporate general and
administrative expenses increased approximately $1.1 million in 1996 as
compared to 1995 resulting from the write-off of $0.5 million in connection
with the final settlement with the buyer of Shopper's Guide of future amounts
due the Issuer, compensation recorded related to stock options granted and
additional consulting costs related to investor relations, acquisition search,
and income tax examinations.
Depreciation and Amortization. Depreciation and amortization increased $0.4
million, or 11.1%, in 1996, as compared with 1995, of which $0.3 million
relates to equipment depreciation and goodwill amortization of CORSEARCH for
the four and one-half months that it was owned by the Issuer. The balance of
the increase is related to capital expenditures for each operation,
substantially offset by lower gaming media services depreciation and
amortization due to the sale of the three trade journals in 1995.
Interest Expense. Interest expense decreased $0.3 million, or 33.3%, in
1996, as compared with 1995, resulting from principal payments on debt during
1996 and lower average interest rates on variable debt, offset by increased
interest on new debt related to the CORSEARCH acquisition.
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Year Ended December 31, 1995 Versus Year Ended December 31, 1994
General. Operations for the year ended December 31, 1995 have three major
variations from the same period ended December 31, 1994. First, the merger of
the Issuer and Tribune/Swab-Fox was completed in May 1995, which is treated as
a downstream merger for accounting, tax and financial reporting purposes.
Accordingly, the Issuer was able to utilize substantially all of the income
tax net operating loss carryforwards which Tribune/Swab-Fox had prior to the
merger, and this significantly reduced the 1995 income tax provision. Second,
the sale of three GEM trade journals, effective July 1, 1995, resulted in a
pre-tax gain of $11.7 million and as a result of such sale, the GEM operations
in the Business to Business Communications segment for the last half of 1995
only included IGWB and the related conference and trade show, World Gaming
Congress, and related activities. Third, operations of Galaxy, acquired
effective March 1, 1994, are included in Business to Business Communications
for twelve months in 1995 as compared with only ten months in 1994.
Revenues. Revenues of $72.1 million for 1995 were $15.2 million, or 26.7%,
higher than for 1994. The major revenue increase is the $11.7 million pre-tax
gain on the sale of the three GEM trade journals. Business to Business
Communications revenue increased $1.7 million, or 4.3%, in 1995 as compared
with 1994, exclusive of the gain on the sale of the three trade journals,
consisting of significant growth in the trade show registration and publishing
portion of this segment in 1995, including two more months of Galaxy's
operations, offset by a decrease of $5.2 million in revenues 1995, primarily
as a result of the sale of the three trade journals. Thus in the last half of
1995, as compared with 1994, the GEM portion of the operations included
revenue from only one trade journal. In addition, an increase in advertising
pages and two new executive seminars in 1995 as compared with 1994 partially
offset the decrease from the trade journals sold. Revenue from the World
Gaming Congress increased approximately $1.0 million in 1995 as compared with
1994. Information Services revenue increased $2.9 million, or 19.2%, in 1995
as compared with 1994 with most of the increase relating to an increase in the
volume of employment histories and criminal records sold. Long distance
telephone resale revenue was approximately $0.7 million lower in 1995 as a
result of the Issuer exiting this business during the latter part of the first
quarter of 1994 due to competitive and regulatory considerations. Other
revenue is mainly interest income related to the contract receivable from the
World Publishing Company ("World Publishing") which is approximately $0.4
million lower in 1995 as compared with 1994 because of continued payments
received on the contract receivable, although interest income on cash received
from the sale of the trade journals substantially offsets this reduction.
Operating Costs. Operating costs were $4.6 million, or 13.1%, higher in
1995, as compared with 1994. Business to Business Communications operating
costs were $2.2 million, or 8.3%, higher in 1995 as compared with 1994. The
decrease in Business to Business Communications operating costs related to the
three trade journals sold in 1995 reduced by the effect of the following cost
increases: costs related to the European executive seminar, the costs related
to the increase in advertising pages, the significant increase in the cost of
paper, a postal rate increase, direct cost increase related to the World
Gaming Congress which increased as a result of continued expansion of this
trade show in 1995, an increase in printing costs for the convention
publishing business of $1.0 million related to the higher cost of paper and an
increase in the number of conventions, directories and services provided, the
increase in the number of personnel at both Galaxy and Atwood (approximately
$2.0 million increase in combined personnel costs) in order to continue to
provide high quality service to their customers and to handle the increase in
the number of trade shows serviced and the inclusion of Galaxy for twelve
months of operations in 1995 versus ten months in 1994. Information Services
operating costs were $2.4 million, or 27.1%, higher for 1995, as compared with
1994. The increases in such costs were related primarily to approximately $0.7
million from the new employment screening service approximately $0.4 million
from the increase in criminal record volume and additional personnel related
to higher volumes and new product development costs. Netted against these
increases is a decrease of approximately $0.5 million in 1995 related to long
distance telephone resale costs because of exiting this business in the latter
part of the first quarter of 1994.
General and Administrative Expenses. General and administrative expenses
were approximately the same in 1995 as in 1994. The reduction in general and
administrative expenses from the Business to Business
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Communications segment during the last half of 1995, and the reduction of
expenses in 1995 resulting from the merger, as compared with 1994, were
generally offset by Galaxy's general and administrative expenses for the
twelve months in 1995, as compared with ten months in 1994, and the accrual
for potential costs under the indemnity provisions of the Termination
Agreement among the Issuer, World Publishing and Newspaper Printing
Corporation ("NPC") as related to settlement of lawsuits against World
Publishing and NPC.
Depreciation and Amortization. Depreciation and amortization increased $0.5
million, or 16.1%, for 1995, as compared with 1994, substantially all related
to the depreciable assets of Galaxy, both the number of months Galaxy was
included in each year and depreciation related to Galaxy's 1994 and 1995
capital expenditures needed to handle Galaxy's growth in 1994 and 1995.
Interest Expense. Interest expense increased $0.1 million, or 14.3%, for
1995, as compared with 1994, resulting from higher average interest rates on
variable rate debt during 1995, partially reduced by principal payments on
debt during the past year. Also, in late May 1995, the Issuer borrowed $2.0
million under its bank lines of credit in connection with the merger and the
related acquisition of equivalent shares for cash, which borrowings were
repaid in early August 1995.
PROVISION FOR INCOME TAXES
Provision for income taxes as a percentage of income before income taxes for
all periods presented is lower than the statutory federal income tax rate
mainly because of the reduction in the valuation reserve related to net
operating loss carryforwards and higher tax basis in the trade journals sold
reduced by goodwill amortization related to acquisitions not being deductible
for federal and state income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's principal sources of funds following the
Recapitalization are anticipated to be cash flows from operating activities
and borrowings under the Senior Credit Facility. Based upon the successful
implementation of management's business and operating strategy, the Company
believes that these funds will provide the Company with sufficient liquidity
and capital resources for the Company to meet its current and future financial
obligations, including the payment of principal and interest on the Notes, as
well as to provide funds for the Company's working capital, capital
expenditures and other needs. No assurance can be given, however, that this
will be the case. As of September 30, 1997, after giving effect to the
Transactions and the Offering, the Issuer would have had $25.0 million of
availability under the Senior Credit Facility. The Company's future operating
performance and ability to service or refinance the Notes and to repay, extend
or refinance the Senior Credit Facility will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control. In addition, any future acquisitions by the
Company would likely require additional financing. See "Risk Factors--
Substantial Leverage," "--Dependence Upon Distributions from Subsidiaries and
LLCs" and "--Uncertain Impact of Acquisition Plans."
In the event of a Change of Control, the Company will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any,
thereon to the repurchase date. Certain events involving a Change of Control
would result in an event of default under the Senior Credit Facility or other
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Company to
repurchase the Notes may cause an event of default under the Senior Credit
Facility or such other indebtedness, even if the Change of Control does not.
Finally, there can be no assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a Change of Control. See
"Risk Factors--Limitations on Change of Control" and "Description of the New
Notes--Change of Control."
Capital Expenditures. Management anticipates that capital expenditures in
1997 will be approximately $6.5 million. Other than the Information Services
division, the primary capital expenditures will be for computers, software,
furniture and office equipment and to acquire additional "reader boxes" at
Galaxy. With regard to the Information Services division, the Issuer will
incur capital expenditures to develop software
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and purchase the computers for CORSEARCH to launch an on-line trademark and
trade name search business. TISI continues to offer its customers in the
trucking industry credits for providing employment information to be utilized
in its database, which credits can be used against charges for future services
from such division. All of the credits earned are considered capital
expenditures for the acquisition of such data. In addition, the Company
invested approximately $1.1 million to acquire interests in Galaxy Expocard
Europe and Casino Executive. Any other acquisitions would require additional
investments. Management anticipates positive cash flow from operations in
1997, even after the anticipated capital expenditures for 1997. Thus, with the
Issuer's available cash reserves and cash flow, management does not anticipate
a need for capital during 1997 except for possible, and as yet unidentified,
acquisitions.
INFLATION
Management anticipates the effect of inflation on the Company's operations
during 1997 will be primarily limited to the effects which general inflation
will have on costs in most areas in which the Company operates.
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THE EXCHANGE OFFER
GENERAL
The Issuer entered into the Exchange Offer Registration Rights Agreement
with the Initial Purchaser pursuant to which the Issuer and the Guarantors
agreed, for the benefit of the holders of the Old Notes, at the Issuer's cost,
(i) to use their best efforts to file with the Commission the Exchange Offer
Registration Statement within 30 days after the date of the original issuance
of the Old Notes with respect to the Exchange Offer for the New Notes, which
will have terms substantially identical to the Old Notes (except that the New
Notes will not contain terms with respect to transfer restrictions or interest
rate increases as described herein) and (ii) to use their best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the date of the original issuance of
the Old Notes. The Exchange Offer Registration Rights Agreement provides that
promptly after the Exchange Offer Registration Statement has been declared
effective, the Issuer will offer the New Notes in exchange for surrender of
the Old Notes and that the Issuer will keep the Exchange Offer open for not
less than 20 days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Old Notes. For
each Old Note validly tendered to the Issuer pursuant to the Exchange Offer
and not withdrawn by the holder thereof, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the tendered Old
Note. Interest on each New Note will accrue from the last Interest Payment
Date on which interest was paid on the Old Note tendered in exchange therefor
or, if no interest has been paid on such tendered Old Note, from October 29,
1997.
Based on existing interpretation of the Securities Act by the Staff set
forth in several no-action letters to third parties, and subject to the
immediately following sentence, the Issuer believes that the New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof without further compliance with the
registration and prospectus delivery provisions of the Securities Act.
However, any holder of Old Notes who is an "affiliate" of the Issuer or who
intends to participate in the Exchange Offer for the purpose of distributing
the New Notes (i) will not be able to rely on the interpretation by the Staff
set forth in the above referenced no-action letters, (ii) will not be able to
tender Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the New Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes who wishes to exchange Old Notes for New Notes
in the Exchange Offer will be required to make certain representations,
including that (i) any New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, (ii) such
holder has no arrangements with any person to participate in the distribution
of such New Notes and (iii) such holder is not an "affiliate," as defined
under Rule 405 of the Securities Act of the Issuer or, if such holder is an
affiliate, that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
holder is not a broker-dealer, it will be required to represent that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the holder is a Participating Broker-Dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it has no arrangements with any person to participate in the
distribution of the New Notes and that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, such holder will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
To date, the Staff has taken the position that Participating Broker--Dealers
may fulfill their prospectus delivery requirements with respect to
transactions involving an exchange of securities such as the exchange pursuant
to the Exchange Offer (other than a resale of an unsold allotment from the
original sale of the Old Notes) with this Prospectus. A Participating Broker--
Dealer which delivers this Prospectus to purchasers in connection with resales
of the Old Notes will be subject to certain of the civil liability provisions
under the Securities Act, and will be bound by the provisions of the Exchange
Offer Registration Rights Agreement (including certain indemnification rights
and obligations). Under the Exchange Offer Registration Rights Agreement, the
Issuer is required to allow Participating Broker-Dealers and other persons, if
any, subject to
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similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such New Notes. A broker-dealer which purchased Old Notes
from the Issuer may not participate in the Exchange Offer.
The Exchange Offer Registration Rights Agreement provides that, in the event
that any changes in law or the applicable interpretations of the Staff do not
permit the Issuer to effect the Exchange Offer or if for any other reason the
Exchange Offer Registration Statement is not declared effective within 150
days after the original issuance of the Old Notes or the Exchange Offer is not
consummated within 180 days after the original issue of the Old Notes or upon
the request of the Initial Purchaser under certain circumstances, the Issuer
and the Guarantors will, in lieu of effecting the registration of the New
Notes pursuant to the Exchange Offer Registration Statement and at the
Issuer's cost, (a) as promptly as practicable, file with the Commission the
Shelf Registration Statement covering resales of the Old Notes, (b) use their
best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by the 180th day after the original issue
of the Old Notes (or promptly in the event of a request by the Initial
Purchaser) and (c) use their best efforts to keep effective the Shelf
Registration Statement for a period of two years after its effective date (or
for a period of one year after such effective date if such Shelf Registration
Statement is filed at the request of the Initial Purchaser or, for such
shorter period, when all of the Old Notes covered by the Shelf Registration
Statement have been sold pursuant thereto). The Issuer will, in the event of
the filing of a Shelf Registration Statement, provide to each holder of the
Old Notes copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for
the Old Notes has become effective and take certain other actions as are
required to permit unrestricted resales of the Old Notes. A holder of Old
Notes who sells such Old Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver the prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Exchange Offer Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each
holder of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement within the time periods set forth in the
Exchange Offer Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and to benefit from the
provisions regarding the increase in interest rate set forth in the following
paragraph.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 30th day following the date
of original issue of the Old Notes, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 150th day following the
date of original issue of the Old Notes or (iii) either (A) the Issuer has not
exchanged New Notes for all Old Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which the
Exchange Offer Registration Statement was declared effective or (B) the
Exchange Offer Registration Statement ceases to be effective at any time prior
to the time that the Exchange Offer is consummated for a period of 15
consecutive days without being succeeded immediately by an additional
Registration Statement, filed and declared effective or (C) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of its effective date for a period of 15 consecutive days without
being succeeded immediately by an additional Shelf Registration Statement
filed and declared effective, then, as liquidated damages, the interest rate
stated on the Old Notes shall be increased by one-half of one percent per
annum, which rate will be increased by an additional one quarter of one
percent per annum for each subsequent 90-day period that any such additional
interest continues to accrue, up to a maximum additional interest rate of 2%
in excess of the original 10 3/8% interest rate per year. Upon (x) the filing
of the Exchange Offer Registration Statement in the case of clause (i) above,
(y) the effectiveness of the Exchange Offer Registration Statement in the case
of clause (ii) above or (z) the day before the date of the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, in the case of clause (iii) above, the interest rate stated on
the Old Notes from the date of such filing, effectiveness or day before the
date of the consummation, as the case may be, will be reduced to the original
interest rate of the Old Notes; 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 pursuant to the
foregoing provisions.
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The summary herein of certain provisions of the Exchange Offer Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Exchange Offer Registration Statement.
Notwithstanding the foregoing, to the extent applicable, there shall be
added to all time limitation periods that number of days representing delays
in the Issuer's filings with the Commission caused by events beyond the
Issuer's control despite its best efforts in either of the following
categories: (i) events affecting issuers generally, such as the temporary
closure of federal agencies; or (ii) events directly affecting the Issuer,
such as its inability to obtain all information of an acquisition entity
constituting a significant subsidiary within a time period that would permit
independent auditors to prepare required audited information on a timely
basis. In addition, if at any time counsel to the Issuer has determined in
good faith that it is reasonable to conclude that the filing of the Exchange
Offer Registration Statement or the Shelf Registration Statement or the
compliance by the Issuer with its disclosure obligations in connection with
the Exchange Offer Registration Statement or the Shelf Registration Statement
may require the disclosure of information which the Board of Directors of the
Issuer has identified as material and which the Board of Directors has
determined that the Issuer has a bona fide business purpose for preserving as
confidential, then the Issuer and the Guarantors may delay the filing or the
effectiveness of the Exchange Offer Registration Statement or Shelf
Registration Statement (if not then filed or effective, as applicable) and
shall not be required to maintain the effectiveness thereof or amend or
supplement the Exchange Offer Registration Statement or Shelf Registration
Statement for a period expiring upon the earlier to occur of (A) the date on
which such material information is disclosed to the public or ceases to be
material or the Issuer is able to so comply with its disclosure obligations
and Commission requirements or (B) 30 days after the Issuer notifies the
holders of such good faith determination.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Issuer arranged for the Old Notes initially purchased by qualified
institutional buyers, as defined pursuant in Rule 144A under the Securities
Act ("Qualified Institutional Buyers"), to be issued and transferable in book-
entry form through the facilities of DTC, acting as depositary. The New Notes
also will be issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders of Old Notes as of , 1997 (the
"Record Date").
The Issuer shall be deemed to have accepted validly tendered Old Notes when,
as and if the Issuer has given oral or written notice thereof to the Exchange
Agent. See "Exchange Agent." The Exchange Agent will act as agent for the
tendering holders of Old Notes for the purpose of receiving New Notes from the
Issuer and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Issuer will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997, unless the Issuer, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Issuer will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Issuer is extending the
Exchange Offer for a specified period of time.
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The Issuer reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived
by the Issuer (if permitted to be waived by the Issuer), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it
to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof. If the Exchange Offer is
amended in a manner determined by the Issuer to constitute a material change,
the Issuer will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Old Notes of such amendment.
Without limiting the manner in which the Issuer may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Issuer shall have no obligation to publish,
advertise or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
Interest on each New Note will accrue from the last Interest Payment Date on
which interest was paid on the Old Note tendered in exchange therefor or, if
no interest has been paid on such tendered Old Note, from October 29, 1997.
Holders of Old Notes whose Old Notes are accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Notes accrued from the last Interest Payment Date or October 29, 1997 (as
the case may be) to the date of the issuance of the New Notes. Consequently,
holders who exchange their Old Notes for New Notes will receive the same
interest payment on the same Interest Payment Date that they would have
received had they not accepted the Exchange Offer. Interest on the New Notes
is payable semi-annually on May 1 and November 1 of each year accruing from
the last Interest Payment Date or, in the case of the first payment, October
29, 1997, at a rate of 10 3/8% per annum.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for
book-entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC
to transfer such Old Notes into the Exchange Agent's account in accordance
with DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
herein under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes
should be sent to the Issuer.
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Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuer or any other person
who has obtained a properly completed bond power from the registered holder,
or any person whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder
(including any participant in DTC whose name appears on a security position
listed as the owner of Old Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender
the Old Notes on behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Issuer's acceptance
of which would, in the opinion of counsel for the Issuer, be unlawful. The
Issuer also reserves the absolute right to waive any irregularities or
conditions of tender as to particular Old Notes. The Issuer's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuer shall determine. Neither the
Issuer, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Issuer reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, or if such holder cannot complete the procedure for book-
entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Old Notes, the certificate
number or numbers of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby, and guaranteeing
that, within five business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Old Notes to be tendered in prior form for transfer and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing all tendered Old Notes
in proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Notes delivered electronically) and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Issuer. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
be signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Deposit or withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Issuer, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no New Notes
will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Issuer will not be
required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes if: (i) any
action or proceeding is instituted or threatened in any court or by or before
any governmental agency with respect to the
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Exchange Offer, which, in the Issuer's judgment, might materially impair the
Issuer's ability to proceed with the Exchange Offer or (ii) any law, statute,
rule or regulation is proposed, adopted or enacted, or any existing law,
statute, rule or regulation is interpreted by the staff of the Commission in a
manner, which, in the Issuer's judgment, might materially impair the Issuer's
ability to proceed with the Exchange Offer.
If the Issuer determines that it may terminate the Exchange Offer, as set
forth above, the Issuer may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date
of the Exchange Offer, subject to the rights of such holders of tendered Old
Notes to withdraw their tendered Old Notes, (iii) waive such termination event
with respect to the Exchange Offer and accept all properly tendered Old Notes
that have not been withdrawn. If such waiver constitutes a material change in
the Exchange Offer, the Issuer will disclose such change by means of a
supplement to this Prospectus that will be distributed to each registered
holder of Old Notes, and the Issuer will extend the Exchange Offer for a
period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.
EXCHANGE AGENT
IBJ Schroder Bank& Trust Company of New York, the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of
this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Department
By Hand or Overnight Courier:
IBJ Schroder Bank& Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing Window
Subcellar One (SC-1)
For Information, call:
Information and Facsimile Confirmation: (212) 858-2103
Facsimile (212) 858-2611 (Eligible Institutions Only)
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Issuer and its affiliates in person, by
telegraph or telephone.
The Issuer will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Issuer may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.
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The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Issuer.
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuer
upon the consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized by the Issuer over the term of the New Notes under
generally accepted accounting principles. Unamortized expenses relating to the
Old Notes will be deferred and amortized over the life of the New Notes.
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BUSINESS
GENERAL
The Company is a diversified business media company which principally
operates two lines of business: (i) Information Services and (ii) Business to
Business Communications. Information Services includes: (i) TISI, which, with
its proprietary database, is the leading provider of pre-employment screening
information used by the trucking industry to facilitate compliance with U.S.
Government regulations and (ii) CORSEARCH, the second largest provider in the
United States of trademark and trade name research to law firms and
corporations. Business to Business Communications are conducted through
several individual businesses, each of which is characterized by leading
competitive positions within specialized market niches. Business to Business
Communications includes: (i) Atwood, the largest domestic independent
publisher of exposition and association related publications and directories;
(ii) Galaxy, the largest independent provider of trade show and convention
registration, exhibitor information and "lead" management services in the
United States and (iii) GEM, which owns and operates the World Gaming
Congress, the world's largest trade show catering to the legalized gaming
industry, and publishes trade magazines directed to the legalized gaming
industry, principally IGWB, the leading publication catering to gaming
industry executives. On a pro forma basis, the Company's consolidated revenues
and adjusted EBITDA for the twelve month period ended September 30, 1997 were
approximately $78.9 million and $17.3 million, respectively. Of such pro forma
consolidated revenues, approximately 40% represented Information Services and
approximately 60% represented Business to Business Communications. Of such pro
forma adjusted EBITDA, 55% represented Information Services and 45%
represented Business to Business Communications.
INFORMATION SERVICES
Information Services provides specialized information and database
management services to precise market segments. TISI is a leading supplier of
pre-employment screening information to the trucking industry and a provider
of risk assessment and underwriting information to agents, underwriters and
others in the insurance industry. CORSEARCH, acquired by the Company in 1996,
is the second largest supplier in the United States of trademark and trade
name searches and information research.
TISI
Pre-Employment Screening Services
TISI, which since 1983 has operated its transportation services business
under the trade name DAC Services ("DAC"), is the leading supplier of
comprehensive pre-employment screening information to the trucking industry
and a provider of driving record-related and other risk assessment and
underwriting information to the insurance industry. DAC, endorsed by the
American Trucking Associations since 1986 and the trucking associations of 41
states, currently maintains a computer network providing on-line electronic
access to a proprietary employment history database of over 2.6 million job
records concerning over 1.4 million truck drivers. Management believes the
demand for the information in its DAC database is driven primarily by federal
government regulation, the Company's ability to provide the information on a
timely basis and the Company's success in marketing to the "truckload" segment
of the trucking industry, which historically exhibits high driver turnover.
"Truckload" carriers, such as J.B. Hunt and Schneider, typically are
differentiated from "route" carriers and "private fleet" carriers in that
"truckload" carriers are hired by third parties and do not have the steady,
predetermined routes of a "route" carrier, nor do they operate as a individual
corporation's captive "private fleet" (e.g., a retailer's "private fleet" of
delivery trucks). As a result, the Company believes the unpredictable nature
of a driver's job for a "truckload" carrier leads to inherently high driver
turnover, which can be more than 100% per year for some trucking companies. As
federal regulations require extensive screening of new truck drivers, this
high turnover rate creates demand for DAC's services.
DAC currently has over 5,600 transportation-related customers, including 93
of the largest 100 U.S. "for hire" carriers which consist of both "truckload"
and "route" carriers. DAC's key asset is its proprietary
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database which is operated as an information cooperative through which DAC's
approximately 2,000 transportation industry members, including 40 of the 41
largest "truckload" carriers and 30 of the 59 largest "route" carriers,
contribute employment records in return for an economic credit against DAC
services and the ability to access DAC's employment history database. Members
pay for each employment record accessed and do not pay if no record is found.
Therefore, as the database grows, the "hit" rate increases and the Company's
revenues and profits are favorably impacted. The Company is not aware of any
comparable database offered by competitors and believes its large cooperative
membership and proprietary database represent significant competitive
advantages which would take a potential competitor several years to replicate.
Non-member customers are precluded from accessing the employment records
database; however, they are provided access to DAC's motor vehicle records as
well as criminal records and drug testing databases.
DAC's services provide comprehensive information which is used by
transportation industry customers to satisfy current DOT pre-employment
screening requirements. Due to public safety concerns, DOT regulations
currently require trucking companies to investigate the driving history,
previous three-year employment history and, since 1995, previous drug and
alcohol test results of prospective drivers. Current regulations require
employers to inquire of previous employers, but do not require previous
employers to respond to such inquiries. Under proposed DOT regulations,
trucking companies would be required to provide certain information concerning
the job histories of drivers in response to inquiries made by prospective
employers. If adopted in their current form, management believes such
regulations could provide greater demand for the Company's services, including
access to employment history and drug and alcohol test results of truck
drivers. There can be no assurance, however, that such regulations will be
adopted in their current form or at all, or if adopted that they will be
beneficial to DAC. Previous forms of such regulations, if they had been
adopted, would have been significantly burdensome to DAC's customers. While
DAC was successful in working with the American Trucking Associations in
modifying such regulations, there can be no assurance that new government
regulation will not be adopted which could have a significant adverse effect
on DAC or its customers' use of DAC services. See "Risk Factors--Government
Regulation."
DAC has virtually instantaneous computer access to MVRs maintained by 27
states and alternative methods to access the MVRs of the remaining 23 states.
In addition, DAC maintains a database which contains certain workers'
compensation records from 17 states, which may be used by prospective
employers either to detect employers that have been omitted by a prospective
employee in his or her employment application or to determine job suitability.
In 1998, DAC intends to implement manual searching capability for many of
those states of which the workers' compensation records are not in DAC's
database.
Criminal records are maintained by approximately 3,300 jurisdictions in the
U.S. and there is no single source for all such records. However, DAC can
access for its customers criminal records from any U.S. jurisdiction requested
by a customer. Management believes that the database of criminal records being
created by DAC will become an increasingly valuable asset, and may provide DAC
access to providing criminal records and other data to industries other than
trucking and insurance.
DAC obtains its MVRs, workers' compensation and criminal records information
from state or county archives, utilizing a nationwide network of agents and
representatives, direct computer connections and proprietary databases. The
information is resold at a mark-up over state and county fees for such
information. In 1996, the information was resold to more than 14,000
customers, including 89% of the customers who requested information in 1995.
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The following table sets forth certain volume data for DAC for each of the
five years ended December 31, 1996 and for the nine months ended September 30,
1996 and 1997:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ------ ------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Records sold (1)............ 8,857 9,530 9,946 10,322 10,975 8,430 8,635
Employment history records
maintained................. 1,196 1,414 1,693 1,940 2,251 2,179 2,478
</TABLE>
- --------
(1)Includes employment records, MVRs and criminal records.
Employers who access DAC's services have the option to choose only those
records that meet their specific information needs. In addition, DAC offers a
"Total Applicant Screening Services" product which provides a customized
package of DAC's pre-employment screening products.
For customers that want to perform their own background checks, the Company
publishes The Guide, a publication available to the general public. The Guide
lists thousands of telephone numbers and addresses for criminal record
jurisdictions, state motor vehicle departments and colleges and universities,
among others, which may be found helpful to those conducting their own
background searches.
Insurance Industry Services
In addition to providing MVRs to the transportation industry, the Company is
also a leading supplier of MVRs to the insurance industry for the screening of
insurance applications. The Company, endorsed by the Professional Insurance
Agents' Association, provides over 5,000 insurance industry customers access
to the Company's computer network to request MVRs and other information.
Approximately 85% of these customers are insurance agents, with the remaining
15% representing branch offices, managing general agents, brokers and a small
number of regional and home office locations. These customers primarily
utilize the Company's data in assessing insurance underwriting risk and also
purchase the Company's workers' compensation and credit report information. In
its effort to provide more complete information to its insurance industry
customers, DAC recently became a licensed reseller of the CLUE(R) database, an
insurance company database of previous insurance claims which allows insurance
companies to access claims data for underwriting purposes.
Electronic Data Interchange Services
DAC also has begun to develop a product line called MessageXpress(R), which
provides electronic business communication services to transportation motor
carriers. Electronic Data Interchange ("EDI") automates manual paper-based
processes, reduces errors and reduces data transfer times. Transportation
companies are increasingly required by their customers to send and receive
documents via EDI. Because the installation and implementation of EDI
technology is expensive and time-consuming, this requirement has been
burdensome on smaller carriers. As a result, in the first quarter of 1996,
TISI introduced its EDI services, tailored to small and medium sized carriers,
which allow such carriers to choose among three different services to match
their technical abilities, volume requirements and budget. This service
handles technical details such as programming and establishing communication
links with one or more shippers, and a carrier need only provide MessageXpress
with the information otherwise provided on a paper document.
CORSEARCH
CORSEARCH, acquired by the Company in 1996, is the second largest provider
of trademark and trade name research services in the United States. CORSEARCH
provides comprehensive trademark and trade name searches for 1,100 law firm
and corporate clients. Management believes the increase in recent filings of
applications for new trademarks and trade names, a greater corporate emphasis
on protecting existing trademarks
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and trade names, growing Internet usage and the increased international
expansion of U.S. companies collectively have created greater demand for
CORSEARCH's services, and provide significant opportunities to expand
CORSEARCH's database operations. The PTO estimates that the number of domestic
trademark filings will increase at a rate of 12% per annum through the year
2000. The number of basic trademark and trade name searches executed by
CORSEARCH grew from 13,795 in 1992 to 19,491 in 1996 (a 41% increase) and
CORSEARCH's revenues grew from $4.2 million in 1992 to $7.2 million in 1996 (a
69.1% increase).
CORSEARCH currently searches three major classifications of trademark
information for its customers: (i) through its proprietary database, CORBASE,
the Company searches all federal trademarks that have been filed with and
registered by the PTO; (ii) through its proprietary database CORSTATE, the
Company searches trademarks that have been filed with the Secretary of State
offices of the 50 states and Puerto Rico and (iii) through databases licensed
to the Company by third parties, the Company searches for common law usages of
company names, product names, trade names and brand names appearing in
thousands of magazines, monographs, journals, newspapers, press releases and
periodicals.
The prices for CORSEARCH's basic search services vary depending upon the
turn-around time requested by the client for the particular search performed.
CORSEARCH provides five levels of pricing of basic searches which increase
incrementally for the five levels of timing provided, from CORSEARCH's
"standard" three to four day service to "ultrarush" (two hour same day
service). As the costs for each search remains substantially constant,
CORSEARCH's profit margins on searches increase along with the prices charged
for such services when services are ordered on a "rush" basis. A typical
search may consist of a search of the federal, state and common law usage
databases of trade names and trademarks.
CORSEARCH's highly trained, industry-focused researchers use CORSEARCH's
proprietary software, proprietary CORBASE and CORSTATE databases, third party
databases and, to a lesser extent, published resources for completing customer
searches. Although the majority of the information contained in CORSEARCH's
state databases is publicly available from governmental authorities and
others, management believes that because of the cycle of intellectual property
registration renewals, it likely would take a new competitor several years to
compile a database containing the state registration information currently
maintained by CORSEARCH and its two primary competitors. New competitors may
purchase the federal database from the PTO but significant computer
programming would be needed to make it usable. Management believes that
CORSEARCH, which competes primarily on the quality, accuracy and timeliness of
its data, provides a consistently high level of service to its clients.
CORSEARCH's customers include small to mid-size law firms and corporations as
well as major companies.
CORSEARCH recently has added international search capabilities, primarily in
selected European countries, Canada and Mexico, and is in the process of
implementing an Internet online search service which currently is scheduled to
begin beta-testing in December 1997 and to become operational during 1998. The
online service is expected to serve as a quick and easy research tool for
clients to "screen" the availability of trademarks and trade names before
undertaking more expensive searches. Access to an international database of
pharmaceutical trademarks in use in 49 countries also recently has been added.
BUSINESS TO BUSINESS COMMUNICATIONS
The Company's Business to Business Communications operations are conducted
through several individual businesses, each of which is characterized by
leading competitive positions within specialized market niches. Business to
Business Communications includes: (i) Atwood, the largest domestic independent
publisher of exposition and association related publications and directories;
(ii) Galaxy, the largest independent provider of trade show and convention
registration, exhibitor information and "lead" management services in the
United States and (iii) GEM, the owner and operator of the World Gaming
Congress, the world's largest trade show catering to the legalized gaming
industry and the publisher of trade magazines directed to the legalized gaming
industry, principally IGWB, catering to gaming industry executives.
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<PAGE>
Atwood
Atwood, founded in 1982, is the leading independent publisher of daily trade
show and convention newspapers, directories, and related publishing products
that are directed to the attendees of U.S. trade shows and conventions. Atwood
competes primarily with trade magazines and the owners and operators of
expositions with in-house publishing capabilities who participate only in
their particular industry and do not have diverse markets or the capabilities
of Atwood. Atwood also publishes the trade journal EXPO, the official
publication of the International Association of Exposition Management, and
maintains an Internet website which is a database for trade show managers and
exhibitors.
Approximately 69% of Atwood's 1996 revenues were derived from its
publication of dailies and directories. During 1996, Atwood provided
publishing, communication or promotional services to approximately 7,000
exhibitors at approximately 207 trade shows and conventions, including 44 of
the "Tradeshow 200" exhibitions. Of the 207 trade shows to which Atwood
provided services in 1996, 81% represented trade shows served by Atwood in
1995. Related products provided by Atwood include pre- and post- convention
materials, literature kiosks and LeSack, a plastic bag filled with literature,
publications, product samples and other marketing information that is
distributed to attendees. Atwood also produces advertising and marketing
products such as Internet Guides, specialty products and restaurant and city
guides distributed to show attendees. Atwood provides magazine publishing
related services to trade associations, including editorial content, layout
and design of trade publications, advertising sales and circulation services.
Atwood's digital group provides CD ROMs, Internet applications, electronic
conference planners and buyer's guides.
Atwood has recently provided the rental of Marketing-oriented Interactive
Kiosks for Exhibitors ("MIKE"). MIKE permits exhibitors to create customized
interactive multimedia programs which are accessed by show attendees via
touchscreen technology on a kiosk that takes up minimal floor space. The
program can be customized to include survey questions that elicit information
from attendees, which allows exhibitors to qualify leads.
Galaxy
Galaxy, founded in 1982, markets its comprehensive registration services,
automated "lead" management products and information services on an exclusive
basis to trade associations, promoters, exhibitors and attendees of exposition
and trade shows and conventions. In 1996, Galaxy provided services to 41 of
the "Tradeshow 200" exhibitions, including four of the top five such
exhibitions. Of the 211 trade shows Galaxy provided services to in 1996, 84%
represented trade shows served by Galaxy in 1995. Management believes Galaxy,
from its experience servicing a wide variety of expositions, has developed a
unique set of organizational skills and technical expertise which provides
Galaxy with competitive advantages.
Multiple versions of Galaxy's "Expocards" (magnetic stripe or "smartcards")
are utilized in the registration process to allow convention and trade show
exhibitors to digitally capture and manipulate attendee information for "lead"
management and follow-up. Galaxy's Expocard technology encodes attendee
registration data on a magnetic stripe attached to a plastic card or on a
computer chip "smartcard" which can be read by trade show and convention
exhibitors renting Galaxy's Expocard readers. The Expocard provides lead data
to exhibitors in electronic form and allows for other product applications.
For example, attendees can leave and retrieve messages at a message center
kiosk established by the Company on site for a fee. The Expocard permits the
conference host (usually a trade association or a for-profit show manager) to
receive information including demographic data, attendance results and exhibit
visitation patterns.
"Smartcards," which have more data storage area, but are more expensive than
the magnetic stripe Expocards, can be utilized to store additional demographic
or other data and can give some "write-on" capability to Expocard. In
addition, the "smartcard" can provide the capability to store credits
redeemable at vending machines and is usable for the purchase of meals,
convention products and paper and media convention materials (outlines, taped
seminars, etc.), for attendance at pre-paid continuing education and other
seminars and
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for collecting and disseminating seminar evaluations. Most customers prefer
the lower-cost magnetic stripe version of Expocard. Galaxy is currently
seeking to acquire a lower cost Smartcard that more customers would find
economically attractive.
Galaxy's "Expocard Connect" is a PC-based system that reads the Expocard's
magnetic strip, allows the exhibitor to add qualifying information to the data
file, saves the data to the PC hard drive in a format compatible with any data
management program and, when networked, can transfer data directly to a data
management program.
Galaxy's InfoStation product is a touchscreen kiosk which allows a show
attendee to insert an Expocard, request product information, record comments
and complete a questionnaire. The database is fully customized and can be
transmitted offsite for fulfillment. The InfoStation package includes
programming, software and hardware and on-site services. The Company's newest
product, still in the test marketing stage, is the iGoExpo, a portable lead
gathering tool, which can be custom designed as a combination card reader and
data input vehicle, a card reader and information service, etc. This hand-held
Personalized Digital Assistant product was used first by Sony at the NAB show
in Las Vegas in the spring of 1997 to make the lead qualification process more
user-friendly, streamline its literature distribution process, improve traffic
flow through its exhibit and more efficiently track buyer interest. According
to TradeShow & Exhibit Manager magazine, this enabled Sony to increase the
number of booth visitors it "qualified" during the show from 5,000 in 1996 to
12,000 in 1997, representing an increase of 140%.
Galaxy Classics provides graphic design and printing services to its and
Atwood's convention and trade show and trade association customers, as well as
to select customers in the geographic areas surrounding Galaxy's headquarters
in Frederick, Maryland. Services include customized graphic design for
multimedia use and printing services, primarily for promotional and marketing
purposes.
Several of Galaxy's customers hold trade shows on a bi-annual or tri-annual
basis. Consequently, Galaxy's revenues vary from year to year. The following
table sets forth, for the years ended December 31, 1994, 1995 and 1996, the
percentage of revenues of Galaxy generated from trade shows of varying
frequencies.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Annual Shows.............................. 87% 97% 85%
Bi-Annual Shows........................... 13 2 11
Tri-Annual Shows.......................... -- -- 3
Other Shows............................... -- 1 1
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
GEM
GEM, founded in 1986 as BMT Publications, Inc., is the leading global
provider of business information and marketing resources for the legalized
gaming industry. GEM owns and operates the World Gaming Congress, the largest
legalized gaming industry trade show in the world and the only trade show
endorsed by the American Gaming Association as the organization's official
trade show. The conference traditionally has been held annually in Las Vegas
during the fourth quarter of each year. Consequently, GEM's financial results
are heavily skewed towards the fourth quarter. In 1996, the World Gaming
Congress sold over 185,000 square feet of exhibition space and included over
21,700 attendees, an increase from 117,000 square feet and 17,500 attendees in
1994.
GEM publishes several trade magazines directed to the legalized gaming
industry, including IGWB. IGWB, with a qualified circulation of over 26,000,
is the leading trade journal directed to the worldwide legalized gaming
industry. In addition, the Company has an 88% interest in Casino Publishing
Company, the publisher of Casino Executive, a trade magazine directed to
casino management executives in North America, and has entered into an
agreement for the purchase of the remaining 12% third-party owned interest.
58
<PAGE>
The following table sets forth certain information with respect to World
Gaming Congress and IGWB:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
World Gaming Congress:
Exhibitor companies......................... 360 454 540 609
Booths...................................... 640 1,162 1,540 1,850
Net square footage.......................... 64,000 117,100 154,000 185,000
Total attendance............................ 10,836 17,479 21,767 21,700
IGWB:
Advertising pages........................... 350 411 497 572
</TABLE>
GEM has a 49% interest in Gaming for Africa Expo, a gaming trade show and
conference held in South Africa, and Gaming for Africa, the leading trade
magazine for gaming in Sub-Saharan Africa. GEM also has entered into a
partnership with a European publishing company. In 1997, the partnership, in
association with European Gaming Organization, a European gaming supplier
trade group, produced the European Casino Executive Congress, a conference
targeted at senior executives in the European casino industry. The optimal
frequency of this conference is currently being evaluated by management.
BUSINESS AND OPERATING STRATEGIES
Management has significant experience in the information services,
exposition services and publishing businesses and has developed a business and
operating strategy to: (i) maximize the strengths of the Company's core
businesses; (ii) expand into new products, services and geographic markets;
(iii) expand through selective acquisitions to enhance the Company's
established business platforms and (iv) improve operating efficiencies.
INFORMATION SERVICES
Management believes that both TISI and CORSEARCH have been successful
because they target well defined market niches and possess competitive
advantages through their proprietary databases, value added information
products and superior customer service. Management's growth strategy for
expanding upon these existing business platforms consists of:
. Broadening TISI's Customer Focus into Additional Trucking and
Transportation Segments. TISI has historically enjoyed success with
"truckload" carriers due to the high employee turnover rates associated
with this segment of the trucking industry. Management intends to
continue capitalizing on this success, but believes the employment
history database can be more aggressively marketed to the other segments
of the U.S. trucking and transportation industry. Specifically,
management intends to expand marketing of its database services to
"private fleet" carriers, which include approximately 14,000 trucking
companies. Management believes that, by expanding the number of
employment records contained in the DAC database, TISI will increase
revenues and profits through higher customer "hit rates" per search.
. Expanding DAC's Business Model to Other Industries. Management believes
that there are opportunities to expand the successful DAC pre-employment
screening business model and core competencies to other industries that
tend to raise public safety concerns, involve substantial financial
risks for employers or have high employee turnover rates. Management
plans to build employment history databases and market pre-employment
screening services to employers in industries possessing these
characteristics.
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<PAGE>
. Enhancing CORSEARCH's International Search Capabilities. CORSEARCH has
historically focused on providing domestic searches for U.S. and foreign
based clients. With the growing presence of global businesses and the
proliferation of Internet usage, there is a growing customer need for
international trademark database searches. As a result, CORSEARCH is in
the process of identifying international trademark and trade name
information sources and building databases similar to those used in its
domestic operations.
. Broadening CORSEARCH's On-Line Product Offering. Management believes
that by expanding CORSEARCH's on-line and Internet products to allow
customers to perform pre-screening searches, CORSEARCH can increase
revenues from existing customers who are currently utilizing these
products from competitors and attract new customers.
. Expanding into Patent Search Services. Management intends to expand its
product offering to include patent searches, likely through
acquisitions. Such acquisitions would provide the Company with greater
breadth of products for the intellectual property market and an
increased ability to serve its existing client base.
BUSINESS TO BUSINESS COMMUNICATIONS
Management believes that each of the business units comprising Business to
Business Communications is a leader in its respective markets and that there
are numerous opportunities to enhance the value of these existing franchises.
. Cross-Selling and Product Bundling Opportunities between Atwood and
Galaxy. Galaxy and Atwood have traditionally been operated as separate
entities and currently have only 13 mutual clients among the 75 clients
which Galaxy and Atwood collectively serve within the "Tradeshow 200."
Management intends to capitalize on the loyal customer base of both
Atwood and Galaxy by marketing both unit's products on a packaged basis
to position Atwood and Galaxy as a comprehensive provider of multiple
media, information and exhibitor services to their customers.
. Expanding Atwood's Custom Publishing Customer Base. Atwood historically
has focused its custom publishing activities on the exposition and trade
association markets. Management has identified additional markets, such
as corporate publishing and corporate gatherings, where Atwood can
capitalize on its custom publishing capabilities.
. Augmenting Galaxy's Exhibitor Products and Services. Management intends
to expand the scope and level of information gathered with respect to
attendees to create additional value-added information products for
exhibitors and trade show managers. For example, Galaxy provided Sony
Electronics, Inc. ("Sony") with a series of sophisticated electronic
"lead" management tools at the 1997 National Association of Broadcasters
("NAB") trade show, which, according to TradeShow & Exhibit Manager
magazine, enabled Sony to increase the number of booth visitors it
"qualified" to 12,000 from 5,000 during the 1996 NAB show, representing
an increase of 140%.
. Expanding Galaxy's Services to the European Marketplace. According to
1996 M&A Exhibition Directory, the exposition and trade show marketplace
in Europe is approximately five times as large as that in the U.S.
(based on total square footage of exhibition space). Galaxy has
historically provided registration and "lead" management services to the
European exposition marketplace through a licensee, Galaxy Expocard
Europe. The Company acquired 73% of Galaxy Expocard Europe in 1997 and
management intends to enhance Galaxy's international capabilities by
more aggressively marketing products to European exposition managers
through Galaxy Expocard Europe.
. Pursuing Selective Acquisitions of Exposition Services
Companies. Management believes that the exposition services industry is
highly fragmented and plans to pursue opportunistic acquisitions to
enhance Galaxy's existing service offerings so that Galaxy, in concert
with Atwood, can become a comprehensive provider of exposition media
services.
. Leveraging Key GEM Franchises. GEM's leading position in the legalized
gaming market is a direct result of its strong brand names. IGWB and the
World Gaming Congress are widely recognized
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<PAGE>
domestically and internationally as the leading sources of business
information regarding the legalized gaming market. Management intends to
utilize this position to increase revenues through (i) launching or
acquiring additional gaming related trade publications targeting
specific high-growth gaming markets (e.g., slot machines and bingo),
(ii) exploring the acquisition or launch of trade shows complementary to
the World Gaming Congress and (iii) working closer with the American
Gaming Association to develop ancillary revenue sources.
. Rationalizing GEM's Overhead Costs. IGWB, GEM's flagship publication,
was formerly part of a group of five trade magazines, four of which were
sold in 1994 and 1995. Following this sale, IGWB continued to occupy the
same office space, although the organization's publishing revenue had
been reduced by approximately 71%. Management has identified
opportunities for cost savings through integration with other
publications.
. Expanding GEM to New Gaming Markets. Management believes portions of the
world's gaming markets are relatively immature and underserved. As a
result, management plans to capitalize on trade show and publishing
opportunities in Europe, Latin America, Asia and Sub-Saharan Africa. As
a first step, the Company recently purchased a 49% ownership stake in
Gaming for Africa, the leading trade show and magazine targeting the
legalized gaming industry in South Africa, one of the world's growing
gaming markets. Management intends to seek other acquisitions and joint
venture opportunities for worldwide expansion.
COMPETITION
Each of the Company's businesses is in competition with other suppliers and
vendors of services or products similar to those provided by the Company and
many of such competitors are significantly larger and have greater resources
than the Company. The following is a brief description of the competitive
environment in which each of the Company's businesses operates.
TISI
TISI has a leading market position in the trucking industry. In the
insurance industry, there are two TISI competitors which are significantly
larger and sell significantly more MVRs than TISI, as well as many regional
providers. Management believes that TISI's ability to maintain and grow its
MVR business in the insurance industry is dependent upon its ability to
continue to resell Choice Point's CLUE(R) data, as described above. Choice
Point is the largest competitor selling MVRs to the insurance industry.
CORSEARCH
The trademark search business is dominated by Thomson & Thomson, which
CORSEARCH estimates controls 80% of the domestic market and an even higher
percentage of international searches done by domestic customers. Thomson &
Thomson is owned by a large international media/information conglomerate.
There is also one smaller competitor which, while doing fewer searches than
CORSEARCH, is owned by a large publishing/information company which
specializes in selling to law firms.
Galaxy
Galaxy has two significant competitors, both of which provide services to
fewer shows in any given year than Galaxy and management believes that they do
not possess the resources of the Company. There are also smaller and regional
competitors as well as some large companies which provide other exposition
services which will compete in certain aspects of Galaxy's business.
Atwood
As a custom publisher, Atwood competes primarily on price, quality and
service and has been successful by targeting the publishing needs of the trade
show, convention and trade association market. Outside of that
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<PAGE>
market there are many custom publishers, some with significantly greater
resources than the Company. In the trade show, convention and trade
association market, there are competitors which, while concentrating on
another set of services they perform for their customers, will also provide
publishing services as part of their package of services. While several of
these competitors are significantly larger than Atwood, management believes
that stronger competitors are trade shows or associations with "in house"
publishing capabilities and trade magazine publishers with specialized
knowledge in the industry that is the subject of the trade show or convention.
GEM
In the gaming trade show business, there is one other significant U.S. show
(which is smaller than World Gaming Congress), a large show held in London
each year, and a variety of smaller niche or regional shows and conferences
throughout the world. A few of these are owned or managed by competitors which
are significantly larger than GEM.
From a publishing standpoint, there is one other significant competitive
magazine serving the U.S. casino industry and several successful magazines and
newsletters serving vertical niches of the gaming industry in the U.S. and
worldwide industry, such as lotteries and pari-mutuals. Internationally, there
are several magazines, particularly in Europe, which successfully serve the
casino industry and compete with the Company. To management's knowledge, none
of such competitors are significantly larger than GEM. In addition, GEM must
compete with other media for advertising dollars, such as direct mail and
direct selling. The latter is particularly important for potential U.S. casino
advertisers as so much of the industry is concentrated in a few locations.
EMPLOYEES
As of October 31, 1997, the Company employed 599 persons on a full-time
basis including 252 in Information Services, 341 in Business to Business
Communications and 6 at the Company's corporate offices. None of the Company's
employees are subject to collective bargaining agreements. The Company
considers relations with its employees to be satisfactory. Most employees are
salaried, with sales personnel receiving commissions on sales. In connection
with the Recapitalization and the reorganization of the Company's management,
the corporate offices have been relocated to New York and the number of
employees in the corporate offices will be reduced to approximately five.
PROPERTIES
The Company conducts its principal operations at the facilities set forth
below:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASED/OWNED
-------- -------------- ------------
<S> <C> <C>
Information Services:
Tulsa, Oklahoma (TISI) (1) 38,800 Leased (Expires June 1999)
New York, New York (CORSEARCH) 22,000 Leased (Expires February 2009)
Business to Business Communications:
Frederick, Maryland (Galaxy) (2) 40,000 Leased (Expires January 2003)
Overland Park, Kansas (Atwood) 22,715 Leased (Expires May 2000)
New York, New York (GEM) (3) 10,400 Leased (Expires August 2000)
Corporate:
Tulsa, Oklahoma (4) 5,400 Owned
New York, New York 1,565 Sub-leased (Expires December
1998)
</TABLE>
- --------
(1) TISI also leases office space in Chicago, Illinois.
(2) Galaxy's office and warehouse space is currently in two locations in
Frederick, Maryland. The primary facility currently is being expanded from
25,000 to 51,000 square feet and, upon the scheduled completion of the
expansion, Galaxy will vacate the secondary location (which is 15,000
square feet) and occupy the new portion of the primary facility in
December 1997 or January 1998.
(3) GEM also leases small offices in Chicago, Illinois and Las Vegas, Nevada.
(4) The Company plans to sell its office space in Tulsa, Oklahoma.
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<PAGE>
Management believes that its facilities are suitable and adequate for its
immediate needs and that additional or substitute space is available if needed
to accommodate expansion.
As a result of the merger of Tribune/Swab-Fox with and into the Issuer, the
Company acquired a 49.99% membership interest in 1995 Land Company, L.L.C., an
Oklahoma limited liability company which owns undeveloped real estate in
Tulsa, Oklahoma. The majority member of this entity has sole management
responsibility for this property and the entity's business. The entity
purchased three significant parcels of raw land from the Company on December
30, 1994 for approximately $1.4 million in cash and notes.
GOVERNMENT REGULATION
As a "consumer reporting agency," TISI is subject to the provisions of the
FCRA and similar acts existing in the states and is regulated by the FTC under
the Federal Trade Commission Act. Under the FCRA, a consumer reporting agency
may furnish a "consumer report" to a customer only for a permissible purpose
allowed by the FCRA. Permissible purposes include extension or review of
credit, collecting an account, employment purposes, underwriting of insurance,
determining eligibility for a license or permit granted by a governmental
entity, or in connection with a business transaction involving the consumer.
All reports of TISI are treated by TISI as consumer reports for purposes of
the FCRA. In addition, TISI's Total Applicant Screening reports are treated by
TISI as "investigative consumer reports" within the meaning of that term under
the FCRA because they involve contacting third parties. Certain additional
restrictions apply to these reports.
The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the restrictions on the use of certain
information are not violated. In addition, a consumer reporting agency must
follow reasonable procedures to assure maximum possible accuracy of the
information concerning the consumer about whom the report relates. The FCRA
also requires a consumer reporting agency, upon request from a consumer, to
disclose all information about that consumer in its file, together with the
source and the recipients of the information. In some cases, this information
must be delivered to the consumer at no cost, and in others the agency may
charge a reasonable fee. TISI does not charge a fee to a driver or other
individual or entity about whom or which data is provided to a customer if
that individual or entity has been turned down for a job or denied insurance
within the last 30 days. Otherwise, TISI may charge a $10.00 fee.
The ADA contains pre-employment inquiry and confidentiality restrictions
designed to prevent discrimination against individuals in the hiring process.
Although TISI's business is not directly regulated by the ADA, the use by its
customers of certain information sold to them, such as workers' compensation
histories or drug and alcohol test results, is regulated, both with respect to
the type of information and the timing of its use. Similar state laws also
affect TISI's business. Some states have human rights laws that provide more
protection than the ADA. A large number of states also regulate the type of
information which can be made available to the public or to a third party or
impose conditions to the release of the information.
While the FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA, and, as a result of the 1997 amendments, criminal penalties for willful
violations, by complying in good faith with the FCRA, TISI is protected from
liability by the FCRA even if there are inadvertent errors in the information
provided. TISI has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer
is accurate and that it otherwise complies with the provisions of the FCRA and
applicable state laws. In addition, each customer of TISI is required to sign
a user agreement, in which the customer agrees to accept responsibility for
using information provided by TISI in accordance with the provisions of the
FCRA, the ADA and local laws. TISI also has internal checks in place regarding
access and release of such information. The Company currently maintains
liability insurance to cover claims by customers or the subjects of reports
for alleged inaccurate information or misuse of information.
The FCRA was amended in 1997, effective October 1, 1997. Such amendments
require DAC's customers to increase their compliance activities and may limit,
under certain circumstances, their ability to access certain information sold
by DAC, in particular certain criminal records over seven years old. While the
effect of such
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amendments is not expected by DAC to impact materially its business or
prospects, primarily because further amendments to the FCRA are anticipated
(and draft legislation of such amendments has been submitted to the U.S.
Congress), the need for customers to revamp procedures and for the industry to
adjust to the new regulations thus far has had a negative impact on the use of
DAC's services and such negative impact may, if the foregoing further
amendments are not adopted, are adopted materially later than anticipated by
management, or are adopted in materially different form than previously
proposed, have a material and adverse effect on the use of DAC's services and
on its results of operations. It is not possible at this time to predict
accurately the extent of such effect.
In the 14 years it has been in business, TISI has not been found liable for
any violations of the FCRA, the ADA or similar state laws. The Company did
settle one case out of court for a nominal amount to avoid litigation
expenses. There can be no assurance, however, that the Company will not be
found liable for any such violations and that, if found so liable, the Company
will not be subject to adverse judgments in substantial amounts. In addition,
there can be no assurance that the FCRA, the ADA or similar state laws will
not be amended or subjected to different judicial or administrative
interpretation in the future. It is not possible at this time to predict the
impact that any such change might have on the Company's results of operations,
financial condition or liquidity.
The DOT is in the process of proposing and promulgating revised regulations
which, among other things, concern the requirements for pre-employment
screening of truck drivers. It is not possible at this time to predict the
impact that such regulations, if adopted, might have on the Company's results
of operations, financial condition or liquidity. If adopted in their current
form, such regulations would likely provide a greater demand for access to
employment history, MVRs and drug and alcohol test results of truck drivers,
such as the information provided by the Company.
LITIGATION AND GOVERNMENT PROCEEDINGS
The Company's 1992-1994 New York State income tax returns are in process of
a review. No assessments have been made to date. Management believes that the
tax positions taken by the Company were correct and that adjustments, if any,
for income taxes will not have a material effect on the Company's consolidated
financial statements. The income tax refund from the State of Oklahoma
included in "Refundable Income Taxes" in the Company's balance sheets as of
December 31, 1996 has been received by the Company.
In the ordinary course of its business, the Company and its subsidiaries
have been named as defendants in lawsuits and a party in various governmental
proceedings from time to time. While in the past, such matters have not had a
material adverse effect on the financial position, results of operation or
liquidity of the Company, and management does not anticipate that such matters
will have such an effect in the future, the outcome of suits and proceedings
cannot be predicted with certainty and, due to such inherent uncertainty of
litigation, there can be no assurance that the Company will not be subject to
adverse judgments in substantial amounts.
FOREIGN SALES
The Company's pro forma net revenues for 1996 and the nine months ended
September 30, 1997 to customers outside the U.S. and Canada were $2.4 million
and $1.1 million, respectively, representing 3.2% and 2.0% of net revenues,
respectively. All of such 1996 net revenues and 1997 revenues are attributable
to Business to Business Communications.
TRADEMARKS, LICENSES AND PATENTS
The Company has registered numerous trademarks, including DAC Services(R),
CORSEARCH(R), CORSTATE(R), CORBASE(R), EXPO(R), World Gaming Congress(R), IGWB
(pending) and MessageXpress(R), in the United States and, in certain cases, in
foreign countries in which the Company does business. The Company believes
that it owns or licenses all intellectual property rights necessary to conduct
its business.
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MANAGEMENT
The following table sets forth information with respect to the current
Directors and executive officers of the Issuer and certain other key employees
of the Issuer and its subsidiaries. All Directors of the Issuer hold office
until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. Each individual listed below is a citizen
of the United States, except for Ian L.M. Thomas who is a citizen of the
United Kingdom.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John S. Suhler.......... 54 Chairman of the Board and Director
Ian L. M. Thomas........ 60 President, Chief Executive Officer and Director
John J. Veronis......... 69 Director
Jeffrey T. Stevenson.... 37 Vice President and Director
S. Gerard Benford....... 59 Treasurer, Secretary and Director
Jeffrey Tannenbaum...... 34 Director
John Rolfe.............. 29 Director
Stefan M. Selig......... 34 Director
Steven J. Hunt.......... 53 Chief Financial Officer
Brian A. Meyer.......... 37 General Counsel
Richard A. Wimbish...... 53 President of TISI
Robert Frank............ 46 President and Chief Operating Officer of
CORSEARCH
W. Michael Goodwin...... 47 President and Chief Executive Officer of Atwood
and Galaxy
</TABLE>
John S. Suhler co-founded VS&A in 1981 and VS&A Fund I in 1987 with Mr.
Veronis. Mr. Suhler currently is President and Co-Chief Executive of VS&A and
is a Founding General Partner of VS&A Fund I. Prior to forming VS&A, Mr.
Suhler was a Corporate Vice President of CBS and President of CBS Publishing
Group.
Ian L. M. Thomas was previously employed as a Managing Director at VS&A.
Prior to his employment at VS&A, Mr. Thomas completed a 24-year career at Reed
Elsevier plc, where he served as Chairman and Chief Executive Officer of Reed
Telepublishing Ltd. and as a member of the Board of Directors of both Reed
Elsevier plc and Reed International plc. In late September 1997, Reed Elsevier
announced that "irregularities" had been uncovered in its circulation
statements for certain of the publications of one of the divisions in Reed
Telepublishing Ltd. and that it had launched a full investigation. The
announcement stated that the irregularities had been traced back to 1991 and
that a charge to 1997 earnings would be taken as a result of the company's
commitment to recompense advertisers in the affected publications and the
board's intent to make a substantial writedown of the division's intangible
asset values. Mr. Thomas has informed the Company that he has no knowledge of
the circumstances referred to in the Reed announcement and related press
reports.
John J. Veronis co-founded VS&A in 1981 and VS&A Fund I in 1987 with Mr.
Suhler. Mr. Veronis currently is Chairman and Co-Chief Executive of VS&A and
is a Founding General Partner of VS&A Fund I. Prior to forming VS&A, Mr.
Veronis co-founded Psychology Today and its parent company, CRM; served as
President of Curtis Magazines and Publisher of its Ladies Home Journal and was
a general corporate executive at Interpublic Group of Companies.
Jeffrey T. Stevenson has served as President and General Partner of VS&A
Fund II since November 1994 and as President of VS&A Fund I since 1989. Mr.
Stevenson joined VS&A in 1982 and prior to joining VS&A Fund I was Executive
Vice President of VS&A in charge of corporate finance.
S. Gerard Benford has served as Executive Vice President and General Partner
of VS&A Fund II since November 1994 and as Executive Vice President of VS&A
Fund I since 1990. Prior to 1990, Mr. Benford was a Corporate Vice President
of Warner Communications Corporation and a principal at Arthur Young &
Company.
Jeffrey Tannenbaum founded Fir Tree Partners, a private investment firm, in
January 1994. From 1988 through 1993, Mr. Tannenbaum was an investment
professional at Kohlberg & Co., a corporate acquisition firm.
John Rolfe joined Fir Tree in February 1997. Prior to joining Fir Tree, Mr.
Rolfe was an investment banker with Donaldson, Lufkin & Jenrette specializing
in media and communications.
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Stefan M. Selig has been a Managing Director in the Merger & Acquisition
Department of UBS Securities since August 1994. Prior to joining UBS, Mr.
Selig was an investment banker in the Mergers and Acquisitions Group at The
First Boston Corporation.
Steven J. Hunt was appointed Chief Financial Officer in November 1997. Prior
to joining the Company, he was the founder of Value Growth Partners,
International, a strategic and financial consulting firm, from 1995 to October
1997. Mr. Hunt previously served as Executive Vice President Business
Development and Planning and Chief Financial Officer of Patrick Media Group,
Inc., a subsidiary of GE Capital Corp. from 1991 to 1995.
Brian A. Meyer was appointed General Counsel in November 1997. Prior to
joining the Company, Mr. Meyer served as Senior Counsel at Revlon, Inc. from
May 1993 to October 1997. From January 1990 to April 1993, he was an attorney
at the law firm of Latham & Watkins.
Richard A. Wimbish joined TISI, a wholly-owned subsidiary of the Issuer, as
Controller in 1987 and became Executive Vice President in 1990. Mr. Wimbish
was made President and Chief Operating Officer of TISI in 1991. Prior to
joining TISI, Mr. Wimbish was Controller and Chief Financial Officer of
Carlson Reserve Corporation from 1981 through 1986.
Robert Frank founded CORSEARCH in 1983 and has been the President and Chief
Operating Officer of such company on a full time basis since such time
(CORSEARCH was acquired by the Issuer in August 1996).
W. Michael Goodwin joined the Company in December 1996, as President and
Chief Executive Officer of both Atwood and Galaxy. Prior to joining the
Company, Mr. Goodwin was founder and President of Falcon Sports Group, Inc., a
company which focused on developing and introducing new sports media
properties. Prior to this, Mr. Goodwin was Executive Vice President and Chief
Operating Officer of Professional Sports Publications, a publisher of sporting
event game day magazines (1992-1995).
EXECUTIVE COMPENSATION
COMPENSATION
Set forth below is certain information with respect to the compensation of
each of the five most highly compensated executive officers of the Issuer and
its subsidiaries, based on salary and bonus earned during 1996, for services
in all capacities to the Issuer and its subsidiaries during each of the
Issuer's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL
COMPENSATION(1) AWARDS PAYOUTS
----------------- ----------- ------------------
NUMBER OF
RESTRICTED SHARES
NAME AND PRINCIPAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS(2) AWARD(S)(3) OPTIONS(4) PAYOUTS COMPENSATION(5)
- ------------------ ---- -------- -------- ----------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Howard G. Barnett, 1996 $270,000 $189,000 $ -- 30,000 -- $7,600
Jr.(6) 1995 210,904 175,000 -- -- -- 5,575
Chairman, President and 1994 207,704 77,889 77,889 75,000 -- 5,544
Chief Executive Officer
J. Gary Mourton 1996 166,400 116,480 -- 21,000 -- 6,541
Senior Vice President & 1995 157,410 63,000 -- -- -- 5,047
Chief Financial Officer 1994 151,410 34,067 34,067 37,500 -- 4,620
Robert E. Craine, Jr. 1996 159,000 111,300 -- 21,000 -- 6,418
Executive Vice President 1995 150,000 55,000 -- -- -- 5,154
1994 133,900 30,127 30,127 37,500 -- 4,107
Richard A. Wimbish 1996 155,000 41,491 -- 10,000 -- 5,429
President, TISI 1995 140,000 36,083 -- -- -- 4,959
1994 125,000 36,192 -- 22,500 -- 3,960
Stuart P. Honeybone 1996 154,000 107,800 -- 21,000 -- 7,585
Vice President 1995 132,000 52,000 -- 15,000 -- 5,369
1994 120,150 27,500 -- 10,000 -- 4,064
</TABLE>
- --------
(1) No cash compensation other than the annual amounts described was paid to
any of the named executives attributable to the periods shown. Certain
executives are also entitled to car allowances or are provided cars,
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<PAGE>
and club dues are paid for certain executives. The value of such
perquisites is not required to be disclosed because the aggregate amount of
such compensation does not exceed the lesser of $50,000 or 10 percent of
the total amount of annual salary and bonus for any named executive.
(2) Includes bonuses earned for the year, even if paid in another year.
(3) Under the T/SF Communications Corporation 1994 Incentive Stock Plan,
approved by the stockholders of the Company at the 1994 Annual Meeting of
Stockholders, one-half of the 1994 bonus paid to Howard G. Barnett, Jr.,
J. Gary Mourton and Robert E. Craine, Jr., was paid in the form of
restricted stock grants. The amount shown here represents the dollar
amount of such stock grants, which were granted at a rate of $6.25 per
share, being the closing price on the AMEX for Common Stock on December
30, 1994 (the last trading day of 1994). As of December 31, 1996, Mr.
Barnett, Mr. Mourton and Mr. Craine held the following number of shares
awarded as restricted stock grants: Mr. Barnett held 12,462 shares, valued
at $345,820 in the aggregate; Mr. Mourton held 5,451 shares, valued at
$151,265 in the aggregate; and Mr. Craine held 4,820 shares, valued at
$133,755 in the aggregate. Values as of December 31, 1996 are based on the
closing price on the AMEX for Common Stock on December 31, 1996 (the last
trading day of 1996).
(4) Consists solely of options to acquire shares of Common Stock.
(5) These amounts represent the total value of the Issuer's contributions made
or accrued to the Issuer's 401(k) plan. All such persons are 100 percent
vested in their accounts under the Issuer's plan.
(6) The cash compensation shown for Howard G. Barnett, Jr. in the table does
not include amounts paid to him as a director of Tribune/Swab-Fox in 1994
and 1995. Employees who are Directors of the Issuer do not receive fees
from the Issuer for their service as Directors.
OPTIONS
The following table sets forth certain information with respect to options
exercised by the named executive officers of the Company and its subsidiaries
during 1996, and the number and value of unexercised options held by such
persons at the end of 1996. The Company has never granted any stock
appreciation rights ("SAR").
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR- FISCAL YEAR-END
END ($)(1)(2)
------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- ------------- -------------------
<S> <C> <C> <C> <C>
Howard G. Barnett,
Jr. ................... -- -- 30,000/75,000 $382,500/$1,762,500
J. Gary Mourton......... -- -- 21,000/37,500 267,750/881,250
Robert E. Craine, Jr. .. -- -- 21,000/37,500 267,750/881,250
Richard A. Wimbish...... -- -- --/32,500 --/667,500
Stuart P. Honeybone..... -- -- 21,000/25,000 267,750/561,250
</TABLE>
- --------
(1) Market value of the underlying securities at exercise date or fiscal year-
end, as the case may be, minus the option exercise price.
(2) Based on the closing price for the Common Stock on the American Stock
Exchange on December 31, 1996, the last trading day of fiscal 1996, which
was $27.75.
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<PAGE>
The following table sets forth certain information with respect to options
granted to the named executive officers of the Company and its subsidiaries
during 1996. The Company has never granted any stock appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
-------------------------------------------------- PRICE
NUMBER OF % OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO EXERCISE OF TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------
NAME GRANTED (#)(3) FISCAL YEAR (PER SHARE) DATE 5% 10%
---- -------------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Barnett,
Jr. ................... 30,000(3) 19.61 $15.00 3/18/03 $135,700 $361,200
J. Gary Mourton......... 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
Robert E. Craine, Jr. .. 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
Richard A. Wimbish...... 10,000(4) 6.54 13.875 3/18/06 87,700 221,100
Stuart P. Honeybone..... 21,000(3) 13.73 15.00 3/18/03 95,000 252,800
</TABLE>
- --------
(1) Consists solely of options to acquire shares of Common Stock. The option
exercise price may be paid in cash, by delivery of already-owned shares
and, in some instances, by offset of the underlying shares, or by a
combination of such methods. Tax withholding obligations, if any, related
to exercise may be paid by offset of the underlying shares, subject to
certain conditions.
(2) Potential realizable value illustrates the value that might be realized
upon exercise of the options immediately prior to the expiration of their
term (ten years from the date of grant as to the options granted Mr.
Wimbish and seven years from the date of grant as to all other options in
the table), assuming that the Common Stock appreciates in value from the
date of grant to the end of the option term at rates of 5% and 10%,
respectively, compounded annually.
(3) These options were granted for a term of seven years, subject to earlier
termination in certain events related to the termination of employment.
The exercise price of $15.00 was higher than the $13.88 per share market
price of the Common Stock on the date of grant. These options vested in
three tranches as the price of the Common Stock reached $18.00, $21.00 and
$24.00, all of which were achieved in 1996.
(4) The options were granted for a term of ten years, subject to earlier
termination in certain events related to the termination of employment.
The exercise price of the options is equal to the fair market value of the
Common Stock on the date of grant.
See "Description of the Transactions--The Option Repurchase" for information
on the effect of the Recapitalization on these options.
COMPENSATION OF DIRECTORS. Directors receive no additional compensation for
service on the Board of Directors or any committee thereof. Directors are
reimbursed by the Issuer for out-of-pocket expenses incurred by them in
connection with their service on the Board of Directors and any committee
thereof.
EMPLOYMENT AGREEMENTS. The Company is subject to employment agreements with
certain Directors, officers or key employees, as follows:
Ian L. M. Thomas is President and Chief Executive Officer and a Director of
the Issuer. Mr. Thomas is party to an employment agreement with the Issuer
that provides for a five-year term at a base salary of $175,000 per year, with
annual increases based upon the Consumer Price Index, plus a bonus (of up to
100% of his base salary) based upon certain performance targets. Mr. Thomas
also will participate in the Issuer's Phantom Stock Plan. See "--Phantom Stock
Plan."
Steven J. Hunt, hired by the Company in November 1997, is the Chief
Financial Officer of the Issuer. Mr. Hunt is party to an employment agreement
with the Issuer that provides for a five-year term at a base salary of
$175,000 per year, with annual increases based upon the Consumer Price Index,
plus a bonus (of up to 50% of his base salary) based upon certain performance
targets. Mr. Hunt also will participate in the Issuer's Phantom Stock Plan.
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<PAGE>
Brian A. Meyer, hired by the Company in November 1997, is the General
Counsel of the Issuer. Mr. Meyer is party to an employment agreement with the
Issuer that provides for a five-year term at a base salary of $160,000 per
year, with annual increases based upon the Consumer Price Index, plus a bonus
(of up to 50% of his base salary) based upon certain performance targets. Mr.
Meyer also will participate in the Issuer's Phantom Stock Plan.
W. Michael Goodwin was hired by the Company in December 1996, to serve as
President and Chief Executive Officer of both Atwood and Galaxy. Mr. Goodwin
is employed pursuant to an employment agreement which extends to December 31,
1997 at a base salary of $165,000 annually. The employment agreement provides
for various incentives and bonus possibilities, with $20,000 of such bonus
guaranteed. To induce Mr. Goodwin to relocate his family to Frederick,
Maryland (Galaxy's location), Mr. Goodwin's Employment Agreement was amended,
in August 1997, to provide for a severance arrangement which would pay him, if
his employment is terminated other than "for cause", his base salary until the
later of (i) 12 months after such termination or (ii) August 31, 1999.
Pursuant to such Employment Agreement, Mr. Goodwin was granted on January 16,
1997 options for 20,000 shares of Common Stock at an exercise price of $28.00
per share, the closing price of the Common Stock on the American Stock
Exchange on such date of grant. Upon consummation of the Tender Offer, Mr.
Goodwin exercised the options and was paid $245,000.
Richard A. Wimbish entered into an employment agreement with TISI, effective
January 1, 1997, which, among other things, provides for a salary in 1997 of
$165,000 and in 1998 of $175,000 and bonuses consistent with prior practices
of TISI (reference is made to the above compensation table for information
concerning Mr. Wimbish's historical bonus earnings). Upon consummation of the
Tender Offer, Mr. Wimbish received a bonus of $535,000 and was paid $567,000
upon the exercise of certain options. Mr. Wimbish continues to hold options
granted under the Issuer's 1994 Incentive Stock Plan. 16,750 shares of Common
Stock are issuable upon exercise of such options, 10,000 of which have an
exercise price of $13.874 per share and 6,750 of which have an exercise price
of $4.25 per share. The Issuer's 1994 Incentive Stock Plan, under which such
options were granted, therefore will survive (solely with respect to such
options). If Mr. Wimbish is terminated at any time after the consummation of
the Transactions, he will receive a severance package equal to two years of
his then base salary.
In connection with the acquisition of CORSEARCH in August 1996, CORSEARCH
entered into an employment agreement with Mr. Frank employing him as its
President through December 31, 1999. Mr. Frank is employed at a salary of
$236,250 in 1997, subject to five percent annual raises if certain income
targets for CORSEARCH are achieved each year. Mr. Frank can receive bonuses
based on the net income of CORSEARCH exceeding certain thresholds each year.
Under the agreement by which CORSEARCH was acquired, in the years 2000 and
2001, Mr. Frank can receive significant additional payments for his interest
in CORSEARCH sold to the Company based on the earnings of CORSEARCH in 1997,
1998 and 1999. Mr. Frank's additional payments are predicated upon CORSEARCH
achieving certain pre-tax income levels in such years and will be determined
according to a formula set forth in the Agreement by which CORSEARCH was
acquired.
In connection with his employment, Mr. Frank was granted options for 15,000
shares of Common Stock at an exercise price of $20.00 per share and 15,000
options at an exercise price of $24.00 per share, both of which were greater
than the closing price of the Common Stock on the AMEX on the date of such
grant. Upon consummation of the Tender Offer, Mr. Frank exercised the options
and was paid $547,500.
In addition, in connection with the Recapitalization, the Company entered
into consulting agreements on October 9, 1997 with Howard G. Barnett, Jr., J.
Gary Mourton and Robert E. Craine, Jr. Mr. Barnett's agreement has a term of
one year, extendable at the option of the Company for a second year; Mr.
Mourton's agreement has a term of one year; and Mr. Craine's agreement has a
term of 90 days. Each agreement pays the consultant compensation at a rate
equal to his base salary from the Company at the time of the Stock Purchase,
except that Mr. Mourton's compensation for the second six months of the year
is at a rate equal to 50% of his current base salary.
Messrs. Mourton, Craine and Stuart P. Honeybone also were parties to a
special bonus plan pursuant to which, upon consummation of the Tender Offer,
they shared, pro rata with their respective salaries, a bonus pool
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<PAGE>
equal to $1,637,500. Messrs. Barnett, Mourton, Craine and Honeybone are each
entitled to participate in a severance plan whereby each person will be paid
one year's salary for every 10 years of service with the Company, plus an
amount equal to all bonus and overtime wages paid for 1996.
PHANTOM STOCK PLAN
The Company has established a Key Employee Equity Appreciation Plan (the
"Phantom Stock Plan") for executives of the Company. Pursuant to the Plan,
executives can be awarded Equity Appreciation Units (the "Units") which
constitute a "phantom" equity interest in any appreciation in the value of the
equity of the Company above the $59.6 million originally invested by VS&A-T/SF
and Fir Tree in the Company and Holdings LLC (the "Equity Appreciation"). The
maximum number of Units issuable under the Plan would constitute approximately
9% of the common equity interests of the Company.
The Units vest 20% per year over five years, provided that the executive
remains an employee of the Company and the annual EBITDA budget for the
Company is achieved (or, if not achieved, that 110% of the annual EBITDA
budget for the next year is achieved).
Upon termination of an executive's employment by the Company for any reason
(other than Cause (as defined in the Plan) or voluntary termination by the
executive), the executive is entitled to receive an amount equal to the value
of his or her vested Units, payment of which can be deferred until a Change in
Control (as defined in the Plan) of the Company. All Units vest on a Change in
Control, and the executive is entitled to receive an amount equal to the value
of his or her Units (unless his or her employment terminated prior to the
Change in Control).
Ian L. M. Thomas, President and Chief Executive Officer of the Issuer, will
be awarded Units equal to 2.5% of the Equity Appreciation and will be awarded
Units equal to an additional 2.5% of the Equity Appreciation if VS&A Fund II
achieves a 20% internal rate of return for its investors. Mr. Hunt, Chief
Financial Officer of the Issuer, will be awarded Units equal to 1.5% of the
Equity Appreciation. Mr. Meyer, General Counsel of the Issuer, will be awarded
Units equal to 1% of the Equity Appreciation. It is anticipated that Messrs.
Goodwin, Wimbish and Frank will also participate in the Phantom Stock Plan.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
VS&A-T/SF, Fir Tree (each, a "Stockholder") and the Issuer are parties to a
Stockholders Agreement (the "Stockholders Agreement"), dated as of October 9,
1997, with respect to the management of the Company and their ownership of
shares of the Common Stock.
The Stockholders Agreement provides each Stockholder the right to "tag"
along on any sale of shares by the other Stockholder, provides to VS&A-T/SF
the right to "drag" along Fir Tree on any sale of all of the Common Stock and
provides preemptive rights to each Stockholder.
The Stockholders Agreement provides that VS&A-T/SF and Fir Tree will vote
for a board consisting of a majority of members designated by VS&A-T/SF and a
number of Fir Tree designees in proportion to Fir Tree's ownership of Common
Stock. Accordingly, the board of directors of the Issuer consists of eight
members, five designated by VS&A-T/SF and three designated by Fir Tree. See
"Management."
The Stockholders Agreement provides that certain actions require approval by
a majority of the Fir Tree designees on the board, including an amendment of
the Certificate of Incorporation or By-Laws, a transaction with VS&A-T/SF or
an affiliate, certain borrowings or management equity plans pursuant to which
management receives more than 10% of the common equity interests of the
Company.
At any time after October 9, 2002, Fir Tree has the right to force a sale of
the Issuer or its assets and the Stockholders are required to sell their
shares or vote in favor of a sale. If a definitive agreement for the sale of
the Issuer is not executed within 18 months after the notice from Fir Tree,
the Stockholders will vote their shares to elect a board consisting of a
majority of members designated by Fir Tree.
The Stockholders Agreement terminates in 10 years or upon an earlier
underwritten initial public offering of Common Stock.
Upon consummation of the Recapitalization, VS&A will be paid an investment
banking fee of $1.5 million by the Issuer, which will be shared with Fir Tree
pro rata (based on the ratio in which VS&A-T/SF and Fir Tree own shares of the
Common Stock).
CERTAIN FEES
VS&A will be paid an annual monitoring fee of $90,000 per year by the
Company and may be paid advisory fees (not to exceed 1% of the transaction
value) in connection with future acquisitions or dispositions by the Company;
Fir Tree will be entitled to receive from VS&A 50% of Fir Tree's pro rata
share of any such fee (based on the ratio in which VS&A-T/SF and Fir Tree own
shares of the Common Stock).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Upon consummation of the Recapitalization, VS&A-T/SF will hold 881,988
shares (or 64%) and Fir Tree will hold 487,506 shares (or 36%) of the Common
Stock, constituting all of the outstanding Common Stock. Upon consummation of
the Tender Offer, Stock Purchase and Option Repurchase, pending the Second
Step Transaction, public shareholders held 102,048 shares of the Common Stock
(or 7%), and VS&A-T/SF's shares constituted approximately 60% and Fir Tree's
shares constituted approximately 33% of the outstanding shares of the Common
Stock. No directors or executive officers of the Company own any shares of the
Common Stock. An affiliate of Ian L. M. Thomas, President and Chief Executive
Officer of the Issuer, has invested $750,000 to purchase 1.95% of VS&A-T/SF.
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<PAGE>
DESCRIPTION OF THE SENIOR CREDIT FACILITY
In connection with the Recapitalization, FUNB provided $25.0 million of
borrowing availability to the Issuer pursuant to the Senior Credit Facility.
Repayment. The Senior Credit Facility is a revolving credit facility which
is due and payable at maturity in September, 2004.
Security; Guaranty. The Senior Credit Facility will be secured by a first
priority lien on substantially all of the properties and assets of the Issuer
and its subsidiaries (which for all purposes includes the LLCs), owned now or
acquired later. The Senior Credit Facility will be guaranteed by the
Guarantors.
Interest. At the Issuer's option, the interest rate per annum applicable to
the Senior Credit Facility will be a fluctuating rate of interest measured by
reference either to: (i) LIBOR plus the applicable borrowing margin or (ii)
FUNB's base rate, which is the greater of the published prime rate of FUNB or
the overnight federal funds rate plus 0.5% (the "FUNB Rate") plus the
applicable borrowing margin. The applicable borrowing margin for the Senior
Credit Facility will range from 1.75% to 2.75% for LIBOR based borrowings and
0.5% to 1.5% for FUNB Rate based borrowings.
Fees. The Issuer has agreed to pay certain fees with respect to the Senior
Credit Facility including (i) upfront facility fees, (ii) agent and
arrangement fees and (iii) commitment fees of 0.5% per annum on the unused
portion of the Senior Credit Facility.
Use of Proceeds. The entire amount of the Senior Credit Facility was made
available to the Issuer concurrently with the closing of the Tender Offer.
Prepayments; Reduction of Commitments. The commitments under the Senior
Credit Facility are required to be permanently reduced with: (i) 100% of the
net cash proceeds of all non-ordinary-course asset sales or other dispositions
of the property by the Issuer and its subsidiaries, including insurance and
condemnation proceeds, subject to limited exceptions and (ii) 100% of the net
proceeds of issuances of equity or debt obligations of the Issuer and its
subsidiaries, subject to limited exceptions (including the Offering). The
Issuer may voluntarily reduce the commitment in amounts of $1.0 million or
more at any time without premium or penalty.
Covenants. The Senior Credit Facility contains covenants, among others,
restricting the ability of the Issuer and the Guarantors to: (i) declare
dividends or redeem or repurchase capital stock; (ii) prepay, redeem or
purchase debt; (iii) incur liens and engage in sale-leaseback transactions;
(iv) make loans and investments; (v) issue more debt; (vi) amend or otherwise
alter debt and other material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales; (ix) transact with
affiliates and (x) alter its lines of business. The Issuer must also make
certain customary indemnifications of the lenders and their agents and will
also be required to comply with financial covenants (based on adjusted pro
forma EBITDA) with respect to: (i) a maximum leverage ratio; (ii) a maximum
senior leverage ratio; (iii) a minimum interest coverage ratio and (iv) a
minimum fixed charge coverage ratio. The Senior Credit Facility also contains
certain customary affirmative covenants.
Events of Default. Events of default under the Senior Credit Facility
include: (i) the Issuer's failure to pay principal or interest when due; (ii)
the Issuer's material breach of any covenant, representation or warranty
contained in the loan documents; (iii) customary cross-default provisions;
(iv) events of bankruptcy, insolvency or dissolution of the Issuer or the
Guarantors; (v) the levy of certain judgments against the Issuer, any
Guarantor, or its assets; (vi) certain adverse events under ERISA plans of the
Issuer or the Guarantors; (vii) the actual or asserted invalidity of security
documents or guarantees of the Issuer or the Guarantors and (viii) a change of
control of the Issuer.
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<PAGE>
DESCRIPTION OF THE NEW NOTES
GENERAL
The New Notes will be issued under an indenture (the "Indenture"), dated as
of October 29, 1997 by and among the Company, the Guarantors and IBJ Schroder
Bank & Trust Company, as Trustee (the "Trustee"). As used in this "Description
of the New Notes" section, references to the Notes mean the New Notes.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from the Company. The definitions of certain capitalized terms used
in the following summary are set forth below under "--Certain Definitions."
For purposes of this section, references to the "Company" include only the
Company and not its Subsidiaries.
The New Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt of the Company.
All of the Company's Subsidiaries and the LLCs will be Restricted
Subsidiaries and each of the active Wholly Owned Restricted Subsidiaries
(including the LLCs) will be Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100.0 million and
will mature on November 1, 2007. Interest on the Notes will accrue at the rate
of 10 3/8% per annum and will be payable semiannually in cash on each May 1
and November 1, commencing on May 1, 1998, to the persons who are registered
Holders at the close of business on the April 15 and October 15 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after November 1,
2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on November 1 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002............................................................ 105.188%
2003............................................................ 103.458%
2004............................................................ 101.729%
2005 and thereafter............................................. 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to November 1, 2000, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined) to
redeem the Notes at a redemption price equal to 110.375% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date
of redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately 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 90 days
after the consummation of any such Public Equity Offering.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis
or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash of all Obligations on Senior
Debt. Upon any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a
bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the Notes,
or for the acquisition of any of the Notes for cash or property or otherwise.
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal
of, interest on, unpaid drawings for letters of credit issued in respect of,
or regularly accruing fees with respect to, any Senior Debt, no payment of any
kind or character shall be made by or on behalf of the Company or any other
Person on its or their behalf with respect to any Obligations on the Notes or
to acquire any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default
have been cured or waived or have ceased to exist or the Trustee receives
notice from the Representative for the respective issue of Designated Senior
Debt terminating the Blockage Period (as defined below), during the 180 days
after the delivery of such Default Notice (the "Blockage Period"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be
made, the basis for commencement of a second Blockage Period by the
Representative of such Designated Senior Debt whether or not within a period
of 360 consecutive days, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of
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commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default
for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Debt.
After giving effect to the Offering of the Old Notes and the application of
the proceeds therefrom, the Recapitalization and the transactions contemplated
thereby, on a pro forma basis, at September 30, 1997, the aggregate amount of
Senior Debt would have been approximately $2.8 million. In addition, the
Company would have had $25.0 million of additional borrowing availability
under the Credit Agreement.
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The
Guarantees will be subordinated to Guarantor Senior Debt on the same basis as
the Notes are subordinated to Senior Debt. The obligations of each Guarantor
are limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Restricted Subsidiary of the Company
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. See "--Certain Covenants--Merger, Consolidation and
Sale of Assets." In the event all of the Capital Stock of a Guarantor is sold
by the Company and the sale complies with the provisions set forth in "--
Certain Covenants--Limitation on Asset Sales," the Guarantor's Guarantee will
be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
HOLDING COMPANY STRUCTURE
The Company is a holding company for its Subsidiaries, with no material
operations of its own and only limited assets. Accordingly, the Company is
dependent upon the distribution of the earnings of its Restricted Subsidiaries
(and distributions with respect to its preferred ownership interest in
Holdings LLC), whether in the form of dividends, advances or payments on
account of intercompany obligations, to service its debt obligations. In
addition, the claims of the Holders of Notes are subject to the prior payment
of all liabilities (whether or not for borrowed money) and to any preferred
stock interest of such Restricted Subsidiaries. There can be no assurance
that, after providing for all prior claims, there would be sufficient assets
available from the Company and its Restricted Subsidiaries to satisfy the
claims of the Holders of Notes. See "Risk Factors--Dependence Upon
Distributions from Subsidiaries and LLCs."
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CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer or (ii) obtain the requisite consents
under the Credit Agreement and all other Senior Debt to permit the repurchase
of the Notes as provided below. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Notes pursuant to the provisions described below. The Company's
failure to comply with the covenant described in the immediately preceding
sentence shall constitute an Event of Default described in clause (iii) and
not in clause (ii) under "Events of Default" below.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not
have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company
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shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the "Change of Control"
provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and Subsidiaries of the Company may incur Acquired Indebtedness,
in each case if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the ratio of the total Indebtedness
of the Company and its Restricted Subsidiaries (excluding any Indebtedness
owed to a Restricted Subsidiary by any other Restricted Subsidiary or the
Company and any Indebtedness owed to the Company by any Restricted Subsidiary)
to the Company's Consolidated EBITDA (determined on a pro forma basis for the
last four fiscal quarters of the Company for which financial statements are
available at the date of determination) is less than 6.0 to 1; provided,
however, that if the Indebtedness which is the subject of a determination
under this provision is Acquired Indebtedness, or Indebtedness incurred in
connection with the simultaneous acquisition of any Person, business, property
or assets, then such ratio shall be determined by giving effect to (on a pro
forma basis, as if the transaction had occurred at the beginning of the four-
quarter period) both the incurrence or assumption of such Acquired
Indebtedness or such other Indebtedness by the Issuers and the inclusion in
the Company's Consolidated EBITDA of the Consolidated EBITDA of the acquired
Person, business, property or assets and any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X under the
Securities Act as in effect and as applied as of the date hereof.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution on any Capital Stock of
the Company or Holdings LLC (other than, in the case of the Company, dividends
or distributions payable solely in Qualified Capital Stock of the Company or
in the case of Restricted Subsidiaries, dividends or distributions payable to
the Company or any Wholly Owned Restricted Subsidiary of the Company), (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant or (iii) the
aggregate amount of Restricted Payments including such proposed Restricted
Payment made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property
as determined reasonably and in good faith by the Board of Directors of the
Company) shall exceed the sum of: (x) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period) minus the aggregate
amount of Permitted Tax Distributions paid subsequent to the Issue Date; plus
(y) 100% of the aggregate net cash proceeds received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company; plus (z) without duplication of any
amounts included in clause (iii) (y) above, 100% of the aggregate net cash
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proceeds of any equity contribution received by the Company from a holder of
the Company's Capital Stock (excluding, in the case of clauses (iii )(y) and
(z), any net cash proceeds from a Public Equity Offering to the extent used to
redeem the Notes pursuant to the redemption provisions herein).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no
Default or Event of Default shall have occurred and be continuing, repurchases
by the Company of Common Stock of the Company or payments by the Company to
enable VS&A-T/SF to repurchase common Equity Interests of VS&A-T/SF, in either
case, without duplication, from employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such employees, in an aggregate amount not to
exceed in any calendar year the sum of (A) $750,000 and (B) any amounts
permitted to have been paid in any preceding calendar years under subclause
(A) above to the extent such amounts were not so paid in any such prior
calendar years; provided that such payments shall not exceed $3.0 million in
the aggregate; (5) if no Default or Event of Default shall have occurred and
be continuing, or would result from any such distribution, Permitted Tax
Distributions and (6) payments in connection with the Recapitalization. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (4) and (5) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors); (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is
received at the time of such disposition; and (iii) upon the consummation of
an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 270 days of
receipt thereof either (A) to prepay any Senior Debt and, in the case of any
Senior Debt under any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility, (B) to make an
investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Subsidiaries as existing on the
Issue Date or in businesses reasonably related thereto ("Replacement Assets"),
or (C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B) or (iv) the Company makes the offer described in
the following sentence. On the 271st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the preceding sentence (each a "Net Proceeds Offer Amount") shall
be applied by the Company or such Restricted Subsidiary to make an offer to
purchase
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(the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date")
not less than 30 nor more than 45 days following the applicable Net Proceeds
Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes
equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock (other than
dividends or distributions in respect to the common Equity Interest in
Holdings LLC); (b) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary of the
Company; or (c) transfer any of its property or assets to the Company or any
other Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) the
Indenture; (3) customary non-assignment provisions of any contract or any
lease governing a leasehold
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interest of any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (5)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; or (6) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4) or (5) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred
to in such clause (2), (4) or (5).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive income
or profits therefrom unless (i) in the case of Liens securing Indebtedness
that is expressly subordinate or junior in right of payment to the Notes, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured, except for (A) Liens existing as of the Issue
Date to the extent and in the manner such Liens are in effect on the Issue
Date; (B) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a
Wholly Owned Restricted Subsidiary of the Company on assets of any Subsidiary
of the Company; (E) Liens securing Refinancing Indebtedness which is incurred
to Refinance any Indebtedness which has been secured by a Lien permitted under
the Indenture and which has been incurred in accordance with the provisions of
the Indenture; provided, however, that such Liens (A) are no less favorable to
the Holders and are not more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being Refinanced and (B)
do not extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. Neither the Company
nor any Guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is expressly by its terms subordinate
or junior in right of payment to any Indebtedness of such person and senior in
any respect of payment to the Notes or the Guarantee of such Guarantor, as the
case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the
Company and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and
of the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes, the Indenture and the Registration Rights Agreement on the part of
the Company to be
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performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction
and (2) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "--Limitation on
Incurrence of Additional Indebtedness" covenant; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated
to be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
the applicable provisions of the Indenture and that all conditions precedent
in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Notes with the same effect
as if such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "--Limitation on Asset
Sales") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or
any other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (ii) such entity assumes by supplemental
indenture all of the obligations of the Guarantor on the Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (ii) of
the first paragraph of this covenant. Any merger or consolidation of a
Guarantor with and into the Company (with the Company being the surviving
entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company need only comply with clause (iv) of the first paragraph of this
covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time
on an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common
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plan) involving aggregate payments or other property with a fair market value
in excess of $250,000 shall be approved by the Board of Directors of the
Company or such Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Restricted Subsidiary enters into an Affiliate Transaction
(or a series of related Affiliate Transactions related to a common plan) that
involves an aggregate payment or other property with a fair market value of
more than $3.0 million, the Company or such Restricted Subsidiary, as the case
may be, shall, prior to the consummation thereof, obtain a favorable opinion
as to the fairness of such transaction or series of related transactions to
the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the
same with the Trustee.
(b) The restrictions set forth in paragraph (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board
of Directors or senior management; (ii) transactions exclusively between or
among the Company and any of its Restricted Subsidiaries or exclusively
between or among such Restricted Subsidiaries, provided such transactions are
not otherwise prohibited by the Indenture; (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement agreement is
not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; (iv) Restricted Payments
permitted by the Indenture; and (v) payments as contemplated by the
Stockholders Agreement.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest additional monies in (x) another
Restricted Subsidiary having total assets with a book value in excess of
$500,000 or (y) a Foreign Subsidiary designated as a Restricted Subsidiary
having total assets with a book value in excess of $3.0 million, then such
transferee or acquired or other Restricted Subsidiary shall (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of the Indenture.
Modification of Holdings LLC Equity Interest. The Company will not and will
not permit any of the Guarantors to amend or modify in any material respect or
in any manner adverse to the Company or the Holders or permit such an
amendment or modification of any provisions of Holdings LLC Equity Interest,
including but not limited to, the provisions granting voting control of
Holdings LLC to the Company or its termination prior to the satisfaction and
discharge of the Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents
and other reports, if any, which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
further provides that, notwithstanding that the Company may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the Commission, to the extent permitted, and provide
the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA (S) 314(a).
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Notwithstanding the foregoing covenants, nothing in the Indenture shall
prohibit the Company from the consummation of the Recapitalization and the
transactions contemplated thereby including the contribution of certain assets
and liabilities of Atwood Convention Publishing, Inc., Galaxy Registration
Inc. and G.E.M. Communications, Inc. to Holdings LLC in exchange for a $45.0
million Holdings LLC Preferred Equity Interest.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes
(except in the case of a default with respect to the "Merger, Consolidation
and Sale of Assets" covenant, which will constitute an Event of Default
with such notice requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $2.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice. If an Event of Default specified in clause (vi) above
with respect to the Company occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may rescind
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and cancel such declaration and its consequences (i) if the rescission would
not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in clause (vi) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights
of Holders to receive payments in respect of the principal of, premium, if
any, and interest on the Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a
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change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Holders 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; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation
of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an officers' certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Debt,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the Trustee, adversely affect the
rights of any of the Holders in any material respect. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an opinion
of counsel. Other modifications and amendments of the Indenture may be made
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture, except that, without the consent
of each Holder affected thereby, no amendment may: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
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including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or
change the date on which any Notes may be subject to redemption or repurchase,
or reduce the redemption or repurchase price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify in any respect materially
adverse to Holders any of the provisions or definitions with respect thereto;
or (vii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or (viii) release
any Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming
a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any
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Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any
division or line of business of such Person or any other properties or assets
of such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course
of business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000
and (ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "--Certain
Covenants--Merger, Consolidation and Sale of Assets."
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250.0
million; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company or Holdings LLC to any Person or group of related Persons for
purposes of Section 13(d)
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of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company or common Equity
Interests of Holdings LLC of any plan or proposal for the liquidation or
dissolution of the Company or Holdings LLC, as the case may be (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) any
Person or Group (other than the Permitted Holders) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 25% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company or common Equity Interests of
Holdings LLC, as the case may be, and the Permitted Holders shall own less
than 50% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company or common Equity Interests of
Holdings LLC, as the case may be; and (iv) the replacement of a majority of
the Board of Directors of the Company over a two-year period from the
directors who constituted the Board of Directors of the Company, at the
beginning of such period, and such replacement shall not have been approved by
a vote of at least a majority of the Board of Directors of the Company then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Company" means T/SF Communications Corporation, a Delaware corporation.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries (including the LLCs) paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or
taxes attributable to sales or dispositions outside the ordinary course of
business), (B) Consolidated Interest Expense and (C) Consolidated Non-cash
Charges less any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of all cash and
non-cash interest expense (minus amortization or write-off of deferred
financing costs included in cash or non-cash interest expense) of such Person
and its Restricted Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including without limitation, (a) any
amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
items classified as extraordinary, nonrecurring or unusual gains, losses or
charges, and the related tax effects, each determined in accordance with GAAP,
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
the referent Person or is merged or consolidated with the referent Person or
any Restricted Subsidiary of the referent Person, (d) the net income (but not
loss) of any Restricted Subsidiary (other than Holdings LLC) of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person or to a
Wholly Owned Restricted Subsidiary of the referent Person by such Person, (f)
any restoration to income of any contingency reserve, except to the extent
that
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provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of October 9, 1997,
between the Company, the lenders party thereto in their capacities as lenders
thereunder and First Union National Bank, as agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified
from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the "Limitation on Incurrence of Additional
Indebtedness" covenant above) or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of 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 upon the happening of any event (other than
an event which would constitute a Change of Control), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except upon the
occurrence of a Change of Control) on or prior to the final maturity date of
the Notes.
"Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
of such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"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 and able buyer, neither of
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whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"Fir Tree" means Fir Tree Value Fund L.P., Fir Tree Institutional Value Fund
L.P. and Fir Tree Partners L.D.C. and its Affiliates.
"Foreign Subsidiary" means any Subsidiary of the Company organized under the
laws of a country or jurisdiction other than the United States or any state or
territory thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Guarantor" means: (i) Atwood Convention Publishing, Inc., a Missouri
corporation, CORSEARCH, Inc., a Delaware corporation, Crimesearch, Inc., an
Oklahoma corporation, Expo Magazine, Inc., a Kansas corporation, Galaxy Design
& Printing, Inc., a Delaware corporation, Galaxy Registration, Inc., a
Maryland corporation, G.E.M. Communication, Inc., an Oklahoma corporation,
Transportation Communications Services, Inc., an Oklahoma corporation, T/SF
Europe, Inc., an Oklahoma corporation, T/SF Investment Co., a Delaware
corporation, T/SF of Nevada, Inc., a Nevada corporation and Transportation
Information Services, Inc., an Oklahoma corporation; (ii) upon their
formation, Holdings LLC and each of the Operating LLCs and (iii) each of the
Company's Restricted Subsidiaries that in the future executes a supplemental
indenture in which such Restricted Subsidiary agrees to be bound by the terms
of the Indenture as a Guarantor; provided that any Person constituting a
Guarantor as described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms of the
Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not/to the extent such interest
is an allowed claim under applicable law) on, and all other amounts owing in
respect of, (x) all monetary obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor
Senior Debt" shall not include (i) any Indebtedness of such Guarantor to a
Restricted Subsidiary of such Guarantor or any Affiliate of such Guarantor or
any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of such Guarantor or
any Restricted Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and
other amounts incurred in connection with obtaining goods, materials or
services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any
liability for federal, state, local or other taxes owed or owing by such
Guarantor, (vi) Indebtedness incurred in violation of the Indenture provisions
set forth under the covenant "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"Holdings LLC" means T/SF Holdings, LLC, a Delaware limited liability
company, whose Common Equity Interests shall be owned by VS&A-T/SF and Fir
Tree in the same proportion as their ownership interest
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in the Common Stock of the Company pursuant to the Recapitalization and whose
preferred Equity Interests shall be owned by the Company. For purposes of the
Indenture, Holdings LLC shall be treated as a Wholly Owned Restricted
Subsidiary.
"Holdings LLC Preferred Equity Interests" as applied to the Equity Interests
of Holdings LLC, means Equity Interests of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of Holdings LLC over Equity Interests
of any other class of such Person.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue by
90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the Obligation so secured, (viii) all Obligations under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the issuer of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include and be valued
at the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
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and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the outstanding
Common Stock of such Restricted Subsidiary, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Common Stock of such Restricted Subsidiary not
sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"LLCs" means Holdings LLC and the Operating LLCs. For purposes of the
Indenture, the LLCs shall be treated as Wholly Owned Restricted Subsidiaries.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Operating LLCs" means, upon their formation, each of (i) Galaxy
Registration LLC, a Delaware limited liability company, (ii) Atwood, LLC, a
Delaware limited liability company and (iii) GEM Gaming, LLC, a Delaware
limited liability company, each of whose common Equity Interests is owned by
Holdings LLC. For purposes of the Indenture, the Operating LLCs shall be
treated as Wholly Owned Restricted Subsidiaries.
"Permitted Holders" means Fir Tree and VS&A Fund II.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Guarantees;
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(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $25.0
million in the aggregate, reduced by any required permanent repayments
pursuant to the provisions under "Certain Covenants--Limitation on Assets
Sales" (which are accompanied by a corresponding permanent commitment
reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Guarantor of the Company for so long as such Indebtedness
is held by the Company or a Guarantor of the Company, in each case subject
to no Lien held by a Person other than the Company or a Guarantor of the
Company; provided that if as of any date any Person other than the Company
or a Guarantor of the Company owns or holds any such Indebtedness or holds
a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien;
provided that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness; and
(xi) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5.0 million at
any one time outstanding.
"Permitted Investments" means each of the following:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment a Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Restricted Subsidiary of the Company;
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(ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Notes and the Indenture;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Company and its
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $500,000 at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses
and otherwise in compliance with the Indenture;
(vi) Investments in Unrestricted Subsidiaries or other entities not to
exceed $4.0 million at any one time outstanding;
(vii) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; and
(viii) Investments made by the Company or its Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured
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by any property or assets of the Company or any Restricted Subsidiary of
the Company other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
"Permitted Tax Distributions" means, subject to the "Limitation of
Restricted Payments" covenant, distributions by Holdings LLC to Fir Tree and
VS&A-T/SF to the extent necessary to permit the direct or indirect beneficial
owners of the common Equity Interests of Holdings LLC to pay federal and state
income tax liabilities arising from income of Holdings LLC irrespective of any
other income or loss such holders may have and attributable to them solely as
a result of Holdings LLC (and any intermediate entity through which such
holder owns such Equity Interests) being a partnership or similar pass-through
entity for federal income tax purposes.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with
the Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Recapitalization" means the recapitalization of the Company as contemplated
by the Stock Purchase Agreement.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional
95
<PAGE>
Indebtedness" covenant (other than pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix) or (xi) of the definition of Permitted Indebtedness), in
each case that does not (1) result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the
terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y)
if such Indebtedness being Refinanced is subordinate or junior to the Notes,
then such Refinancing Indebtedness shall be subordinate to the Notes at least
to the same extent and in the same manner as the Indebtedness being
Refinanced; provided, further that Indebtedness incurred currently with an
irrevocable offer to purchase on a date not more than 60 days from the date of
incurrence of such Indebtedness an amount of Notes equal to such Indebtedness
shall be deemed Refinancing Indebtedness.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal
of, premium, if any, interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, to the extent such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of, (x)
all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (y) all Interest Swap Obligations and (z) all obligations
under Currency Agreements, in each case whether outstanding on the Issue Date
or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Guarantor of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on
Incurrence of Additional Indebtedness," (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to
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<PAGE>
the Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Stock Purchase Agreement" means the stock purchase agreement dated as of
August 15, 1997, as amended, by and among VS&A-T/SF, VS&A Fund II and the
Company, relating to the Recapitalization.
"Stockholders Agreement" means the stockholders agreement dated as of
October 9, 1997 among VS&A-T/SF, Fir Tree and the Company.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with the
"Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Company or any of
its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"VS&A Fund II" means VS&A Communications Partners II, L.P. a Delaware
limited partnership and its Affiliates.
"VS&A-T/SF" means VS&A-/T/SF Inc., a Delaware corporation and, after the
merger of VS&A-T/SF into the Company, VS&A-T/SF L.L.C.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than in the case of a foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly Owned Restricted Subsidiary of such Person.
97
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary presents the material U.S. federal income tax
consequences of the Exchange Offer and the ownership and disposition of the
New Notes. The summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations (including proposed Treasury
regulations) ("Regulations"), Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions currently in effect, all of which are
subject to change, possibly on a retroactive basis.
This summary does not discuss all aspects of U.S. federal income taxation
that may be relevant to investors in light of their personal investment
circumstances, including any elections made by the investors under any
applicable tax law. This summary applies to beneficial owners of the Notes who
hold such Notes as capital assets and does not apply to certain types of
holders subject to special treatment under the U.S. federal income tax laws
(for example, dealers in securities, tax-exempt organizations, insurance
companies, persons other than the initial holders of the New Notes, persons
that will hold notes as a position in an integrated transaction (including a
"straddle") consisting of Notes and one or more other positions and persons
that have a "functional currency" other than the U.S. dollar) and does not
discuss the consequences to a holder under state, local or foreign tax laws.
The Issuer has not sought and will not seek any rulings from the IRS with
respect to the positions discussed below. There can be no assurance that the
IRS will not take a different position concerning the tax consequences of the
Exchange Offer and ownership or disposition of the Old Notes or New Notes or
that any such position would not be sustained.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for U.S. federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (iv) any
other person or entity whose income or gain in respect of a Note is
effectively connected with the conduct of a United States trade or business.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSIDERATIONS OF THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE NOTES.
(i) Exchange Offer. The exchange pursuant to the Exchange Offer of Old Notes
for New Notes will not be treated as a taxable exchange for U.S. federal
income tax purposes and the New Notes will be treated as a continuation of the
Old Notes, because the terms of the New Notes are identical in all material
respects to the terms of the Old Notes. Accordingly, a U.S. Holder will not
recognize gain or loss upon such exchange.
(ii) Interest. Interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time it is paid or accrued in accordance
with the U.S. Holder's method of accounting for tax purposes.
(iii) Sales, Exchange or Retirement of Notes. Upon the sale, exchange
(except pursuant to the Exchange Offer as provided above), retirement or other
disposition of a Note, a U.S. Holder will recognize gain or loss equal to the
difference between the amount realized (except to the extent attributable to
accrued interest) and the U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note will be equal to the cost of the Note,
increased by accrued market discount, if any, if the U.S. Holder has included
such market discount in income (see "Market Discount" below), and decreased by
any amortized bond premium (defined below) and payments received. Generally,
and subject to the discussion under "Market Discount" below, any
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<PAGE>
gain or loss recognized by a U.S. Holder upon a sale, retirement or other
disposition of the Note will be long-term capital gain or loss if the Note has
been held for more than one year, generally subject to maximum tax rate of 28
percent. Pursuant to recently enacted legislation, with respect to any capital
asset held for more than 18 months, capital gains will be subject to tax at a
rate of 20 percent.
(iv) Acquisition at a Premium. If a subsequent U.S. Holder acquires a Note
for an amount (exclusive of accrued and unpaid interest through the
acquisition date) in excess of the Note's stated redemption price at maturity
("Bond Premium"), the U.S. Holder may elect, in accordance with applicable
Code provisions, to amortize the Bond Premium using a constant yield method.
The amount of Bond Premium amortized in any year will be treated as a
reduction of the U.S. Holder's interest income from the Note.
(v) Market Discount. If a U.S. Holder purchases a Note for an amount that is
less than its issue price (or, in the case of a subsequent purchaser, its
"revised issue price," as defined in the Code) as of the purchase date, the
amount of the difference will be treated as "market discount," unless such
difference is less than a specified de minimis amount. Market discount
generally will accrue ratably during the period from the date of acquisition
to the maturity date of the Note, unless the U.S. Holder elects to accrue such
discount on the basis of the constant interest method, in accordance with
applicable Code provisions.
A U.S. Holder of a Note with market discount generally will be required to
treat as ordinary income any gain recognized on the sale, exchange, retirement
or other disposition of the Note to the extent of accrued market discount
unless the U.S. Holder elects in accordance with the applicable Code
provisions to include market discount in income as it accrues. A U.S. Holder
of a Note acquired at market discount who does not make a current inclusion
election will be required to defer the deduction of all or a portion of the
interest on any indebtedness incurred or maintained to purchase or carry the
Note until the maturity of the Note or its earlier disposition in a taxable
transaction.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal, redemption or repurchase premium, if any, and
interest on a Note and to certain payments of proceeds of the sale or
retirement of a Note. The Issuer, its agent, a broker, or any paying agent, as
the case may be, will be required to withhold tax from any payment that is not
subject to backup withholding at a rate of 31 percent of such payment if the
U.S. Holder of the Note fails to furnish his taxpayer identification number
(social security number or employer identification number), to certify that
such U.S. Holder is not subject to backup withholding or to otherwise comply
with the applicable requirements of the backup withholding rules. Certain U.S.
Holders (including, among others, all corporations) are not subject to the
backup withholding and reporting requirements.
Any amount withheld under the backup withholding rules from a payment to a
U.S. Holder may be claimed as a credit against such U.S. Holder's United
States federal income tax liability.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND THE OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
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<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuer has agreed that for a period of 10 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Issuer will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market rates prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Issuer by Proskauer Rose LLP, 1585 Broadway, New York, New York 10036.
Proskauer Rose LLP also represents VS&A, VS&A Fund I, VS&A Fund II and VS&A-
T/SF, including, without limitation, representation of such entities in
connection with the Tender Offer, Stock Purchase and Second Step Transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Issuer and its subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, incorporated by reference in this Prospectus and
included elsewhere in the registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.
100
<PAGE>
INDEX TO FINANCIAL STATEMENTS
T/SF COMMUNICATIONS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants.................................. F-2
Consolidated balance sheets as of September 30, 1997 (unaudited) and
December 31, 1996 and 1995............................................... F-3
Consolidated statements of operations for the nine months ended September
30, 1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995
and 1994................................................................. F-4
Consolidated statements of changes in stockholders' equity for the nine
months ended September 30, 1997 and 1996 (unaudited) and the years ended
December 31, 1996, 1995 and 1994......................................... F-5
Consolidated statements of cash flows for the nine months ended September
30, 1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995
and 1994................................................................. F-6
Notes to consolidated financial statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of T/SF Communications Corporation:
We have audited the accompanying consolidated balance sheets of T/SF
Communications Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of T/SF Communications
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Tulsa, Oklahoma
February 21, 1997
F-2
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------
1997 1996 1995
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................... $ 6,894 $ 2,257 $13,383
Short-term investments......................... -- -- 1,000
Accounts receivable, less reserve for doubtful
accounts of $593 in 1997, $412 in 1996 and
$516 in 1995.................................. 11,275 10,194 8,209
Inventories (Note 1)........................... 224 193 181
Deferred tax assets (Notes 1 and 6)............ 674 896 494
Current contract receivable and other current
assets........................................ 2,872 2,604 3,050
Refundable income taxes........................ -- 2,102 3,239
------- ------- -------
Total current assets......................... 21,939 18,246 29,556
------- ------- -------
CONTRACT AND NOTES RECEIVABLE AND INVESTMENTS.... 1,116 1,203 2,721
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost (Notes 1
and 4):
Exposition equipment........................... 3,761 3,107 2,987
Data processing and office furniture and
equipment..................................... 12,739 8,635 6,653
------- ------- -------
16,500 11,742 9,640
Less--accumulated depreciation................. 9,086 7,182 4,739
------- ------- -------
7,414 4,560 4,901
------- ------- -------
DEFERRED TAX ASSETS (Note 6)..................... 326 578 1,456
------- ------- -------
INTANGIBLES AND OTHER ASSETS, net (Notes 1 and
2).............................................. 32,033 31,395 14,810
------- ------- -------
$62,828 $55,982 $53,444
======= ======= =======
CURRENT LIABILITIES:
Notes payable (Note 5)......................... $ 20 $ 500 $ --
Accounts payable............................... 4,903 3,496 4,200
Accrued liabilities (Note 11).................. 3,081 5,028 5,509
Deferred revenue............................... 9,010 2,343 3,255
Current portion of long-term debt (Note 5)..... 1,149 1,133 1,266
------- ------- -------
Total current liabilities.................... 18,163 12,500 14,230
------- ------- -------
LONG-TERM DEBT (Note 5).......................... 3,713 3,493 4,529
------- ------- -------
DEFERRED CONTRACT LIABILITIES AND CREDITS........ 1,324 1,803 2,199
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 8)
</TABLE>
<TABLE>
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY, per accompanying statement
(Notes 1, 7 and 9):
Preferred stock, $10 par value, 1,000 shares
authorized......................................... -- -- --
Common stock, $.10 par value, 10,000 shares
authorized......................................... 331 332 332
Additional paid-in capital.......................... 12,773 13,754 13,475
Retained earnings................................... 26,524 24,100 18,679
------- ------- -------
Total stockholders' equity........................ 39,628 38,186 32,486
------- ------- -------
$62,828 $55,982 $53,444
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES (Notes 1, 2 and
3):
Operating revenues....... $53,711 $43,377 $66,816 $59,805 $54,054
Interest and other
income.................. 1,165 1,400 1,478 1,039 2,163
(Loss) gain on sale of
assets, net............. (210) 328 348 11,234 702
------- ------- ------- ------- -------
54,666 45,105 68,642 72,078 56,919
------- ------- ------- ------- -------
COSTS AND EXPENSES (Notes
1, 2, 3 and 4):
Operating costs.......... 33,474 27,549 40,314 39,665 35,069
General and
administrative.......... 13,000 10,289 15,207 11,841 11,862
Interest................. 401 413 581 859 736
Depreciation and
amortization............ 3,564 2,843 4,018 3,601 3,118
------- ------- ------- ------- -------
50,439 41,094 60,120 55,966 50,785
------- ------- ------- ------- -------
INCOME BEFORE INCOME
TAXES..................... 4,227 4,011 8,522 16,112 6,134
INCOME TAX PROVISION (Notes
1 and 6).................. (1,803) (1,578) (3,101) (58) (2,589)
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES
(Note 1).................. -- -- -- (266) (981)
------- ------- ------- ------- -------
INCOME FROM CONTINUING
OPERATIONS................ 2,424 2,433 5,421 15,788 2,564
DISCONTINUED OPERATIONS,
net (Note 4).............. -- -- -- 37 (2,816)
------- ------- ------- ------- -------
NET INCOME (LOSS).......... 2,424 2,433 5,421 15,825 (252)
DIVIDENDS ON PREFERRED
SHARES.................... -- -- -- -- (139)
------- ------- ------- ------- -------
INCOME (LOSS) APPLICABLE TO
COMMON SHARES............. $ 2,424 $ 2,433 $ 5,421 $15,825 $ (391)
======= ======= ======= ======= =======
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE (Note 1):
Continuing operations.... $ 0.68 $ 0.69 $ 1.53 $ 4.19 $ 0.65
Discontinued operations.. -- -- -- 0.01 (0.75)
------- ------- ------- ------- -------
$ 0.68 $ 0.69 $ 1.53 $ 4.20 $ (0.10)
======= ======= ======= ======= =======
CASH DIVIDENDS PER COMMON
SHARE..................... $ -- $ -- $ -- $ 0.27 $ --
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK:
Beginning balance.......... $ -- $ -- $ -- $ -- $ 459
Conversion and redemption
of preferred stock........ -- -- -- -- (459)
------- ------- ------- ------- -------
Balance at end of period... -- -- -- -- --
------- ------- ------- ------- -------
COMMON STOCK:
Beginning balance.......... 332 332 332 342 336
Conversion of preferred
stock..................... -- -- -- -- 17
Conversion of Class B
common stock.............. -- -- -- 46 --
Issuance of common stock... 4 1 1 -- --
Retirement of common
stock..................... (5) -- (1) (165) (2)
Retirement of stock held by
subsidiary................ -- -- -- (9) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 109 --
Reclassification of common
stock subject to put...... -- -- -- 9 (9)
------- ------- ------- ------- -------
Balance at end of period... 331 333 332 332 342
------- ------- ------- ------- -------
COMMON STOCK, CLASS B:
Balance at end of period... -- -- -- -- 46
------- ------- ------- ------- -------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance.......... 13,754 13,475 13,475 20,128 21,879
Conversion and redemption
of preferred stock........ -- -- -- -- (1,077)
Issuance of common stock... 55 84 111 43 --
Retirement of common
stock..................... (1,372) -- (196) (13,342) (158)
Retirement of stock held by
subsidiary................ -- -- -- (556) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 6,686 --
Compensation recognized on
stock option grants....... -- -- 364 -- --
Income tax benefit for
stock options exercised... 336 -- -- -- --
Reclassification of common
stock subject to put...... -- -- -- 516 (516)
------- ------- ------- ------- -------
Balance at end of period... 12,773 13,559 13,754 13,475 20,128
------- ------- ------- ------- -------
RETAINED EARNINGS:
Beginning balance.......... 24,100 18,679 18,679 3,904 4,295
Net income (loss).......... 2,424 2,433 5,421 15,825 (252)
Dividends paid............. -- -- -- (1,050) (139)
------- ------- ------- ------- -------
26,524 21,112 24,100 18,679 3,904
Less stock of parent com-
pany held by subsidiary... -- -- -- -- (565)
------- ------- ------- ------- -------
$39,628 $35,004 $38,186 $32,486 $23,855
======= ======= ======= ======= =======
PREFERRED SHARES:
Beginning balance.......... -- -- -- -- 46
Conversion and redemption
of preferred stock........ -- -- -- -- (46)
------- ------- ------- ------- -------
Balance at end of period... -- -- -- -- --
======= ======= ======= ======= =======
COMMON SHARES:
Beginning balance.......... 3,318 3,318 3,318 3,424 3,363
Conversion of preferred
stock..................... -- -- -- -- 174
Conversion of Class B
common stock.............. -- -- -- 464 --
Issuance of common stock... 41 10 1 4 --
Retirement of common
stock..................... (50) -- (1) (1,654) (25)
Retirement of stock held by
subsidiary................ -- -- -- (95) --
Acquisition of outside
minority interest through
merger.................... -- -- -- 1,087 --
Reclassification of common
stock subject to put...... -- -- -- 88 (88)
------- ------- ------- ------- -------
Balance at end of period... 3,309 3,328 3,318 3,318 3,424
======= ======= ======= ======= =======
COMMON SHARES, CLASS B:
Balance at end of period... -- -- -- -- 464
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------
1997 1996 1996 1995 1994
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)....... $ 2,424 $ 2,433 $ 5,421 $ 15,825 $ (252)
------- ------- -------- -------- --------
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization.......... 3,564 2,843 4,018 3,601 3,163
Accretion of interest
expense............... 150 177 282 133 47
Loss (gain) on sale of
assets................ 210 (328) (348) (11,234) (702)
Reserves provided on
investments........... -- -- 425 8 2,812
Compensation recognized
on stock option
grants................ -- -- 364 -- --
Changes in assets and
liabilities:
Accounts receivable
and refundable income
taxes................ 1,238 (178) (483) (3,686) (1,907)
Inventories........... 71 (11) (12) 187 (213)
Current contract
receivable and other
current assets....... (848) (645) 390 (816) (399)
Intangibles and other
assets............... (166) (150) (160) (282) 77
Accounts payable and
accrued liabilities.. (1,117) 465 (1,389) (1,006) 1,877
Deferred revenue...... 6,667 4,863 (912) 383 266
Deferred income
taxes................ 474 766 309 (641) (343)
Minority interests.... -- -- -- 266 981
------- ------- -------- -------- --------
Total adjustments.... 10,243 7,802 2,484 (13,087) 5,659
------- ------- -------- -------- --------
Net cash provided by
operating activities.... 12,667 10,235 7,905 2,738 5,407
------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net sales (purchases) of
short-term
investments............ -- 1,000 1,000 1,000 (2,000)
Collections on contract
and notes receivables.. 643 1,305 1,372 6,538 5,033
Investments, net of
distributions.......... (132) (27) (212) (315) (165)
Capital expenditures.... (5,460) (1,955) (2,641) (2,589) (3,254)
Proceeds from the sale
of assets.............. 35 770 772 18,816 8,983
Payments for
acquisitions, net of
cash acquired.......... (939) (15,691) (15,691) -- (1,114)
Payments on deferred
contract liabilities... (482) (603) (685) (616) (502)
------- ------- -------- -------- --------
Net cash (used in)
provided by investing
activities.............. (6,335) (15,201) (16,085) 22,834 6,981
------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments of notes
payable, net........... -- -- -- -- (151)
Principal payments of
long-term debt......... (1,410) (3,265) (3,361) (2,477) (6,378)
Issuance of long-term
debt................... 1,267 -- -- -- --
Borrowings under bank
lines-of-credit........ -- -- 3,500 2,900 3,300
Payments under bank
lines-of-credit........ (500) -- (3,000) (2,900) (3,300)
Issuance of common
stock.................. 63 84 111 43 347
Repurchase of common
stock.................. (1,381) -- (196) (13,290) (2,770)
Redemption of preferred
stock.................. -- -- -- -- (1,520)
Dividends paid.......... -- -- -- (1,050) (139)
Compensation of stock
options................ 336 -- -- -- --
------- ------- -------- -------- --------
Net cash used in
financing activities.... (1,625) (3,181) (2,946) (16,774) (10,611)
------- ------- -------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............. 4,707 (8,147) (11,126) 8,798 1,777
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD.. 2,257 13,383 13,383 4,585 2,808
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD........ $ 6,964 $ 5,236 $ 2,257 $ 13,383 $ 4,585
======= ======= ======== ======== ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid for:
Interest............... $ 214 $ 256 $ 294 $ 642 $ 1,039
Income taxes........... 1,211 2,046 3,845 3,168 2,783
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL REFERENCES TO ACTIVITY OR AMOUNTS SUBSEQUENT TO FEBRUARY 21, 1997ARE
UNAUDITED EVENTS AND ARE SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
T/SF Communications Corporation and subsidiaries (collectively, the
"Company," unless the context indicates otherwise) are engaged in providing
media services to the gaming industry with trade magazines, newsletters,
conferences and a trade show; providing exposition services, primarily
registration, lead management and publication (primarily convention/trade show
newspapers and directories) services; and providing information services in
the form of pre-employment information, primarily for the insurance and
trucking industries, and trademark/trade name research.
On January 25, 1995, the Company entered into an Agreement and Plan of
Merger, as amended with Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox")
whereby, subject to approval of the Company and Tribune/Swab-Fox stockholders
(the Company as a 78% owned subsidiary of Tribune/Swab-Fox), Tribune/Swab-Fox
would be merged with and into the Company. On May 25, 1995, Tribune/Swab-Fox
was merged (the "Merger") with and into the Company. In the Merger, each share
of Tribune/Swab-Fox stock was converted into 0.1255 of a share of the Company
or, at the election of the holder, $0.88 in cash. While the Merger was
structured for legal purposes as a merger of Tribune/Swab-Fox with and into
the Company, for accounting purposes the Merger has been treated as a
recapitalization of Tribune/Swab-Fox, with Tribune/Swab-Fox as the survivor
(downstream merger). Thus, for financial reporting purposes, Tribune/Swab-Fox
is the acquiring and surviving entity. Accordingly, the historical financial
statements of the Company, as the surviving entity, are those historical
financial statements of Tribune/Swab-Fox. Earnings per share for the periods
prior to the Merger are restated to reflect the number of equivalent shares
giving effect to the recapitalization. The Company acquired 1,110,675
equivalent shares (8,850,000 Tribune/Swab-Fox shares) for cash in the Merger,
the effect of which is taken into account as of the date of the Merger. In
connection with the Merger, the Board of Directors of Tribune/Swab-Fox
declared a one-time dividend of $0.0344 per share ($0.27 per equivalent share)
which was paid on May 24, 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Minority interest
represents the minority stockholders' interest in the Company prior to the
Merger.
Inventories
Inventories are recorded at the lower of cost or market determined on first-
in, first-out and average cost methods.
Depreciation
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from 3 to 25
years.
F-7
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Intangibles and Other Assets
Intangibles and other assets include mainly goodwill related to acquisitions
and credits granted for truck driver employment information files. These
assets are being amortized over periods of 3 1/2 to 30 years and consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION SEPTEMBER 30 ----------------
PERIOD 1997 1996 1995
----------------- ------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Goodwill..................... 30 years $31,982 $30,857 $13,663
Employment information costs
and other................... 3 1/2 to 11 years 5,697 5,192 4,046
Covenants-not-to-compete and
consulting agreements....... 5-10 years 895 895 1,273
------- ------- -------
38,574 36,944 18,982
Accumulated amortization..... (6,541) (5,549) (4,172)
------- ------- -------
$32,033 $31,395 $14,810
======= ======= =======
</TABLE>
Goodwill impairment is assessed at each balance sheet date based upon a
review of the acquired entity's operations as to income, growth of income in
relation to the expected growth of income when acquired and, if the entity is
considered for sale, estimated realizable value. Valuation reserves are
provided if the carrying value of acquired goodwill is determined to be
permanently impaired.
Revenue Recognition
Revenues from information services are net of the cost of charges from state
motor vehicle record departments which are incurred by the Company as an agent
for its customers. As provided in the agreements with customers, the Company
charges a fee for its service and is also reimbursed for state charges.
Exposition services revenues are recognized when the services are provided.
Advertising revenues from publishing are recognized when each publication is
published and distributed. Subscription revenue is recognized ratably over the
subscription period. Trademark research revenues are recognized when the
research is completed and reports transmitted to the client.
Income Taxes
The Company accounts for income taxes under SFAS No. 109 which requires an
asset and liability approach to financial accounting and reporting. The
difference between the financial statement and tax bases of assets and
liabilities is determined annually. Deferred income tax assets and liabilities
are computed for those differences that have future tax consequences using
currently enacted tax laws and rates that apply to the periods in which they
are expected to affect taxable income.
Postretirement Benefits
No postretirement medical or insurance benefits are offered to any
employees.
Statements of Cash Flows
For purposes of the statements of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less are considered
to be cash equivalents.
F-8
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings (Loss) per Common Share
Earnings (loss) per common and common equivalent share are computed by
dividing net income (loss), adjusted for dividends on preferred stock and
before deduction of interest expense (net of tax) on certain previously
outstanding Tribune/Swab-Fox subordinated convertible debentures, by the
weighted average number of common and common equivalent shares, when dilutive,
outstanding during the year. Outstanding incentive stock options, warrants and
common shares that would be issued assuming the previously outstanding
Tribune/Swab-Fox 6 1/2% convertible preferred shares and the 11% subordinated
convertible debentures due in 1997 were converted into common stock are
considered common stock equivalents and, when dilutive, are included in the
calculation of earnings (loss) per common share.
The weighted average number of common and common equivalent shares
outstanding was 3,543 in 1996, 3,766 in 1995, 3,733 in 1994 and 3,564 and
3,537 for the nine months ended September 30, 1997 and 1996, respectively.
Common shares that would be issued assuming conversion of the previously
outstanding Tribune/Swab-Fox new senior preferred shares and the 11%
subordinated convertible debentures due in 1998 were not included in the
calculations of the applicable years since the effect would have been
antidilutive. The above shares for 1995 and 1994 are as if converted into the
Company's shares at 0.1255 of a share for each previous outstanding share of
Tribune/Swab-Fox.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACQUISITIONS:
CORSEARCH, Inc. ("CORSEARCH")
On August 15, 1996, the Company acquired all of the issued and outstanding
capital stock of CORSEARCH, a leading provider of trademark and tradename
research and information services, using both proprietary and public
databases. The Company paid $14,400 in cash, $900 in notes and assumed
approximately $1,300 in additional nonoperating liabilities. In addition, the
Company agreed to pay additional consideration in 2000 and 2001 to the two
senior managers/stockholders of CORSEARCH predicated upon CORSEARCH achieving
certain pretax income levels in the years 1997, 1998 and 1999. The minimum
additional consideration to be paid in 2000 and 2001 is $1,500 which has been
discounted at a rate of 8 1/2% and recorded in long-term debt. Costs in excess
of assets acquired were approximately $16,750 and are recorded in "Other
Assets."
In connection with the closing of the transaction, the two senior managers
entered into employment agreements with CORSEARCH through December 31, 1999,
which provide for base salaries, bonuses based on achieving escalating income
targets and covenants-not-to-compete.
Unaudited pro forma results of operations, had the CORSEARCH acquisition
occurred on January 1, 1996, with respect to 1996 are revenues of $72,834;
income from continuing operations of $5,529; and earnings (loss) per common
share from continuing operations of $1.56. This unaudited pro forma
information is presented in response to applicable accounting rules and is not
necessarily indicative of the actual results that would have been achieved had
the CORSEARCH acquisition occurred on January 1, 1996.
F-9
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Galaxy Registration, Inc. ("Galaxy")
Effective March 1, 1994, the Company completed the acquisition of Galaxy, a
provider, on a national basis, of registration, information and marketing
services to the convention/trade show industry. The Company acquired Galaxy
with the payment of $1,200 in cash plus a note payable for $900. If certain
earnings targets were achieved, the former principal owner of Galaxy, who was
employed as President and Chief Operating Officer of Galaxy, would receive
additional payments not to exceed $2,900 by 1997. In connection with this
transaction, on March 17, 1994, the former principal owner of Galaxy purchased
75,000 shares of the Company's Common Stock at $4.625 per share for a total
purchase price of $347. A covenant-not-to-compete and an employment agreement
were also entered into with the former principal owner. The earnings target
for 1994 was achieved and the Company accrued $300 of purchase price
adjustments payable to the former owner. In 1995, the agreement with the
former principal owner was amended to provide that substantially all of the
additional purchase price would be paid over the period set forth in the
acquisition agreement. The additional purchase price was discounted and
recorded as additional goodwill in 1995. In addition, the former owner earned
$100 of incentive compensation in both of the periods ended December 31, 1995
and 1994, which was expensed each year.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to 1994, are revenues of $58,469;
income from continuing operations of $2,726 and earnings (loss) per common
share from continuing operations of $0.73. This unaudited pro forma
information is presented in response to applicable accounting rules and is not
necessarily indicative of the actual results that would have been achieved had
the Galaxy acquisition occurred on January 1, 1994, with respect to the 1994
information.
(3) DISPOSITION OF ASSETS:
In 1994, the Company's Board of Directors authorized the sale of three of
the Company's trade journals. An Asset Purchase Agreement was signed June 16,
1995, and the sale of these trade journals was closed on August 2, 1995, for
$21,000 cash. The "Gain on sale of assets" in 1995 in the statement of
operations includes the $11,739 pretax gain from this transaction.
On April 30, 1994, the Company sold the assets of Shopper's Guide, Inc. The
Company received $1,750 in cash, a $1,100 cash payment for post-closing
adjustments, and the buyer assumed certain liabilities totaling $930. The
Company also received the right to receive a maximum of $3,450 out of future
cash flow from the business conducted with the assets sold, as defined, over
the next five years and after the buyer receives a certain sum. In addition,
the Company entered into a five-year covenant-not-to-compete in exchange for
$750 in cash. No gain or loss was recorded on the sale or in connection with
the covenant-not-to-compete. In 1996, the Company received $200 from the buyer
as final settlement of the future payments. A loss of approximately $500 was
recognized in 1996 related to this final settlement.
(4) REAL ESTATE:
Effective November 30, 1994, Tribune/Swab-Fox's Board of Directors approved
a plan to dispose of the remaining real estate operations. As a result, the
real estate business was reclassified as discontinued operations and the sale
of these discontinued assets in 1995 resulted in a nominal net gain. Prior to
the Merger, Tribune/Swab-Fox and the Company filed separate income tax
returns. Due to Tribune/Swab-Fox's history of losses, no deferred tax asset
was recognized related to net operating loss carryforwards. Therefore, no
income tax benefit was recognized on the real estate business losses. The
following summarizes the components of the loss from discontinued operations:
F-10
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
----------- -------------
<S> <C> <C>
Revenues....................................... $ 100 $ 589
Costs and expenses............................. (63) (3,405)
---------- -------------
Income (loss) from discontinued operations..... $ 37 $ (2,816)
========== =============
</TABLE>
On December 30, 1994, significant parcels of raw land were sold to 1995 Land
Company L.L.C., an Oklahoma limited liability company ("1995 Land Company"),
for $1,387, including cash of $600 and a note receivable of $786 which was
paid in early 1995. 1995 Land Company is owned 49.99% by the Company, but the
funding for the purchase was provided through a loan from the owner of the
remaining 50.01%, who oversees, manages and funds the development and sale of
these properties.
In March 1995, the Company entered into an Acquisition Agreement with
Midwest Energy Companies, Inc. ("MECI"), which is indirectly controlled by a
director of the Company. Under the agreement approximately 900 acres of raw
land, with a book value of $1,650 at December 31, 1994, was exchanged for
7,422,773 shares of MECI common stock.
As a part of the liquidation plan, periodical reviews of the market value
for each property were made and a write-down of the real estate assets of
approximately $2,800 was recognized in 1994. This write-down is reflected in
"costs and expenses" in the table above and included in discontinued
operations.
(5) LONG-TERM DEBT:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1997 1996 1995
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Note payable under Galaxy Purchase Agreement,
discounted at 8.5%, annual payments per
agreement with final payment in April 2000,
effective April 1, 1997, the discount period
ended and the note now accrues interest at
7%............................................ $1,219 $ 1,859 $ 1,898
Payable under CORSEARCH Purchase Agreement,
discounted at 8.5%, payable in equal annual
payments in 2000 and 2001..................... 1,206 1,130 --
Promissory Notes, unsecured, payable
semiannually, plus interest through August 15,
1999, interest rate adjusts 1% below the base
rate of Citibank, N.A. (8.5% at September 30,
1997)......................................... 600 900 --
Promissory Note, unsecured, payable quarterly,
plus interest, through December 2000, interest
rate adjusts semiannually to the base rate of
Chase Manhattan Bank (8.5% at September 30,
1997)......................................... 270 332 3,034
7.5% Promissory Notes, unsecured, annual
payments of $155, plus interest, with final
payments in August 1998 and March 1999........ 175 330 484
Capital lease agreement, monthly payments of
$38 including interest, through June 2000..... 1,175 -- --
Other.......................................... 217 75 379
------ ------- -------
Total long-term debt........................... 4,862 4,626 5,795
Less portion due within one year............... (1,149) (1,133) (1,266)
------ ------- -------
$3,713 $ 3,493 $ 4,529
====== ======= =======
</TABLE>
F-11
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Installments due on long-term debt during each of the five years subsequent
to December 31, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1997.................................. $1,133
1998.................................. 963
1999.................................. 898
2000.................................. 1,252
2001.................................. 380
------
$4,626
======
</TABLE>
At December 31, 1996, the Company has a revolving credit arrangement with a
bank which allows the Company to borrow up to $16,000 and at the Company's
election can be converted into a four-year term loan. A balance of $500 was
outstanding under this arrangement at December 31, 1996. Common stock of the
Company's operating subsidiaries, except CORSEARCH, is pledged as collateral
under this revolving credit arrangement, which also provides for various
covenants including restricting the payment of dividends in any fiscal year to
a maximum of $2,000. Interest on amounts borrowed is payable monthly at the
Chase Manhattan base rate (8.5% at December 31, 1996). The revolving credit
arrangement expired June 30, 1997. Management elected not to renew the
arrangement. A one-quarter (.25)% annum fee is payable to the bank on the
unused portion of the credit facility.
(6) INCOME TAXES:
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CURRENT:
Federal.......................................... $ 2,487 $ (679) $ 2,600
State............................................ 305 1,378 332
------- ------- -------
2,792 699 2,932
------- ------- -------
DEFERRED:
Federal.......................................... 266 (521) (339)
State............................................ 43 (120) (4)
------- ------- -------
309 (641) (343)
------- ------- -------
$ 3,101 $ 58 $ 2,589
======= ======= =======
</TABLE>
F-12
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax computed at the federal statutory rate (34%)
to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Income tax provision at statutory rates........ $ 2,897 $ 5,478 $ 1,128
Amortization of acquired assets not deductible
for income tax purposes....................... 262 193 224
Losses without tax benefit..................... -- -- 1,061
Utilization of losses previously subject to
valuation allowance........................... -- (3,570) --
Excess of tax basis of assets sold over book
basis, not previously tax effected............ -- (1,591) (36)
State income taxes............................. 232 (428) 217
Reduction in previously provided taxes related
to settlement of tax examinations............. (300) -- --
Other.......................................... 10 (24) (5)
------- -------- -------
$ 3,101 $ 58 $ 2,589
======= ======== =======
</TABLE>
Significant components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
DEFERRED TAX ASSETS:
Income recognized in different accounting period for income
tax purposes.............................................. $ 236 $1,028
Deferred severance benefits payable........................ 686 805
Reserves on assets......................................... 343 293
Accrued expenses deductible when paid...................... 606 304
Fixed asset basis differences.............................. 100 --
------ ------
Deferred tax assets...................................... 1,971 2,430
------ ------
DEFERRED TAX LIABILITIES:
Fixed asset basis difference............................... -- (144)
Unusual gain recognized in different accounting period for
income tax reporting purposes............................. -- (336)
Other asset basis difference............................... (497) --
------ ------
Deferred tax liabilities................................. (497) (480)
------ ------
NET DEFERRED TAX ASSETS.................................... $1,474 $1,950
====== ======
</TABLE>
Net deferred tax assets are reflected on the accompanying balance sheets as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
------ ------
<S> <C> <C>
CURRENT ASSETS--Deferred tax assets........................... $ 896 $ 494
LONG-TERM--Deferred tax assets................................ 578 1456
------ ------
$1,474 $1,950
====== ======
</TABLE>
F-13
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to December 31, 1996, the Company was notified by the taxing
authority of a state that the income tax refund receivable from the state
would be contested and was also notified by the taxing authority of a second
state of proposed adjustments to certain prior years' income taxes paid.
Management believes that the tax positions taken by the Company were correct
and that the amounts included in "refundable income taxes" in the consolidated
balance sheet as of December 31, 1996, will ultimately be received and that
adjustments, if any, for income taxes will not be material to the consolidated
financial statements.
(7) CAPITAL STOCK:
The Company has authorized 10,000,000 shares of $0.10 par value Common Stock
and 1,000,000 shares of $10.00 par value preferred stock. No shares of
preferred stock have been issued. (Reference is made to Note 1 for the capital
stock transactions in connection with the Merger.)
In 1996, 1995 and 1994, the Company purchased and retired 7,900 shares
($24.94 per share), 78,819 shares ($10.50 and $5.48 per share), and 25,000
shares ($6.37 per share), respectively, of its Common Stock owned by certain
officers and directors. As part of these transactions, the Company received
payments on loans of $300 in 1995 and $24 in 1994.
Capital stock transactions prior to the Merger included conversion, in
December 1994, of the 6 1/2% Cumulative Convertible Preferred Stock of
Tribune/Swab-Fox into 1,386,675 common shares (174,027 equivalent shares) and
redemption of the remaining outstanding preferred stocks for approximately
$1,520 which were the 1,400 shares of Class A Preferred Stock redeemed at a
price of $110 per share and the 13,657 shares of New Senior Preferred Stock
redeemed at $100 per share.
The Tribune/Swab-Fox incentive stock option plan was terminated as part of
the Merger. No options were outstanding under this plan.
The Company's incentive stock option plan authorizes an aggregate of 150,000
shares of the Company's Common Stock which may be granted to key employees.
Options for 118,000 shares were outstanding at December 31, 1996, at option
prices ranging from $5.50 to $15.00 per share. During 1996, options for
103,000 shares were granted. No options were exercised and options for 5,000
shares were canceled. Options are granted at the discretion of the Board of
Directors' Compensation Committee at a minimum exercise price of 100% of the
market value of the Company's Common Stock at the date of grant.
In January 1994, the Company's Board of Directors approved the 1994
Incentive Stock Plan which permits the grant of stock options and awards of
restricted stock to executives and key employees. Pursuant to various bonus
and incentive plans, the Company awarded 29,186 shares of restricted stock at
$6.25 and $4.94 per share in April 1995 and May 1995, as part of incentives
which were accrued in 1994. These restricted shares vest three years from the
effective date of the grant. Options of 20,000 shares were granted during the
nine months ended September 30, 1997 at an option price of $28.00 per share,
options for 50,000 shares were granted in 1996 at option prices ranging from
$13.88 to $24.00 per share, options for 15,000 shares were granted in 1995 at
an option price of $6.00 per share and options for 202,500 shares were granted
in 1994 at an option price of $4.25 per share. The options were granted at the
market price of the Company's Common Stock at the effective date of the grant,
expire in 2001 through 2007 and vest 100% in 1997 through 2000. Options for
30,000 shares were exercised for a total price of $153 during the nine months
ended September 30, 1997.
An Employee Stock Purchase Plan has been approved and 100,000 shares of
Common Stock have been allocated for this plan. No shares have been issued
under this plan. In 1995, the Company's Board of Directors approved the
matching of 20% of each employee's contributions (limited to 5% maximum
employee contribution) to the qualified 401(k) defined contribution plan with
the Company's Common Stock and 50,000 shares of Common Stock have been
allocated for this plan. During 1997, 1996 and 1995, 2,273 shares, 6,247
F-14
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shares and 3,852 shares were issued to the 401(k) plan as matching
contributions. As of June 1, 1997, the matching of 20% of each employee's
contribution with Company Common Stock was ceased and additional cash
contributions in the same amounts will be made.
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock--Based
Compensation" (SFAS No. 123). SFAS No. 123 established financial accounting
and reporting standards for stock-based compensation plans and to transactions
in which an entity issues its equity instruments to acquire goods and services
from nonemployees. Since the effect of SFAS No. 123 is not material, the
Company has made no disclosure of pro forma net income and earnings per share
as if SFAS No. 123 had been adopted.
(8) COMMITMENTS AND CONTINGENCIES:
Operating lease agreements of the Company are principally for office
facilities and equipment and expire at various dates through 2009. Rent
expense in 1996, 1995 and 1994 under operating leases was approximately
$1,190, $1,080 and $924, respectively.
As of December 31, 1996, future minimum lease payment are as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE
YEAR ENDING DECEMBER 31, PAYMENTS
------------------------ --------------
(IN THOUSANDS)
<S> <C>
1997.......................... $1,344
1998.......................... 1,290
1999.......................... 982
2000.......................... 644
2001.......................... 407
Thereafter.................... 3,018
------
$7,685
======
</TABLE>
The Company has employment agreements with five key employees of the Company
and its subsidiaries which provide for individual compensation ranging from
$43 to $225 annually ($605 annually in the aggregate) and expire at various
dates through 1999.
The Company is a defendant in certain litigation arising out of operations
in the normal course of business. However, it is the opinion of management
that the ultimate liabilities relating thereto, if any, will not have a
material adverse effect on the financial position or results of operations of
the Company.
(9) RELATED PARTY TRANSACTIONS:
Effective December 31, 1994, the Chairman of the Executive Committee of
Tribune/Swab-Fox retired. Deferred compensation expense of approximately $277
was recorded in 1994 related to this retirement. In addition, the Company
acquired 25,100 shares of Common Stock for $160 from the former employee. In
connection with an amendment to the Retirement Agreement in December 1995, the
Company purchased an additional 30,000 shares of Common Stock at $10.50 per
share, a note payable to the Company of approximately $300 was paid and the
puts and calls for shares of Common Stock owned by the former Chairman of the
Executive Committee were canceled.
In March 1995, upon exercise of an option, the Company acquired 48,819
equivalent shares of the Company's Common Stock from the Profit Sharing Plan
and Trust of Tribune/Swab-Fox Companies, Inc., of
F-15
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
which the former Chairman and Chief Executive Officer of the Company is the
trustee, for $292, with a cash payment of $73 and a note for $219 payable in
equal annual installments over four years.
Under the terms of a loan agreement, amended in June 1992, a current officer
and director of the Company borrowed approximately $250 (outstanding balance
of $200 at December 31, 1996) from the Company at an interest rate of 8.5%,
secured by 87,333 shares of Common Stock of the Company and payable in
semiannual payments of $17, plus interest, with all of the remaining balance
due in October 1999.
(10) BUSINESS SEGMENT INFORMATION:
Operations of the Company are conducted primarily through two business
segments entirely within the continental United States. These segments and the
primary operations of each are as follows:
Business to Business Communications
Publisher (Atwood) of various convention/trade show publications and a trade
journal, provider (Galaxy) of registration services, exhibitor marketing and
information services all to the exposition industry and owner (G.E.M.) of the
World Gaming Congress, the world's largest trade show catering to the
legalized gaming industry, and the publisher of several trade magazines and
newsletters.
Information Services
Provider (TISI) of pre-employment screening information including motor
vehicle reports, truck driver employment information, worker's compensation
information, credit reports, criminal record reports and other pre-employment
screening information and services to the trucking and other industries and
motor vehicle reports to the insurance industry. Provider (CORSEARCH) of
trademark research and information services, using both proprietary and public
databases.
F-16
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------------- -------------------------
1997 1996 1996 1995 1994
--------------- --------------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES FROM SALES
TO UNAFFILIATED CUSTOM-
ERS:
Business to Business
Communications....... $ 29,323 $ 26,313 $42,891 $53,089 $39,665
Information Services.. 24,388 17,064 24,273 17,950 15,091
Corporate and other... 955 1,728 1,478 1,039 2,163
--------------- --------------- ------- ------- -------
$ 54,666 $ 45,105 $68,642 $72,078 $56,919
=============== =============== ======= ======= =======
OPERATING PROFIT:
Business to Business
Communications....... $ 755 $ 1,216 $ 6,018 $14,789 $ 4,344
Information Services.. 5,057 4,194 5,612 3,435 2,992
--------------- --------------- ------- ------- -------
Operating profit from
segments............. 5,812 5,410 11,630 18,224 7,336
Corporate expenses,
net.................. (1,184) (986) (2,527) (1,253) (466)
Interest expense...... (401) (413) (581) (859) (736)
--------------- --------------- ------- ------- -------
Income before income
taxes................ $ 4,227 $ 4,011 $ 8,522 $16,112 $ 6,134
=============== =============== ======= ======= =======
IDENTIFIABLE ASSETS:
Business to Business
Communications....... $ 17,298 $ 15,189 $14,629 $15,525 $26,405
Information Services.. 34,215 32,016 32,035 12,640 12,101
Corporate............. 11,315 12,149 9,318 25,279 12,808
Discontinued
operations........... -- -- -- -- 2,267
--------------- --------------- ------- ------- -------
$ 62,828 $ 59,354 $55,982 $53,444 $53,581
=============== =============== ======= ======= =======
DEPRECIATION AND AMORTI-
ZATION:
Business to Business
Communications....... $ 1,618 $ 1,647 $ 2,192 $ 2,365 $ 2,033
Information Services.. 1,872 1,122 1,723 1,175 1,035
Corporate............. 74 74 103 61 50
Discontinued
operations........... -- -- -- -- 45
--------------- --------------- ------- ------- -------
$ 3,564 $ 2,843 $ 4,018 $ 3,601 $ 3,163
=============== =============== ======= ======= =======
CAPITAL EXPENDITURES:
Business to Business
Communications....... $ 2,282 $ 890 $ 1,097 $ 1,296 $ 3,284
Information Services.. 3,173 1,055 1,533 1,285 935
Corporate............. 5 10 11 8 163
--------------- --------------- ------- ------- -------
$ 5,460 $ 1,955 $ 2,641 $ 2,589 $ 4,382
=============== =============== ======= ======= =======
</TABLE>
Corporate revenues consist principally of revenues from interest, covenants-
not-to-compete and miscellaneous nonoperating income. Operating profit is net
revenues less applicable operating expenses and segment general and
administrative expenses. Corporate general and administrative expenses are
generally not allocated to each segment.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist principally of cash and
cash equivalents, notes receivable, prepaid expenses and corporate furniture,
fixtures and equipment. Capital expenditures include additions to property,
plant and equipment, goodwill and truck driver employment information files.
F-17
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1997, 1996, 1995 and 1994, no customer represented 10% or more of the
Company's revenue or operating profit.
(11)ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------
1997 1996 1995
------------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Current portion of deferred contract
liabilities.................................. $ 430 $ 419 $ 482
Accrued interest.............................. 99 52 47
Accrued payroll and employee benefits......... 1,010 1,763 902
Accrued income taxes.......................... 1,031 311 2,073
Accrued other liabilities..................... 511 2,483 2,005
------ ------ ------
$3,081 $5,028 $5,509
====== ====== ======
</TABLE>
F-18
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM IN
CONNECTION WITH THE OFFER MADE BY THIS MEMORANDUM. IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INITIAL PURCHASER. THIS MEMORANDUM DOES NOT CONSTITUTE
AN OFFER OR A SOLICITATION IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION SET FORTH
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... i
Incorporation of Certain Documents by Reference.......................... ii
Cautionary Statement Regarding Industry Forecasts........................ ii
Cautionary Statement Regarding Forward Looking Statement................. iii
Summary.................................................................. 1
Risk Factors............................................................. 19
Description of the Transactions.......................................... 25
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Unaudited Pro Forma Consolidated Financial Information................... 28
Selected Historical Consolidated Financial Data.......................... 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
The Exchange Offer....................................................... 45
Business................................................................. 53
Management............................................................... 65
Certain Relationships and Related
Transactions............................................................ 71
Security Ownership of Certain Beneficial Owners and Management........... 71
Description of the Senior Credit Facility................................ 72
Description of the New Notes............................................. 73
Certain U.S. Federal Income Tax Consequences............................. 100
Plan of Distribution..................................................... 102
Legal Matters............................................................ 102
Independent Public Accountants........................................... 102
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
---------------------
PROSPECTUS
---------------------
[LOGO] TSF COMMUNICATIONS
CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES
DUE 2007 ($100,000,000 PRINCIPAL AMOUNT OUTSTANDING) FOR 10 3/8% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to any criminal action by
or in the right of the corporation, no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnify for such expenses which the court shall deem
proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
However, if the director or officer is not successful in the defense of any
action, suit or proceeding as referred to above or in the defense of any
claim, issue or matter therein, he shall only be indemnified by the
corporation as authorized in the specific case upon a determination that
indemnification is proper because he or she met the applicable standard set
forth above as determined by a majority of the disinterested Board of
Directors or by the stockholders.
Article ELEVENTH of the Registrant's Certificate of Incorporation provides
that the Registrant shall indemnify to the fullest extent permitted by law
every director or officer of the Registrant and such person's heirs,
executors, administrators and personal representatives against all judgments,
penalties, fines, settlements and reasonable expenses actually incurred by the
person in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
Article TWELFTH of the Registrant's Certificate of Incorporation eliminates
the liability of directors to stockholders or the Registrant for monetary
damages arising out of the directors' breach of their fiduciary duty of care,
in accordance with Section 102(b)(7) of the General Corporation Law of
Delaware.
The Registrant carries a standard form of directors' and officers' liability
insurance policy covering losses up to $3,000,000 (subject to a $150,000
deductible).
The Purchase Agreement provides for reciprocal indemnification between the
Registrant and its controlling persons, on the one hand, and the Initial
Purchaser and its controlling persons, on the other hand, against certain
liabilities in connection with the Offering, including liabilities under the
Securities Act.
The foregoing summaries are necessarily subject to the complete text of the
General Corporation Law of Delaware, the Registrant's Certificate of
Incorporation, the Purchase Agreement and the agreement related to the
directors' and officers' liability insurance referred to above and are
qualified in their entirety by reference thereto.
II-1
<PAGE>
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Purchase Agreement, dated October 24, 1997, by and between First
Union Capital Markets Corp. and T/SF Communications Corporation
2.1** Stock Purchase Agreement, dated as of August 15, 1997, among VS&A
Communications Partners II, L.P., VS&A-T/SF Inc. and T/SF
Communications Corporation
3.1 Certificate of Incorporation of Registrant (incorporated herein by
reference to Exhibit 3.1 to the Registration Statement of the
Registrant on Form S-1, No. 33-27811 (the "S-1"))
3.2 By-laws of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the S-1)
4.1* Indenture, dated as of October 29, 1997, by and among T/SF
Communications Corporation, the Guarantors named therein and IBJ
Schroder Bank and Trust Company, as Trustee
4.2* Registration Rights Agreement, dated as of October 29, 1997, by and
among T/SF Communications Corporation, the Guarantors (named
therein) and First Union Capital Markets Corp.
4.3 Form of Old Note (included in Indenture filed as Exhibit 4.1)
4.4 Form of New Note (included in Indenture filed as Exhibit 4.1)
4.5* Form of Letter of Transmittal to be used by tendering holders of
Old Notes in the Exchange Offer
5* Opinion of Proskauer Rose LLP
10.1* Senior Subordinated Credit Agreement, dated as of October 9, 1997,
among T/SF Communications Corporation, the Guarantors (named
therein) and First Union Corporation (as Lender and Agent)
10.2* Credit Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation and First Union Corporation (as Lender
and Agent)
10.3** Security Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation, the Guarantors (as defined therein) and
First Union National Bank
10.4** Stock Pledge Agreement, dated as of October 9, 1997, made by VS&A-
T/SF, Inc. and Fir Tree Value Fund, L.P., Fir Tree Institutional
Value Fund, L.P., and Fir Tree Value Partners, LDC, in favor of
First Union National Bank
10.5** Stock Pledge Agreement, dated as of October 9, 1997, made by T/SF
Communications Corporation in favor of First Union National Bank
10.6** Stock Pledge Agreement, dated as of October 9, 1997, made by T/SF
Holdings, LLC, in favor of First Union National Bank
10.7** Stock Pledge Agreement, dated as of October 9, 1997, made by Atwood
Convention Publishing, Inc., Galaxy Registration, Inc., G.E.M.
Communications, Inc., Transportation Information Services, Inc.,
T/SF Investment Co. and T/SF of Nevada, Inc., in favor of First
Union National Bank
10.8** Operating Agreement of T/SF Holdings, LLC
10.9** Employment Agreement by and between Ian L.M. Thomas and T/SF
Communications Corporation, dated as of October , 1997
10.10** Employment Agreement by and between Steven J. Hunt and T/SF
Communications Corporation, dated as of November 10, 1997
10.11** Employment Agreement by and between Brian A. Meyer and T/SF
Communications Corporation, dated as of November 10, 1997
10.12** Stockholders' Agreement, dated as of October 9, 1997, among T/SF
Communications Corporation, VS&A-T/SF, L.L.C. and Fir Tree Value
Fund, L.P., Fir Tree Institutional Value Fund, L.P. and Fir Tree
Value Partners, LDC
10.13* Consulting Agreement by and between Howard G. Barnett, Jr. and T/SF
Communications Corporation, dated October 9, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14* Consulting Agreement by and between Robert F. Craine, Jr. and T/SF
Communications Corporation, dated October 9, 1997
10.15* Consulting Agreement by and between J. Gary Mourton and T/SF
Communications Corporation, dated October 9, 1997
10.16 T/SF Communications Corporation 1991 Incentive Stock Plan
(incorporated herein by reference to Exhibit A to the Registrant's
Proxy Statement for Annual Meeting of Stockholders dated May 23,
1994)
10.17 Settlement Agreement, dated and effective as of December 12, 1995,
by and between T/SF Communications Corporation and Robert J. Swab
(incorporated herein by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995)
10.18 Operating Agreement for 1995 Land Company, L.L.C., dated December
20, 1994, by and between John C. Bumgarner, Jr. and Tribune/Swab-
Fox (incorporated herein by reference to Exhibit 10.20 of
Tribune/Swab-Fox's Annual Report on Form 10-K for the year ended
December 31, 1994)
10.19 Revolving Credit Agreement, dated as of June 30, 1996, by and among
T/SF Communications Corporation, T/SF Investment Co., and BancFirst
(incorporated herein by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
June 30, 1996 ("Form 10-Q"))
10.20 Pledge Agreement, dated as of June 30, 1996, between T/SF
Communications Corporation and BancFirst (incorporated herein by
reference to Exhibit 10.2 to the Form 10-Q)
10.21 Pledge Agreement, dated as of June 30, 1996, between T/SF
Investment Co. and BancFirst (incorporated herein by reference to
Exhibit 10.3 to the Form 10-Q)
10.22 Stock Purchase Agreement, dated as of August 15, 1996, by and among
T/SF Investment Co. and the shareholders of CORSEARCH, Inc.
(incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated August 30, 1996,
with respect to events occurring on August 15, 1996, amended
October 29, 1996 ("Form 8-K"))
10.23 Employment Agreement, dated August 15, 1996, by and between
CORSEARCH, Inc. and Robert Frank (incorporated herein by reference
to Exhibit 99.1 to the Form 8-K)
12* Statement re: computation of ratios
21 Subsidiaries of the Registrant (incorporated herein by reference to
Exhibit 21 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996).
23.1* Consent of Arthur Andersen, LLP
23.2 Consent of Proskauer Rose LLP (contained in opinion filed as
Exhibit 5)
24 Power of Attorney (included on pages II-6 and II-7)
25* Statement of eligibility of trustee (Form T-1)
27* Financial Data Schedule
</TABLE>
- ----------------
* Filed herewith.
** To be filed by amendment.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which officers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
(7) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(8) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(9) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
II-5
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 25th day of
November, 1997.
Date: November 25, 1997
T/SF COMMUNICATIONS CORPORATION
/s/ Ian L. M. Thomas
By___________________________________
Ian L. M. Thomas,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below hereby constitutes and appoints Ian L. M. Thomas and
Brian A. Meyer, or either of them, as his true and lawful attorney-in-fact and
agent, with full power of substitution, to sign on his behalf individually and
in any and all capacities any and all amendments and post-effective amendments
to this Registration Statement on Form S-4 and to file the same with all
exhibits hereto and all other documents in connection therewith with the
Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do all such other acts
and things requisite or necessary to be done or desirable in connection with
the foregoing, as fully as the undersigned might or could do in person, hereby
ratifying confirming all that such attorneys-in-fact and agents, or either of
them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: November 25, 1997
T/SF COMMUNICATIONS CORPORATION
/s/ Ian L. M. Thomas
By___________________________________
Ian L. M. Thomas,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ John S. Suhler Chairman of the November 25,
- ------------------------------------- Board 1997
JOHN S. SUHLER
/s/ Ian L.M. Thomas President, Chief November 25,
- ------------------------------------- Executive Officer, 1997
IAN L.M. THOMAS and Director
II-6
<PAGE>
SIGNATURES TITLE DATE
/s/ Steven J. Hunt Chief Financial November 25,
- ------------------------------------- Officer 1997
STEVEN J. HUNT
/s/ John J. Veronis Director November 25,
- ------------------------------------- 1997
JOHN J. VERONIS
/s/ Jeffrey T. Stevenson Vice President and November 25,
- ------------------------------------- Director 1997
JEFFREY T. STEVENSON
/s/ S. Gerard Benford Vice President and November 25,
- ------------------------------------- Director 1997
S. GERARD BENFORD
/s/ Jeffrey Tannenbaum Director November 25,
- ------------------------------------- 1997
JEFFREY TANNENBAUM
/s/ John Rolfe Director November 25,
- ------------------------------------- 1997
JOHN ROLFE
Director
- -------------------------------------
STEFAN M. SELIG
II-7
<PAGE>
EXHIBIT 4.1
T/SF COMMUNICATIONS CORPORATION,
as Issuer
and
THE GUARANTORS named herein
and
IBJ SCHRODER BANK AND TRUST COMPANY
as Trustee
_________________________
INDENTURE
Dated as of October 29, 1997
______________________
$100,000,000
10 3/8% Senior Subordinated Notes due 2007, Series A
10 3/8% Senior Subordinated Notes due 2007, Series B
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
---------------------
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1).............................................................. 7.10
(a)(2)........................................................... 7.10
(a)(3)........................................................... N.A.
(a)(4)........................................................... N.A.
(a)(5)........................................................... 7.08; 7.10
(b).............................................................. 7.08; 7.10; 11.02
(c).............................................................. N.A.
311(a)................................................................. 7.11
(b).............................................................. 7.11
(c).............................................................. N.A.
312(a)................................................................. 2.05
(b).............................................................. 11.03
(c).............................................................. 11.03
313(a)................................................................. 7.06
(b)(1)........................................................... N.A.
(b)(2)........................................................... 7.06
(c).............................................................. 7.06; 11.02
(d).............................................................. 7.06
314(a)................................................................. 4.07; 4.08
(b).............................................................. N.A.
(c)(1)........................................................... 11.04
(c)(2)........................................................... 11.04
(c)(3)........................................................... N.A.
(d).............................................................. N.A.
(e).............................................................. 11.05
(f).............................................................. N.A.
315(a)................................................................. 7.01(b)
(b).............................................................. 7.05
(c).............................................................. 7.01(a)
(d).............................................................. 7.01(c)
(e).............................................................. 6.11
316(a)(last sentence).................................................. 2.09
(a)(1)(A)........................................................ 6.05
(a)(1)(B)........................................................ 6.04
(a)(2)........................................................... N.A.
(b).............................................................. 6.07
(c).............................................................. 9.04
317(a)(1).............................................................. 6.08
(a)(2)........................................................... 6.09
(b).............................................................. 2.04
318(a)................................................................. N.A.
(c).............................................................. 11.01
</TABLE>
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions....................................................................................1
SECTION 1.02. Incorporation by Reference of TIA.............................................................28
SECTION 1.03. Rules of Construction.........................................................................29
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating...............................................................................29
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount......................................30
SECTION 2.03. Registrar and Paying Agent....................................................................31
SECTION 2.04. Paying Agent To Hold Assets in Trust..........................................................32
SECTION 2.05. Holder Lists..................................................................................33
SECTION 2.06. Transfer and Exchange.........................................................................33
SECTION 2.07. Replacement Notes.............................................................................34
SECTION 2.08. Outstanding Notes.............................................................................34
SECTION 2.09. Treasury Notes................................................................................35
SECTION 2.10. Temporary Notes...............................................................................35
SECTION 2.11. Cancellation..................................................................................35
SECTION 2.12. Defaulted Interest............................................................................36
SECTION 2.13. CUSIP Number..................................................................................37
SECTION 2.14. Deposit of Monies.............................................................................37
SECTION 2.15. Restrictive Legends...........................................................................37
SECTION 2.16. Book-Entry Provisions for Global Security.....................................................38
SECTION 2.17. Special Transfer Provisions...................................................................40
SECTION 2.18. Liquidated Damages Under Registration Rights Agreement........................................43
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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ARTICLE THREE
REDEMPTION
<S> <C> <C>
SECTION 3.01. Notices to Trustee............................................................................43
SECTION 3.02. Selection of Notes To Be Redeemed.............................................................43
SECTION 3.03. Optional Redemption...........................................................................44
SECTION 3.04. Notice of Redemption..........................................................................44
SECTION 3.05. Effect of Notice of Redemption................................................................46
SECTION 3.06. Deposit of Redemption Price...................................................................46
SECTION 3.07. Notes Redeemed in Part........................................................................46
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes..............................................................................47
SECTION 4.02. Maintenance of Office or Agency...............................................................47
SECTION 4.03. Corporate Existence...........................................................................47
SECTION 4.04. Payment of Taxes and Other Claims.............................................................48
SECTION 4.05. Maintenance of Properties and Insurance.......................................................48
SECTION 4.06. Compliance Certificate; Notice of Default.....................................................49
SECTION 4.07. Compliance with Laws..........................................................................50
SECTION 4.08. Reports to Holders............................................................................50
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.......................................................50
SECTION 4.10. Limitation on Restricted Payments.............................................................51
SECTION 4.11. Limitation on Transactions with Affiliates....................................................53
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness...........................................54
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries......................................................................55
SECTION 4.14. Modification of Holdings LLC Equity Interest ........................................56
SECTION 4.15. Change of Control.............................................................................56
SECTION 4.16. Limitation on Asset Sales.....................................................................59
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries......................................63
SECTION 4.18. Limitation on Liens...........................................................................63
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.19. Conduct of Business...........................................................................64
SECTION 4.20. Additional Guarantees.........................................................................64
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated Debt.........................................65
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets......................................................65
SECTION 5.02. Successor Corporation Substituted.............................................................67
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.............................................................................67
SECTION 6.02. Acceleration..................................................................................69
SECTION 6.03. Other Remedies................................................................................70
SECTION 6.04. Waiver of Past Defaults.......................................................................70
SECTION 6.05. Control by Majority...........................................................................71
SECTION 6.06. Limitation on Suits...........................................................................71
SECTION 6.07. Right of Holders To Receive Payment...........................................................72
SECTION 6.08. Collection Suit by Trustee....................................................................72
SECTION 6.09. Trustee May File Proofs of Claim..............................................................72
SECTION 6.10. Priorities....................................................................................73
SECTION 6.11. Undertaking for Costs.........................................................................73
SECTION 6.12. Restoration of Rights and Remedies............................................................74
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.............................................................................74
SECTION 7.02. Rights of Trustee.............................................................................75
SECTION 7.03. Individual Rights of Trustee..................................................................77
SECTION 7.04. Trustee's Disclaimer..........................................................................77
SECTION 7.05. Notice of Default.............................................................................77
SECTION 7.06. Reports by Trustee to Holders.................................................................78
SECTION 7.07. Compensation and Indemnity....................................................................78
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.08. Replacement of Trustee........................................................................79
SECTION 7.09. Successor Trustee by Merger, Etc..............................................................81
SECTION 7.10. Eligibility; Disqualification.................................................................81
SECTION 7.11. Preferential Collection of Claims Against the Company.........................................81
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations..........................................................82
SECTION 8.02. Application of Trust Money....................................................................84
SECTION 8.03. Repayment to the Company......................................................................85
SECTION 8.04. Reinstatement.................................................................................85
SECTION 8.05. Acknowledgment of Discharge by Trustee........................................................86
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders....................................................................86
SECTION 9.02. With Consent of Holders.......................................................................87
SECTION 9.03. Compliance with TIA...........................................................................87
SECTION 9.04. Revocation and Effect of Consents.............................................................88
SECTION 9.05. Notation on or Exchange of Notes..............................................................88
SECTION 9.06. Trustee To Sign Amendments, Etc...............................................................89
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness.....................................................89
SECTION 10.02. Suspension of Payment When Senior Debt is in Default..........................................90
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization of Company..........................................91
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior Debt..................................93
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C> <C>
SECTION 10.05. Obligations of the Company Unconditional......................................................93
SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.......................94
SECTION 10.07. Application by Trustee of Assets Deposited with It............................................95
SECTION 10.08. No Waiver of Subordination Provisions.........................................................95
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Notes................................96
SECTION 10.10. Right of Trustee to Hold Senior Debt..........................................................97
SECTION 10.11. This Article Ten Not To Prevent Events of Default.............................................97
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior Debt........................................97
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.................................................................................98
SECTION 11.02. Notices......................................................................................98
SECTION 11.03. Communications by Holders with Other Holders.................................................99
SECTION 11.04. Certificate and Opinion as to Conditions Precedent..........................................100
SECTION 11.05. Statements Required in Certificate or Opinion...............................................100
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar...................................................101
SECTION 11.07. Legal Holidays..............................................................................101
SECTION 11.08. Governing Law...............................................................................101
SECTION 11.09. No Adverse Interpretation of Other Agreements...............................................101
SECTION 11.10. No Personal Liability.......................................................................101
SECTION 11.11. Successors..................................................................................102
SECTION 11.12. Duplicate Originals.........................................................................102
SECTION 11.13. Severability................................................................................102
SECTION 11.14. Independence of Covenants...................................................................102
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
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----
ARTICLE TWELVE
GUARANTEE OF NOTES
<S> <C> <C>
SECTION 12.01. Unconditional Guarantee.....................................................................102
SECTION 12.02. Limitations on Guarantees...................................................................104
SECTION 12.03. Execution and Delivery of Guarantee.........................................................104
SECTION 12.04. Release of a Guarantor......................................................................105
SECTION 12.05. Waiver of Subrogation.......................................................................106
SECTION 12.06. Immediate Payment...........................................................................107
SECTION 12.07. No Set-Off..................................................................................107
SECTION 12.08. Obligations Absolute........................................................................107
SECTION 12.09. Obligations Continuing......................................................................107
SECTION 12.10. Obligations Not Reduced.....................................................................108
SECTION 12.11. Obligations Reinstated......................................................................108
SECTION 12.12. Obligations Not Affected....................................................................108
SECTION 12.13. Waiver......................................................................................110
SECTION 12.14. No Obligation To Take Action Against the Company............................................110
SECTION 12.15. Dealing with the Company and Others.........................................................110
SECTION 12.16. Default and Enforcement.....................................................................111
SECTION 12.17. Amendment, Etc..............................................................................111
SECTION 12.18. Acknowledgment..............................................................................111
SECTION 12.19. Costs and Expenses..........................................................................111
SECTION 12.20. No Merger or Waiver; Cumulative Remedies....................................................112
SECTION 12.21. Survival of Obligations.....................................................................112
SECTION 12.22. Guarantee in Addition to Other Obligations..................................................112
SECTION 12.23. Severability................................................................................112
SECTION 12.24. Successors and Assigns......................................................................113
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.................................113
SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default................113
</TABLE>
vi
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<TABLE>
<CAPTION>
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----
<S> <C> <C>
SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior
Debt on Dissolution, Liquidation or Reorganization of Such Guarantor.............115
SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of
Guarantor Senior Debt............................................................117
SECTION 13.05. Obligations of the Guarantors Unconditional.................................................118
SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice.....................119
SECTION 13.07. Application by Trustee of Assets Deposited with It..........................................119
SECTION 13.08. No Waiver of Subordination Provisions.......................................................120
SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations..............121
SECTION 13.10. Right of Trustee To Hold Guarantor Senior Debt..............................................121
SECTION 13.11. No Suspension of Remedies...................................................................121
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Debt............................122
SIGNATURES............................................................................................127
EXHIBIT A - Form of Series A Note...........................................................................A-1
Exhibit B - Form of Series B Note...........................................................................B-1
Exhibit C - Form of Legend for Global Notes.................................................................C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers
to Non-QIB Accredited Investors.................................................................D-1
Exhibit E - Form of Certificate To Be Delivered in Connection with Transfers
Pursuant to Regulation S........................................................................E-1
Exhibit F - Form of Guarantee...............................................................................F-1
</TABLE>
vii
<PAGE>
INDENTURE, dated as of October 29, 1997, by and among T/SF
Communications Corporation, a Delaware corporation (the "Company"), each of the
-------
Guarantors named herein, as guarantors, and IBJ Schroder Bank and Trust Company,
as Trustee (the "Trustee").
-------
The Company has duly authorized the creation of an issue of 10 3/8%
Senior Subordinated Notes due 2007, Series A, and 10 3/8% Senior Subordinated
Notes due 2007, Series B to be issued in exchange for the 10 3/8% Senior
Subordinated Notes due 2007, Series A, pursuant to the Registration Rights
Agreement (as defined herein) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary
to make the Notes, 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 hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's 10
3/8% Senior Subordinated Notes due 2007, Series A and Series B.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
---------------------
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person, and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, the Company becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
<PAGE>
-2-
"Additional Interest" shall have the meaning set forth in the
-------------------
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any other
---------
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Agent Members" has the meaning provided in Section 2.16.
-------------
"Asset Acquisition" means (a) an Investment by the Company or any
-----------------
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned
<PAGE>
-3-
Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company or
any Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
-------- -------
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000
and (ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Section 5.01.
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal,
--------------
state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
---------------
"Board of Directors" means, as to any Person, the board of directors
------------------
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which banking institutions in the city of New York are required or
authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease ob-
<PAGE>
-4-
ligations under GAAP and, for purposes of this definition, the amount of such
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or non-voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
----------------
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
---
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
-------
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any United States branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substan-
<PAGE>
-5-
tially all their assets in securities of the types described in clauses (i)
through (v) above.
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or Holdings LLC to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together
-----
with any Affiliates thereof, (whether or not otherwise in compliance with the
provisions of this Indenture); (ii) the approval by the holders of Capital Stock
of the Company or common Equity Interests of Holdings LLC of any plan or
proposal for the liquidation or dissolution of the Company or Holdings LLC, as
the case may be (whether or not otherwise in compliance with the provisions of
this Indenture); (iii) any Person or Group (other than the Permitted Holders)
shall become the owner, directly or indirectly, beneficially or of record, of
shares representing more than 25% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Company or common
Equity Interests of Holdings LLC, as the case may be, and the Permitted Holders
shall own less than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of the Company or common Equity
Interests of Holdings LLC, as the case may be; and (iv) the replacement of a
majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"Change of Control Offer" has the meaning provided in Section 4.15.
-----------------------
"Change of Control Payment Date" has the meaning provided in Section
------------------------------
4.15.
<PAGE>
-6-
"Commission" means the SEC.
----------
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means T/SF Communications Corporation, a Delaware
-------
corporation.
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries (including the LLCs) paid
or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions outside the ordinary course of business),
(B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges, less
----
any non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication: (i) the aggregate of all cash and
non-cash interest expense (minus amortization or write-off of deferred financing
costs included in cash or non-cash interest expense) of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, (a) any amortization of debt
discount, (b) the net costs under Interest Swap Obligations, (c) all capitalized
interest and (d) the interest portion of any deferred payment obligation; and
(ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its Restricted
Subsidiaries during
<PAGE>
-7-
such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
-----------------------
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
--------
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
items classified as extraordinary, nonrecurring or unusual gains, losses or
charges, and the related tax effects, each determined in accordance with GAAP,
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of the
referent Person or is merged or consolidated with the referent Person or any
Restricted Subsidiary of the referent Person, (d) the net income (but not loss)
of any Restricted Subsidiary (other than Holdings LLC) of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract, operation of
law or otherwise, (e) the net income of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person, (f) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued) and (h) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
----------------------
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without du-
<PAGE>
-8-
plication) amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person, for
-----------------------------
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"consolidation" means, with respect to any Person, the consolidation
-------------
of the accounts of the Restricted Subsidiaries of such Person with those of such
Person, all in accordance with GAAP; provided, however, that "consolidation"
-------- -------
will not include consolidation of the accounts of any Unrestricted Subsidiary of
such Person with the accounts of such Person. The term "consolidated" has a
correlative meaning to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
----------------------
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at One State Street, New York, NY 10004.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
-------------------
"Credit Agreement" means the Credit Agreement dated as of October 9,
----------------
1997, between the Company, the lenders party thereto in their capacities as
lenders thereunder and First Union National Bank, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
--------
<PAGE>
-9-
increase in borrowings is permitted by Section 4.12 or adding Restricted
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Defeasance Payment" means any distribution from any defeasance trust
------------------
described under Section 8.01.
"Depository" means The Depository Trust Company, its nominees and
----------
successors.
"Designated Senior Debt" means (i) Indebtedness under or in respect of
----------------------
the Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of 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 upon the happening of any event
(other than an event which would constitute a Change of Control), matures or is
mandatorily redeemable, pursuant to a sinking fund obliga-
<PAGE>
-10-
tion or otherwise, or is redeemable at the sole option of the holder thereof
(except upon the occurrence of a Change of Control) on or prior to the final
maturity date of the Notes.
"Equity Interest" of any Person means any and all shares, interests,
---------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such person, including any Preferred Equity Interests.
"Event of Default" has the meaning provided in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Exchange Notes" means the 10 3/8% Senior Subordinated Notes due 2007,
--------------
Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement.
"Exchange Offer" has the meaning provided in the Registration Rights
--------------
Agreement.
"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 and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"Fir Tree" means the Fir Tree Value Fund L.P., Fir Tree Institutional
--------
Value Fund L.P. and Fir Tree Partners L.D.C. and its Affiliates.
"Foreign Subsidiary" means any Subsidiary of the Company organized
------------------
under the laws of a country or jurisdiction
<PAGE>
-11-
other than the United States or any state or territory thereof or the District
of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date.
"Global Note" has the meaning provided in Section 2.01.
-----------
"guarantee" means any obligation, contingent or otherwise, of any
---------
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part) (but if in part, only to the extent thereof); provided,
--------
however, that the term "guarantee" shall not include (A) endorsements for
- -------
collection or deposit in the ordinary course of business and (B) guarantees
(other than guarantees of Indebtedness) by the Company in respect of assisting
one or more Subsidiaries in the ordinary course of their respective businesses,
including without limitation guarantees of trade obligations and operating
leases, on ordinary business terms. The term "guarantee" used as a verb has a
corresponding meaning.
<PAGE>
-12-
"Guarantee" means the guarantee of the obligations under this
---------
Indenture and the Notes by each of the Guarantors as set forth in Article Twelve
hereof.
"Guarantor" means: (i) Atwood Convention Publishing, Inc., a Missouri
---------
corporation, CORSEARCH, Inc., a Delaware corporation, Crimesearch, Inc., an
Oklahoma corporation, Expo Magazine, Inc., a Kansas corporation, Galaxy Design &
Printing, Inc., a Delaware corporation, Galaxy Registration, Inc., a Maryland
corporation, G.E.M. Communication, Inc., an Oklahoma corporation, Transportation
Communications Services, Inc., an Oklahoma corporation, T/SF Europe, Inc., an
Oklahoma corporation, T/SF Investment Co., a Delaware corporation, T/SF of
Nevada, Inc., a Nevada corporation and Transportation Information Services,
Inc., an Oklahoma corporation; (ii) upon their formation, Holdings LLC and each
of the Operating LLCs and (iii) each of the Company's Restricted Subsidiaries
that in the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall cease
- --------
to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of this Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor (i) the
---------------------
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documen-
<PAGE>
-13-
tation with respect thereto, whether or not/to the extent such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (i) any Indebtedness of such Guarantor to a Restricted
Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such
Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of such Guarantor or any Restricted
Subsidiary of such Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (vi) Indebtedness incurred
in violation of Section 4.12, (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company and (viii) any Indebtedness which is,
by its express terms, subordinated in right of payment to any other Indebtedness
of such Guarantor.
"Holder" means the Person in whose name a Note is registered on the
------
Registrar's books.
"Holdings LLC" means T/SF Holdings, LLC, a Delaware limited liability
------------
company, whose common Equity Interests shall be owned by VS&A-T/SF and Fir Tree
in the same proportion as their ownership interest in the Common Stock of the
Company pursuant to the Recapitalization and whose preferred Equity Interests
shall be owned by the Company. For purposes of the Indenture, Holdings LLC
shall be treated as a Wholly Owned Restricted Subsidiary.
<PAGE>
-14-
"Holdings LLC Preferred Equity Interests" as applied to the Equity
---------------------------------------
Interests of Holdings LLC, means Equity Interests of any class or classes
(however designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of Holdings LLC over Equity Interests of
any other class of such Person.
"incur" has the meaning set forth in Section 4.12.
-----
"Indebtedness" means with respect to any Person, without duplication,
------------
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its "maximum fixed repurchase price", but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which
<PAGE>
-15-
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Capital Stock as if such Disqualified Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
-----------------------------
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" means the 10 3/8% Senior Subordinated Notes due 2007,
-------------
Series A, of the Company.
"Initial Purchaser" means First Union Capital Markets Corp.
-----------------
"interest," when used with respect to any Note means the amount of all
--------
interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated
<PAGE>
-16-
notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.10, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time such Restricted Subsidiary is
designated an Unrestricted Subsidiary and shall exclude the fair market value of
the net assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided, that no such
--------
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
<PAGE>
-17-
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such former
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
----------
"Legal Defeasance" has the meaning set forth in Section 8.01.
----------------
"Legal Holiday" has the meaning provided in Section 11.07.
-------------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"LLCs" means Holdings LLC and the Operating LLCs. For purposes of
----
this Indenture, the LLCs shall be treated as Wholly Owned Restricted
Subsidiaries.
"Maturity Date" means November 1, 2007.
-------------
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Net Cash Proceeds" means, with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Sub-
<PAGE>
-18-
sidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses and
fees relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions), (b) taxes paid or
payable after taking into account any reduction in consolidated tax liability
due to available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.16.
------------------
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.16.
-------------------------
"Net Proceeds Offer Payment Date" has the meaning set forth in Section
-------------------------------
4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in Section
-------------------------------
4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
---------------
in Regulation S.
"Notes" means, collectively, the Initial Notes, the Private Exchange
-----
Notes, if any, and the Exchange Notes, treated as a single class of securities
under this Indenture.
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
<PAGE>
-19-
"Officer" means, with respect to any Person, the Chairman of the Board
-------
of Directors, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity and with respect to the Trustee or any agent of the
Trustee, a Trust Officer.
"Officers' Certificate" means a certificate signed by two Officers of
---------------------
the Company.
"Operating LLCs" means, upon their formation, each of (i) Galaxy
--------------
Registration LLC, a Delaware limited liability company, (ii) Atwood LLC, a
Delaware limited liability company and (iii) GEM Gaming, LLC, a Delaware limited
liability company, each of whose common Equity Interests is owned by Holdings
LLC. For purposes of this Indenture, the Operating LLCs shall be treated as
Wholly Owned Restricted Subsidiaries.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee complying with the requirements of Sections
11.04 and 11.05, as they relate to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Permitted Holders" means Fir Tree and VS&A Fund II.
-----------------
"Permitted Indebtedness" means, without duplication, each of the
----------------------
following:
(i) Indebtedness under the Notes, this Indenture and the Guarantees;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $25.0
million in the aggregate, reduced by any required permanent repayments
pursuant to Section 4.16 (which are accompanied by a corresponding
permanent commitment reduction) thereunder;
<PAGE>
-20-
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
-------- -------
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with this Indenture to the extent the notional
principal amount of such Interest Swap Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency Agreements; provided, that in the
--------
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Guarantor of the Company for so long as such Indebtedness
is held by the Company or a Guarantor of the Company, in each case subject
to no Liens held by any Person other than the Company or a Guarantor of the
Company; provided, that if as of any date any Person other than the Company
--------
or a Guarantor of the Company owns or holds any such Indebtedness or holds
a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such
<PAGE>
-21-
Indebtedness is held by a Wholly Owned Restricted Subsidiary, in each case
subject to no Lien; provided, that (a) any Indebtedness of the Company to
--------
any Wholly Owned Restricted Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under this Indenture and the Notes and (b) if as of any date any Person
other than a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two Business Days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(x) Refinancing Indebtedness; and
(xi) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5.0 million at
any one time outstanding.
"Permitted Investments" means each of the following: (i) Investments
---------------------
by the Company or any Restricted Subsidiary of the Company in any Person that is
or will become immediately after such Investment a Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Restricted
Subsidiary of the Company; (ii) Investments in the Company by
<PAGE>
-22-
any Restricted Subsidiary of the Company; provided, that any Indebtedness
--------
evidencing such Investment is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and this Indenture;
(iii) Investments in cash and Cash Equivalents; (iv) loans and advances to
employees and officers of the Company and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes not in excess of
$500,000 at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vi) Investments in Unrestricted Subsidiaries or other entities not
to exceed $4.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and (viii) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with Section 4.16.
"Permitted Liens" means the following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social se-
<PAGE>
-23-
curity, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, that such Liens do not extend to any property or
--------
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
-------- -------
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired
and (B) the Lien securing such Indebtedness shall be created within 90 days
of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's
<PAGE>
-24-
obligations in respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided, that (A) such Liens secured such Acquired
--------
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company.
<PAGE>
-25-
"Permitted Tax Distributions" means, subject to Section 4.10,
---------------------------
distributions by Holdings LLC to Fir Tree and VS&A-T/SF to the extent necessary
to permit the direct or indirect beneficial owners of the common Equity
Interests of Holdings LLC to pay federal and state income tax liabilities
arising from income of Holdings LLC irrespective of any other income or loss
such holders may have and attributable to them solely as a result of Holdings
LLC (and any intermediate entity through which such holder owns such Equity
Interests) being a partnership or similar pass-through entity for federal income
tax purposes.
"Person" means an individual, partnership, corporation, unincorporated
------
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
--------------
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
---------
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" shall have the meaning provided in the
----------------------
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Notes in the form set forth in Exhibit A.
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
<PAGE>
-26-
"Property" means, with respect to any Person, any interests of such
--------
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock,
partnership interests and other equity or ownership interests in any other
Person.
"Public Equity Offering" means an underwritten public offering of
----------------------
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
-----------------------
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Recapitalization" means the recapitalization of the Company as
----------------
contemplated by the Stock Purchase Agreement.
"Receivables" means any right of payment from or on behalf of any
-----------
obligor, whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the financing by the Company or any
Restricted Subsidiary of the Company of merchandise or services, and monies due
thereunder, security in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges and
other obligations with respect thereto, proceeds from claims on insurance
policies related thereto, any other proceeds related thereto, and any other
related rights.
"Record Date" means the Record Dates specified in the Notes.
-----------
"Redemption Date," when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
<PAGE>
-27-
"Redemption Price," when used with respect to any Note to be redeemed,
----------------
means the price fixed for such redemption, including principal and premium, if
any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
--------------
"Refinance" means, in respect of any security or Indebtedness, to
---------
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
------------------------
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
Section 4.12 (other than pursuant to clauses (ii), (iv), (v), (vi), (vii),
(viii), (ix) or (xi) of the definition of Permitted Indebtedness), in each case
that does not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by the Company in connection with such Refinancing) or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided, that (x) if such Indebtedness being Refinanced is Indebtedness of the
- --------
Company, then such Refinancing Indebtedness shall be Indebtedness solely of the
Company and (y) if such Indebtedness being Refinanced is subordinate or junior
to the Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced; provided, further that Indebtedness incurred concurrently with
-------- -------
an irrevocable offer to purchase on a date not more than 60 days from the date
of incurrence of such Indebtedness an amount of Notes
<PAGE>
-28-
equal to such Indebtedness shall be deemed Refinancing Indebtedness.
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the Issue Date by and among the Company, the Guarantors
and the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
------------
"Regulation S Global Note" means a permanent global note in registered
------------------------
form representing the aggregate principal amount of Notes sold in reliance on
Regulation S under the Securities Act.
"Related Person" of any Person means any other Person directly or
--------------
indirectly owning 10% or more of the outstanding voting Common Stock of such
Person (or, in the case of a Person that is not a corporation, 10% or more of
the equity interest in such Person).
"Replacement Assets" shall have the meaning set forth in Section 4.16.
------------------
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative in respect of any Designated Senior Debt; provided that if,
--------
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Restricted Payment" shall have the meaning set forth in Section 4.10.
------------------
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
-------- -------
entitled to request and con-
<PAGE>
-29-
clusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
---------------------
Person which at the time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"S&P" means Standard & Poor's Rating Services, a division of The
---
McGraw Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission promulgated thereunder.
"Senior Debt" means, the principal of, premium, if any, and interest
-----------
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any in-
<PAGE>
-30-
terest accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, to the extent such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations of every nature of the Company
under the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt"
shall not include (i) any Indebtedness of the Company to a Guarantor of the
Company or any Affiliate of the Company or any of such Affiliate's Subsidiaries,
(ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of the Company or any Subsidiary of the Company (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness incurred in violation of the Indenture
provisions set forth under Section 4.12, (vii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code is without recourse to the Company and (viii) any Indebtedness which
is, by its express terms, subordinated in right of payment to any other
Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
----------------------
1.02(w) of Regulation S-X under the Securities Act.
"Stock Purchase Agreement" means the stock purchase agreement dated as
------------------------
of August 15, 1997, as amended, by and among VS&A-T/SF, VS&A Fund II and the
Company, relating to the Recapitalization.
<PAGE>
-31-
"Stockholders Agreement" means the stockholders agreement dated as of
----------------------
October 9, 1997 among VS&A-T/SF, Fir Tree and the Company.
"Subsidiary," with respect to any Person, means (i) any corporation of
----------
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
----------------
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.03.
"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 such successor.
"Trust Officer" means any officer or assistant officer of the Trustee
-------------
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"U.S. Government Obligations" mean direct obligations of, and
---------------------------
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
<PAGE>
-32-
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
-----------------------
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
--------
Company certifies to the Trustee that such designation complies with Section
4.10 and (y) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 and (y) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"VS&A Fund II" means VS&A Communications Partners II, L.P., a Delaware
------------
limited partnership and its Affiliates.
"VS&A-T/SF" means VS&A-T/SF Inc., a Delaware corporation and, after
---------
the merger of VS&A-T/SF into the Company, VS&A-T/SF L.L.C.
<PAGE>
-33-
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
----------------------------------
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
--------------------
"indenture security holder" means a Holder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" on the indenture securities means the Company or any other
-------
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
<PAGE>
-34-
SECTION 1.03. 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 of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however, that
-------- -------
any reference to the Bankruptcy Law shall mean the Bankruptcy Law as
applicable to the relevant case.
ARTICLE TWO
THE NOTES
---------
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
---------
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
---------
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation,
<PAGE>
-35-
legend or endorsement on them. Each Note shall be dated the date of its issuance
and shall show the date of its authentication. Each Note shall have an executed
Guarantee endorsed thereon substantially in the form of Exhibit F hereto.
---------
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
- ----------------
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes offered and
sold in reliance on Regulation S shall be issued initially in the form of one or
more permanent global Notes in registered form, substantially in the form set
forth in Exhibit A (the "Global Note"), deposited with the Trustee, as custodian
--------- -----------
for the Depository, duly executed by the Company (and having an executed
Guarantee endorsed thereon) and authenticated by the Trustee as hereinafter
provided and shall bear the legend set forth in Exhibit C. The aggregate
---------
principal amount of the Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
--------- --------
Notes").
- -----
All Notes offered and sold in reliance on Regulation S shall remain in
the form of a Global Note until the consummation of the Exchange Offer pursuant
to the Registration Rights Agreement; provided, however, that all of the time
-------- -------
periods specified in the Registration Rights Agreement to be complied with by
the Company and the Guarantors have been so complied with.
<PAGE>
-36-
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
--------------------------
Two Officers of the Company and each Guarantor shall sign (each of
whom shall have been duly authorized by all requisite corporate actions) the
Notes for the Company and the Guarantees for the Guarantors by manual or
facsimile signature.
If an Officer whose signature is on a Note or a Guarantee was an
Officer at the time of such execution but no longer holds that office or
position at the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $100,000,000, (ii) Private Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes and (iii) Exchange Notes for issue only in a Registered
Exchange Offer, pursuant to the Registration Rights Agreement, for a like
principal amount of Initial Notes, in each case upon a written order of the
Company in the form of an Officers' Certificate of the Company. Each such
written order shall specify the amount of Notes to be authenticated and whether
the Notes are to be issued as Physical Notes or Global Notes or such other
information as the Trustee may reasonably request. The aggregate principal
amount of Notes outstanding at any time may not exceed $100,000,000, except as
provided in Sections 2.07 and 2.08.
The Trustee may appoint an authenticating agent (the "Authenticating
--------------
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
- -----
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same
<PAGE>
-37-
rights as an Agent to deal with the Company or with any Affiliate of the
Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
---------
("Paying Agent") and (c) notices and demands to or upon the Company in respect
- --------------
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. The Company may act as
their own Paying Agent, except that for the purposes of payments on the Notes
pursuant to Sections 4.15 and 4.16, neither the Company nor any Affiliate of the
Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Company.
<PAGE>
-38-
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by the Company or any other obligor on the Notes),
and the Company and the Paying Agent shall notify the Trustee of any Default by
the Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Holder 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
the Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish or cause the Registrar to furnish
to the Trustee before each Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of the Holders, which list may
be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes of other
authorized de-
<PAGE>
-39-
nominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Notes presented or surrendered for registration of
- -------- -------
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company, the Trustee and the
Registrar or co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registration of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Notes and the
Guarantors shall execute Guarantees thereon at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax, fee or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.10, 3.04, 4.15, 4.16 or 9.05, in
which event the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, de-
<PAGE>
-40-
stroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note and the Guarantors shall execute a Guarantee
thereon if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity of
reasonable tenor, sufficient in the reasonable judgment of the Company, the
Guarantors and the Trustee, to protect the Company, the Guarantors, the Trustee
or any Agent from any loss which any of them may suffer if a Note is replaced.
Every replacement Note shall constitute an additional obligation of the Company
and the Guarantors.
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
- ---- ----
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal, premium, if any, and interest due on the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes shall be
deemed not to be outstanding and interest on them shall cease to accrue.
<PAGE>
-41-
SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or an Affiliate of the Company shall be considered as though they
are 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 Notes which a Trust Officer of the Trustee actually knows are so owned
shall be so considered. The Company shall notify the Trustee, in writing, when
it or, to its knowledge, any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired and such other information as the Trustee may reasonably
request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company consider appropriate for temporary Notes and so indicate in the
Officers' Certificate. Without unreasonable delay, the Company shall prepare,
the Trustee shall authenticate and the Guarantors shall execute Guarantees on,
upon receipt of a written order of the Company pursuant to Section 2.02,
definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
<PAGE>
-42-
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the Company may not
issue new Notes to replace Notes that they have paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
The Company will pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Company shall,
to the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest or the next succeeding Business Day if such date is not a Business Day.
The Company shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the proposed payment
(a "Default Interest Payment Date"), and at the same time the Company shall
-----------------------------
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or 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 provided in
this Section; provided, however, that in
-------- -------
<PAGE>
-43-
no event shall the Company deposit monies proposed to be paid in respect of
defaulted interest later than 11:00 a.m. New York City time of the proposed
Default Interest Payment Date. At least 15 days before the subsequent special
record date, the Company shall mail (or cause to be mailed) to each Holder, as
of a recent date selected by the Company, with a copy to the Trustee, a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if any,
to be paid. Notwithstanding the foregoing, any interest which is paid prior to
the expiration of the 30-day period set forth in Section 6.01(a) shall be paid
to Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Company may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that no representation is hereby
-------- -------
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes, and any such
redemption or exchange shall not be affected by any defect in or omission of
such numbers. The Company shall promptly notify the Trustee of any change in
the CUSIP number.
SECTION 2.14. Deposit of Monies.
-----------------
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Re-
<PAGE>
-44-
demption Date, Change of Control Payment Date and Net Proceeds Offer Payment
Date, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to the Holders on such Interest Payment Date, Maturity Date,
Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment
Date, as the case may be.
SECTION 2.15. Restrictive Legends.
-------------------
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the legend (the "Private Placement Legend") as set forth in
------------------------
Exhibit A on the face thereof until after the second anniversary of the later of
- ---------
the Issue Date and the last date on which the Company or any Affiliate of the
Company was the owner of such Note (or any predecessor security) (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) (or such longer period of time as may be
required under the Securities Act or applicable state securities laws in the
opinion of counsel for the Company, unless otherwise agreed by the Company and
the Holder thereof).
Each Global Note shall also bear the legend as set forth in Exhibit C
---------
on the face thereof.
SECTION 2.16. Book-Entry Provisions
for Global Security.
--------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit C.
- ---------
Members of, or participants in, the Depository ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever.
<PAGE>
-45-
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 Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Company shall execute,
the Guarantors shall execute Guarantees on, and the Trustee shall authenticate
and deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Guarantors shall execute Guarantees on and the
Trustee shall authenticate and deliver, to each beneficial
<PAGE>
-46-
owner identified by the Depository in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of
this Section 2.16 shall, except as otherwise provided by paragraphs (a)(i)(x)
and (d) of Section 2.17, bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
(g) No Obligation of the Trustee. (i) The Trustee shall have no
----------------------------
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
any ownership interest in the Securities, with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member thereof
or with respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depository or its nominee in the
case of a Global Security). The rights of beneficial owners in any Global
Security in global form shall be exercised only through the Depository subject
to the applicable rules and procedures of the Depository. The Trustee may rely
and shall be fully protected and indemnified pursuant to Section 7.07 in relying
upon information furnished by the Depository with respect to any beneficial
owners, its members and participants.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under
<PAGE>
-47-
applicable law with respect to any transfer of any interest in any Security
(including without limitation any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 2.17. 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 Note 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 Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the Issue Date (provided, however, that neither the Company
-------- -------
nor any Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second anniversary
of the Issue Date) 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 D 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 E hereto; and
---------
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in the Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Regis-
<PAGE>
-48-
trar shall register the transfer and reflect on its books and records the
date and a decrease in the principal amount of the Global Note from which
such interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Restricted
Security if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is
a QIB within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository'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 such Global
Note in an amount equal to the principal amount of the Physical Notes to be
trans-
<PAGE>
-49-
ferred, and the Trustee shall cancel the Physical Notes so transferred.
(c) Restrictions on Transfer and Exchange of Global Notes.
-----------------------------------------------------
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(d) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Company nor any Affiliate of the
-------- -------
Company has held any beneficial interest in such Note, or portion thereof, at
any time prior to or on the third anniversary of the Issue Date), 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.
(e) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during
<PAGE>
-50-
the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
(f) Transfers of Notes Held by Affiliates. Any certificate (i)
-------------------------------------
evidencing a Note that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after the
last date on which the Company or any Affiliate of the Company was an owner of
such Note, in each case, bear the Private Placement Legend, unless otherwise
agreed by the Company (with written notice thereof to the Trustee).
SECTION 2.18. Liquidated Damages Under
Registration Rights Agreement.
-----------------------------
Under certain circumstances, the Company shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 5 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE THREE
REDEMPTION
----------
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Paragraph 5 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
45 days before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee, as evidenced in a writing signed on behalf of the
Trustee), to-
<PAGE>
-51-
gether with an Officers' Certificate stating that such redemption shall comply
with the conditions contained herein and in the Notes. Any such notice may be
cancelled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Notes To Be Redeemed.
---------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes, or portions thereof, for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
--- ----
or by such other method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
- -------- -------
be redeemed in part; and provided, further, that if a partial redemption is made
-------- -------
with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall be made by the Trustee only on a pro rata
--- ----
basis or on as nearly a pro rata basis as is practicable (subject to the
--- ----
procedures of the Depository), unless such method is otherwise prohibited. A
new Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
On and after the applicable Redemption Date, interest will cease to accrue on
Notes or portions thereof called for redemption as long as the Company has
deposited with the Paying Agent for the Notes funds in satisfaction of the
applicable Redemption Price.
SECTION 3.03. Optional Redemption.
-------------------
The Notes will be redeemable, at the Company's option, in whole at any
time or in part from time to time, on and after November 1, 2002, upon not less
than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on November 1 of the years set forth below,
plus, in each case, accrued and unpaid interest, if any, thereon to the date of
redemption:
<PAGE>
-52-
Year Percentage
---- ----------
2002............................ 105.188%
2003............................ 103.458%
2004............................ 101.729%
2005 and thereafter............. 100.000%
At any time, or from time to time, on or prior to November 1, 2000,
the Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem the Notes at a redemption price equal to 110.375% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided, that at least 65% of the principal amount
of Notes originally issued remains outstanding immediately following 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
90 days after the consummation of any such Public Equity Offering.
SECTION 3.04. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its registered address,
with a copy to the Trustee and any Paying Agent. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. The Company shall provide such notices of redemption to the
Trustee at least five days before the intended mailing date.
Each notice of redemption shall identify (including the CUSIP number)
the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
<PAGE>
-53-
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued interest as of the Redemption Date, if any,
upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.05. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued
<PAGE>
-54-
interest as of such date, if any. Upon surrender to the Trustee or Paying Agent,
such Notes called for redemption shall be paid at the Redemption Price plus
accrued interest thereon to the Redemption Date, but installments of interest,
the maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant record dates referred
to in the Notes. Interest shall accrue on or after the Redemption Date and shall
be payable only if the Company defaults in payment of the Redemption Price.
SECTION 3.06. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date and in accordance with Section 2.14,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose,
except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.
Unless the Company fails to comply with the preceding paragraph and
default in the payment of such Redemption Price plus accrued interest, if any,
interest on the Notes to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Notes are presented for payment.
SECTION 3.07. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
<PAGE>
-55-
ARTICLE FOUR
COVENANTS
---------
SECTION 4.01. Payment of Notes.
----------------
(a) The Company shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or any of its Affiliates) holds, prior to 11:00 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and ex-
<PAGE>
-56-
pense, all things necessary to preserve and keep in full force and effect its
respective corporate existence and the corporate existence of each of its
Restricted Subsidiaries in accordance with the respective organizational
documents of each such Restricted Subsidiary and the material rights (charter
and statutory) and franchises of the Company and each such Restricted
Subsidiary; provided, however, that the Company shall not be required to
-------- -------
preserve, with respect to itself, any material right or franchise and, with
respect to any of its Restricted Subsidiaries, any such existence, material
right or franchise, if the Board of Directors of the Company shall determine in
good faith that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Subsidiaries, taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all material lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of the Company or any of its Subsidiaries; provided, however,
-------- -------
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
negotiations or proceedings properly instituted and diligently conducted for
which adequate reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
--------------
(a) The Company shall, and shall cause each of the Restricted
Subsidiaries to, maintain all properties used or useful in the conduct of its
business in good working order and condition (subject to ordinary wear and tear)
and make all nec-
<PAGE>
-57-
essary repairs, renewals, replacements, additions, betterments and improvements
thereto and actively conduct and carry on its business; provided, however, that
-------- -------
nothing in this Section 4.05 shall prevent the Company or any of the Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is (i) in the ordinary course of business
pursuant to customary business terms or (ii) in the good faith judgment of the
respective Boards of Directors or other governing body of the Company or
Restricted Subsidiary, as the case may be, desirable in the conduct of their
respective businesses and is not disadvantageous in any material respect to the
Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of the Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the good faith judgment
of the Company, are adequate and appropriate for the conduct of the business of
the Company and its Restricted Subsidiaries in a prudent manner, with reputable
insurers.
SECTION 4.06. Compliance Certificate;
Notice of Default.
------------------
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each of the Company's fiscal years, an Officers' Certificate of the
Company (provided, however, that one of the signatories to each such Officers'
-------- -------
Certificate shall be the Company's principal executive officer, principal
financial officer or principal accounting officer), as to such Officers'
knowledge, without independent investigation, of the Company's compliance with
all conditions and covenants under this Indenture (without regard to any period
of grace or requirement of notice provided hereunder) and in the event any
Default of the Company's exists, such Officers shall specify the nature of such
Default. Each such Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Ac-
<PAGE>
-58-
countants, the annual financial statements delivered pursuant to Section 4.08
shall be accompanied by a written report of the Company's independent certified
public accountants (who shall be a firm of established national reputation)
stating (A) that their audit examination has included a review of the terms of
this Indenture and the form of the Notes as they relate to accounting matters,
and (B) whether, in connection with their audit examination, any Default or
Event of Default has come to their attention and if such a Default or Event of
Default has come to their attention, specifying the nature and period of
existence thereof; provided, however, that, without any restriction as to the
-------- -------
scope of the audit examination, such independent certified public accountants
shall not be liable by reason of any failure to obtain knowledge of any such
Default or Event of Default that would not be disclosed in the course of an
audit examination conducted in accordance with generally accepted auditing
standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 11.02 hereof,
by registered or certified mail or by facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action within 10 days of its becoming aware of such
occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition or
<PAGE>
-59-
results of operations of the Company and its Subsidiaries taken as a whole.
SECTION 4.08. Reports to Holders.
------------------
The Company will deliver to the Trustee within 15 days after filing of
the same with the Commission, copies of the quarterly and annual reports and of
the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company
will also comply with the other provisions of Section 314(a) of the TIA.
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
--------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly,
<PAGE>
-60-
(a) declare or pay any dividend or make any distribution on any
Capital Stock of the Company or Holdings LLC (other than, in the case of
the Company, dividends or distributions payable in Qualified Capital Stock
of the Company or in the case of Restricted Subsidiaries, dividends or
distributions payable to the Company or any Wholly Owned Restricted
Subsidiary of the Company);
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock;
(c) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes; or
(d) make any Investment (other than a Permitted Investments)
(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
------------------
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing, or (ii) the Company is not able
to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of
Restricted Payments (including such proposed Restricted Payment) made subsequent
to the Issue Date (the amount expended for such purposes, if other than in cash,
being the fair market value of such property as determined reasonably and in
good faith by the Board of Directors of the Company) shall exceed the sum of:
(x) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Re-
<PAGE>
-61-
stricted Payment occurs (the "Reference Date") (treating such period as a
--------------
single accounting period) minus the aggregate amount of Permitted Tax
Distributions paid subsequent to the Issue Date; plus
----
(y) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company, including
treasury stock; plus
----
(z) without duplication of any amounts included in clause
(iii)(y) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii) (y) and (z), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the
Notes pursuant to the redemption provisions herein).
Notwithstanding the foregoing, the provisions set forth above will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes, either (i) solely
in exchange for
<PAGE>
-62-
shares of Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company or (B) Refinancing Indebtedness;
(4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the
Company or payments by the Company to enable VS8A-T/SF to repurchase common
Equity Interests of VS8A-T/SF, in either case, without duplication, from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such employees, in an aggregate amount not to exceed in any calendar year
the sum of (A) $750,000 and (B) any amounts permitted to have been paid in
any preceding calendar years under subclause (A) above to the extent such
amounts were not so paid in any such prior calendar years; provided that
--------
such payments shall not exceed $3.0 million in the aggregate;
(5) if no Default or Event of Default shall have occurred and be
continuing, or would result from any such distribution, Permitted Tax
Distributions; and
(6) payments in connection with the Recapitalization.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of this Section
4.10, amounts expended pursuant to clauses (1), (2), (4) and (5) shall be
included in such calculation.
SECTION 4.11. Limitation on Transactions
with Affiliates.
----------------
(a) The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into, or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase,
<PAGE>
-63-
sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
---------
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
- -----------
(b) of this Section 4.11 and (y) Affiliate Transactions on terms that are no
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $250,000 shall be approved by the Board of
Directors of the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related to
a common plan) that involves an aggregate payment or other property with a fair
market value of more than $3.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries, provided, such transactions are not
--------
otherwise prohibited by this Indenture; (iii) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment
<PAGE>
-64-
thereto) or in any replacement agreement thereto so long as any such amendment
or replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by this Indenture; and (v) payments as
contemplated by the Stockholders Agreement.
SECTION 4.12. Limitation on Incurrence of
Additional Indebtedness.
------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
-----
(other than Permitted Indebtedness); provided, however, if no Default or Event
-------- -------
of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
its Restricted Subsidiaries may incur Indebtedness (including, without
limitation, Acquired Indebtedness) and subsidiaries of the Company may incur
Acquired Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the ratio of the
total Indebtedness of the Company and its Restricted Subsidiaries (excluding any
Indebtedness owed to a Restricted Subsidiary by any other Restricted Subsidiary
or the Company and any Indebtedness owed to the Company by any Restricted
Subsidiary) to the Company's Consolidated EBITDA (determined on a pro forma
basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is less than 6.0 to 1;
provided, however, that if the Indebtedness which is the subject of a
- -------- -------
determination under this provision is Acquired Indebtedness, or Indebtedness
incurred in connection with the simultaneous acquisition of any Person,
business, property or assets, then such ratio shall be determined by giving
effect to (on a pro forma basis, as if the transaction had occurred at the
beginning of the four-quarter period) both the incurrence or assumption of such
Acquired Indebtedness or such other Indebtedness by the Issuers and the
inclusion in the Company's
<PAGE>
-65-
Consolidated EBITDA of the Consolidated EBITDA of the acquired Person, business,
property or assets and any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Securities Act as in effect and
as applied as of the date hereof.
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries.
--------------------------------
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to: (a) pay dividends or
make any other distributions on or in respect of its Capital Stock (other than
dividends or distributions in respect to the common Equity Interest in Holdings
LLC); (b) make loans or advances, or pay any Indebtedness or other obligation
owed to the Company or any other Restricted Subsidiary of the Company; or (c)
transfer any of its property or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired; (5) agreements existing on the
Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date; or (6) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (4) or (5) above; provided, however, that the provisions relating to
-------- -------
such encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or
<PAGE>
-66-
restriction contained in the applicable agreements referred to in such clause
(2), (4) or (5).
SECTION 4.14. Modification of Holdings LLC Equity
Interest.
-----------------------------------
The Company will not and will not permit any of the Guarantors to
amend or modify in any material respect or in any manner adverse to the Company
or the Holders or permit such an amendment or modification of any provisions of
the Holdings LLC Preferred Equity Interest, including but not limited to, the
provisions granting voting control of Holdings LLC to the Company or its
termination prior to the satisfaction and discharge of this Indenture.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, each Holder will have
the right to require that the Company purchase all or a portion of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer"), at
-----------------------
a purchase price equal to 101% of the principal amount thereof plus accrued
interest to the date of purchase.
(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to
(i) repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Debt the terms of which require repayment
upon a Change of Control or offer to repay in full and terminate all commitments
under Indebtedness under the Credit Agreement and all other such Senior Debt and
to repay the Indebtedness owed to each lender which has accepted such offer or
(ii) obtain the requisite consents under the Credit Agreement and all other
Senior Debt to permit the repurchase of the Notes as provided below. The
Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Notes pursuant to the
provisions described below. The Company's failure to comply with the
immediately preceding sentence shall constitute an Event of Default under
Section 6.01(iii) and not under Section 6.01(iv).
<PAGE>
-67-
(c) Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first class mail, a notice to each
Holder at such Holder's last registered address, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.15, that all Notes tendered and not withdrawn will be accepted
for payment and that the Change of Control Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
------------------------------
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment
<PAGE>
-68-
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes the Holder delivered
for purchase and a statement that such Holder is withdrawing his election
to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and each
-------- -------
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change
of Control.
On or before the Change of Control Payment Date, the Commpany shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Any Notes not so accepted shall
be promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
Neither the Board of Directors of the Company nor the Trustee may
waive the provisions of this Section 4.15 relating to a Holder's right to
redemption upon a Change of Control Offer.
<PAGE>
-69-
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the provisions of this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
-------------------------
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of
(as determined in good faith by the Company's Board of Directors);
(ii) at least 75% of the consideration received by the Company or
the Restricted Subsidiary, as the case may be, from such Asset Sale shall
be in the form of cash or Cash Equivalents and is received at the time of
such disposition; and
(iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 270 days of receipt thereof either (A)
to prepay any Senior Debt and, in the case of any Senior Debt under any
revolving Credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in
properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Company and
its Subsidiaries as existing on the Issue Date or
<PAGE>
-70-
in businesses reasonably related thereto ("Replacement Assets") or (C) a
------------------
combination of prepayment and investment permitted by the foregoing clauses
(iii)(A) and (iii)(B); or
(iv) the Company makes the offer described in the following
sentence. On the 271st day after an Asset Sale or such earlier date, if
any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (iii)(A) through (iii)(C) of the
preceding paragraph (each a "Net Proceeds Offer Trigger Date"), such
-------------------------------
aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A) through (iii)(C) of the preceding paragraph (each a "Net Proceeds
------------
Offer Amount") shall be applied by the Company or such Restricted
------------
Subsidiary to make an offer to purchase (a "Net Proceeds Offer") on a date
------------------
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45
-------------------------------
days following the applicable Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds
--- ----
Offer Amount at a price equal to 100% of the principal amount of the Notes
to be purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase; provided, however, that if at any time any non-cash
-------- -------
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance
with this Section 4.16. The Company may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not just
<PAGE>
-71-
the amount in excess of $5.0 million, shall be applied as required pursuant
to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this Section 4.16
with respect to such deemed sale as if it were an Asset Sale. In addition, the
fair market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.
(b) Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) at least 80% of
the consideration for such Asset Sale constitutes Replacement Assets and (ii)
such Asset Sale is for fair market value; provided, that any consideration not
--------
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the preceding paragraphs.
(c) Each Net Proceeds Offer pursuant to this Section 4.16 shall be
mailed or caused to be mailed, by first class mail, by the Company within 25
days after the Net Proceeds Offer Trigger Date to all Holders at their last
registered addresses, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.16, that all Notes tendered will be accepted for payment;
provided, however, that if the aggregate principal amount of Notes tendered
-------- -------
in a Net Pro-
<PAGE>
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ceeds Offer plus accrued interest at the expiration of such offer exceeds
the aggregate amount of the Net Proceeds Offer, the Company shall select
the Notes to be purchased on a pro rata basis (with such adjustments as may
--- ----
be deemed appropriate by the Company so that only Notes in denominations of
$1,000 or multiples thereof shall be purchased) and that the Net Proceeds
Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law;
(ii) the purchase price (including the amount of accrued interest)
and the Net Proceeds Offer Payment Date (which shall be not less than 30
nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date and which shall be at least five business days after the Trustee
receives notice thereof from the Company);
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the Net
Proceeds Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and
<PAGE>
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(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and each
-------- -------
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof;
On or before the Net Proceeds Offer Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(i) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent. The Trustee shall promptly authenticate and mail
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Upon the payment of the purchase price for the Notes
accepted for purchase, the Trustee shall return the Notes purchased to the
Company for cancellation. Any monies remaining after the purchase of Notes
pursuant to a Net Proceeds Offer shall be returned within three Business Days by
the Trustee to the Company except with respect to monies owed as obligations to
the Trustee pursuant to Article Seven. For purposes of this Section 4.16, the
Trustee shall act as the Paying Agent.
To the extent the amount of Notes tendered pursuant to any Net
Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net
Proceeds Offer, the Company may use any remaining portion of such Net Cash
Proceeds not required to fund the repurchase of tendered Notes for general
corporate purposes and such Net Proceeds Offer Amount shall be reset to zero.
<PAGE>
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(d) The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 4.16, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
the provisions of this Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock
of Restricted Subsidiaries.
-----------------------------
The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
-------------------
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date or any proceeds therefrom, or assign
or otherwise convey any right to receive income or profits therefrom unless (i)
in the case of Liens securing Indebtedness that is expressly subordinate or
junior in right of payment to the Notes, the Notes are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes are equally and ratably secured, except for (A)
Liens existing as of the Issue Date to the extent and in the manner such Liens
are in effect on the Issue Date; (B) Liens securing Senior Debt and Liens
securing Guarantor Senior Debt; (C) Liens securing the Notes and the Guarantees;
(D) Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company
on assets of
<PAGE>
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any Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which
is incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens (1) are no less
-------- -------
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (2) do not extend to or cover any property or assets of the
Company or any of its Subsidiaries not securing the Indebtedness so Refinanced;
and (F) Permitted Liens.
SECTION 4.19. Conduct of Business.
-------------------
The Company and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or related to the businesses in which
the Company and its Restricted Subsidiaries are engaged on the Issue Date.
SECTION 4.20. Additional Subsidiary Guarantees.
--------------------------------
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary that is not a Guarantor,
or if the Company or any of its Restricted Subsidiaries shall organize, acquire
or otherwise invest additional monies in (x) another Restricted Subsidiary
having total assets with a book value in excess of $500,000 or (y) a Foreign
Subsidiary designated as a Restricted Subsidiary having total assets with a book
value in excess of $3.0 million, then such transferee or acquired or other
Restricted Subsidiaries shall (a) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes and this Indenture on the terms set forth
in this Indenture and (b) deliver to the Trustee an Opinion of Counsel stating
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary thereafter, such
<PAGE>
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Restricted Subsidiary shall be a Guarantor for all purposes of the Indenture.
SECTION 4.21. Prohibition on Incurrence of Senior
Subordinated Debt.
-----------------------------------
Neither the Company nor any Guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
expressly by its terms subordinate or junior in right of payment to any
Indebtedness of such person and senior in any respect of payment to the Notes or
the Guarantee of such Guarantor, as the case may be.
ARTICLE FIVE
SUCCESSOR CORPORATION
---------------------
SECTION 5.01. Merger, Consolidation
and Sale of Assets.
-------------------
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Company's Restricted Subsidiaries)
whether as an entirety or substantially as an entirety to any Person unless:
(i) either (1) the Company shall be the surviving or continuing corporation or
(2) the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and the Company's Restricted Subsidiaries substantially as an
entirety (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any state thereof or the
District of Columbia and (y) shall expressly assume, by supplemental inden-
<PAGE>
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ture (in form and substance satisfactory to the Trustee), executed and delivered
to the Trustee, the due and punctual payment of the principal of, premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes, this Indenture and the Registration Rights Agreement on the part of
the Company to be performed or observed; (ii) immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.12 hereof; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent in this Indenture
relating to such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company,
<PAGE>
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shall be deemed to be the transfer of all or substantially all of the properties
and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16 of
this Indenture) will not, and the Company will not cause or permit any Guarantor
to, consolidate with or merge with or into any Person other than the Company or
another Guarantor unless: (a) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or the entity to which
such sale, lease, conveyance or other disposition shall have been made is a
corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia; (b) such entity assumes by
supplemental indenture all of the obligations of the Guarantor under its
Guarantee; (c) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (d) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of
--- -----
clause (ii) of the first paragraph of this Section 5.01. Any merger or
consolidation of a Guarantor with and into the Company (with the Company being
the surviving entity) or another Guarantor that is a Wholly Owned Restricted
Subsidiary need only comply with clause (iv) of paragraph (a) of this Section
5.01.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such successor had been
named as the Company herein.
<PAGE>
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ARTICLE SIX
REMEDIES
--------
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" means any of the following events:
(i) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether
or not such payment is prohibited by Article Ten of this Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article Ten of this
Indenture);
(iii) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to
observance or performance of any of the terms or provisions of Section
5.01, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such In-
<PAGE>
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debtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $2.0
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(vi) the Company or any of its Significant Subsidiaries pursuant to
or under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(d) makes a general assignment for the benefit of its creditors;
or
(e) shall generally not pay its debts when such debts become due
or shall admit in writing its inability to pay its debts generally;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding,
(b) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its
Properties, or
<PAGE>
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(c) orders the liquidation of the Company or any Significant
Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for 60
days; or
(viii) any of the Guarantees cease to be in full force and effect
or any of the Guarantees are declared to be null and void or invalid and
unenforceable or any of the Guarantees is found to be invalid or any of the
Guarantors denies its liability under its Guarantees (other than by reason
of release of a Guarantor in accordance with the terms of this Indenture).
SECTION 6.02. Acceleration.
------------
(a) If an Event of Default specified in Section 6.01 (other than an
Event of Default specified in clause (vi) or (vii) of Section 6.01 with respect
to the Company) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of
and accrued interest on all the Notes to be due and payable by notice in writing
to the Company and the Trustee specifying the respective Event of Default and
that it is a "notice of acceleration" (the "Acceleration Notice") and the same
(i) shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Credit Agreement, shall become immediately due and payable
upon the first to occur of an acceleration under the Credit Agreement or five
Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice. If an Event of Default of the
type described in clause (vi) or (vii) above with respect to the Company occurs
and is continuing, then such amount will ipso facto become and be immediately
----------
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
(b) At any time after a declaration of acceleration with respect to
the Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
conse-
<PAGE>
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quences (i) if the rescission would not conflict with any judgment or decree,
(ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of such
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (vi) of the description of Events of Default above, the Trustee shall
have received an Officers' Certificate and an Opinion of Counsel that such Event
of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may
be enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee
or any Holder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Prior to the declaration of acceleration of the Notes, the Holders of
not less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive
<PAGE>
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any existing Default or Event of Default and its consequences under this
Indenture, except a Default or Event of Default specified in Section 6.01(i) or
(ii) or in respect of any provision hereof which cannot be modified or amended
without the consent of the Holder so affected pursuant to Section 9.02. When a
Default or Event of Default is so waived, it shall be deemed cured and shall
cease to exist. This Section 6.04 shall be in lieu of (S) 316(a)(1)(B) of the
TIA and such (S) 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Article Six and under the TIA.
The Holders of not less than a majority in aggregate principal amount of the
outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, provided, however, that the Trustee
-------- -------
may refuse to follow any direction (a) that conflicts with any rule of law or
this Indenture, (b) that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or (c) that may expose the Trustee to personal
liability for which reasonable indemnity provided to the Trustee against such
liability shall be inadequate in the judgment of the Trustee; provided, further,
-------- -------
however, that the Trustee may take any other action deemed proper by the Trustee
- -------
that is not inconsistent with such direction or this Indenture. This Section
6.05 shall be in lieu of (S) 316(a)(1)(A) of the TIA, and such (S) 316(a)(1)(A)
of the TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
SECTION 6.06. Limitation on Suits.
-------------------
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trus-
<PAGE>
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tee to institute such proceeding as Trustee under the Notes and this Indenture,
the Trustee has failed to institute such proceeding within 25 days after receipt
of such notice, request and offer of indemnity and the Trustee, within such 25-
day period, has not received directions inconsistent with such written request
by Holders of not less than a majority in aggregate principal amount of the
outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
-----------------------------------
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
and interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in clause (i) or (ii) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on the
Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the
<PAGE>
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costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Company or Restricted Subsidiaries (or any other obligor upon the Notes), their
creditors or their property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. The
Company's payment obligations under this Section 6.09 shall be secured in
accordance with the provisions of Section 7.07. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article Six it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
<PAGE>
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Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest;
Third: to Holders for the principal amounts (including any premium) owing
under the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for the principal
(including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in
<PAGE>
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such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
-------
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee may exercise such of the rights and powers vested in it by this
Indenture and shall use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(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 that 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.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for
<PAGE>
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its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(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 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed
<PAGE>
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or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 11.04 and 11.05.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, 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.
(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 security
or indemnity satisfactory to the Trustee against the
<PAGE>
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costs, expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any of their
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after obtaining knowledge
<PAGE>
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thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Note, including an accelerated payment, a
Default in payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of
the proviso to (S) 315(b) of the TIA and such proviso to (S) 315(b) of the TIA
is hereby expressly excluded from this Indenture and the Notes, as permitted by
the TIA.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after August 1 of each year beginning with 1997, the
Trustee shall, to the extent that any of the events described in TIA (S) 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such date that complies with TIA (S) 313(a).
The Trustee also shall comply with TIA (S)(S) 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each stock exchange, if
any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Company and the Trustee. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reim-
<PAGE>
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burse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties under
this Indenture. Such expenses shall include the reasonable fees and expenses of
the Trustee's agents, counsel, accountants and experts.
The Company shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by them except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance or administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity; provided, however,
-----------------
that any failure to so notify the Company shall not relieve the Company of its
indemnity obligations hereunder except to the extent the Company's ability to
defend such claim shall be prejudiced thereby. At the Trustee's sole
discretion, the Company shall defend the claim and the Trustee shall cooperate
and may participate in the defense; provided, however, that any settlement of a
-------- -------
claim shall be approved in writing by the Trustee if such settlement would
result in an admission of liability by the Trustee or if such settlement would
not be accompanied by a full release of the Trustee for all liability arising
out of the events giving rise to such claim. Alternatively, the Trustee may at
its option have separate counsel of its own choosing and the Company shall pay
the reasonable fees and expenses of such counsel.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to
<PAGE>
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pay principal of or premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing at least 10 days in advance of such resignation. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee and
appoint a successor Trustee with the Company's consent, by so notifying the
Company and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
<PAGE>
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, 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 Company shall mail notice of such successor Trustee's
appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
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 Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
-------- -------
such corporation shall be otherwise qualified and eligible under this Article
Seven.
<PAGE>
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SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holding company system,
the related bank holding company) shall have a combined capital and surplus of
at least $100 million as set forth in its most recent published annual report of
condition, and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 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 (S)
310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company, as
obligors of the Notes.
SECTION 7.11. Preferential Collection of
Claims Against the Company.
--------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Company, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.01. Termination of Company's Obligations.
------------------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly pro-
<PAGE>
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vided for in this Indenture) as to all outstanding Notes when (i) either (a) all
Notes theretofore authenticated and delivered (except lost, stolen or destroyed
Notes which have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and the
Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the date of deposit
together with irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as the case
may be; (ii) the Company has paid all other sums payable under this Indenture by
the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with.
The Company may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance
----------------
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights of
Holders to receive payments in respect of the principal of, premium, if any, and
interest on the Notes when such payments are due, (ii) the Company's obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payments, (iii) the rights, powers, trust, duties and
immunities of the Trustee and the Company's obligations in connection therewith
and (iv) the Legal Defeasance provisions of this Section 8.01. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company and the Guarantors, if any,
<PAGE>
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released with respect to covenants contained in Sections 4.04, 4.08 and 4.10
through 4.20 and Article Five ("Covenant Defeasance") and thereafter any
-------------------
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event of Covenant Defeasance, those
events described under Section 6.01 (except those events described in Section
6.01(i),(ii),(vi) and (vii)) will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States dollars, non-callable
U.S. Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling or (B) 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
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee
<PAGE>
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confirming that the Holders 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;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
under Section 6.01(vi) or (vii) from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with;
(viii) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that (A) the trust funds will not be subject to
any rights of holders of Senior Debt, including, without limitation, those
arising under the Indenture and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect
<PAGE>
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of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and
(ix) certain other customary conditions precedent are satisfied.
SECTION 8.02. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations except as it may agree in
writing with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof.
SECTION 8.03. Repayment to the Company.
------------------------
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for one year; provided, however,
-------- -------
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the
<PAGE>
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Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.04. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Section
8.01; provided, however, that if the Company has made any payment of interest on
-------- -------
or principal of any Notes because of the reinstatement of their obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge
by Trustee.
---------------------------
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified in Section 8.01,
provided the legal counsel delivering such Opinion of Counsel may rely as to
- --------
matters of fact on one or more Officers' Certificates of the Company.
<PAGE>
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ARTICLE NINE
MODIFICATION OF THE INDENTURE
-----------------------------
SECTION 9.01. Without Consent of Holders.
--------------------------
Subject to the provisions of Section 9.02, the Company, the Guarantors
and the Trustee may amend, waive or supplement this Indenture without notice to
or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 4.20 or 5.01 of this Indenture; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in order to effect or maintain the qualification
of this Indenture under the TIA; or (e) to make any change that would provide
any additional benefit or rights to the Holders or that does not adversely
affect the rights of any Holder. Notwithstanding the foregoing, the Trustee and
the Company may not make any change that adversely affects the rights of any
Holder under this Indenture without the consent of such Holder. In formulating
its opinion on such matters, the Trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation, solely on an
Opinion of Counsel.
SECTION 9.02. With Consent of Holders.
-----------------------
All other modifications and amendments of this Indenture may be made
with the consent of the Holders of a majority in the then outstanding principal
amount of the then outstanding Notes, except that, without the consent of each
Holder of the Notes affected thereby, no amendment may, directly or indirectly:
(i) reduce the amount of Notes whose Holders must consent to any amendment; (ii)
reduce the rate of or change or have the effect of changing the time for payment
of interest, including defaulted interest, on any Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any
<PAGE>
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change in provisions of this Indenture protecting the right of each Holder of a
Note to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment or permitting
Holders of a majority in principal amount of Notes to waive Defaults or Events
of Default; (vi) amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify in any material respect any
of the provisions or definitions with respect thereto; (vii) modify or change
any provision of this Indenture affecting the ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or (viii) release any
Guarantor from any of its obligations under its Guarantee or this Indenture
otherwise than in accordance with the terms of this Indenture.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Company shall mail to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.03. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
-------- -------
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by
<PAGE>
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the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note, even if notation of the
consent is not made on any Note. Subject to the following paragraph, any such
Holder or subsequent Holder may revoke the consent as to such Holder's Note or
portion of such Note by notice to the Trustee or the Company received before the
date on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver. An
amendment, supplement or waiver becomes effective upon receipt by the Trustee of
such Officers' Certificate and evidence of consent by the Holders of the
requisite percentage in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
<PAGE>
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SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
-------- -------
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully protected
in relying upon an Opinion of Counsel and an Officers' Certificate of the
Company, stating that no event of default shall occur as a result of such
amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture, provided the legal counsel delivering such Opinion
--------
of Counsel may rely as to matters of fact on one or more Officers' Certificates
of the Company. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
-------------
SECTION 10.01. Notes Subordinated to Senior Debt.
----------------------------------
The Company covenants and agrees, and each Holder of the Notes, by its
acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Senior Debt, including, without
limitation, the Company's obligations under the Credit Agreement; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt, and that each holder of Senior Debt whether now
outstanding or
<PAGE>
-105-
hereafter created, incurred, assumed or guaranteed shall be deemed to have
acquired Senior Debt in reliance upon the covenants and provisions contained in
this Indenture and the Notes.
SECTION 10.02. Suspension of Payment When Senior Debt
is in Default.
--------------------------------------
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its or their behalf with respect to any Obligations on
the Notes, or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event or default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives notice of the event of default to the Trustee (a
"Default Notice"), then, unless and until all events of default have been cured
- ---------------
or waived or have ceased to exist or the Trustee receives notice thereof from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
---------------
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything therein to
the contrary, in no event will a Blockage Period extend beyond 180 days from the
date the payment on the notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for the
commencement of a second Blockage
<PAGE>
-106-
Period by the Representative of such Designated Senior Debt whether or not
within a period of 360 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amount of Senior Debt held by such holders) or
their respective Representatives, as their respective interests may appear. The
Trustee shall be entitled to rely on information regarding amounts then due and
owing on the Senior Debt, if any, received from the holders of Senior Debt (or
their Representatives) or, if such information is not received from such holders
or their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Debt thereafter due or declared to be due
--------
shall first be paid in full in cash or Cash Equivalents before the Holders are
entitled to receive any payment of any kind or character with respect to
Obligations on the Notes.
<PAGE>
-107-
SECTION 10.03. Notes Subordinated to Prior Payment of
All Senior Indebtedness on
Dissolution, Liquidation or
Reorganization of Company.
---------------------------------------
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior Debt (pro
rata to such holders on the basis of the respective amounts of Senior Debt held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Indebtedness has
been paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Senior Debt.
<PAGE>
-108-
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
has not occurred.
(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, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.03, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (pro rata to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolida-
<PAGE>
-109-
tion, merger, conveyance or transfer, assume the Company's obligations hereunder
in accordance with Article Five hereof.
SECTION 10.04. Holders To Be Subrogated to Rights of
Holders of Senior Debt.
-------------------------------------
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the Notes shall be
paid in full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior Debt,
on the other hand.
SECTION 10.05. Obligations of the Company
Unconditional.
--------------------------
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as between the Company and the
Holders, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders and creditors of the
Company other than the holders of the Senior Debt, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article Ten of the holders of Senior Debt in respect
of cash, property or Notes of the Company received upon the exercise of any such
remedy. Upon any payment or distribution of assets or securi-
<PAGE>
-110-
ties of the Company referred to in this Article Ten, the Trustee, subject to the
provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
any liquidation, dissolution, winding-up or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other Person making any payment or distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten. Nothing in this Article Ten shall apply to the
claims of, or payments to, the Trustee under or pursuant to Section 7.07. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself or itself to be a holder of any Senior Debt (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Senior Debt or a trustee or
representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 10.06. Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice.
-----------------------------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of
<PAGE>
-111-
the Notes pursuant to the provisions of this Article Ten. Regardless of anything
to the contrary contained in this Article Ten or elsewhere in this Indenture,
the Trustee shall not be charged with knowledge of the existence of any default
or event of default with respect to any Senior Debt or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until
the Trustee shall have received notice in writing from the Company, or from a
holder of Senior Debt or a Representative therefor, together with proof
satisfactory to the Trustee of such holding of Senior Debt or of the authority
of such Representative, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume conclusively that no such facts exist.
SECTION 10.07. Application by Trustee of Assets
Deposited with It.
--------------------------------
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall
be for the sole benefit of the Holders of the Notes and, to the extent allocated
for the payment of Notes, shall not be subject to the subordination provisions
of this Article Ten. Otherwise, any deposit of assets or securities by or on
behalf of the Company with the Trustee or any Paying Agent (whether or not in
trust) for the payment of principal of or interest on any Notes shall be subject
to the provisions of this Article Ten; provided, however, that if prior to the
-------- -------
second Business Day preceding the date on which by the terms of this Indenture
any such assets may become distributable for any purpose (including, without
limitation, the payment of either principal of or interest on any Note) the
Trustee or such Paying Agent shall not have received with respect to such assets
the notice provided for in Section 10.06, then the Trustee or such Paying Agent
shall have full power and authority to receive such assets and to apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary received by it on or after such date. The foregoing
shall not apply to the Paying Agent if the Company or any Subsidiary or
Affiliate of the Company is acting as Paying Agent. Nothing contained in this
Section 10.07 shall
<PAGE>
-112-
limit the right of the holders of Senior Debt to recover payments from any
Holder as contemplated by this Article Ten.
SECTION 10.08. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided 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 by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this Section
10.08, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Notes to the holders of Senior Debt,
do any one or more of the following: (1) change the manner, place, terms or
time of payment of, or renew or alter, Senior Debt or any instrument evidencing
the same or any agreement under which Senior Debt is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (3) release any Person liable in any manner for
the collection or payment of Senior Debt; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.09. Holders Authorize Trustee To
Effectuate Subordination of Notes.
---------------------------------
Each Holder of the Notes by such Holder's acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this Article Ten, and appoints the Trustee such Holder's attorney-
in-fact for such purpose, including, in the event of any liquidation,
<PAGE>
-113-
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Company tending towards liquidation or
reorganization of the business and assets of the Company, the immediate filing
of a claim for the unpaid balance of such Holder's Notes in the form required in
said proceedings and cause 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 any of the holders of the Senior Debt or their Representative is hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Notes. Nothing herein contained shall be deemed to authorize the Trustee or the
holders of Senior Debt or their Representative to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Debt or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 10.10. Right of Trustee to Hold Senior Debt.
------------------------------------
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may
<PAGE>
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be made and the notice may be given to their Representative, if any.
SECTION 10.11. This Article Ten Not To Prevent Events
of Default.
--------------------------------------
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article Six or to pursue any rights or remedies hereunder
or under applicable law, subject to the rights, if any, under this Article Ten
of the holders, from time to time, of Senior Debt.
SECTION 10.12. No Fiduciary Duty of Trustee to
Holders of Senior Debt.
-------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and it undertakes to perform or observe such of its
covenants and obligations as are specifically set forth in this Article Ten, and
no implied covenants or obligations with respect to the Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be liable
to any such holders (other than for its willful misconduct or gross negligence)
if it shall pay over or deliver to the Holders of Notes or the Company or any
other Person money or assets in compliance with the terms of this Indenture.
Nothing in this Section 10.12 shall affect the obligation of any Person other
than the Trustee to hold such payment for the benefit of, and to pay such
payment over to, the holders of Senior Debt or their Representative.
<PAGE>
-115-
ARTICLE ELEVEN
MISCELLANEOUS
-------------
SECTION 11.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
-------- -------
11.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
<PAGE>
-116-
if to the Company or any Guarantor:
T/SF Communications Corporation
350 Park Avenue
New York, NY 10022
Telecopier Number: (212) 935-0877
Attn: Chief Executive Officer
if to the Trustee:
IBJ Schroder Bank and Trust Company
One State Street
New York, NY 10004
Telecopier Number: (212) 858-2952
Attention: Corporate Trust Department
Each of the Company and the Trustee by written notice to the other may
designate additional or different addresses for notices to such Person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if hand delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar ten (10) days prior to such mailing and
shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
<PAGE>
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SECTION 11.03. Communications by Holders
with Other Holders.
-------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and any other Person shall have the protection of TIA
(S) 312(c).
SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.
------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory
to the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with (which counsel, as to factual matters, may rely on an
Officers' Certificate).
SECTION 11.05. Statements Required in
Certificate or Opinion.
-----------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements
<PAGE>
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or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably 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 each such
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying
Agent, Registrar.
-----------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
-------------
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.08. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
<PAGE>
-119-
SECTION 11.09. No Adverse Interpretation
of Other Agreements.
-------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
---------------------
No director, officer, employee or stockholder, as such, of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, this Indenture, the Guarantees or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
SECTION 11.11. Successors.
----------
All agreements of the Company in this Indenture and the Notes shall
bind their successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 11.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
<PAGE>
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SECTION 11.14. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
ARTICLE TWELVE
GUARANTEE OF NOTES
------------------
SECTION 12.01. Unconditional Guarantee.
-----------------------
Subject to the provisions of this Article Twelve, each Guarantor, if
any, hereby, jointly and severally, unconditionally and irrevocably guarantees,
on a senior subordianted basis (such guarantee to be referred to herein as a
"Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
- ----------
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company or any other Guarantors to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Notes (and any Additional Interest payable thereon) shall be duly and punctually
paid in full when due, whether at maturity, upon redemption at the option of
Holders pursuant to the provisions of the Notes relating thereto, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Notes and all other
obligations of the Company or the Guarantors to the Holders or the Trustee
hereunder or thereunder (including amounts due the Trustee under Section 7.07
hereof) and all other obligations shall be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall
<PAGE>
-121-
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed, or failing performance of
any other obligation of the Company to the Holders under this Indenture or under
the Notes, for whatever reason, each Guarantor shall be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under
this Guarantee, and shall entitle the Holders of Notes to accelerate the
obligations of the Guarantors hereunder in the same manner and to the same
extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Company, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and this
Guarantee. This Guarantee is a guarantee of payment and not of collection. If
any Holder or the Trustee is required by any court or otherwise to return to the
Company or to any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or such Guarantor, any amount
paid by the Company or such Guarantor to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders of Notes and the
<PAGE>
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Trustee, on the other hand, (a) subject to this Article Twelve, the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article Six
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such obligations
as provided in Article Six hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, of any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor,
determined in accordance with GAAP.
SECTION 12.02. Limitations on Guarantees.
-------------------------
The obligations of each Guarantor under its Guarantee will be limited
to the maximum amount which, after giving effect to all other contingent and
fixed liabilities of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
SECTION 12.03. Execution and Delivery of Guarantee.
-----------------------------------
To further evidence the Guarantee set forth in Section 12.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit F herein, shall be endorsed on each Note authenticated and
---------
delivered by the Trustee. Such Guarantee shall be executed on behalf of
<PAGE>
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each Guarantor by either manual or facsimile signature of two Officers of each
Guarantor, each of whom, in each case, shall have been duly authorized to so
execute by all requisite corporate action. The validity and enforceability of
any Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 12.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
SECTION 12.04. Release of a Guarantor.
----------------------
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock of a Guarantor by the
Company or a Restricted Subsidiary of the Company in a transaction constituting
an Asset Sale the Net Cash Proceeds of which are applied in accordance with
Section 4.16, or upon the consolidation or merger of a Guarantor with or into
any Person in compliance with Article Five (in each case, other than to the
Company or an Affiliate of the Company or a Restricted Subsidiary), or if any
Guarantor is dissolved or liquidated in accordance with this Indenture, or if a
Guarantor is designated an Unrestricted Subsidiary in accordance with Section
4.14, such Guarantor and each Subsidiary of such Guarantor that is also a
Guarantor shall be deemed released from all obligations under this Article
Twelve without any further action required on the part of the Trustee or any
Holder; provided, however, that each such Guarantor is sold or
-------- -------
<PAGE>
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disposed of in accordance with this Indenture. Any Guarantor not so released or
the entity surviving such Guarantor, as applicable, shall remain or be liable
under its Guarantee as provided in this Article Twelve.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request by the Company or such
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 12.04, provided the legal
--------
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers' Certificates of the Company.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Twelve.
Except as set forth in Articles Four and Five and this Section 12.04,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
SECTION 12.05. Waiver of Subrogation.
---------------------
Until this Indenture is discharged and all of the Notes are discharged
and paid in full, each Guarantor hereby irrevocably waives and agrees not to
exercise any claim or other rights which it may now or hereafter acquire against
the Company that arise from the existence, payment, performance or enforcement
of the Company's obligations under the Notes or this Indenture and such
Guarantor's obligations under this Guarantee and this Indenture, in any such
instance including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against the Company, whether or not such claim,
remedy or right arises in
<PAGE>
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equity, or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Guarantor in violation of the preceding sentence and any amounts owing to the
Trustee or the Holders of Notes under the Notes, this Indenture, or any other
document or instrument delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to such Guarantor for the benefit of, and held in trust
for the benefit of, the Trustee or the Holders and shall forthwith be paid to
the Trustee for the benefit of itself or such Holders to be credited and applied
to the obligations in favor of the Trustee or the Holders, as the case may be,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 12.05 is knowingly made in contemplation of
such benefits.
SECTION 12.06. Immediate Payment.
-----------------
Each Guarantor agrees to make immediate payment to the Trustee on
behalf of the Holders of all Obligations owing or payable to the respective
Holders upon receipt of a demand for payment therefor by the Trustee to such
Guarantor in writing.
SECTION 12.07. No Set-Off.
----------
Each payment to be made by a Guarantor hereunder in respect of the
Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
<PAGE>
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SECTION 12.08. Obligations Absolute.
--------------------
The obligations of each Guarantor hereunder are and shall be absolute
and unconditional and any monies or amounts expressed to be owing or payable by
each Guarantor hereunder which may not be recoverable from such Guarantor on the
basis of a Guarantee shall be recoverable from such Guarantor as a primary
obligor and principal debtor in respect thereof.
SECTION 12.09. Obligations Continuing.
----------------------
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. Each Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder and under any other instrument or instruments in such form
as counsel to the Trustee may advise and as will prevent any action brought
against it in respect of any default hereunder being barred by any statute of
limitations now or hereafter in force and, in the event of the failure of a
Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and
agent of such Guarantor to make, execute and deliver such written acknowledgment
or acknowledgments or other instruments as may from time to time become
necessary or advisable, in the judgment of the Trustee on the advice of counsel,
to fully maintain and keep in force the liability of such Guarantor hereunder.
SECTION 12.10. Obligations Not Reduced.
-----------------------
The obligations of each Guarantor hereunder shall not be satisfied,
reduced or discharged solely by the payment of such principal, premium, if any,
interest, fees and other monies or amounts as may at any time prior to discharge
of this Indenture pursuant to Article 8 be or become owing or payable under or
by virtue of or otherwise in connection with the Notes or this Indenture.
<PAGE>
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SECTION 12.11. Obligations Reinstated.
----------------------
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Company or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 12.12. Obligations Not Affected.
------------------------
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or might operate to release
or otherwise exonerate any Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise, including, without limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding up or other proceeding involving or
affecting the Company or any other person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obliga-
<PAGE>
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tion of the Company or any other person under this Indenture, the Notes or
any other document or instrument;
(c) any failure of the Company, whether or not without fault on their
part, to perform or comply with any of the provisions of this Indenture or
the Notes, or to give notice thereof to a Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other person or their respective assets or the release or
discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from, any
of the Notes or this Indenture, including, without limitation, any increase
or decrease in the principal amount of or premium, if any, or interest on
any of the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a Guarantor;
(h) any merger or amalgamation of the Company or a Guarantor with any
Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of
the Obligations or the obligations of a Guarantor under its Guarantee; and
<PAGE>
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(j) any other circumstance, including release of the Guarantor
pursuant to Section 12.04 (other than by complete, irrevocable payment)
that might otherwise constitute a legal or equitable discharge or defense
of the Company under this Indenture or the Notes or of a Guarantor in
respect of its Guarantee hereunder.
SECTION 12.13. Waiver.
------
Without in any way limiting the provisions of Section 11.01 hereof,
each Guarantor hereby waives notice of acceptance hereof, notice of any
liability of any Guarantor hereunder, notice or proof of reliance by the Holders
upon the obligations of any Guarantor hereunder, and diligence, presentment,
demand for payment on the Company, protest, notice of dishonor or non-payment of
any of the Obligations, or other notice or formalities to the Company or any
Guarantor of any kind whatsoever.
SECTION 12.14. No Obligation To Take Action Against
the Company.
------------------------------------
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Company or any other Person or any
Property of the Company or any other Person before the Trustee is entitled to
demand payment and performance by any or all Guarantors of their liabilities and
obligations under their Guarantees or under this Indenture.
SECTION 12.15. Dealing with the Company and Others.
-----------------------------------
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
<PAGE>
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(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given by
the Company or any third party with respect to the obligations or matters
contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as the
Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with,
the Company and all other Persons and any security as the Holders or the
Trustee may see fit.
SECTION 12.16. Default and Enforcement.
-----------------------
If any Guarantor fails to pay in accordance with Section 12.06 hereof,
the Trustee may proceed in its name as trustee hereunder in the enforcement of
the Guarantee of any such Guarantor and such Guarantor's obligations thereunder
and hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from such Guarantor the obligations.
SECTION 12.17. Amendment, Etc.
--------------
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other Person from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
<PAGE>
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SECTION 12.18. Acknowledgment.
--------------
Each Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
SECTION 12.19. Costs and Expenses.
------------------
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees) incurred by the
Trustee, its agents, advisors and counsel or any of the Holders in enforcing any
of their rights under any Guarantee.
SECTION 12.20. No Merger or Waiver; Cumulative
Remedies.
-------------------------------
No Guarantee shall operate by way of merger of any of the obligations
of a Guarantor under any other agreement, including, without limitation, this
Indenture. No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, remedy, power or privilege hereunder or
under the Indenture or the Notes, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder or under this Indenture or the Notes preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges in the Guarantee and under this
Indenture, the Notes and any other document or instrument between a Guarantor
and/or the Company and the Trustee are cumulative and not exclusive of any
rights, remedies, powers and privilege provided by law.
SECTION 12.21. Survival of Obligations.
-----------------------
Without prejudice to the survival of any of the other obligations of
each Guarantor hereunder, the obligations of each Guarantor under Section 12.01
shall survive the payment in full of the Obligations and shall be enforceable
against such Guarantor without regard to and without giving effect to any
<PAGE>
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defense, right of offset or counterclaim available to or which may be asserted
by the Company or any Guarantor.
SECTION 12.22. Guarantee in Addition to Other
Obligations.
------------------------------
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes and any guarantees or security at any time held by or for the benefit of
any of them.
SECTION 12.23. Severability.
------------
Any provision of this Article Twelve which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Twelve.
SECTION 12.24. Successors and Assigns.
----------------------
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the other Holders and their respective successors
and permitted assigns, except that no Guarantor may assign any of its
obligations hereunder or thereunder.
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
--------------------------
SECTION 13.01. Guarantee Obligations Subordinated to
Guarantor Senior Debt.
-------------------------------------
Anything herein to the contrary notwithstanding, each of the
Guarantors, for itself and its successors, and each
<PAGE>
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Holder, by his or her acceptance of Guarantees, agrees that the payment of all
Obligations owing to the Holders in respect of its Guarantee (collectively, as
to any Guarantor, its "Guarantee Obligations") is subordinated, to the extent
---------------------
and in the manner provided in this Article Thirteen, to the prior payment in
full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Guarantor Senior Debt, of all Obligations on
Guarantor Senior Debt of such Guarantor, including without limitation, the
Guarantors' obligations under the Credit Agreement.
This Article Thirteen shall constitute a continuing offer to all
Persons who become holders of, or continue to hold, Guarantor Senior Debt, and
such provisions are made for the benefit of the holders of Guarantor Senior Debt
and such holders are made obligees hereunder and any one or more of them may
enforce such provisions.
SECTION 13.02. Suspension of Guarantee Obligations
When Guarantor Senior Debt Is in
Default.
-----------------------------------
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon redemption, by declaration or otherwise, of any
principal or interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Designated Senior
Debt of a Guarantor or guaranteed by a Guarantor (which Designated Senior Debt
or guarantee, as the case may be, constitutes Guarantor Senior Debt of such
Guarantor), no payment of any kind or character shall be made by, or on behalf
of, the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes, or to acquire any of the Notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Guarantor Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Guarantor Senior Debt, permitting
the holders of such Guarantor Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of Guarantor
Senior Debt gives notice of the event of default to the Trustee (a "Default
-------
Notice"),
- ------
<PAGE>
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then, unless and until all events of default have been cured or waived
or have ceased to exist or the Trustee receives notice thereof from the
Representative for the respective issue of Guarantor Senior Debt terminating the
Blockage Period (as defined below), during the 180 days after the delivery of
such Default Notice (the "Blockage Period"), neither the Company nor any other
---------------
Person on its behalf shall (x) make any payment of any kind or character with
respect to any Obligations on the Notes or (y) acquire any of the Notes for cash
or property or otherwise. Notwithstanding anything therein to the contrary, in
no event will a Blockage Period extend beyond 180 days from the date the payment
on the Notes was due and only one such Blockage Period may be commenced within
any 360 consecutive days. No event of default which existed or was continuing
on the date of the commencement of any Blockage Period with respect to the
Guarantor Senior Debt shall be, or be made, the basis for the commencement of a
second Blockage Period by the Representative of such Guarantor Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period, that in either case would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 13.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro
rata to such holders on the basis of the respective amount of Guarantor Senior
Debt held by such holders) or their respective Representatives, as their
respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Guarantor Senior Debt,
if any, received from the holders of Guarantor Senior Debt (or their
Representatives) or, if such information is not received
<PAGE>
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from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Guarantor Senior Debt.
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Debt thereafter due or
--------
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Notes.
SECTION 13.03. Guarantee Obligations Subordinated to
Prior Payment of All Guarantor
Senior Debt on Dissolution,
Liquidation or Reorganization of
Such Guarantor.
-------------------------------------
Upon any payment or distribution of assets of any Guarantor of any
kind or character, whether in cash, property or securities to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors or marshaling of assets of such Guarantor, whether voluntary or
involuntary, or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to any Guarantor or its property, whether
voluntary or involuntary, but excluding any liquidation or dissolution of a
Guarantor into the Company or into another Guarantor):
(a) the holders of all Guarantor Senior Debt of such Guarantor shall
first be entitled to receive payments in full in cash or Cash Equivalents,
or such payment duly provided for to the satisfaction of the holders of
Guarantor Senior Debt, of all amounts payable under Guarantor Senior Debt
before the Holders will be entitled to receive any payment or distribution
of any kind or character on account of the Guarantee of such Guarantor, and
until all Obligations with respect to the Guarantor Senior Debt are paid in
full in cash or Cash Equivalents, or such payment
<PAGE>
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duly provided for to the satisfaction of the holders of Guarantor Senior
Debt, any distribution to which the Holders would be entitled shall be made
to the holders of Guarantor Senior Debt of such Guarantor;
(b) any payment or distribution of assets of such Guarantor 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 Thirteen shall be paid by the
liquidating trustee or agent or other Person making such a payment or
distribution, directly to the holders of Guarantor Senior Debt of such
Guarantor or their representatives, ratably according to the respective
amounts of such Guarantor Senior Debt remaining unpaid held or represented
by each, until all such Guarantor Senior Debt remaining unpaid shall have
been paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Guarantor Senior Debt,
after giving effect to any concurrent payment or distribution to the
holders of such Guarantor Senior Debt;
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of such Guarantor of any kind or character, whether
such payment shall be in cash, property or securities, and such Guarantor
shall have made payment to the Trustee or directly to the Holders or any
Paying Agent in respect of payment of the Guarantees before all Guarantor
Senior Debt of such Guarantor is paid in full in cash or Cash Equivalents,
or such payment duly provided for to the satisfaction of the holders of
Guarantor Senior Debt, such payment or distribution (subject to the
provisions of Sections 13.06 and 13.07) shall be received, segregated from
other funds, and held in trust by the Trustee or such Holder or Paying
Agent for the benefit of, and shall immediately be paid over by the Trustee
(if the notice required by Section 13.06 has been received by the Trustee)
or by the Holder to, the holders of such Guarantor Senior Debt or their
representatives, ratably according to the respective amounts of such
Guar-
<PAGE>
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antor Senior Debt held or represented by each, until all such Guarantor
Senior Debt remaining unpaid shall have been paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt, after giving effect to any concurrent
payment or distribution to the holders of Guarantor Senior Debt.
Each Guarantor shall give prompt notice to the Trustee prior to any
dissolution, winding up, total or partial liquidation or total or partial
reorganization (including, without limitation, in bankruptcy, insolvency, or
receivership proceedings or upon any assignment for the benefit of creditors or
any other marshaling of such Guarantor's assets and liabilities).
SECTION 13.04. Holders of Guarantee Obligations To
Be Subrogated to Rights of Holders
of Guarantor Senior Debt.
-----------------------------------
Subject to the payment in full in cash or Cash Equivalents, or such
payment duly provided for to the satisfaction of the holders of Guarantor Senior
Debt, of all Guarantor Senior Debt, the Holders of Guarantee Obligations of a
Guarantor shall be subrogated to the rights of the holders of Guarantor Senior
Debt of such Guarantor to receive payments or distributions of assets of such
Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or
in respect of the Guarantee Obligations shall be paid in full in cash or Cash
Equivalents, and for the purpose of such subrogation no payments or
distributions to the holders of such Guarantor Senior Debt by or on behalf of
such Guarantor, or by or on behalf of the Holders by virtue of this Article
Thirteen, which otherwise would have been made to the Holders shall, as between
such Guarantor and the Holders, be deemed to be payment by such Guarantor to or
on account of such Guarantor Senior Debt, it being understood that the
provisions of this Article Thirteen are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one hand, and the holders
of such Guarantor Senior Debt, on the other hand.
<PAGE>
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If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Thirteen shall have
been applied, pursuant to the provisions of this Article Thirteen, to the
payment of all amounts payable under such Guarantor Senior Debt, then the
Holders shall be entitled to receive from the holders of such Guarantor Senior
Debt any such payments or distributions received by such holders of such
Guarantor Senior Debt in excess of the amount sufficient to pay all amounts
payable under or in respect of such Guarantor Senior Debt in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt.
Each Holder by purchasing or accepting a Note waives any and all
notice of the creation, modification, renewal, extension or accrual of any
Guarantor Senior Debt of the Guarantors and notice of or proof of reliance by
any holder or owner of Guarantor Senior Debt of the Guarantors upon this Article
Thirteen and the Guarantor Senior Debt of the Guarantors shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this
Article Thirteen, and all dealings between the Guarantors and the holders and
owners of the Guarantor Senior Debt of the Guarantors shall be deemed to have
been consummated in reliance upon this Article Thirteen.
SECTION 13.05. Obligations of the Guarantors
Unconditional.
-----------------------------
Nothing contained in this Article Thirteen or elsewhere in this
Indenture or in the Guarantees is intended to or shall impair, as between the
Guarantors and the Holders, the obligation of the Guarantors, which is absolute
and unconditional, to pay to the Holders all amounts due and payable under the
Guarantees 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 Guarantors other than the holders of the Guarantor
Senior Debt, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Thirteen, of the holders of
<PAGE>
-139-
Guarantor Senior Debt in respect of cash, property or securities of the
Guarantors received upon the exercise of any such remedy. Upon any payment or
distribution of assets of any Guarantor referred to in this Article Thirteen,
the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the
Holders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any liquidation, dissolution, winding up or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other Person making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Guarantor Senior Debt and other Indebtedness of any
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Thirteen. Nothing in this Article Thirteen shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Guarantor Senior Debt (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Guarantor Senior Debt or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Thirteen, the Trustee may request such Person to furnish evidence
to the reasonable satisfaction of the Trustee as to the amount of Guarantor
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Thirteen, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
<PAGE>
-140-
SECTION 13.06. Trustee Entitled To Assume Payments
Not Prohibited in Absence of Notice.
------------------------------------
The Trustee shall not at any time be charged with knowledge of the
existence of any facts that would prohibit the making of any payment to or by
the Trustee unless and until the Trustee or any Paying Agent shall have received
notice thereof from the Company or any Guarantor or from one or more holders of
Guarantor Senior Debt or from any Representative therefor and, prior to the
receipt of any such notice, the Trustee, subject to the provisions of Sections
7.01 and 7.02, shall be entitled in all respects conclusively to assume that no
such fact exists.
SECTION 13.07. Application by Trustee of Assets
Deposited with It.
--------------------------------
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall
be for the sole benefit of Holders of the Notes and, to the extent allocated for
the payment of Notes, shall not be subject to the subordination provisions of
this Article Thirteen. Otherwise, any deposit of assets or securities by or on
behalf of a Guarantor with the Trustee or any Paying Agent (whether or not in
trust) for payment of the Guarantees shall be subject to the provisions of this
Article Thirteen; provided, however, that if prior to the second Business Day
-------- -------
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including, without limitation, the payment
of either principal of or interest on any Note) the Trustee or such Paying Agent
shall not have received with respect to such assets the notice provided for in
Section 13.06, then the Trustee or such Paying Agent shall have full power and
authority to receive such assets and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
received by it on or after such date. The foregoing shall not apply to the
Paying Agent if the Company or any Subsidiary or Affiliate of the Company is
acting as Paying Agent. Nothing contained in this Section 13.07 shall limit the
<PAGE>
-141-
right of the holders of Guarantor Senior Debt to recover payments as
contemplated by this Article Thirteen from any Holder.
SECTION 13.08. No Waiver of Subordination
Provisions.
--------------------------
(a) No right of any present or future holder of any Guarantor Senior
Debt to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, by any such holder, or by any non-compliance by
any Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this Section
13.08, the holders of Guarantor Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Thirteen or
the obligations hereunder of the Holders of the Notes to the holders of
Guarantor Senior Debt, do any one or more of the following: (1) change the
manner, place, terms or time of payment of, or renew or alter, Guarantor Senior
Debt or any instrument evidencing the same or any agreement under which
Guarantor Senior Debt is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Guarantor Senior
Debt; (3) release any Person liable in any manner for the collection or payment
of Guarantor Senior Debt; and (4) exercise or refrain from exercising any rights
against the Guarantors and any other Person.
SECTION 13.09. Holders Authorize Trustee To
Effectuate Subordination of
Guarantee Obligations.
----------------------------
Each Holder of the Guarantee Obligations by his acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this
<PAGE>
-142-
Article Thirteen, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of any Guarantor tending towards liquidation or reorganization of the business
and assets of any Guarantor, the immediate filing of a claim for the unpaid
balance under its or his Guarantee Obligations in the form required in said
proceedings and cause 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 any
of the holders of the Guarantor Senior Debt or their Representative is hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Guarantee Obligations. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any holder of Guarantee
Obligations any plan of reorganization, arrangement, adjustment or composition
affecting the Guarantee Obligations or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to vote in respect of the claim of any holder of Guarantee
Obligations in any such proceeding.
SECTION 13.10. Right of Trustee To Hold Guarantor
Senior Debt.
----------------------------------
The Trustee shall be entitled to all of the rights set forth in this
Article Thirteen in respect of any Guarantor Senior Debt at any time held by it
to the same extent as any other holder of Guarantor Senior Debt, and nothing in
this Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 13.11. No Suspension of Remedies.
-------------------------
The failure to make a payment in respect of the Guarantees by reason
of any provision of this Article Thirteen shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 6.01.
<PAGE>
-143-
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Thirteen of the holders, from time to time, of Guarantor Senior
Debt.
SECTION 13.12. No Fiduciary Duty of Trustee to
Holders of Guarantor Senior Debt.
--------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Debt, and it undertakes to perform or observe such
of its covenants and obligations as are specifically set forth in this Article
Thirteen, and no implied covenants or obligations with respect to the Guarantor
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be liable to any such holders (other than for its willful misconduct
or gross negligence) if it shall pay over or deliver to the holders of Guarantee
Obligations or the Guarantors or any other Person, money or assets in compliance
with the terms of this Indenture. Nothing in this Section 13.12 shall affect
the obligation of any Person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of Guarantor Senior
Debt or their Representative.
<PAGE>
SIGNATURES
----------
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
T/SF COMMUNICATIONS CORPORATION
By:
-------------------------------
Name:
Title:
ATWOOD CONVENTION PUBLISHING, INC.
CORSEARCH, INC.
CRIMESEARCH, INC.
EXPO MAGAZINE, INC.
GALAXY DESIGN & PRINTING, INC.
GALAXY REGISTRATION, INC.
G.E.M. COMMUNICATION, INC.
TRANSPORTATION COMMUNICATIONS
SERVICES, INC.
T/SF EUROPE, INC.
T/SF INVESTMENT CO.
T/SF OF NEVADA, INC.
TRANSPORTATION INFORMATION
SERVICES, INC.
T/SF HOLDINGS, LLC
ALWOOD, LLC
GALAXY REGISTRATION, LLC
GEM GAMING, LLC
<PAGE>
-2-
By:
-----------------------------
Name:
Title:
IBJ SCHRODER BANK AND TRUST
COMPANY, as Trustee
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A NOTE]
-----------------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE>
CUSIP No.: [ ]
T/SF COMMUNICATIONS CORPORATION
-------------------------------
10 3/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
No. [ ] $100,000,000
T/SF COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company," which term includes any successor entities), for value received
promises to pay to CEDE & CO. or registered assigns the principal sum of ONE
HUNDRED MILLION Dollars ($100,000,000) on November 1, 2007.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
T/SF COMMUNICATIONS CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Dated:
A-1
<PAGE>
Certificate of Authentication
This is one of the 10 3/8% Senior Subordinated Notes due 2007, Series
A, referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK AND TRUST
COMPANY, as Trustee
By:
----------------------------
Authorized Signatory
Date of Authentication:
A-2
<PAGE>
(REVERSE OF SECURITY)
---------------------
10 3/8% Senior Subordinated Note due 2007, Series A
(1) Interest. T/SF COMMUNICATIONS CORPORATION, a Delaware corporation
--------
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above. Interest on the Notes will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from October 29, 1997. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing May 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by their check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
(3) Paying Agent and Registrar. Initially, IBJ Schroder Bank and
--------------------------
Trust Company (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
A-3
<PAGE>
(4) Indenture. The Company issued the Notes under an Indenture, dated
---------
as of October 29, 1997 (the "Indenture"), by and among the Company, the
Guarantors and the Trustee. This Note is one of a duly authorized issue of
Notes of the Company designated as its 10 3/8% Senior Subordinated Notes due
2007, Series A (the "Initial Notes"), limited (except as otherwise provided in
the Indenture) in aggregate principal amount to $100,000,000 which may be issued
under the Indenture. The Notes include the Initial Notes, the Private Exchange
Notes and the Exchange Notes, as defined below, issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes,
the Private Exchange Notes and the Exchange Notes are treated as a single class
of securities under the Indenture. Capitalized terms herein are used as defined
in the Indenture unless otherwise defined herein. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. Notwithstanding
anything to the contrary herein, the Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and said Act for a statement of
them. The Notes are general unsecured obligations of the Company. Payment on
each Note is guaranteed on a senior basis by the Guarantors pursuant to Article
12 of the Indenture. Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
(5) Redemption. The Notes will be redeemable, at the Company's
----------
option, in whole at any time or in part from time to time, on and after November
1, 2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set forth below, plus, in each case, accrued and unpaid interest, if any,
thereon to the date of redemption:
A-4
<PAGE>
Year Percentage
---- ----------
2002............................ 105.188%
2003............................ 103.458%
2004............................ 101.729%
2005 and thereafter............. 100.000%
At any time, or from time to time, on or prior to November 1, 2000,
the Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem the Notes at a redemption price equal to 110.375% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the date of redemption; provided that at least 65% of the principal amount of
---------
the Notes originally issued remains outstanding immediately following such
redemption. In order to effect the foregoing redemption with the proceeds of
any Equity Offering, the Company shall make such redemption not more than 90
days after the consummation of any such Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
A-5
<PAGE>
(8) Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement by and among the Company, the Guarantors and the Initial Purchaser,
the Company and the Guarantors will be obligated to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note for the Company's 10 3/8% Senior Subordinated Notes due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respects as the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
(9) Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
(10) Persons Deemed Owners. The registered Holder of a Note shall 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 one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(12) Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain
A-6
<PAGE>
covenants, but including, under certain circumstances, its obligation to pay the
principal of and interest on the Notes but without affecting the rights of the
Holders to receive such amounts from such deposits).
(13) Amendment; Supplement; Waiver. Subject to certain exceptions set
-----------------------------
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely affect
the rights of any Holder of a Note.
(14) Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and the Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Restricted Subsidiaries, and on the ability of the Company and its Restricted
Subsidiaries to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Company's and its Restricted Subsidiaries' assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
(15) Subordination. The Notes are subordinated in right of payment,
-------------
in the manner and to the extent set forth in
A-7
<PAGE>
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder by his
acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on his behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such purposes.
(16) Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(17) Defaults and Remedies. Except as set forth in the Indenture, if
---------------------
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal or
interest when due, for any reason or a Default in compliance with Article Five
of the Indenture) if it determines that withholding notice is in their interest.
(18) Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or its
respective Affiliates as if it were not the Trustee.
(19) No Recourse Against Others. No partner, director, officer,
--------------------------
employee or stockholder, as such, of the Company or any Guarantor, as such,
shall have any liability for any ob-
A-8
<PAGE>
ligations of the Company or any Guarantor under the Notes, the Indenture, the
Guarantees or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
(20) Guarantees. This Note will be entitled to the benefits of
----------
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Guarantors, the
Trustee and the Holders.
(21) Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(22) Governing Law. This Note and the Indenture shall be governed by
-------------
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
(23) Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(24) 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 Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
A-9
<PAGE>
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: T/SF COMMUNICATIONS CORPORATION, 2407 East Skelly
Drive, Tulsa, Oklahoma 74105.
A-10
<PAGE>
ASSIGNMENT FORM
---------------
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________________ Signed:___________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [ ], the undersigned confirms that it has not utilized
any general solicitation or general advertising in connection with the transfer:
A-11
<PAGE>
[Check One]
-----------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if item (3), (4), (5) or (7)
-------- -------
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other in-
A-12
<PAGE>
formation as the Trustee or the Company have reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: _____________________ Signed:
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:_________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: __________________
NOTICE: To be executed by
an executive officer
A-13
<PAGE>
EXHIBIT B
---------
CUSIP No.: [ ]
T/SF COMMUNICATIONS CORPORATION
10 3/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
No. [ ] $100,000,000
T/SF COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company," which term includes any successor entities), for value received
promises to pay to CEDE & CO. or registered assigns the principal sum of ONE
HUNDRED MILLION Dollars ($100,000,000) on November 1, 2007.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
T/SF COMMUNICATIONS CORPORATION
By:
---------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated:
B-1
<PAGE>
Certificate of Authentication
This is one of the 10 3/8% Senior Subordinated Notes due 2007, Series
B, referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK AND TRUST
COMPANY, as Trustee
By:
---------------------------------
Authorized Signatory
Date of Authentication:
B-2
<PAGE>
(REVERSE OF SECURITY)
---------------------
10 3/8% Senior Subordinated Note due 2007, Series B
(1) Interest. T/FS COMMUNICATIONS CORPORATION, a Delaware corporation
--------
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate per annum shown above. Interest on the Notes will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from October 29, 1997. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing May 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by their check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
(3) Paying Agent and Registrar. Initially, IBJ Schroder Bank and
--------------------------
Trust Company (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice to
the Holders.
(4) Indenture. The Company issued the Notes under an Indenture, dated
---------
as of October 29, 1997 (the "Indenture"), by and among the Company, the
Guarantors and the Trustee. This Note is one of a duly authorized issue of
Exchange Notes of the Company designated as it 10 3/8% Senior Subordinated Notes
due
B-3
<PAGE>
2007, Series B (the "Exchange Notes"), limited (except as otherwise provided
in the Indenture) in aggregate principal amount to $100,000,000, which may be
issued under the Indenture. The Notes include the 10 3/8% Senior Subordinated
Notes due 2007, Series A (the "Initial Notes"), the Private Exchange Notes, and
the Exchange Notes, issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement. The Initial Notes, the Private Exchange Notes
and the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company. Payment on each Note is
guaranteed on a senior basis by the Guarantors pursuant to Article 12 of the
Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time in accordance with its terms.
(5) Redemption. The Notes will be redeemable, at the Company's
----------
option, in whole at any time or in part from time to time, on and after November
1, 2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set forth below, plus, in each case, accrued and unpaid interest, if any,
thereon to the date of redemption:
Year Percentage
---- ----------
2002............................ 105.188%
2003............................ 103.458%
2004............................ 101.729%
2005 and thereafter............. 100.000%
At any time, or from time to time, on or prior to November 1, 2000,
the Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem the Notes at a redemption price equal to 110.375% of
the prin-
B-4
<PAGE>
cipal amount thereof, plus accrued and unpaid interest, if any, thereon
to the date of redemption; provided, that at least 65% of the principal amount
--------
of the Notes originally issued remains outstanding immediately following such
redemption. In order to effect the foregoing redemption with the proceeds of
any Equity Offering, the Company shall make such redemption not more than 60
days after the consummation of any such Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
(8) Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
B-5
<PAGE>
(9) Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
(10) Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(11) Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, including, under certain circumstances, its
obligation to pay the principal of and interest on the Notes but without
affecting the rights of the Holders to receive such amounts from such deposit).
(12) Amendment; Supplement; Waiver. Subject to certain exceptions set
-----------------------------
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely affect
the rights of any Holder of a Note.
(13) Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and the Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted
B-6
<PAGE>
Subsidiaries, issue Preferred Stock of its Restricted Subsidiaries, and on the
ability of the Company and its Restricted Subsidiaries to merge or consolidate
with any other Person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the Company's and its Restricted
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
(14) Subordination. The Notes are subordinated in right of payment,
-------------
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
(15) Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(16) Defaults and Remedies. Except as set forth in the Indenture, if
---------------------
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal or
interest when due, for any reason or a Default in compliance with Article Five
of the Indenture) if it determines that withholding notice is in their interest.
B-7
<PAGE>
(17) Trustee Dealings with the Company. The Trustee under the
---------------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
its respective Affiliates as if it were not the Trustee.
(18) No Recourse Against Others. No partner, director, officer,
--------------------------
employee or stockholder, as such, of the Company or any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, the Indenture, the Guarantees or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
(19) Guarantees. This Note will be entitled to the benefits of
----------
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Guarantors, the
Trustee and the Holders.
(20) Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(21) Governing Law. This Note and the Indenture shall be governed by
-------------
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
(22) Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(23) CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed
B-8
<PAGE>
on the Notes as a convenience to the Holders of the Notes. No representation is
made as to the accuracy of such numbers as printed on the Notes and reliance may
be placed only on the other identification numbers printed hereon.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: T/SF COMMUNICATIONS CORPORATION, 2407 East Skelly
Drive, Tulsa, Oklahoma 74105.
B-9
<PAGE>
ASSIGNMENT FORM
---------------
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________________ Signed:___________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [ ], the undersigned confirms that it has not utilized
any general solicitation or general advertising in connection with the transfer:
B-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
------------------------------------
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _________________ __________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face
of the within Note in every particular without
alteration or enlargement or any change whatsoever
and be guaranteed.
Signature Guarantee:__________________________
B-11
<PAGE>
EXHIBIT C
---------
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
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 NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF
THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
[ ], [ ]
[ ]
[ ]
[ ]
Ladies and Gentlemen:
In connection with our proposed purchase of 10 3/8% Senior
Subordinated Notes due 2007 (the "Notes") of T/SF COMMUNICATIONS CORPORATION, we
confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the indenture relating
to the Notes (the "Indenture") and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act"), and all applicable State
securities laws.
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold within the United States or to, or for the account or benefit of,
U.S. persons except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so only
(i) to the Company or any subsidiary thereof, (ii) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act) that, prior to such transfer, furnishes (or has furnished
D-1
<PAGE>
on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the
Indenture) a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Notes (the form
of which letter can be obtained from the Trustee), (iii) outside the United
States in accordance with Rule 904 of Regulation S promulgated under the
Securities Act, (iv) pursuant to the exemption from registration provided
by Rule 144 under the Securities Act (if available), or (v) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to 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 Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes 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, the Company, the Trustee and others 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.
D-2
<PAGE>
Very truly yours,
[Name of Transferee]
By:
-------------------------
Name:
Title:
D-3
<PAGE>
EXHIBIT E
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
[ ], [ ]
[ ]
[ ]
[ ]
[ ]
Re: T/SF COMMUNICATIONS CORPORATION. (the "Company")
10 3/8% Senior Subordinated Notes due 2007 (the
"Notes")
------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate
principal amount of the Notes, 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 Notes 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 offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged 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;
E-1
<PAGE>
(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 Notes.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
----------------------------
Authorized Signature
E-2
<PAGE>
EXHIBIT F
---------
GUARANTEE
---------
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Company under the Indenture or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Twelve of the
Indenture and this Guarantee. This Guarantee will become effective in
accordance with Article Twelve of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of October 29, 1997, by and among
T/SF COMMUNICATIONS CORPORATION, a Delaware corporation, and IBJ Schroder Bank
and Trust Company, as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Twelve of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Guarantee.
F-1
<PAGE>
This Guarantee is subject to release upon the terms set forth in the
Indenture.
F-2
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly
executed.
Date: October 29, 1997
ATWOOD CONVENTION PUBLISHING, INC.
CORSEARCH, INC.
CRIMESEARCH, INC.
EXPO MAGAZINE, INC.
GALAXY DESIGN & PRINTING, INC.
GALAXY REGISTRATION, INC.
G.E.M. COMMUNICATION, INC.
TRANSPORTATION COMMUNICATIONS
SERVICES, INC.
T/SF EUROPE, INC.
T/SF INVESTMENT CO.
T/SF OF NEVADA, INC.
TRANSPORTATION INFORMATION
SERVICES, INC.,
as Guarantors
By:
------------------------------
Name:
Title:
F-3
<PAGE>
EXHIBIT 4.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of October 29, 1997
By and Among
T/SF COMMUNICATIONS CORPORATION
as Issuer
THE GUARANTORS
named herein
and
FIRST UNION CAPITAL MARKETS CORP.
as Initial Purchaser
================================================================================
$100,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions..................................................... 1
2. Exchange Offer.................................................. 5
3. Shelf Registration..............................................
4. Additional Interest............................................. 10
5. Registration Procedures......................................... 12
6. Registration Expenses........................................... 23
7. Indemnification................................................. 24
8. Rule 144 and 144A............................................... 29
9. Underwritten Registrations...................................... 29
10. Miscellaneous................................................... 30
(a) No Inconsistent Agreements.................................. 30
(b) Adjustments Affecting Registrable Notes..................... 30
(c) Amendments and Waivers...................................... 30
(d) Notices..................................................... 30
(e) Successors and Assigns...................................... 32
(f) Counterparts................................................ 32
(g) Headings.................................................... 32
(h) Governing Law............................................... 32
(i) Severability................................................ 32
(j) Securities Held by the Company or Its Affiliates............ 32
(k) Third Party Beneficiaries................................... 33
(l) Entire Agreement............................................ 33
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
October 29, 1997 by and among T/SF Communications Corporation, a Delaware
corporation (the "Company"), the Guarantors named on the signature pages hereto
-------
(the "Guarantors") and First Union Capital Markets Corp. (the "Initial
-------
Purchaser").
-------
This Agreement is entered into in connection with the Purchase
Agreement, dated as of October 24, 1997, by and among the Company, the
Guarantors and the Initial Purchaser (the "Purchase Agreement") that provides
------------------
for the sale by the Company to the Initial Purchaser of $100,000,000 aggregate
principal amount of the Company's 10 3/8% Senior Subordinated Notes due 2007
(the "Notes"). The Notes will be guaranteed (the "Guarantees") on a senior
-----
subordinated basis by the Guarantors. In order to induce the Initial Purchaser
to enter into the Purchase Agreement, the Company and the Guarantors have agreed
to provide the registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and its direct and indirect transferees and assigns.
The execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1.
- --
Definitions
- -----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the first introductory paragraph hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
Closing Date: The Closing Date as defined in the Purchase Agreement.
------------
Company: See the first introductory paragraph hereto.
-------
<PAGE>
-2-
Effectiveness Date: The date that is 150 days after the Issue Date.
------------------
Effectiveness Period: See Section 3(a) hereof.
--------------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Registration Statement: See Section 2(a) hereof.
-------------------------------
Filing Date: Within 30 days after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of October 29, 1997 by & among the
---------
Company, the Guarantors and IBJ Schroder Bank and Trust Company, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph hereto.
-----------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: The date on which the original Notes were sold to the
----------
Initial Purchaser pursuant to the Purchase Agreement.
NASD: See Section 5(s) hereof.
----
Notes: See the second introductory paragraph hereto.
-----
Participant: See Section 7(a) hereof.
-----------
<PAGE>
-3-
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, limited
------
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Note upon original issuance of the Notes and
-----------------
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(v)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(v) hereof is applicable, the Exchange Registration Statement) covering such
Note, Exchange Note or Private Exchange Note, as the case may be, has been
declared effective by the SEC and such Note, Exchange Note or Private Exchange
Note, as the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, is sold in compliance with Rule 144, (iii) such Note has
been exchanged for an Exchange Note or Exchange Notes pursuant to an Exchange
Offer and is en-
<PAGE>
-4-
titled to be resold without complying with the prospectus delivery requirements
of the Securities Act or (iv) such Note, Exchange Note or Private Exchange Note,
as the case may be, ceases to be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Registration Statement and any
registration statement filed in connection with a Shelf Registration, filed with
the SEC pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including post-
effective amendments, all exhibits and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration: See Section 3(a) hereof.
------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
<PAGE>
-5-
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2.
- --
Exchange Offer
- --------------
(a)
The Company and the Guarantors shall file with the SEC no later than
the Filing Date an offer to exchange (the "Exchange Offer") any and all of the
--------------
Registrable Notes (other than the Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company that are identical
in all material respects to the Notes (the "Exchange Notes") (and that are
--------------
entitled to the benefits of the Indenture or a trust indenture that is identical
in all material respects to the Indenture (other than such changes to the
Indenture or any such identical trust indenture as are necessary to comply with
any requirements of the SEC to effect or maintain the qualification thereof
under the TIA) and that, in either case, has been qualified under the TIA),
except that the Exchange Notes (other than Private Exchange Notes, if any) shall
have been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and shall comply with all applicable tender
-------------------------------
offer rules and regulations under the Exchange Act. The Company and the
Guarantors agree to use their respective best efforts to (x) cause the Exchange
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20
business days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 180th day following the Issue Date. If after
such Exchange Registration Statement is declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this Agreement.
Each Holder who participates in the Exchange Offer will be required to represent
that any Exchange Notes received by it will be acquired in the ordinary course
of its business, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement or understanding with any Person to participate
in the distribution of the Exchange Notes in violation of the provisions of the
Securities Act and that such Holder is not an affiliate of the Company within
the meaning of
<PAGE>
-6-
the Securities Act and is not acting on behalf of any persons or entities who
could not truthfully make the foregoing representations. Upon consummation of
the Exchange Offer in accordance with this Section 2, the provisions of this
Agreement shall continue to apply, mutatis mutandis, solely with respect to
------- --------
Registrable Notes that are Private Exchange Notes and Exchange Notes held by
Participating Broker-Dealers, and the Company shall have no further obligation
to register Registrable Notes (other than Private Exchange Notes and other than
in respect of any Exchange Notes as to which clause 2(c)(v) hereof applies)
pursuant to Section 3 hereof. No securities other than the Exchange Notes shall
be included in the Exchange Registration Statement.
(b)
The Company and the Guarantors shall include within the Prospectus
contained in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, that shall
contain a summary statement of the positions taken or policies made by the Staff
of the SEC with respect to the potential "underwriter" status of any broker-
dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
- ----------------------------
publicly disseminated by the staff of the SEC or such positions or policies, in
the judgment of the Initial Purchaser, represent the prevailing views of the
Staff of the SEC. Such "Plan of Distribution" section shall also expressly
permit the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
The Company and the Guarantors shall use their respective best efforts
to keep the Exchange Registration Statement effective and to amend and
supplement the Prospectus contained therein in order to permit such Prospectus
to be lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 30 days after the
- -------- -------
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
<PAGE>
-7-
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or that are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, the Company, upon the request of the Initial Purchaser
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
shall issue and deliver to the Initial Purchaser in exchange (the "Private
-------
Exchange") for such Notes 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 Notes (the "Private Exchange Notes") and that are issued pursuant
----------------------
to the same indenture as the Exchange Notes, except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
In connection with the Exchange Offer, the Company and the Guarantors
shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company and the Guarantors shall:
<PAGE>
-8-
(1) accept for exchange all Notes properly tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may 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 Notes shall
not be subject to the transfer restrictions set forth in the Indenture and (2)
the Private Exchange Notes shall be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent
together on all matters as one class and that neither the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company and the Guarantors are not
permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 180 days of the Issue Date, (iii) the holder of Private
Exchange Notes so requests at any time after the consummation of the Private
Exchange, (iv) the Holders of not less than a majority in aggregate principal
amount of the Registrable Notes determine that the interests of the Holders
would be materially adversely affected by consummation of the Exchange Offer or
(v) in the case of any Holder that participates in the Exchange Offer, such
Holder does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the Company within the
meaning of the Securities Act), then the Company shall promptly deliver to the
Holders and the Trustee written notice thereof (the "Shelf Notice") to the
------------
Trustee and in the case of clauses (i), (ii) and (iv), all Holders, in the case
of clause (iii), the Holders of the Private Exchange Notes and in the case of
clause (v), the affected Holder, and shall file a Shelf Registration pursuant to
Section 3 hereof.
<PAGE>
-9-
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company and the Guarantors shall as
------------------
promptly as reasonably practicable file with the SEC a Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415 covering
all of the Registrable Notes (the "Shelf Registration"). If the Company and the
------------------
Guarantors shall not have yet filed an Exchange Registration Statement, the
Company and the Guarantors shall use their respective best efforts to file with
the SEC the Shelf Registration on or prior to the Filing Date. The Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company and the Guarantors shall not permit any
securities other than the Registrable Notes to be included in the Shelf
Registration.
The Company and the Guarantors shall use their respective best efforts
to cause the Shelf Registration to be declared effective under the Securities
Act on or prior to the Effectiveness Date and to keep the Shelf Registration
continuously effective under the Securities Act until the date that is two years
from the Issue Date (the "Effectiveness Period"), or such shorter period ending
--------------------
when all Registrable Notes covered by the Shelf Registration have been sold in
the manner set forth and as contemplated in the Shelf Registration.
(b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
-------------------------
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Company
and the Guarantors shall use their respective best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company and the Guarantors shall
--------------------------
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
<PAGE>
-10-
4. Additional Interest
-------------------
(a) The Company, the Guarantors and the Initial Purchaser agree that
the Holders of Registrable Notes will suffer damages if the Company and the
Guarantors fail to fulfill their respective obligations under Section 2 or
Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Company and the Guarantors agree
to pay, as liquidated damages, additional interest on the Notes ("Additional
----------
Interest") under the circumstances and to the extent set forth below (without
- --------
duplication):
(i) if neither the Exchange Registration Statement nor the Shelf
Registration has been filed on or prior to the Filing Date, Additional
Interest shall accrue on the Notes over and above the stated interest at a
rate of 0.50% per annum for the first 90 days immediately following the
Filing Date, such Additional Interest rate increasing by an additional
0.25% per annum at the beginning of each subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date, then, commencing on the 151st day after the Issue Date,
Additional Interest shall be accrued on the Notes included or that should
have been included in such Registration Statement over and above the stated
interest at a rate of 0.50% per annum for the first 90 days immediately
following the Effectiveness Date, such Additional Interest rate increasing
by an additional 0.25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Company and the Guarantors have not exchanged
Exchange Notes for all Notes validly tendered in accordance with the terms
of the Exchange Offer on or prior to the 180th day after the Issue Date or
(B) the Exchange Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated for a period of 15
consecutive days without being succeeded immediately by an additional
Exchange Registration Statement filed and declared effective or (C) if
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period for a period of 15 consecutive days without being
succeeded immediately by an additional Exchange Registration Statement
filed and declared effective, then Additional Inter-
<PAGE>
-11-
est shall be accrued on the Notes (over and above any interest otherwise
payable on the Notes) at a rate of 0.50% per annum on (x) the 181st day
after the Issue Date, in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective without being declared
effective within five business days thereafter in the case of (B) above, or
(z) the day such Shelf Registration ceases to be effective, in the case of
(C) above, such Additional Interest rate increasing by an additional 0.25%
at the beginning of each such subsequent 90-day period (it being understood
and agreed that, notwithstanding any provision to the contrary, so long as
any Note that is the subject of a Shelf Notice is then covered by an
effective Shelf Registration Statement, no Additional Interest shall accrue
on such Note);
provided, however, that the Additional Interest rate on any affected Note may
- -------- -------
not exceed at any one time in the aggregate 2.0% in excess of the original per
annum interest rate; and provided, further, that (1) upon the filing of the
-------- -------
Exchange Registration Statement or a Shelf Registration (in the case of clause
(i) of this Section 4(a)), (2) upon the effectiveness of the Exchange
Registration Statement or the Shelf Registration (in the case of clause (ii) of
this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes
tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon the
effectiveness of the Exchange Registration Statement that had ceased to remain
effective (in the case of (iii)(B) of this Section 4(a)) or upon the
effectiveness of the Shelf Registration that had ceased to remain effective (in
the case of (iii)(C) of this Section 4(a)), Additional Interest on the affected
Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue.
(b) The Company and the Guarantors shall notify the Trustee within one
business day after each and every date on which an event occurs in respect of
which Additional Interest is required to be paid (an "Event Date"). Any amounts
----------
of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable in cash semi-annually on each May 1 and November 1 (to
the holders of record on the October 15 and April 15 immediately preceding such
dates), 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 Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable
<PAGE>
-12-
during such period (determined on the basis of a 360-day year consisting 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.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company and the Guarantors shall effect such
registrations to permit the sale of the securities covered thereby in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
and in connection with any Registration Statement filed by the Company and the
Guarantors hereunder, the Company and the Guarantors shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections
2 or 3 hereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that, if (1) such filing is pursuant to Section 3 hereof
-------- -------
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the
Company and the Guarantors shall furnish to and afford the Holders of the
Registrable Notes covered by such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each
case at least five business days prior to such filing). The Company and the
Guarantors shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may be, or
their counsel, or the managing underwriters, if any, shall reasonably
object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration
<PAGE>
-13-
or Exchange Registration Statement, as the case may be, as may be necessary
to keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be; cause
the related Prospectus to be supplemented by any prospectus supplement
required by applicable law, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act and
the Exchange Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of
any securities being sold by a Participating Broker-Dealer covered by any
such Prospectus; the Company and the Guarantors shall be deemed not to have
used their respective best efforts to keep a Registration Statement
effective during the Applicable Period if each of the Company and the
Guarantors voluntarily and knowingly takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period, unless such
action is required by applicable law or unless the Company and the
Guarantors comply with this Agreement, including without limitation, the
provisions of paragraph 5(k) hereof and the last paragraph of this Section
5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but
in any event within two business days) and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or
any post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules,
<PAGE>
-14-
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes or resales of Exchange Notes by Participating Broker-
Dealers the representations and warranties of the Company contained in any
agreement (including any underwriting agreement), contemplated by Section
5(n) hereof cease to be true and correct, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or written threat of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respects or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and (vi) of
the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use their respective reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus
or suspending the qualification (or exemption from qualification) of any of
the Registrable Notes or the Exchange Notes for sale in any jurisdiction
and, if any such order is issued, to use their best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
<PAGE>
-15-
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters, if any, such
Holders or counsel for any of them determine is reasonably necessary to be
included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after
the Company has received notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment and (iii) supplement
or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling Holder
of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to their respective counsel and each managing underwriter, if
any, at the sole expense of the Company, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules and, if
requested, all documents incorporated or deemed to be incorporated therein
by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling Holder
of Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their respective counsel and the underwriters, if any, at the sole
expense of the Company, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Company and the Guaran-
<PAGE>
-16-
tors hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers, if any, in connection with the
offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or Exchange
Notes or any delivery of a Prospectus contained in the Exchange
Registration Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, to use their best efforts to
register or qualify and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, the managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Notes for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer
or the managing underwriter or underwriters reasonably request in writing;
provided, however, that where Exchange Notes held by Participating Broker-
-------- -------
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Company and the Guarantors agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do
any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided, however, that none of the
-------- -------
Company or the Guarantors shall be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in any such jurisdiction where it is not then so subject.
<PAGE>
-17-
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use their respective best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the Holders thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company and the Guarantors will cooperate in
all reasonable respects with the filing of such Registration Statement and
the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi), hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the Company's sole expense, a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company shall not be
required to amend or supplement a Registration Statement,
<PAGE>
-18-
any related Prospectus or any document incorporated therein by reference,
in the event that, and for a period not to exceed an aggregate of 30 days
in any calendar year if, (i) an event occurs and is continuing as a result
of which the Shelf Registration would, in the Company's good faith
judgment, contain 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, and
(ii) (a) the Company determines in its good faith judgment that the
disclosure of such event at such time would have a Material Adverse Effect
on the business, operations or prospects of the Company or (b) the
disclosure otherwise relates to a pending material business transaction
that has not yet been publicly disclosed.
(l) Use their respective best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case may
be, to be rated with the appropriate rating agencies, if so requested by
the Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement or the Exchange Notes, as the
case may be, or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, as are customarily made by
<PAGE>
-19-
issuers to underwriters in underwritten offerings of debt securities
similar to the Notes, and confirm the same in writing if and when
requested; (ii) obtain the written opinion of counsel to the Company and
written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings of debt similar to the Notes and such other
matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) obtain "cold comfort" letters and updates thereof in
form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration
Statement and the managing underwriter or underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3 hereof
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection
by any selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained
<PAGE>
-20-
by any such selling Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the "Inspectors"), at the
----------
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and instruments
of the Company and its subsidiaries (collectively, the "Records") as shall
-------
be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the respective officers, directors
and employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement. Records that the Company determines, in good faith,
to be confidential and any Records that it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is, in the
opinion of counsel for any Inspector, necessary or advisable in connection
with any action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out of, based
upon, relating to or involving this Agreement or any transactions
contemplated hereby or arising hereunder or (iv) the information in such
Records has been made generally available to the public. Each selling
Holder of such Registrable Securities and each such Participating Broker-
Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Company unless and until such information is generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Ex-
<PAGE>
-21-
change Offer or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Registrable Notes, to
effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and use its reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable such indenture to be
so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, who may, at the Company's
election, be internal counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or Private
Exchange Notes, as the case may be, and the related indenture constitute
legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with its respective terms, subject to customary
exceptions and qualifications.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Regis-
<PAGE>
-22-
trable Notes that such Registrable Notes are being cancelled in exchange
for the Exchange Notes or the Private Exchange Notes, as the case may be;
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
----
(u) Use their respective best efforts to take all other steps
necessary or advisable to effect the registration of the Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company and the Guarantors may require each seller of Registrable
Notes as to which any registration is being effected to furnish to the Company
and the Guarantors such information regarding such seller and the distribution
of such Registrable Notes as the Company and the Guarantors may, from time to
time, reasonably request. The Company and the Guarantors may exclude from such
registration the Registrable Notes of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such request
and in such event shall have no further obligation under this Agreement
(including, without limitation, obligations under Section 4 hereof) with respect
to such seller or any subsequent holder of such Registrable Notes. Each seller
as to which any Shelf Registration is being effected agrees to furnish promptly
to the Company and the Guarantors all information required to be disclosed in
order to make the information previously furnished to the Company and the
Guarantors by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Sections 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, un-
<PAGE>
-23-
til such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company and the Guarantors shall be borne by the
Company and the Guarantors whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
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 Registrable Notes included in any Registration
Statement or sold by any Participating Broker-Dealer, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) reasonable fees and
disbursements of counsel for the Company and reasonable fees and disbursements
of special counsel for the sellers of Registrable Notes
<PAGE>
-24-
(subject to the provisions of Section 6(b) hereof), (v) fees and disbursements
of all independent certified public accountants referred to in Section 5(n)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (vi) rating
agency fees, if any, and any fees associated with making the Registrable Notes
or Exchange Notes eligible for trading through the Depository Trust Company,
(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, (xi) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, if applicable, and (xii) the expenses
relating to printing, word processing and distributing of all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary to comply with this Agreement.
(b) The Company and the Guarantors shall (i) reimburse the Holders of
the Registrable Notes being registered in a Shelf Registration for the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority in aggregate principal amount of the Registrable Notes to
be included in such Registration Statement and (ii) reimburse out-of-pocket
expenses (other than legal expenses) of Holders of Registrable Notes incurred in
connection with the registration and sale of the Registrable Notes pursuant to a
Shelf Registration or in connection with the exchange of Registrable Notes
pursuant to the Exchange Offer. In addition, the Company and the Guarantors
shall reimburse the Initial Purchaser for the reasonable fees and expenses of
one counsel in connection with the Exchange Offer, which shall be Cahill Gordon
& Reindel, and shall not be required to pay any other legal expenses in
connection therewith.
7. Indemnification
---------------
(a) Each of the Company and the Guarantors agrees to indemnify and
hold harmless each Holder of Registrable Notes offered pursuant to a Shelf
Registration Statement and each Participating Broker-Dealer selling Exchange
Notes during the Applicable Period, the officers and directors of each such
Person or its affiliates, and each other Person, if any, who controls any such
Person or its affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the
<PAGE>
-25-
Exchange Act (each, a "Participant"), from and against any and all losses,
-----------
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses actually incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement pursuant to which the offering of such
Registrable Notes or Exchange Notes, as the case may be, is registered (or any
amendment thereto) or related Prospectus (or any amendments or supplements
thereto) or any related preliminary prospectus, or caused by, arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that none of the Company or the Guarantors will be required
to indemnify a Participant if (i) such losses, claims, damages or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by or on behalf of such
Participant expressly for use therein or (ii) if such Participant sold to the
person asserting the claim the Registrable Notes or Exchange Notes that are the
subject of such claim and such untrue statement or omission or alleged untrue
statement or omission was contained or made in any preliminary prospectus and
corrected in the Prospectus or any amendment or supplement thereto and the
Prospectus does not contain any other untrue statement or omission or alleged
untrue statement or omission of a material fact that was the subject matter of
the related proceeding and it is established by the Company in the related
proceeding that such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company and each of the Guarantors, the Company's
directors and officers, each Guarantor's directors and officers and each Person
who controls the Company and the Guarantors within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only (i) with
reference to information relat-
<PAGE>
-26-
ing to such Participant furnished to the Company in writing by or on behalf of
such Participant expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto or any preliminary prospectus or (ii) with
respect to any untrue statement or representation made by such Participant in
writing to the Company. The liability of any Participant under this paragraph
shall in no event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
----------- ------
notify the Person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemnifying Person, upon request of the
- ------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any obligation or liability that it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not otherwise aware of
such action or claim). In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person shall have failed within a reasonable
period of time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such proceeding or
separate but substantially similar related proceeding in the same jurisdiction
arising out of the same general allegations, be liable for the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and
<PAGE>
-27-
that all such fees and expenses shall be reimbursed promptly as they are
incurred. Any such separate firm for the Participants and such control Persons
of Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Company, its directors, its
officers and such control Persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent, but if settled
with such consent or if there be a final non-appealable judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for reasonable fees and expenses actually
incurred by counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; provided, however, that the Indemnifying Person shall not be liable
-------- -------
for any settlement effected without its consent pursuant to this sentence if the
Indemnifying Person is contesting, in good faith, the request for reimbursement.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, 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 any
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such
<PAGE>
-28-
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes 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 Person or Persons on the one hand and the
Indemnified Person or Persons 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
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 on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contri-
<PAGE>
-29-
bution from any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability that the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and 144A
-----------------
The Company and the Guarantors covenant that they will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time the Company and the Guarantors are not required to file such
reports, they will, upon the request of any Holder of Registrable Notes, make
publicly available annual reports and such information, documents and other
reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The
Company and the Guarantors further covenant for so long as any Registrable Notes
remain outstanding, to make available to any Holder or beneficial owner of
Registrable Notes in connection with any sale thereof and any prospective
purchaser of such Registrable Notes from such Holder or beneficial owner the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Company and the
Guarantors.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
<PAGE>
-30-
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and shall not, after the date of this Agreement, enter into any
agreement with respect to any of the Company's securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any agreement with respect to any of its securities that
will grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) 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, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. 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 Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold by such Holders
pursuant to such Registration Statement; provided, however, that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case
<PAGE>
-31-
may be, set forth on the records of the registrar under the Indenture, with
a copy in like manner to the Initial Purchaser as follows:
FIRST UNION CAPITAL MARKETS CORP.
301 South College Street, TW-10
Charlotte, NC 28288
Facsimile No.: (704) 383-9527
Attention: Corporate Finance Department
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: William M. Hartnett, Esq.
2. if to the Initial Purchaser, at the addresses specified in Section
10(d)(1);
3. if to the Company, at the address as follows:
T/SF COMMUNICATIONS CORPORATION
350 Park Avenue
New York, New York 10022
Facsimile No.: (212) 935-0877
Attention: General Counsel
with a copy to:
Proskauer Rose, LLP
1585 Broadway
New York, NY 10036
Facsimile No.: (212) 969-2900
Attention: Lawrence H. Budish, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
<PAGE>
-32-
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties 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.
(j) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE>
-33-
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
T/SF COMMUNICATIONS CORPORATION
By:
------------------------------------
Name:
Title:
ATWOOD CONVENTION PUBLISHING, INC.
CORSEARCH, INC.
CRIMESEARCH, INC.
EXPO MAGAZINE, INC.
GALAXY DESIGN & PRINTING, INC.
GALAXY REGISTRATION, INC.
G.E.M. COMMUNICATION, INC.
TRANSPORTATION COMMUNICATIONS
SERVICES, INC.
T/SF EUROPE, INC.
T/SF INVESTMENT CO.
T/SF OF NEVADA, INC.
TRANSPORTATION INFORMATION
SERVICES, INC.
T/SF Holdings, LLC
Atwood, LLC
Galaxy Registration, LLC
GEM Gaming, LLC
By:
------------------------------------
Name:
Title:
FIRST UNION CAPITAL MARKETS CORP.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.5
LETTER OF TRANSMITTAL
for
10 3/8% Senior Subordinated Notes
of
T/SF COMMUNICATIONS CORPORATION
Pursuant to the
EXCHANGE OFFER
In Respect Of
All of its Outstanding 10 3/8% Senior Subordinated Notes Due 2007
for
10 3/8% Series B Senior Subordinated Notes Due 2007
--------------------
Pursuant to the Prospectus Dated November [28], 1997
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER
[26], 1997 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
To: IBJ Schroder Bank & Trust Company, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Deilvery:
IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company
P.O. Box 84 One State Street One State Street
Bowling Green Station New York, NY 10004 New York, NY 10004
New York, NY 10274-0084 Attn: Securities Processing Window, Attn: Securities Processing Window,
Attn: Reorganization Subcellar One (SC-1) Subcellar One (SC-1)
Operations Department
</TABLE>
For information, call:
Information and Facsimile
Confirmation (212) 858-2103
Facsimile: (212) 858-2611 (Eligible Institutions Only)
Delivery of this letter of transmittal to an address, or transmission via
telegram, telex or facsimile, other than as set forth above, will not constitute
a valid delivery. The instructions contained herein should be read carefully
before this letter of transmittal is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated November [28], 1997, of T/SF Communications
Corporation, a Delaware corporation (the "Company"), which, together with this
letter of transmittal and the instructions hereto (the "Letter of Transmittal"),
constitute the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 10 3/8% Series B Senior Subordinated Notes Due 2007 (the
"New Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus constitutes a part, for each $1,000 principal amount of its
outstanding 10 3/8% Senior Subordinated Notes Due 2007 (the "Old Notes"), upon
the terms and subject to the conditions set forth in the Prospectus.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the
<PAGE>
procedures set forth in the Prospectus under "The Exchange Offer - Procedures
for Tendering" by any financial institution that is a participant in DTC and
whose name appears on a security position listing as the owner of Old Notes
(such participants, acting on behalf of Holders, are referred to herein,
together with such Holders, as "Acting Holders"); or (iii) tender of Old Notes
is to be made according to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer - Guaranteed Delivery Procedures." DELIVERY
OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Old Notes or other required documents to reach the Exchange
Agent prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Old Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer - Guaranteed
Delivery Procedures."
The term "Holder" with respect to the Exchange Offer means any person: (i) in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder; or (ii) whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES MUST
COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers and principal
amounts on a separately executed schedule and affix the schedule to this Letter
of Transmittal. Tenders of Old Notes will be accepted only in principal amounts
equal to $1,000 or integral multiples thereof.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Name(s) and Address(es) of Holder(s) Certificate Number(s)* Aggregate Principal
(Please fill in, if blank) (Attach signed list if Amount Tendered
necessary) (if less than all)**
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
* * Need not be completed by Holders who wish to tender with respect to all Old Notes listed. See
Instruction 2.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:______________________________________________
DTC Book Entry Account No.:_________________________________________________
Transaction Code No.:_______________________________________________________
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:_________________________________________
Window Ticket No. (if any):_________________________________________________
Date of Execution of Notice of Guaranteed Delivery:_________________________
Name of Eligible Institution that Guaranteed Delivery:______________________
____________________________________________________________________________
If Delivered by Book Entry Transfer: Name of Tendering Institution:_________
DTC Book Entry Account No.:_________________________________________________
Transaction Code No.:_______________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
Ladies and Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders to
the Company the principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance for exchange of the principal amount of Old Notes
tendered in accordance with this Letter of Transmittal, the undersigned sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to the Old Notes tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent its agent and attorney-
in-fact (with full knowledge that the Exchange Agent also acts as the agent of
the Company and as Trustee under the Indenture for the Old Notes and the New
Notes) with respect to the tendered Old Notes with full power of substitution to
(i) deliver certificates for such Old Notes to the Company, or transfer
ownership of such Old Notes on the account books maintained by DTC, together in
either such case, with all accompanying evidences of transfer and authenticity
to, or upon the order of, the Company and (ii) present such Old Notes for
transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
3
<PAGE>
The undersigned hereby represents and warrants that he has full power and
authority to tender, sell, assign and transfer the Old Notes tendered hereby and
that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim, when the same are acquired by the Company. The undersigned
also acknowledges that this Exchange Offer is being made in reliance upon an
interpretation by the staff of the Securities and Exchange Commission that the
New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer
may be offered for sale, resold and otherwise transferred by holders thereof
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. 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 the New Notes.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate in
the distribution of such New Notes and (iii) such holder is not an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company or, if such
holder is an affiliate, that such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes.
If the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it has no
arrangements with any person to participate in the distribution of the New Notes
and that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. If any tendered Old Notes are
not accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for any such unaccepted Old Notes will be returned (except as noted
below with respect to tenders through DTC), without expense, to the undersigned
at the address shown below or at a different address shown below or at a
different address as may be indicated under "Special Issuance Instructions" as
promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer - Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange, and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the account at DTC). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s),
4
<PAGE>
unless, in either event, tender is being made through DTC. In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange, and return any Old Notes not
tendered or not exchanged, in the name(s) of, and send said certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
lnstructions" to transfer any Old Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
5
<PAGE>
PLEASE SIGN HERE
(To Be Completed by All Tendering Holders of
Old Notes Regardless of Whether Old Notes Are Being
Physically Delivered Herewith)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Company of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy
x _______________________________________ Date:________________________________
x _______________________________________ Date:________________________________
Signature(s) of Holder(s) or
Authorized Signatory
Name(s):_________________________________ Address:______________________________
(including Zip Code)
_________________________________
(Please Print)
Capacity:________________________ Area Code and Telephone No:___________
Social Security No.______________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (See Instruction 3 herein)
Certain Signatures Must Be Guaranteed by an Eligible Institution
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number
(including area code) of Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Printed Name)
________________________________________________________________________________
(Title)
6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instruction 4 herein)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered are to be issued in the name of, or the New Notes issued pursuant to
the Exchange Offer are to be issued to the order of, someone other than the
person or persons whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Old Notes" within this Letter of Transmittal, or if Old Notes
tendered by book-entry transfer that are not accepted for purchase are to be
credited to an account maintained at DTC
Name:____________________________________________
(Please print)
Address:_________________________________________
(Please print)
_________________________________________________
Zip Code
_________________________________________________
Taxpayer identification or social security number
(See Substitute Form W-9 herein)
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 4 herein)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for purchase or the New Notes issued pursuant to the
Exchange Offer are to be sent to someone other than the person or persons whose
signature(s) appear(s) within this Letter of Transmittal or to an address
different from that shown in the box entitled "Description of Old Notes" within
this Letter of Transmittal
Name:____________________________________________
(Please print)
Address:_________________________________________
(Please print)
_________________________________________________
Zip Code
_________________________________________________
Taxpayer identification or social security number
(See Substitute Form W-9 herein)
7
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer and the Solicitation
1. Delivery of this Letter of Transmittal and Old Notes. The certificates for
the tendered Old Notes (or a confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of all Old Notes delivered electronically), as
well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at its address set forth
herein prior to 5:00 P.M., New York City time, on the Expiration Date. The
method of delivery of the tendered Old Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. Instead of delivery by
mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date must tender their Old Notes and follow the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes, the certificate number or numbers of
such Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five business days
after the Expiration Date, this Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a confirmation
of electronic mail delivery of book-entry delivery into the Exchange Agent's
account at DTC) and any required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of electronic mail delivery of book-entry delivery into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
five business days after the Expiration Date, all as provided in the Prospectus
under the caption, "The Exchange Offer - Guaranteed Delivery Procedures." Any
Holder of Old Notes who wishes to tender his Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York
City time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering Holders of Old Notes, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
8
<PAGE>
2. Partial Tenders. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes is tendered, the tendering Holder
should fill in the principal amount tendered in the third column of the chart
entitled "Description of Old Notes." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, Old Notes for the principal amount of the Old Notes not tendered and a
certificate or certificates representing New Notes issued in exchange of any Old
Notes accepted will be sent to the Holder at his registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal or unless tender is made through DTC, promptly after the Old Notes
are accepted for exchange.
3. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse any tendered Old Note, nor provide a separate bond power.
In any other case, such holder must either properly endorse the Old Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signatures on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder(s) of any Old Notes listed, such Old Notes must
be endorsed or accompanied by appropriate bond powers signed as the name of the
registered Holder(s) appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians, attorneys-
in-fact, or officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution unless the Old Notes tendered pursuant
thereto are tendered (i) by a registered Holder (including any participant in
DTC whose name appears on a security position listing as the owner of Old Notes)
who has not completed the box set forth herein entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" or (ii) for
the account of an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the
9
<PAGE>
amount of any such transfer taxes (whether imposed on the registered Holder or
any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
<S> <C> <C>
Certificate Surrendered Old Notes Tendered Old Notes Accepted
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Delivery Prepared__________ Checked by__________________ Date_________________________
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are accepted
for payment is required to provide the Exchange Agent (as payer) with such
Holder's correct TIN on Substitute Form W-9 below or otherwise establish a basis
for exemption from backup withholding. If such Holder is an individual, the TIN
is his social security number. If the Exchange Agent is not provided with the
correct TIN, a $50 penalty may be imposed by the Internal Revenue Service, and
payments made with respect to New Notes may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
10
<PAGE>
Purpose of Substitute Form W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i) the
Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding);
or (ii) an adequate basis for exemption.
What Number to Give the Exchange Agent
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
11
<PAGE>
<TABLE>
<S> <C>
PAYER'S NAME
SUBSTITUTE Part 1 -PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number
RIGHT AND CERTIFY BY SIGNING AND DATING
FORM W-9 BELOW. OR_________________________________
Employer Identification Number
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE Part 2 -Certification - Under Penalties of Perjury, I certify that: Part 3 --
PAYER'S REQUEST FOR TAXPAYER (1) The number shown on this form is my correct Taxpayer Awaiting TIN
IDENTIFICATION NUMBER Identification Number (or I am waiting for a number to
be issued to me) and [_]
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Servlce ("IRS") that I am subject to backup wIthholding as a result of failure to
report all interest or dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
Certificate instructions - You must cross out item (2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or dividends
on your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE___________________________________________ DATE__________________________________________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31 percent of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- -------------------------------------- ----------------------------------------
Signature Date
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Deilvery Courier:
IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company
P.O. Box 84 One State Street One State Street
Bowling Green Station New York, NY 10004 New York, NY 10004
New York, NY 10274-0084 Attn: Securities Processing Window, Attn: Securities Processing Window,
Attn: Reorganization Subcellar One (SC-i) Subcellar One (SC-1)
Operations Department
</TABLE>
For information, call:
Information and Facsimile
Confirmation (212) 858-2103
Facsimile: (212) 858-2611 (Eligible Institutions Only)
12
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for
10 3/8% Senior Subordinated Notes Due 2007
of
T/SF Communications Corporation
As set forth in the Prospectus, dated November [28], 1997 (the "Prospectus"),
of T/SF Communications Corporation (the "Company"), in the accompanying Letter
of Transmittal and instructions thereto (the "Letter of Transmittal"), this form
or one substantially equivalent hereto must be used to accept the Company's
exchange offer (the "Exchange Offer") to purchase all of its outstanding 10 3/8%
Senior Subordinated Notes Due 2007 (the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not lost
but are not immediately available, (ii) time will not permit the Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date or (iii) the
procedure for book-entry transfer cannot be completed prior to the Expiration
Date. This form may be delivered by an Eligible Institution by mail or hand
delivery or transmitted, via telegram, telex or facsimile, to the Exchange Agent
as set forth below. All capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
DECEMBER [26], 1997 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON
THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To: IBJ Schroder Bank & Trust Company, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Delivery:
IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company IBJ Schroder Bank and Trust Company
P.O. Box 84 One State Street One State Street
Bowling Green Station New York, NY 10004 New York, NY 10004
New York, NY 10274-0084 Attn: Securities Processing Window, Attn: Securities Processing Window,
Attn: Reorganization Subcellar One (SC-1) Subcellar One (SC-1)
Operations Department
</TABLE>
For information, call:
Information and Facsimile
Confirmation: (212) 858-2103
Facsimile: (212) 858-2611 (Eligible Institutions Only)
Delivery of this instrument to an address, or transmission via telegram,
telex or facsimile, other than as set forth above, will not constitute a valid
delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which are hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time on the Business Day
prior to the Expiration Date. Tenders of Old Notes may also be withdrawn if the
Exchange Offer is terminated without any such Old Notes being purchased
thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
13
<PAGE>
Signature(s) of the Registered Owner(s) or Name(s) of Registered Holder(s)
Authorized Signatory:_____________________ ____________________________________
__________________________________________ ____________________________________
__________________________________________ ____________________________________
Principal Amount of Old Notes Tendered: Address:____________________________
__________________________________________ ____________________________________
Certificate No(s). of Old Notes Area Code and Telephone No.:________
(if available): If Old Notes will be delivered by
book-entry transfer at
The Depository Trust Company,
Depository Account No.:_____________
Date:_____________________________________
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or
on a security position listing as the owner of Old Notes or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
____________________________________________________________________
Capacity: ____________________________________________________________________
Address(s): ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Do not send Old Notes with this form. [Debentures] should be sent to the
Exchange Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s) the Old Notes covered hereby within the meaning of Rule
14e-4 under the Securities Act of 1934, as amended, (b) represents that such
tender of Old Notes complies with such Rule 14e-4, and (c) guarantees that,
within five New York Stock Exchange trading days from the date of this Notice of
Guaranteed Delivery, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with certificates representing
the Old Notes covered hereby, in proper form for transfer (or confirmation of
the book-entry transfer of such Old Notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to the procedure for book-entry transfer
set forth in the Prospectus) and required documents will be deposited by the
undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal and
Old Notes tendered hereby to the Exchange Agent within the time period set forth
above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm: _________________________ _______________________________________
Authorized Signature
Address: ______________________________ Name: _________________________________
_______________________________________ Title:_________________________________
Area Code and Telephone No.: __________ Date:__________________________________
14
<PAGE>
EXHIBIT 5
Letterhead of Proskauer Rose LLP
November 25, 1997
T/SF Communications Corporation
New York, New York
Ladies and Gentlemen:
You have requested our opinion in connection with the filing by T/SF
Communications Corporation, a Delaware corporation ("T/SF"), with the Securities
and Exchange Commission of a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to $100,000,000 principal amount of T/SF's 10 3/8% Series B
Senior Subordinated Notes due 2007 (the "New Notes"). The Registration
Statement relates to the offer (the "Exchange Offer") by T/SF to exchange the
New Notes for $100,000,000 principal amount of T/SF's outstanding 10 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes").
We have examined such records, documents and other instruments as we
have deemed relevant and necessary as a basis for the opinions hereinafter set
forth. We have also assumed without investigation the authenticity of any
document submitted to us as an original, the conformity to originals of any
document submitted to us as a copy, the authenticity of the originals of such
latter documents, the genuineness of all signatures and the legal capacity of
natural persons who signed such documents.
Based upon the foregoing, it is our opinion that:
The New Notes, when duly executed by T/SF, authenticated by the trustee
pursuant to the terms of the related Indenture and exchanged for the Old Notes
in accordance with the terms of the Exchange Offer, will be duly authorized and
legally issued and will constitute binding obligations of T/SF entitled to the
benefits of the Indenture in accordance with their terms, subject as to their
binding nature to applicable bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
The foregoing opinions relate only to matters of the general corporate
law of the State of Delaware and to matters of Federal law and do not purport to
express any opinion on the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement. In
so doing, we do not admit that we are in the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and regulations
of the Securities and Exchange Commission thereunder.
Except to the extent provided in the preceding paragraph, this opinion
is rendered solely to T/SF in connection with the Exchange offer and may not be
relied upon by, nor may copies be delivered to, any other person or entity for
any purpose without our prior written consent.
Very truly yours,
/s/ PROSKAUER ROSE LLP
<PAGE>
EXHIBIT 10.1
SENIOR SUBORDINATED CREDIT AGREEMENT
dated as of
October 9, 1997
among
T/SF COMMUNICATIONS CORPORATION,
as Borrower,
THE GUARANTORS named herein,
THE LENDERS named herein
and
FIRST UNION CORPORATION, as Agent
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS.....................................................1
1.1 Certain Defined Terms.......................................1
1.2 Accounting Terms...........................................34
1.3 Other Definitional Provisions..............................34
SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND
LOANS; NOTES..........................................34
2.1 Bridge Loan and Bridge Note................................34
2.2 Term Loan and Term Note....................................36
2.3 Interest on the Loans......................................37
2.4 Fees.......................................................39
2.5 Prepayments and Payments...................................39
2.6 Use of Proceeds............................................43
SECTION 3 CONDITIONS.....................................................43
3.1 Conditions to Bridge Loan..................................43
3.2 Conditions to Term Loan....................................50
SECTION 4 REPRESENTATIONS AND WARRANTIES.................................51
4.1 Organization and Good Standing; Capitalization.............51
4.2 Authorization and Power....................................52
4.3 No Conflicts or Consents...................................52
4.4 Enforceable Obligations....................................54
4.5 Properties; Liens..........................................54
4.6 Financial Condition........................................55
4.7 Full Disclosure............................................57
4.8 No Default.................................................57
4.9 Compliance with Contracts, Etc.............................57
4.10 No Litigation.............................................58
4.11 Use of Proceeds; Margin Stock, Etc........................58
4.12 Taxes.....................................................59
4.13 ERISA.....................................................59
4.14 Compliance with Law.......................................60
4.15 Government Regulation.....................................60
4.16 Capital Structure and Subsidiaries........................60
4.17 Intellectual Property.....................................60
4.18 Environmental Matters.....................................61
-i-
<PAGE>
Page
----
4.19 Survival of Representations and Warranties................63
4.20 Permits...................................................63
4.21 Insurance.................................................64
4.22 Labor Matters.............................................64
4.23 Guarantees................................................64
4.24 Senior Subordinated Indenture; Etc........................65
4.25 Broker's or Finder's Fees.................................66
4.26 Terms of Holdings LLC Preferred Equity Interest...........66
SECTION 5 AFFIRMATIVE COVENANTS..........................................66
5.1 Financial Statements and Other Reports.....................66
5.2 Corporate Existence, Etc...................................73
5.3 Payment of Taxes and Claims; Tax Consolidation.............73
5.4 Maintenance of Properties; Insurance.......................73
5.5 Inspection.................................................74
5.6 Equal Security for Loans and Notes.........................74
5.7 Compliance with Laws, Etc..................................75
5.8 Maintenance of Accurate Records, Etc.......................75
5.9 Recapitalization Documents.................................75
5.10 Exchange of Term Notes....................................75
5.11 ERISA Compliance..........................................76
5.12 Payments in U.S. Dollars..................................77
5.13 Register..................................................77
5.14 Lenders Meeting...........................................78
5.15 Additional Guarantors.....................................78
5.16 Marketing Take-Out Securities.............................78
5.17 Warrants..................................................78
SECTION 6 NEGATIVE COVENANTS.............................................79
6.1 Indebtedness...............................................79
6.2 Liens......................................................81
6.3 Restricted Payments........................................83
6.4 Investments................................................84
6.5 Contingent Obligations.....................................85
6.6 Senior Subordinated Indebtedness...........................86
6.7 Restriction on Fundamental Changes.........................87
6.8 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................88
6.9 Transactions with Shareholders and Affiliates..............89
6.10 Subsidiary Stock..........................................89
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6.11 Business Activities.......................................90
6.12 Amendments or Waivers of Certain Documents................90
6.13 Amendments to Charter Documents...........................90
6.14 Asset Sales...............................................90
6.15 Transfer of Assets to Subsidiaries........................91
6.16 Modification of the LLC Preferred Equity Interests........91
SECTION 7 EVENTS OF DEFAULT..............................................91
7.1 Failure To Make Payments When Due..........................92
7.2 Default in Other Agreements................................92
7.3 Breach of Certain Covenants................................92
7.4 Breach of Warranty.........................................92
7.5 Other Defaults Under Agreement or Loan Documents...........93
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc......93
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc........93
7.8 Judgments and Attachments..................................94
7.9 Dissolution................................................94
7.10 Guarantee.................................................94
7.11 Foreclosure...............................................94
SECTION 8 SUBORDINATION..................................................96
8.1 Obligations Subordinated to Senior Indebtedness of
the Company...........................................96
8.2 Priority and Payment Over of Proceeds in Certain Events....96
8.3 Payments May Be Paid Prior to Dissolution..................99
8.4 Rights of Holders of Senior Indebtedness of the Company
Not To Be Impaired....................................99
8.5 Subrogation...............................................100
8.6 Obligations of the Company Unconditional..................101
8.7 Lenders Authorize Agent to Effectuate Subordination.......101
SECTION 9 THE AGENT.....................................................102
9.1 Appointment...............................................102
9.2 Delegation of Duties......................................103
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9.3 Exculpatory Provisions....................................103
9.4 Reliance by Agent.........................................104
9.5 Notice of Default.........................................104
9.6 Non-Reliance on Agent and Other Lenders...................105
9.7 Indemnification...........................................105
9.8 Agent in Its Individual Capacity..........................106
9.9 Resignation of the Agent; Successor Agent.................106
SECTION 10 GUARANTEE....................................................107
10.1 Unconditional Guarantee...................................107
10.2 Subordination of Guarantee................................108
10.3 Severability..............................................108
10.4 Limitation of Guarantor's Liability.......................108
10.5 Guarantors May Consolidate, etc., on Certain Terms........109
10.6 Contribution..............................................109
10.7 Waiver of Subrogation.....................................110
10.8 Evidence of Guarantee.....................................111
10.9 Waiver of Stay, Extension or Usury Laws...................111
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS........................111
11.1 Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness..........................................111
11.2 Priority and Payment Over of Proceeds in Certain Events...112
11.3 Payments May Be Paid Prior to Dissolution.................115
11.4 Rights of Holders of Subsidiary Guarantor Senior
Indebtedness Not To Be Impaired.......................115
11.5 Subrogation...............................................116
11.6 Obligations of the Guarantors Unconditional...............117
11.7 Lenders Authorize Agent to Effectuate Subordination.......117
SECTION 12 MISCELLANEOUS 118
12.1 Representation of the Lenders.............................118
12.2 Participations in and Assignments of Loans and Notes......118
12.3 Expenses..................................................121
12.4 Indemnity.................................................121
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12.5 Setoff....................................................122
12.6 Amendments and Waivers....................................123
12.7 Independence of Covenants.................................124
12.8 Entirety..................................................124
12.9 Notices...................................................124
12.10 Survival of Warranties and Certain Agreements............125
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative....125
12.12 Severability.............................................125
12.13 Headings.................................................125
12.14 Applicable Law...........................................126
12.15 Successors and Assigns; Subsequent Holders of Notes......126
12.16 Counterparts; Effectiveness..............................126
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial.....127
12.18 Payments Pro Rata........................................128
12.19 Taxes....................................................128
12.20 Waiver of Stay, Extension or Usury Laws..................130
12.21 Requirements of Law......................................130
12.22 Confidentiality..........................................131
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<PAGE>
SCHEDULES
A EXISTING LIENS
B-1 SUBSIDIARIES
B-2 INACTIVE SUBSIDIARIES
C ERISA
D EXISTING INVESTMENTS
E INTELLECTUAL PROPERTY
F ENVIRONMENTAL MATTERS
G PERMITS
H EXISTING INDEBTEDNESS
I TERMS OF THE HOLDINGS LLC PREFERRED STOCK
J TRANSACTIONS WITH AFFILIATES
K ASSET SALES
L LITIGATION
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF TERM NOTE
III FORM OF COMPLIANCE CERTIFICATE
IV-A FORM OF NOTICE OF BORROWING
IV-B FORM OF NOTICE OF CONVERSION
V TERM SHEET FOR REGISTRATION RIGHTS AGREEMENT
VI FORM OF OPINION OF PROSKAUER ROSE LLP - COUNSEL FOR THE
COMPANY AND THE GUARANTORS
VII FORM OF OPINION OF CAHILL GORDON & REINDEL - COUNSEL FOR THE
LENDERS
IX FORM OF NOTATION OF GUARANTEE
X FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-vi-
<PAGE>
This Senior Subordinated Credit Agreement is dated as of
October 9, 1997, and entered into by and among T/SF Communications Corporation,
a Delaware corporation (the "Company"), the Guarantors named on the signature
pages hereto, the Lenders named on the signature pages hereto (the "Lenders")
and First Union Corporation ("First Union"), as agent for the Lenders (in such
capacity, the "Agent").
RECITALS
WHEREAS, the Company desires that the Lenders extend a senior
subordinated credit facility to the Company in connection with the
Recapitalization (as defined herein);
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereby agree
as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Agreement shall have the
following meanings:
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation.
"Adjusted Net Assets" shall have the meaning provided in
Section 10.6.
"Affiliate," as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Per-
<PAGE>
-2-
son, whether through the ownership of voting securities or by contract or
otherwise, or (ii) the ownership of more than 10% of the voting securities of
that Person; provided that none of First Union or any of its Affiliates shall be
treated as an Affiliate of the Company or of any Subsidiary of the Company.
"Agent" has the meaning ascribed to such term in the introduc-
tion to this Agreement.
"Agreement" means this Senior Subordinated Credit Agreement
dated as of October 9, 1997, as it may be amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.
"Amount of Unfunded Benefit Liability" means, with respect to
any Pension Plan, (i) if set forth on the most recent actuarial valuation report
with respect to such Pension Plan, the amount of unfunded benefit liabilities
(as defined in Section 4001(a)(18) of ERISA) and (ii) otherwise, the excess of
(a) the greater of the current liability (as defined in Section 412(l)(7) of the
Internal Revenue Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the market value of the assets of
such Pension Plan.
"Applicable Interest Rate" means (i) for each Quarterly Period
prior to the Conversion Date, the Applicable LIBOR Rate then in effect and (ii)
for each Quarterly Period on and after the Conversion Date, the greatest of, as
of the Interest Rate Determination Date, (a) the Applicable Prime Rate then in
effect, (b) the Applicable LIBOR Rate then in effect and (c) the Application
Treasury Rate then in effect in each case as determined on the applicable
Interest Rate Determination Date; provided, however, that in no event shall the
Applicable Interest Rate exceed 18% per annum.
"Applicable LIBOR Rate" means (i) an interest rate per annum
equal to the rate of interest appearing on Telerate Page 3750 (or any successor
page) or if no such rate is available, the rate of interest determined by the
Agent to be the rate or the arithmetic mean of rates (rounded upward, if
necessary, to the nearest 1/16 of one percentage point) at which Dollar deposits
in immediately available funds are offered by First Union to first-tier banks in
the London interbank Eurodollar market, at approximately 11:00 a.m., London
time, on the Interest Rate Determination Date for a 3-month period at the amount
of the Loans outstanding plus (ii) the Applicable LIBOR Rate Spread.
<PAGE>
-3-
"Applicable LIBOR Rate Spread" means (i) 4.50% per annum for
the period from and including the Closing Date to but excluding the 90th day
following the Closing Date and for the two subsequent 90-day periods to but
excluding the 270th day following the Closing Date the Applicable LIBOR Rate
Spread in effect for the immediately preceding 90-day period plus .25% per annum
and for the subsequent 90-day period the Applicable LIBOR Rate Spread in effect
for the immediately preceding 90-day period plus .50% per annum and (ii) 6.50%
per annum for the period from and including the Conversion Date to but excluding
the 90th day following the Conversion Date and for each subsequent 90-day period
the Applicable Treasury Rate for the immediately preceding 90-day period plus
.50% per annum.
"Applicable Prime Rate" means (i) the rate which First Union
announces from time to time as its prime lending rate, the Applicable Prime Rate
to change when and as such prime lending rate changes, plus (ii) the Applicable
Prime Rate Spread. The Applicable Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
First Union or its affiliates may make commercial loans or other loans at rates
of interest at, above or below the Applicable Prime Rate.
"Applicable Prime Rate Spread" means 4.25% per annum for the
period from and including the Conversion Date to but excluding the 90th day
following the Conversion Date and for each subsequent 90-day period the
Applicable Prime Rate Spread in effect for the immediately preceding 90-day
period plus .50% per annum.
"Applicable Treasury Rate" means (i) the rate equal to the
yield (expressed as a rate per annum) in the secondary market on United States
Treasury securities of substantially the same principal amount as the Loans and
having a term to maturity of (a) one year, (b) three years, (c) five years and
(d) ten years, whichever of (a), (b), (c) and (d) has the greatest yield as of
the Interest Rate Determination Date (the determination of yield to be based
upon quotes obtained by the Agent from at least two established dealers in such
market), plus (ii) the Applicable Treasury Rate Spread.
"Applicable Treasury Rate Spread" means 6.50% per annum for
the period from and including the Conversion Date to but excluding the 90th day
following the Conversion Date and for each subsequent 90-day period the
Applicable Treasury Rate Spread for the immediately preceding 90-day period plus
.50% per annum.
<PAGE>
-4-
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall be merged with or into the Company or any Subsidiary of the Company, or
(b) the acquisition by the Company or any Subsidiary of the Company of the
assets of any Person (other than a Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means, except as set forth on Schedule K, any
----------
direct or indirect sale, issuance, conveyance, lease, assignment, transfer or
other disposition for value (including, without limitation, pursuant to any
amalgamation, merger or consolidation or pursuant to any sale-and-leaseback
transaction) by the Company or by any of its Subsidiaries to any Person other
than the Company or any of its Wholly-Owned Subsidiaries (any such transaction,
a "disposition") of (i) any of the stock of any of the Company's Subsidiaries,
(ii) substantially all of the assets of any division or line of business of the
Company or of any of its Subsidiaries, or (iii) any other assets (whether
tangible or intangible) of the Company or of any of its Subsidiaries; excluding
---------
(a) any disposition of Cash Equivalents or inventory in the ordinary course of
business or obsolete equipment in the ordinary course of business consistent
with past practices of the Company or the lease or sublease of any real or
personal property in the ordinary course of business, (b) any disposition of
stock or assets in any single transaction or related series of transactions the
aggregate value of which is equal to $250,000 or less and (c) the contribution
of substantially all of the assets and liabilities of Atwood, Galaxy and GEM to
Holdings LLC in connection with the Recapitalization.
"Atwood" means Atwood Convention Publishing, Inc., a Missouri
corporation.
"Bankruptcy Law" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute
or any other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding
pursuant to or within the meaning of any Bankruptcy
<PAGE>
-5-
Law, containing an adjudication of bankruptcy or insolvency, or providing for
liquidation, winding up, dissolution or reorganization, or appointing a
custodian of a debtor or of all or any substantial part of a debtor's property,
or providing for the staying, arrangement, adjustment or composition of
indebtedness or other relief of a debtor.
"Board of Directors" means, with respect to any Person, the
Board of Directors of such Person or any duly authorized committee of that
Board.
"Bridge Loan" means, collectively, the loans made by the
Lenders pursuant to Section 2.1A.
"Bridge Loan Commitment" means the commitment of the Lenders
to make the Bridge Loan as set forth in Section 2.1A.
"Bridge Notes" has the meaning ascribed to such term in Sect-
ion 2.1D.
"Business Day" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of New York, New York or is a
day on which banking institutions therein located are authorized or required by
law or other governmental action to close.
"Capital Lease," as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is required to be accounted for as a capital lease on
the balance sheet of that Person.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including,
without limitation, each class of Common Stock and Preferred Stock of such
Person and (ii) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means obligations under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations determined in
accordance with GAAP.
<PAGE>
-6-
"Cash Equivalents" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Rating Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having the highest
rating obtainable from either S&P's or Moody's; and (iv) certificates of deposit
or bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia that (a) is
at least "adequately capitalized" (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000; (v) shares of any money market
mutual fund that (a) has its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of not
less than $500,000,000, and (c) has the highest rating obtainable from either
S&P's or Moody's; and (vi) repurchase agreements with respect to, and which are
fully secured by a perfected security interest in, obligations of a type
described in clause (i) or clause (ii) above and are with any commercial bank
described in clause (iv) above.
"Cash Proceeds" means, with respect to any Asset Sale, cash
payments (including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise but only as and when so
received) received from such Asset Sale.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof; (ii) the approval by the holders of Capital Stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company; (iii) any
Person or Group (other than the Permitted Holders) shall become the
<PAGE>
-7-
owner, directly or indirectly, beneficially or of record, of shares representing
more than 20% of the Voting Stock of the Company; provided, however, such
-------- -------
referenced percentage in this clause (iii) may be increased to 49% with the
consent of the Agent, which consent shall not be unreasonably withheld or
delayed; or (iv) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted the Board of
Directors of the Company at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the Board of
Directors of the Company then still in office who either were members of such
Board of Directors at the beginning of such period or whose election as a member
of such Board of Directors was previously so approved.
"Change of Control Date" has the meaning ascribed to such
term in Section 2.5A(iv).
"Change of Control Offer" has the meaning ascribed to such
term in Section 2.5A(iv).
"Closing Date" means the date on or before October 9, 1997 on
which the initial Bridge Loan is made and the conditions set forth in Section
3.1 are satisfied or waived in accordance with Section 12.6.
"Commission" means the Securities and Exchange Commission.
"Commitment Letter" means the letter agreement dated August
13, 1997, between the Company and First Union pursuant to which First Union
committed to provide the Bridge Loan to the Company, subject to the terms and
conditions thereof, and the Company committed to pay First Union certain fees
and to satisfy certain other obligations to First Union in respect of such
commitments.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
"Company" has the meaning ascribed to such term in the intro-
duction to this Agreement.
<PAGE>
-8-
"Compliance Certificate" means a certificate substantially in
the form of Exhibit III delivered to the Agent by the Company pursuant to
-----------
Section 5.1(iv)(b).
"Consolidated EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Restricted Subsidiaries (including the LLCs)
paid or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions outside the ordinary course of business),
(B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP. For purposes of this definition, the LLCs
shall be treated as a Wholly-Owned Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to the Company, the ratio of Consolidated EBITDA of the Company during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis, in accordance with Article 11 of Regulation S-X under the
Securities Act of 1933, as amended, for the period of such calculation to (a)
the incurrence or repayment of any Indebtedness of the Company or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (b) any Asset
Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of its
<PAGE>
-9-
Subsidiaries incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Four Quarter Period. If the Company or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if the Company or such Subsidiary, as the case may be, had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (iii) notwithstanding clause (i) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to the
Company for any period, the sum, without duplication, of (a) Consolidated
Interest Expense (including any premium or penalty paid in connection with
redeeming or retiring Indebtedness of the Company and its Subsidiaries prior to
the stated maturity thereof pursuant to the agreements governing such
Indebtedness), plus (b) the product of (i) the amount of all dividend payments
on any series (other than Holdings LLC Preferred Equity Interests) of Preferred
Stock of the Company (other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during such period times (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then-current effective
<PAGE>
-10-
consolidated federal, state and local income tax rate of the Company, expressed
as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of all
cash and non-cash interest expense (minus amortization or write-off of deferred
financing costs included in cash or non-cash interest expense) of such Person
and its Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net costs under Interest Swap Obligations, (c) all
capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
items classified as extraordinary, nonrecurring or unusual gains, losses or
charges, and the related tax effects, each determined in accordance with GAAP,
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any Subsidiary
of the referent Person, (d) the net income (but not loss) of any Subsidiary
(other than Holdings LLC) of the referent Person to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is restricted by a contract, operation of law or otherwise, (e) the net
income of any Person, other than a Subsidiary of the referent Person, except to
the extent of cash dividends or distributions paid to the referent Person or to
a Wholly Owned Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corpo-
<PAGE>
-11-
ration prior to such consolidation, merger or transfer of assets.
"Consolidated Non-Cash Charges" means, with respect to the
Company, for any period, the aggregate depreciation, amortization and other
non-cash expenses of the Company and its Subsidiaries reducing Consolidated Net
Income of the Company for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
item or loss or any such charge which requires an accrual of or a reserve for
cash charges for any future period).
"Contested Claim" means any Tax, Indebtedness or other claim
or liability (i) the validity or amount of which is being diligently contested
in good faith, (ii) for which adequate reserve, or other appropriate provision,
if any, as required in conformity with GAAP shall have been made, and (iii) with
respect to which any right to execute upon or sell any assets of the Company or
of any of its Subsidiaries has not matured or has been and continues to be
effectively enjoined, superseded or stayed.
"Contingent Obligation," as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Interest Rate Agreements and Currency Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or dis-
<PAGE>
-12-
charge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Controlled Group" means (i) a controlled group of
corporations as defined in Section 1563(a) of the Internal Revenue Code or (ii)
a group of trades or businesses under common control, as defined in Section
414(c) of the Internal Revenue Code, of which the Company or any of its
Subsidiaries is a part or becomes a part.
"Conversion Date" means the one year anniversary of the
Closing Date or such later date to which the Conversion Date may be deferred
pursuant to Section 3.2D.
"Covered Taxes" has the meaning ascribed to it in Section
12.19.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement designed to protect the Company or any of
its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Disqualified Capital Stock" means 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 upon the happening of any event (other than an
event which would consti-
<PAGE>
-13-
tute a Change of Control), matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof (except upon the occurrence of a Change of Control), in whole or
in part, on or prior to the final maturity date of the Term Notes.
"Dollars" or the sign "$" means the lawful money of the United
States of America.
"Eligible Assignee" means (A) (i) a commercial bank organized
under the laws of the United States of America or any state thereof; (ii) a
savings and loan association or savings bank organized under the laws of the
United States or any state thereof; (iii) a commercial bank organized under the
laws of any other country or a political subdivision thereof; provided that (x)
such bank is acting through a branch or agency located in the United States or
(y) such bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political subdivision
of such country; and (iv) any other entity which is an "accredited investor" (as
defined in Regulation D under the Securities Act of 1933) which extends credit
or buys loans as one of its businesses including, but not limited to, insurance
companies, mutual funds and lease financing companies, in each case (under
clauses (i) through (iv) above) that is reasonably acceptable to the Agent; and
(B) any Lender and any Affiliate of any Lender.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA (i) which is, or, at any time within the five
calendar years immediately preceding the date hereof, was at any time,
maintained or contributed to by the Company or its Subsidiaries or any of their
respective ERISA Affiliates or (ii) with respect to which the Company or its
Subsidiaries retains any liability, including any potential joint and several
liability as a result of an affiliation with an ERISA Affiliate or a party that
would be an ERISA Affiliate except for the fact the affiliation ceased more than
five calendar years prior to the date hereof.
"Environmental Claim" means any accusation, allegation, notice
of violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
response or corrective action, any damage, including, without limitation,
personal injury (including sickness, disease or death), tangible or intangible
property damage, contribution, indemnity, indirect or consequential damages,
damage to the environment, nui-
<PAGE>
-14-
sance, pollution, contamination or other adverse effects on the environment, or
for fines, penalties or restrictions, in each case arising under any
Environmental Law, including without limitation, relating to, resulting from or
in connection with Hazardous Materials and relating to the Company, any of its
Subsidiaries or any of their respective properties or predecessors in interest.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
--
seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.),
- --- -- ---
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
------
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air
-- ---
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
ss. 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7
-- ---
U.S.C. ss. 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss.
-- ---
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
-- ---
U.S.C. ss. 11001 et seq.), each as amended or supplemented, and any analogous
-- ---
future or present statutes and regulations promulgated pursuant thereto, each as
in effect as of the date of determination.
"Environmental Lien" means a Lien in favor of a Tribunal or
other Person (i) for any liability under an Environmental Law or (ii) for
damages arising from or costs incurred by such Tribunal or other Person in
response to a release or threatened release of hazardous or toxic waste,
substance or constituent into the environment.
"Equity Financing" shall mean the contribution to the capital
of the Company effected pursuant to the sale of the Company's stock pursuant to
the Stock Purchase Agreement and the contribution to Holdings LLC in connection
with the Recapitalization.
<PAGE>
-15-
"Equity Financing Documents" shall mean each of the documents
related to the consummation of the Equity Financing.
"Equity Interest" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, of such Person, including any Preferred Equity Interests.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate," as applied to any Person, means (i) any
corporation which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that Person is, or was at any time within
the five calendar years immediately preceding the date hereof, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time within the five calendar years immediately
preceding the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Internal Revenue Code) or the failure to make by its due date a
required installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of
<PAGE>
-16-
ERISA of a notice of intent to terminate such plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the withdrawal by the Company or any
of its Subsidiaries or any of their respective ERISA Affiliates from any Pension
Plan with two or more contributing sponsors or the termination of any such
Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA;
(v) the institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of liability on the
Company or any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by the Company or any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by the Company or any of its Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on the Company or any of its Subsidiaries or any
of their respective ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan;
(ix) the assertion of a material claim (other than routine claims for benefits)
against any Employee Benefit Plan other than a Multiemployer Plan or the assets
thereof, or against the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates in connection with any such Employee Benefit Plan;
(x) receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Event of Default" means each of the events set forth in
Section 7.
<PAGE>
-17-
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Exchange Notes" has the meaning ascribed to it in Section
5.10(ii).
"Exchange Request" has the meaning ascribed to it in Section
5.10.
"Facilities" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by the
Company, its Subsidiaries or any of their respective predecessors in interest.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate equal for each day during such period 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 which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fir Tree" means Fir Tree Value Fund L.P., Fir Tree Institut-
ional Value Fund L.P. and Fir Tree Value Partners L.D.C. and their Affiliates.
"FUCMC" means First Union Capital Markets Corp.
"Funding Subsidiary Guarantor" has the meaning ascribed to it
in Section 10.6.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by The Financial Accounting Standards
Board and which are consistently applied for all periods after the date hereof
so as to properly reflect the financial condition, and the results of operations
and changes in financial position, of the Company and its Subsidiaries, except
that any accounting principle or practice required to be changed in order to
continue as a generally accepted accounting principle or practice may be so
changed.
"Galaxy" means Galaxy Registration, Inc., a Maryland corpora-
tion.
<PAGE>
-18-
"GEM" means G.E.M. Communications, Inc., an Oklahoma
corporation.
"Guarantee Obligations" has the meaning ascribed to it in
Section 11.1.
"Guarantees" means, collectively, the guarantees delivered to
the Lenders by the Guarantors pursuant to Section 10 which are evidenced by
notations of guarantee substantially in the form of Exhibit VIII.
------------
"Guarantor Payment Blockage Period" has the meaning ascribed
to it in Section 11.2.
"Guarantor Senior Indebtedness" means, with respect to any
Guarantor, the principal of, premium, if any, and interest on, and all amounts
payable in respect of, all obligations of every nature of such Guarantor from
time to time owed to the lenders under the Senior Credit Facility, including,
without limitation, all obligations with respect to letters of credit and
principal of and interest on, and all fees, indemnities and expenses payable
under, the Senior Credit Facility and all obligations under Interest Rate
Agreements entered into with lenders under the Senior Credit Facility and their
respective Affiliates and any guarantees thereof including any agreement
refinancing all or any portion of the Indebtedness under such Senior Credit
Facility but only to the extent such Indebtedness is fully and adequately
secured. Without limiting the generality of the foregoing, "Guarantor Senior
Indebtedness" shall include interest accruing thereon subsequent to the
occurrence of any Event of Default specified in Sections 7.6 and 7.7 relating to
the Guarantors, whether or not the claim for such interest is allowed under any
applicable Bankruptcy Law. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include that portion of any Indebtedness which is
incurred by such Guarantor in violation of this Agreement.
"Guarantors" means (i) each of the present and future
Wholly-Owned Subsidiaries of the Company, including Atwood, Galaxy, GEM,
CORESEARCH, Inc., a Delaware corporation, Crimesearch, Inc., an Oklahoma
corporation, Expo Magazine, Inc., a Kansas corporation, Galaxy Design &
Printing, Inc., a Maryland corporation, Transportation Communications Services,
Inc., an Oklahoma corporation, T/SF Europe, Inc., an Oklahoma corporation, T/SF
Investment Co., a Delaware corporation, T/SF of Nevada, Inc., a Nevada
corporation and Transportation Information Services, Inc., an Oklahoma
corporation, other than inactive
<PAGE>
-19-
Subsidiaries with no assets, and (ii) upon their formation, Holdings LLC and
each of the Operating LLCs.
"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," "infectious waste," "toxic substances" or
any other formulations intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or which may or could pose a hazard
to human health or safety or the environment.
"Holdings LLC" means T/SF Holdings, LLC, a Delaware limited
liability company, whose Common Equity Interests shall be owned by VS&A - T/SF
and Fir Tree in the same proportion as their ownership interest in the Common
Stock of the Company pursuant to the Recapitalization and whose Preferred Equity
Interests shall be owned by the Company. For purposes of this Agreement,
Holdings LLC shall be treated as a Wholly-Owned Subsidiary.
"Holdings LLC Preferred Equity Interests" as applied to the
Equity Interests of Holdings LLC, means Equity Interests of any class or classes
(however designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of Holdings LLC, over Equity Interests of
any other class of such Person.
"Inactive Subsidiary" means, with respect to any Person, any
Subsidiary of such Person listed on Schedule B-2, for
<PAGE>
-20-
so long as such Subsidiary is not conducting any business and does not hold any
assets.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurable" and "Incurring" shall
have meanings correlative to the foregoing); provided that any amendment,
--------
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall only be deemed to be an Incurrence of Indebtedness if
and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed; provided, further, that any Indebtedness of a
--------
Person existing at the time such Person becomes a Subsidiary of the Company
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary of the
Company.
"Indebtedness" means, with respect to any Person, (i) all
indebtedness, obligations and liabilities of such Person for borrowed money,
(ii) that portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet of such Person in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit,
whether or not representing obligations for borrowed money, of such Person, (iv)
any indebtedness, obligation or liability of such Person owed for all or any
part of the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than six
months (or a longer period of up to one year, if such terms are available from
suppliers in the ordinary course of business) from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness, obligations and liabilities secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall not
include trade payables and accrued liabilities Incurred in the ordinary course
of business for the
<PAGE>
-21-
purchase of goods or services which are not secured by a Lien other than a
Permitted Encumbrance and obligations under Interest Rate Agreements and
Currency Agreements (which constitute Contingent Obligations, not Indebtedness),
(vi) guarantees of such Person in respect of Indebtedness of other Persons and
(vii) all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Agreement, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value to be determined reasonably and in good faith by the board of
directors of the issuer of such Disqualified Capital Stock.
"Indemnified Liabilities" has the meaning ascribed to such
term in Section 12.4.
"Indemnitees" has the meaning ascribed to such term in Section
12.4.
"Independent Financial Advisor" means a firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Intellectual Property" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of the Company as currently conducted that are
material to the condition (financial or otherwise), business, operations or
prospects of the Company and its Subsidiaries, taken as a whole.
"Intercompany Indebtedness" means any Indebtedness of the
Company or any Subsidiary of the Company which, in the case of the Company, is
owing to any Wholly-Owned Subsidiary and which, in the case of any such
Subsidiary, is owing to the Company or any Wholly-Owned Subsidiary of the
Company; provided that if as of any date any Person other than the Company or a
--------
<PAGE>
-22-
Wholly-Owned Subsidiary of the Company or any lender under the Senior Credit
Facility owns or holds such Indebtedness, or holds any Lien in respect thereof,
such Indebtedness shall no longer be Intercompany Indebtedness permitted to be
Incurred pursuant to Section 6.1(vi).
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means, with respect to any
Quarterly Period, the second Business Day on which banks in New York and London
are open prior to the first Business Day of such Quarterly Period.
"Interest Swap Obligations" means the obligations of any
Person, pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor code or statute.
"Investment" means (i) any direct or indirect purchase or
other acquisition of, or of a beneficial interest in, any Securities of any
other Person or (ii) any direct or indirect loan, advance (other than advances
to employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business), extension of credit or
capital contribution to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that, as to any such arrangement in
- --------
<PAGE>
-23-
corporate form, such corporation shall not, as to any Person of which such
corporation is a Subsidiary, be considered to be a Joint Venture to which
such Person is a party.
"Laws" means all applicable statutes, laws, ordinances,
regulations, rules, orders, judgments, writs, injunctions or decrees of any
state, commonwealth, nation, territory, possession, province, county, parish,
town, township, village, municipality or Tribunal, and "Law" means each of the
foregoing.
"Lenders" has the meaning ascribed to that term in the
introduction to this Agreement and shall include any assignee of any Loan, Note
or Loan Commitment to the extent of such assignment.
"LIBOR Rate" means the rate determined on the basis of the
offered rates for deposits in U.S. Dollars for a period of three months which
appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the
Interest Rate Determination Date for such Quarterly Period. If at least two
rates appear on the Reuters Screen LIBO Page, the rate for such Quarterly Period
will be the arithmetic mean of such rates rounded upwards, if necessary, to the
nearest 1/16 of 1%. If fewer than two rates appear on the Reuters Screen LIBO
Page, then such rate shall equal the arithmetic mean (rounded upward to the
nearest 1/16 of 1%) of the interest rates per annum at which deposits in U.S.
Dollars for a period of three months are offered by First Union or its designee
at approximately 11:00 a.m., London time, on such Interest Rate Determination
Date to first class banks in the London interbank market.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Litigation" means any action, suit, proceeding, claim,
lawsuit and/or investigation conducted or threatened by or before any Tribunal.
"LLCs" means Holdings LLC and the Operating LLCs. For purposes
of this Agreement, the LLCs shall be treated as Wholly-Owned Subsidiaries.
<PAGE>
-24-
"Loan Commitment" means the Bridge Loan Commitment and the
Term Loan Commitment.
"Loan Documents" means this Agreement, the Bridge Notes, the
Term Notes, the Guarantees, the Senior Subordinated Indenture, the Exchange
Notes and the Registration Rights Agreement.
"Loans" means the Bridge Loan and the Term Loan as each may be
outstanding.
"Margin Stock" has the meaning assigned to that term in
Regulation U and Regulation G of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Material Adverse Change" means a material adverse change in
the business, operations, properties, assets, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole,
or (ii) the impairment of the ability of the Company and its Subsidiaries, taken
as a whole, to perform, or the impairment of the ability of the Agent or Lenders
to enforce, the Obligations.
"Material Subsidiary" means, with respect to any accounting
period, (a) any Subsidiary of the Company (i) whose revenues constitute greater
than 10% of the aggregate dollar value of the revenues of Company and its
Subsidiaries, taken as a whole, for such accounting period or (ii) the fair
market value of whose assets at any time during such accounting period is
greater than 10% of the fair market value of all of the assets of Company and
its Subsidiaries at such time and (b) the LLCs.
"Maximum Cash Interest Rate" means an interest rate of 14% per
annum; provided that in computing such interest rate, fees paid to the Lenders
-------
shall not be deemed an interest payment.
"Multiemployer Plan" means a Pension Plan which is a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to any Asset Sale,
Cash Proceeds of such Asset Sale net of bona fide direct
<PAGE>
-25-
costs of sale including, but not limited to, (i) income taxes reasonably
estimated to be actually payable as a result of such Asset Sale within two years
of the date of such Asset Sale, (ii) payment of the outstanding principal amount
of, premium or penalty, if any, and interest on, any Indebtedness that is
secured by a Lien on the stock or assets in question and that is required to be
repaid under the terms thereof as a result of such Asset Sale, (iii) out-of-
pocket expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales commissions)
and (iv) any portion of cash proceeds which the Company determines in good faith
should be reserved for post-closing adjustments or liabilities relating to the
Asset Sale retained by the Company, it being understood and agreed that on the
day that all such post-closing adjustments have been determined, the amount (if
any) by which the reserved amount in respect of such Asset Sale exceeds the
actual post-closing adjustments, payable by the Company or any of its
Subsidiaries, shall constitute Net Cash Proceeds on such date.
"Non-payment Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to act to
accelerate the maturity of any Designated Senior Indebtedness.
"Notes" means, collectively, the Bridge Notes and the Term
Notes.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit IV-A with respect to a proposed borrowing.
------------
"Notice of Conversion" means a notice substantially in the
form of Exhibit IV-B with respect to a proposed conversion.
------------
"Obligations" means all obligations of every nature of the
Company from time to time owed to the Lenders and the Agent under the Loan
Documents, whether for principal, reimbursements, interest, fees, expenses,
indemnities or otherwise, and whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including obligations of performance).
"Offer Payment Date" has the meaning ascribed to such term in
Section 2.5A(iv).
"Officer" means the Chairman of the Board, the President, any
Vice President, the Chief Financial Officer, the Con-
<PAGE>
-26-
troller, the Treasurer, the Secretary or Assistant Secretary of each of the
Company and the Guarantors.
"Officers' Certificate" means, as applied to any corporation,
a certificate executed on behalf of such corporation by two Officers; provided
--------
that every Officers' Certificate with respect to the compliance with a condition
precedent to the making of the Loans hereunder shall include (i) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Operating LLCs" means, upon their formation, each of (i)
Galaxy Registration LLC, a Delaware limited liability company, (ii) Atwood, LLC,
a Delaware limited liability company and (iii) GEM Gaming, LLC, a Delaware
limited liability company, each of whose Common Stock is owned by Holdings LLC.
For purposes of this Agreement, the Operating LLCs shall be treated as
Wholly-Owned Subsidiaries.
"Other Taxes" has the meaning ascribed to such term in Section
12.19.
"Pari Passu Indebtedness" means, with respect to the Company
or any Subsidiary Guarantor, Indebtedness of such Person which ranks pari passu
---- -----
in right of payment to the Loans or the Guarantee of such Subsidiary Guarantor,
as the case may be.
"Payment Blockage Period" has the meaning ascribed to such
term in Section 8.2(b).
"Payment Default" means any default in the payment of
principal, premium, if any, or interest on any Designated Senior Indebtedness
beyond any applicable grace period with respect thereto.
"Payment Office" shall mean the office of the Agent located at
301 South College Street, Charlotte, NC 28288 or such other office as the Agent
may designate to the Company and the Lenders from time to time.
<PAGE>
-27-
"Payment Restriction" has the meaning ascribed to such term in
Section 6.8.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"Pension Plan" means an employee pension benefit plan as
defined in Section 3(2) of ERISA which is subject to the provisions of Title IV
of ERISA and which is maintained for employees of the Company, any Subsidiary of
the Company or any member of the Controlled Group.
"Permits" has the meaning ascribed to such term in Section
4.20.
"Permitted Holders" means Fir Tree and VS&A and their
Affiliates.
"Permitted Refinancing Indebtedness" means (A) any Refinancing
by the Company of Indebtedness of the Company or of its Subsidiaries (other than
Indebtedness Incurred or outstanding pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix) or (xi) of Section 6.1) and (B) any Indebtedness incurred
pursuant to a Refinancing by any Subsidiary of the Company of Indebtedness
Incurred by such Subsidiary (other than Indebtedness Incurred or outstanding
pursuant to clause (ii), (vi), (viii), (ix) or (xii) of Section 6.1), in the
case of each of (A) and (B), that does not (1) result in an increase in the
total of the aggregate principal amount of the Indebtedness of such Person being
Refinanced as of the date of such proposed Refinancing (if such Indebtedness
that is Refinancing the existing Indebtedness is issued at a price less than
100% of the principal amount thereof, an increase shall not be deemed to have
occurred unless the gross proceeds of such Indebtedness that is Refinancing the
existing Indebtedness is in excess of the total of the aggregate principal
amount of the Indebtedness being Refinanced as of the date of such proposed
Refinancing) or (2) create Indebtedness with a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced is
--------
Indebtedness of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company, (y) if such Indebtedness being Refinanced is
subordinate or junior in right of payment to the Loans or the Guarantees, as the
case may be, or if recourse in respect of the Indebtedness being Refinanced is
limited in any respect, then such Indebtedness proposed to be Incurred to
Refinance the
<PAGE>
-28-
existing Indebtedness shall be subordinate in right of payment to the Loans or
the Guarantees, as the case may be, and recourse with respect thereto, as the
case may be, shall be limited at least to the same extent and in the same manner
as the Indebtedness being Refinanced and (z) if such Indebtedness being
Refinanced is Pari Passu Indebtedness, then such Indebtedness proposed to be
incurred to Refinance the existing Indebtedness shall be Pari Passu
Indebtedness; provided, further, that Indebtedness incurred currently with an
-------- -------
irrevocable offer to purchase, on a date not more than 60 days from the date of
the incurrence of such Indebtedness, an amount of Notes equal to such
Indebtedness shall be deemed Refinancing Indebtedness.
"Permitted Tax Distributions" means, subject to Section 6.3,
distributions by Holdings LLC to Fir Tree and VS&A-T/SF to the extent necessary
to permit the direct or indirect beneficial owners of the common Equity
Interests of Holdings LLC to pay federal and state income tax liabilities
arising from income of Holdings LLC irrespective of any other income or loss
such holders may have and attributable to them solely as a result of Holdings
LLC (and any intermediate entity through which such holder owns such Equity
Interests) being a partnership or similar pass-through entity for federal income
tax purposes.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to such term in
Section 2.B.
"Plan" means an employee benefit plan as defined in Section
3(3) of ERISA maintained by the Company or any of its Subsidiaries for employees
of the Company or any of its Subsidiaries.
"Potential Event of Default" means a condition or event which,
after notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any applicable grace or
cure period.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights (as compared
<PAGE>
-29-
to any other Capital Stock of such Person) with respect to dividends or
redemptions or upon liquidation.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Agreement, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's chief financial officer or Board of Directors in
consultation with its independent certified public accountants.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Quarterly Period" shall mean the period commencing on the
first calendar day of each three-month period, if such day is a Business Day, or
the first Business Day succeeding the first calendar day of each three-month
period and ending on the day next preceding the first Business Day of the
following Quarterly Period; provided that the first Quarterly Period shall
--------
commence on the Closing Date and shall end on and exclude January 1, 1998.
"Real Property Assets" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation thereof, in
each case owned or leased (as lessee) by the Company or its Subsidiaries.
"Recapitalization" means the recapitalization of the Company
as contemplated by the Stock Purchase Agreement.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Register" has the meaning ascribed to such term in Section
5.13.
"Registration Rights Agreement" means a registration rights
agreement substantially in the form contemplated by Exhibit V (with such changes
---------
therein as the Agent and the Company shall approve).
"Related Business" means any capital expenditure or Investment
in properties and assets that replace the properties and assets that were the
subject of an Asset Sale or in properties and assets that will be used in the
business of the Com-
<PAGE>
-30-
pany and its Subsidiaries as existing on the Closing Date or in businesses
reasonably related thereto.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"Reportable Event" has the meaning set forth in Section 4043
of ERISA, but excluding any event for which the 30-day notice requirement has
been waived by applicable regulations of the PBGC.
"Required Lenders" means the Lender or Lenders holding at
least 51% of the aggregate outstanding principal amount of Notes.
"Restricted Payment" has the meaning ascribed to such term in
Section 6.3.
"Securities" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit sharing agreement or arrangement, bonds, debentures, options, warrants,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Senior Credit Facility" means the Loan Agreement dated as of
October 9, 1997 among the Company, the lenders listed therein and First Union,
as agent, together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replace-
<PAGE>
-31-
ment agreement and whether by the same or any other agent, lender or group of
lenders pursuant to which the Company may borrow up to $25,000,000 in the
aggregate at any one time.
"Senior Indebtedness" means for any Person the principal of,
premium, if any, and interest on, and all amounts payable in respect of, all
obligations of every nature of the Company from time to time owed to the lenders
under the Senior Credit Facility, including, without limitation, all obligations
in respect of letters of credit and principal of and interest on and all fees,
indemnities, and expenses payable under the Senior Credit Facility and all
obligations under Interest Rate Agreements entered into with lenders under the
Senior Credit Facility and their respective Affiliates and any guarantees
thereof including any agreement refinancing all or any portion of the
Indebtedness under such Senior Credit Facility but only to the extent such
Indebtedness is fully and adequately secured. Without limiting the generality of
the foregoing, "Senior Indebtedness" shall include interest accruing thereon
subsequent to the occurrence of any Event of Default specified in Sections 7.6
and 7.7 relating to the Company, whether or not the claim for such interest is
allowed under any applicable Bankruptcy Law. Notwithstanding the foregoing,
"Senior Indebtedness" of any Person shall not include that portion of any
Indebtedness which is incurred by such Person in violation of this Agreement.
"Senior Subordinated Indenture" means an indenture between the
Company and a trustee substantially in the form contemplated by and in
accordance with Section 5.10 (with such changes therein as the Agent and the
Company shall approve, and, at such time as notes issued thereunder are sold in
a public offering, with other appropriate changes to reflect such public
offering), as the same may at any time be amended, modified and supplemented and
in effect.
"Stock Purchase" means the acquisition by VS&A-T/SF of shares
of stock of the Company pursuant to the Stock Purchase Agreement.
"Stock Purchase Agreement" means the stock purchase agreement
dated as of August 15, 1997, as amended, by and among VS&A-T/SF, VS&A and the
Company, relating to the Recapitalization.
"Stockholders Agreement" means the Stockholders Agreement
dated October 9, 1997 among VS&A-T/SF, Fir Tree and the Company.
<PAGE>
-32-
"Subordinated Indebtedness" means Indebtedness of the Company
or any Guarantor which is expressly subordinated in right of payment to the
Notes or the Guarantee of such Guarantor, as the case may be.
"Subsequent Bridge Note" has the meaning ascribed to such term
in Section 2.1D.
"Subsequent Term Note" has the meaning ascribed to such term
in Section 2.2E.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereto is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof; provided that with respect to the
--------
Company, "Subsidiary" shall not include Inactive Subsidiaries so long as such
entities remain Inactive Subsidiaries. For purposes of this Agreement, each of
the LLCs shall be deemed to be Subsidiaries.
"Take-Out Securities" means any debt securities of the Company
and/or the Guarantors the proceeds of which are used to repay the Notes in full.
"Taxes" means all taxes, assessments, fees, levies, imposts,
duties, penalties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest penalties, from time to time or at any
time imposed by any Law or any Tribunal.
"Term Loan Commitment" has the meaning ascribed to such term
in Section 2.2A.
"Term Notes" has the meaning ascribed to such term in Section
2.2E.
"Transaction Costs" means the fees, costs and expenses payable
by the Company pursuant hereto and other fees, costs and expenses payable by the
Company or a Subsidiary of the Company in connection with the Transactions.
"Transactions" shall mean, collectively, (i) the Equity
Financing, (ii) the incurrence of the revolving loans drawn down on the Closing
Date under the Senior Credit Facil-
<PAGE>
-33-
ity, (iii) the incurrence of the Bridge Loans hereunder on the Closing Date,
(iv) the Recapitalization, (v) any other transaction on the Closing Date
contemplated in relation to the foregoing, including, but not limited to, the
formation of the LLCs, and (vi) the payment of fees and expenses in connection
with the foregoing.
"Transferee" has the meaning ascribed to such term in Section
12.19.
"Tribunal" means any government, any arbitration panel, any
court or any governmental department, commission, board, bureau, agency,
authority or instrumentality of the United States or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted and/or existing.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Voting Stock" means, with respect to any Person, securities
of any class or classes of Capital Stock in such Person entitling the holders
thereof (whether at all times or only so long as no senior class of stock has
voting power by reason of any contingency) to vote in the election of members of
the board of directors or other governing body of such Person.
"VS&A" means VS&A Communications Partners II, L.P., a Delaware
limited partnership.
"VS&A-T/SF" means VS&A-T/SF Inc., a Delaware corporation, and
after the merger of VS&A-T/SF into the Company, VS&A-T/SF L.L.C.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
<PAGE>
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"Wholly-Owned Subsidiary" means, with respect to any Person,
any corporation, association or other business entity of which 100% of the total
voting power of shares of stock or other equity interest 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 that Person or one or more of the other Wholly-Owned
Subsidiaries of that Person or a combination thereof and including Holdings LLC
and the Operating LLCs.
1.2 Accounting Terms
----------------
For the purposes of this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with GAAP. The LLCs shall be treated as Wholly-Owned Subsidiaries for computing
financial covenants.
1.3 Other Definitional Provisions
-----------------------------
(a) Any of the terms defined in Section 1.1 may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference.
(b) If Holdings LLC and the Operating LLCs are not formed, all
references to Holdings LLC, Operating LLC and LLCs shall be disregarded.
SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES
2.1 Bridge Loan and Bridge Note
---------------------------
A. Bridge Loan Commitment. Subject to the terms and
----------------------
conditions of this Agreement and in reliance upon the representations and
warranties of the Company herein set forth, the Lenders hereby agree to lend to
the Company on the Closing Date $80,000,000 in the aggregate (the "Bridge
Loan"), each such Lender committing to lend the amount set forth next to such
Lender's name on the signature pages hereto. The Lenders' commitments to make
the Bridge Loan to the Company pursuant to this Section 2.1A are herein called
individually, the "Bridge Loan Commitment" and collectively, the "Bridge Loan
Commitments."
B. Notice of Borrowing. When the Company desires to
-------------------
borrow under this Section 2.1, it shall deliver to the Agent
<PAGE>
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a Notice of Borrowing no later than 11:00 A.M. (New York time), at least two
Business Days in advance of the Closing Date or such later date as shall be
agreed to by the Agent. The Notice of Borrowing shall specify the applicable
date of borrowing (which shall be a Business Day). Upon receipt of such Notice
of Borrowing, the Agent shall promptly notify each Lender of its share of the
Bridge Loan and the other matters covered by the Notice of Borrowing.
C. Disbursement of Funds. (a) No later than 12:00 Noon
---------------------
(New York time) on the Closing Date, each Lender will make available its pro
rata share of the Bridge Loan requested to be made on such date in the manner
provided below. All amounts shall be made available to the Agent in U.S. Legal
Tender and immediately available funds at the Payment Office and the Agent
promptly will make available to the Company by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Agent shall have been notified by any Lender prior to
the Closing Date that such Lender does not intend to make available to the Agent
its portion of the Bridge Loan to be made on such date, the Agent may assume
that such Lender has made such amount available to the Agent on such date, and
the Agent, in reliance upon such assumption, may (in its sole discretion and
without any obligation to do so) make available to the Company a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Lender and the Agent has made available same to the Company, the Agent
shall be entitled to recover such corresponding amount from such Lender. If such
Lender does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Company, and the Company shall
immediately pay such corresponding amount to the Agent. The Agent shall also be
entitled to recover from such Lender or the Company, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Company to the date
such corresponding amount is recovered by the Agent, at a rate per annum equal
to (x) if paid by such Lender, the overnight Federal Funds Rate or (y) if paid
by the Company, the then applicable rate of interest on the Loans.
(b) Nothing herein shall be deemed to relieve any Lender from
its obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice
any rights which the Company may have against any Lender as a result of any
default by such Lender hereunder.
<PAGE>
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D. Bridge Notes. The Company shall execute and deliver
------------
to each Lender on the Closing Date a Bridge Note dated the Closing Date
substantially in the form of Exhibit I to evidence such Lender's portion of the
---------
Bridge Loan Commitment and with appropriate insertions (the "Original Bridge
Notes"). On each interest payment date prior to the Conversion Date on which the
Company elects to pay a PIK Interest Amount pursuant to Section 2.3B, the
Company shall execute and deliver to each Lender on such interest payment date a
Bridge Note dated such interest payment date substantially in the form of
Exhibit I annexed hereto in a principal amount equal to such Lender's pro rata
- ---------
portion of such PIK Interest Amount and with other appropriate insertions (each
a "Subsequent Bridge Note" and, together with the Original Bridge Notes, the
"Bridge Notes"). A Subsequent Bridge Note shall bear interest from the date of
its issuance at the same rate borne by all Bridge Notes.
E. Scheduled Payment of Bridge Loan. Subject to Section
--------------------------------
2.2, the Company shall pay in full the outstanding amount of the Bridge Loan and
all other Obligations owing hereunder no later than the Conversion Date.
F. Termination of Bridge Loan Commitment. The Bridge
-------------------------------------
Loan Commitment hereunder shall terminate on the earlier of (i) the date on
which the Acquisition Agreement is terminated in accordance with its terms or
(ii) December 31, 1997 if the Bridge Loan is not made on or before such date.
G. Pro Rata Borrowings. The Bridge Loan made under this
-------------------
Agreement shall be made by the Lenders pro rata on the basis of their respective
--- ----
Bridge Loan Commitments. It is understood that no Lender shall be responsible
for any default by any other Lender of its obligation to make its portion of the
Bridge Loan hereunder and that each Lender shall be obligated to make its
portion of the Bridge Loan hereunder, regardless of the failure of any other
Lender to fulfill its commitments hereunder.
2.2 Term Loan and Term Note
-----------------------
A. Term Loan Commitment. Subject to the terms and
--------------------
conditions of this Agreement and in reliance upon the representations and
warranties of the Company herein set forth, the Lenders hereby agree, on the
Conversion Date, upon the request of the Company, to convert the then
outstanding principal amount of the Bridge Notes into a term loan (the "Term
Loan"), such Term Loan to be in the aggregate principal amount of the then
outstanding principal amount of the Bridge Notes. The
<PAGE>
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Lenders' commitments under this Section 2.2A are herein called collectively, the
"Term Loan Commitment."
B. Notice of Conversion/Borrowing. If the Company has
------------------------------
not repaid the Bridge Loan in full on or prior to the Conversion Date, then the
Company shall convert the then outstanding principal amount of the Bridge Notes
into a Term Loan under this Section 2.2. The Company shall deliver to the
Lenders a Notice of Conversion no later than 11:00 A.M. (New York time), at
least two Business Days in advance of the Conversion Date. The Notice of
Conversion shall specify the principal amount of the Bridge Notes outstanding on
the Conversion Date to be converted into a Term Loan.
C. Making of Term Loan. Upon satisfaction or waiver of
-------------------
the conditions precedent specified in Section 3.2, each Lender shall extend to
the Company the Term Loan to be issued on the Conversion Date by such Lender by
cancelling on its records a corresponding principal amount of the Bridge Notes
held by such Lender.
D. Maturity of Term Loan. The Term Loan shall mature and
---------------------
the Company shall pay in full the outstanding principal amount thereof and
accrued interest thereon on the tenth anniversary of the Closing Date (the
"Maturity Date").
E. Term Notes. The Company, as borrower, shall execute
----------
and deliver to each Lender on the Conversion Date a Term Note dated the
Conversion Date substantially in the form of Exhibit II to evidence the Term
----------
Loan made on such date, in the principal amount of the Bridge Notes held by such
Lender on such date and with other appropriate insertions (collectively the
"Original Term Notes"). On or after the Conversion Date, on each interest
payment date on which the Company elects to pay a PIK Interest Amount pursuant
to Section 2.3B, the Company shall execute and deliver to each Lender on such
interest payment date a Term Note dated such interest payment date substantially
in the form of Exhibit II annexed hereto in a principal amount equal to such
----------
Lender's pro rata portion of such PIK Interest Amount and with other appropriate
insertions (each a "Subsequent Term Note" and, together with the Original Term
Notes, the "Term Notes"). A Subsequent Term Note shall bear interest at the same
rate borne by all Term Notes.
2.3 Interest on the Loans
---------------------
A. Rate of Interest. The Loans shall bear interest on
----------------
the unpaid principal amount thereof from the date made
<PAGE>
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through maturity (whether by prepayment, acceleration or otherwise) each
Quarterly Period at a rate per annum equal to the Applicable Interest Rate for
such period.
Notwithstanding this Section 2.3A or any other provision
herein, in no event will the combined sum of interest (cash or otherwise) on the
Loans exceed 18.00% per annum.
--- -----
B. Interest Payments. Interest shall be payable (i)
-----------------
with respect to the Bridge Loan, in arrears on January 1, 1998, April 1, 1998,
July 1, 1998, October 1, 1998, and upon any prepayment of the Bridge Loan (to
the extent accrued on the amount being prepaid) and at maturity of the Bridge
Loan in respect of any amounts paid on such date and not converted to Term Loans
and (ii) with respect to the Term Loan, in arrears on each January 1, April 1,
July 1 and October 1 of each year, commencing on the first of such dates to
follow the Conversion Date, upon any prepayment of the Term Loan (to the extent
accrued on the amount being prepaid) and at maturity of the Term Loan; provided,
--------
however, that if, on any interest payment date, the interest rate borne by the
- -------
Bridge Loan or the Term Loan, as the case may be, exceeds the Maximum Cash
Interest Rate, the Company may pay all or a portion of the interest payable in
excess of the amount of interest that would be payable on such date at the
Maximum Cash Interest Rate by issuance of Subsequent Bridge Notes or Subsequent
Term Notes, as the case may be, in an aggregate principal amount equal to the
amount of such interest being so paid (the "PIK Interest Amount").
C. Post-Maturity Interest. Any principal payments on the
----------------------
Loans not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loans not paid when due, in each case whether at stated
maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is 2.00% per annum
in excess of the rate of interest otherwise payable under this Agreement for the
Loans.
D. Computation of Interest. Interest on the Loans shall
-----------------------
be computed on the basis of a 360-day year and the actual number of days elapsed
in the period during which it accrues. In computing interest on the Loans, the
date of the making of the Loans shall be included and the date of payment shall
be excluded; provided that if a Loan is repaid on the same day on which it is
made, one day's interest shall be paid on that Loan.
<PAGE>
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2.4 Fees
----
The Company agrees to pay to First Union all fees and other
obligations in accordance with, and at the times specified by, the Commitment
Letter.
2.5 Prepayments and Payments
------------------------
A. Prepayments
-----------
(i) Voluntary Prepayments. The Company may, upon not
---------------------
less than three Business Days' prior written or telephonic notice
confirmed in writing to the Agent at any time and from time to time,
prepay the Loans made to the Company in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of $100,000
in excess of that amount at a redemption price equal to the principal
amount thereof plus accrued and unpaid interest thereon to the date of
redemption; provided the redemption price shall be 103.0% of par plus
--------
accrued interest if the source of repayment is from a transaction for
which FUCMC or any of its affiliates was not the exclusive agent or
sole manager for the Company.
Notice of prepayment having been given as aforesaid, the
principal amount of the Loans to be prepaid shall become due and
payable on the prepayment date. Amounts of the Loans so prepaid may not
be reborrowed.
(ii) Mandatory Prepayments
(a) Prepayments from Asset Sales. Upon receipt by the Company
----------------------------
or any Subsidiary of the Company of Cash Proceeds of any Asset Sale
occurring after the Closing Date, (i) the Company or any Subsidiary of
the Company shall, or shall cause its Subsidiaries to, apply the Net
Cash Proceeds of such Asset Sale to prepay revolving loans outstanding
under the Senior Credit Facility; provided that the commitment
--------
thereunder is permanently reduced to the extent of the prepayment; and
(ii) after the Conversion Date, the Company or any Subsidiary of the
Company may apply any Net Cash Proceeds remaining after application
pursuant to clause (i) above to a Related Business. Concurrently with
the consummation of an Asset Sale, the Company shall deliver to the
Agent an Officer's Certificate demonstrating the derivation of Net Cash
Proceeds from the gross sales price of such Asset Sale.
<PAGE>
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To the extent not used as above, the Company shall, or shall
cause its Subsidiaries to, prepay the Loans with the Net Cash Proceeds
received from any Asset Sale on a date not later than the Business Day
next succeeding (i) the third Business day after the receipt thereof if
such date of receipt is on or prior to the Conversion Date and (ii) the
180th day after the consummation of such Asset Sale if and to the
extent that such Net Cash Proceeds are not applied by the Company or
any Subsidiary of the Company within 180 days to a Related Business if
such date of receipt is after the Conversion Date.
(b) Prepayments from Issuances of Take-Out Securities.
-------------------------------------------------
Concurrently with the receipt by the Company of proceeds from the
issuance of Take-Out Securities, the Company shall prepay the Loans in
whole (at a price per Note equal to either the principal amount of such
Note plus accrued and unpaid interest, if any, to the date of payment
or a redemption price of 103.0% if FUCMC was not the exclusive agent or
sole manager with respect to the Take-Out Securities transaction).
(c) Notice. The Company shall notify the Agent of any
------
prepayment to be made pursuant to this Section 2.5A(ii) at least two
Business Days prior to such prepayment date (unless shorter notice is
satisfactory to the Required Lenders).
(iii) Company's Mandatory Prepayment Obligation; Application
------------------------------------------------------
of Prepayments. All prepayments shall include payment of accrued
--------------
interest on the principal amount so prepaid and shall be applied to
payment of interest before application to principal.
(iv) Mandatory Offer to Purchase Notes
---------------------------------
(a) Upon the occurrence of a Change of Control (the date of
such occurrence, the "Change of Control Date"), the Company shall, if
the Lenders so request, offer to purchase (the "Change of Control
Offer") all of the Notes at a purchase price equal to 101.5% of the
aggregate principal amount thereof plus accrued interest thereon to the
date of repurchase. Prior to the mailing of the notice to the Agent
provided for in paragraphs (b) and (c) below but in any event within 30
days following any Change of Control, the Company hereby covenants to
(i) repay in full all Indebtedness under the Senior Credit Facility or
to offer to repay in full all such Indebtedness and to repay
<PAGE>
-41-
the Indebtedness of each lender under the Senior Credit Facility who
has accepted such offer or (ii) obtain the requisite consents under the
Senior Credit Facility to permit the payment of the Notes as provided
for in paragraph (d) below. The Company shall first comply with the
covenant in the preceding sentence before it shall be required to pay
the Notes pursuant to this Section 2.5A(iv).
(b) The notice to the Agent shall contain all instructions and
materials necessary to enable the Lenders to tender Notes.
(c) Within 30 days following any Change of Control the Company
shall mail a notice to the Agent stating:
(1) that the Change of Control Offer is being made
pursuant to this Section 2.5(A)(iv) and that all Notes validly
tendered will be accepted for payment;
(2) the purchase price and the purchase date, which
shall be no earlier than 30 days nor later than 40 days from
the date such notice is mailed (the "Offer Payment Date");
(3) that any Note not tendered will continue to
accrue interest;
(4) that any Note accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest
after the Offer Payment Date unless the Company shall default
in the payment of the repurchase price of the Notes;
(5) that if a Lender elects to have a Note
purchased pursuant to the Change of Control Offer it will be
required to surrender the Note, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company prior to 5:00 p.m. New York time on
the Offer Payment Date;
(6) that a Lender will be entitled to withdraw its
election if the Company receives, not later than 5:00 p.m. New
York time on the Business Day preceding the Offer Payment
Date, a telegram, telex, facsimile transmission or letter
setting forth the principal amount of Notes such Lender
delivered for purchase, and a statement that such Lender is
withdrawing its election to have such Note purchased; and
<PAGE>
-42-
(7) that if Notes are purchased only in part a new
Note of the same type will be issued in principal amount equal
to the unpurchased portion of the Notes surrendered.
(d) On or before the Offer Payment Date, the Company shall (i)
accept for payment Notes or portions thereof which are to be purchased
in accordance with the above, and (ii) deposit at the Payment Office
U.S. Legal Tender sufficient to pay the purchase price of all Notes to
be purchased. The Agent shall promptly mail to the Lenders whose Notes
are so accepted payment in an amount equal to the purchase price unless
such payment is prohibited pursuant to Section 8 or otherwise.
(e) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the purchase of Notes pursuant to an
offer hereunder. To the extent the provisions of any securities laws or
regulations conflict with the provisions under 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.
B. Manner and Time of Payment. All payments of principal
--------------------------
and interest hereunder and under the Notes by the Company shall be made without
defense, set-off or counterclaim and in same-day funds and delivered to the
Agent, unless otherwise specified, not later than 12:00 Noon (New York time) on
the date due at the Payment Office for the account of the Lenders; funds
received by the Agent after that time shall be deemed to have been paid by the
Company on the next succeeding Business Day. The Company hereby authorizes the
Agent to charge its account with the Agent in order to cause timely payment to
be made of all principal, interest and fees due hereunder (subject to sufficient
funds being available in its account for that purpose).
C. Notation of Payment. Each Lender agrees that before
-------------------
disposing of any Note held by it, or any part thereof (other than by granting
participations therein), such Lender will make a notation thereon of all
principal payments previously made thereon and of the date to which interest
thereon has been paid and will notify the Company of the name and address of the
transferee of that Note; provided that the failure to make (or any error in the
--------
making of) such a notation or to
<PAGE>
-43-
notify the Company of the name and address of such transferee shall not limit or
otherwise affect the obligation of the Company hereunder or under such Notes
with respect to the Loans and payments of principal or interest on any such
Note.
2.6 Use of Proceeds
---------------
A. Bridge Loan. The proceeds of the Bridge Loan shall be
-----------
applied by the Company, together with borrowings under the Senior Credit
Facility and funds raised in the Equity Financing, to the payment of the
Transaction Costs and to pay the consideration for the Recapitalization.
B. Term Loan. Upon the extension of a Term Loan by a
---------
Lender, the Company shall cancel a corresponding principal amount of Bridge
Notes held by such Lender.
SECTION 3 CONDITIONS
3.1 Conditions to Bridge Loan
-------------------------
The obligation of the Lenders to make the Bridge Loan is
subject to prior or concurrent satisfaction of each of the following conditions:
A. On or before the Closing Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by the Agent shall be reasonably satisfactory in form and substance
to the Agent, and the Agent shall have received on behalf of the Lenders the
following items, each of which shall be in form and substance satisfactory to
the Agent and, unless otherwise noted, dated the Closing Date:
1. a certified copy of the Company's, each Guarantor's and any
other of the Company's Subsidiaries' (other than the inactive
subsidiaries) charter, together with a certificate of status,
compliance, good standing or like certificate with respect to the
Company and each Guarantor issued by the appropriate government
officials of the jurisdiction of its incorporation and of each
jurisdiction in which it owns any material assets or carries on any
material business, each to be dated a recent date prior to the Closing
Date;
<PAGE>
-44-
2. a copy of the Company's and each Guarantor's and any other
of the Company's Subsidiaries' bylaws, certified as of the Closing Date
by one of its Officers;
3. resolutions of the Company's and each Guarantor's Board of
Directors approving and authorizing the execution, delivery and
performance of this Agreement, each of the other Loan Documents and any
other documents, instruments and certificates required to be executed
by the Company or such Guarantor in connection herewith and therewith
and approving and authorizing the execution, delivery and payment of
the Notes and the consummation of the Transactions, each certified as
of the Closing Date by one of its Officers as being in full force and
effect without modification or amendment;
4. signature and incumbency certificates of the Company's and
each Guarantor's Officers executing this Agreement and the Bridge
Notes;
5. executed copies of this Agreement and the Bridge Notes
substantially in the form of Exhibit I executed in accordance with
---------
Section 2.1D drawn to the order of the Lenders and with appropriate
insertions;
6. an originally executed Notice of Borrowing substantially in
the form of Exhibit IV-A, signed by the President or a Vice President
------------
of the Company on behalf of the Company in writing delivered to the
Agent;
7. originally executed copies of one or more favorable written
opinions of (I) Proskauer Rose, LLP, special counsel for the Company
and the Subsidiary Guarantors, substantially in the form of Exhibit VI
----------
and addressed to the Lenders, (II) Cahill Gordon & Reindel, counsel for
the Lenders, substantially in the form of Exhibit VII and addressed to
-----------
the Lenders and (III) such other opinions of counsel and such
certificates or opinions of accountants, appraisers or other
professionals as the Agent shall have reasonably requested including,
without limitation, receipt of an environmental report and technical
reports from independent consultants in respect of the Company and the
Subsidiaries of the Company and their respective properties, reasonably
satisfactory to the Agent;
8. a certificate, delivered by the Company and signed by the
President or a Vice President and the Chief Financial or Accounting
Officer of the Company and ad-
<PAGE>
-45-
dressed to the Lenders in form and substance reasonably satisfactory to
the Agent, with appropriate attachments, stating that, after giving
effect to the consummation of the Transactions, the fair saleable value
of the assets of the Company and its Subsidiaries will not be less than
the probable liability on their debts, that each of the Company and its
Subsidiaries will be able to pay its debts as they mature and that each
will not have unreasonably small capital to conduct its business, and
the Agent shall have received such opinions of value, other appropriate
factual information and expert advice supporting the conclusions
reached in such letter as the Agent may reasonably request, all in form
and substance reasonably satisfactory to the Agent.
9. true and correct copies of the Stock Purchase Agreement,
which shall not have been amended without the Agent's consent (which
consent shall not be unreasonably withheld or delayed) and which shall
be in full force and effect and each of the conditions to purchase
contained therein shall have been satisfied and not materially waived
or amended without the Agent's prior written consent (which consent
shall not be unreasonably withheld or delayed);
10. (i) executed or conformed copies of the Senior Credit
Facility and any amendments thereto made on or prior to the Closing
Date and a copy of each legal opinion delivered in connection with the
Senior Credit Facility, and the terms and provisions of the Senior
Credit Facility and all documents and instruments relating thereto
shall be reasonably satisfactory to the Agent, (ii) an Officers'
Certificate from the Company certifying that the Senior Credit Facility
is in full force and effect on the Closing Date and no material term or
condition thereof has been amended, modified or waived from the form
most recently provided to the Agent a reasonable time prior to the
Closing Date except with the prior written consent of the Agent (which
consent shall not be unreasonably withheld or delayed) and (iii) an
Officers' Certificate from the Company to the effect that such party
has performed or complied with all agreements and conditions contained
in the Senior Credit Facility and any agreements or documents referred
to therein, and the Company is not in default in the performance or
compliance with any of the terms or provisions thereof;
<PAGE>
-46-
11. a notation of Guarantee, executed and delivered by each
Guarantor, dated the date of this Agreement, substantially in the form
of Exhibit VIII, as applicable; and
------------
12. a copy of the Stock Purchase Agreement and Stockholders
Agreement relating to the Recapitalization and all such counterpart
originals or certified copies of such documents, instruments,
certificates and opinions as the Agent may reasonably request.
B. The Agent shall have received reports and other
information in form, scope and substance satisfactory to the Agent concerning
environmental liabilities of the Company and the Guarantors.
C. On or before the Closing Date, all authorizations,
consents and approvals necessary in connection with the Transactions shall have
been obtained and remain in full force and effect and all applicable waiting
periods under Law applicable to the Recapitalization shall have expired without
any action being taken by any competent authority (including without limitation,
any Tribunal) which restrains, prevents or imposes materially adverse conditions
upon the completion of the Recapitalization or the financing thereof and
evidence of the receipt of such authorizations, consents and approvals
satisfactory to the Agent shall have been delivered to the Agent.
D. No default or event of default shall have occurred
under the Senior Credit Facility, all conditions to borrowing thereunder shall
have been satisfied without waiver (except for any written waivers delivered in
respect of a condition that in the opinion of the Agent is immaterial) and the
Company shall have available to it a revolving credit facility of which not more
than $20,000,000 shall have been funded as of such date.
E. On or before the Closing Date, the Company shall have
paid to First Union the fees payable on the Closing Date pursuant to Section
2.4.
F. On or before the Closing Date, the Company shall have
performed in all material respects all agreements which this Agreement provides
shall be performed on or before the Closing Date except as otherwise disclosed
to and agreed to in writing by the Agent.
G. At the Closing Date, the Company shall have
consummated the Equity Financing (other than $4,500,000 to be con-
<PAGE>
-47-
tributed to Holdings LLC) and received gross cash proceeds of approximately
$35,500,000 from VS&A-T/SF and management and the roll-over by Fir Tree of
common equity capital in the Company with a value of approximately $19,600,000.
The Equity Financing shall have been definitively documented on terms and
conditions satisfactory to the Agent, all such documentation shall be in full
force and effect and the parties thereto shall be in compliance with all
material agreements thereunder.
H. Simultaneously with the making of the Bridge Loan by
the Lenders, the Company shall have delivered to the Agent an Officers'
Certificate from the Company in form and substance satisfactory to the Agent to
the effect that (i) the representations and warranties in Section 4 and the
representations and warranties of the Company in the Senior Credit Facility are
true, correct and complete in all material respects on and as of the Closing
Date to the same extent as though made on and as of that date, (ii) on or prior
to the Closing Date, the Company has performed and complied with in all material
respects all covenants and conditions to be performed and observed by the
Company on or prior to the Closing Date and (iii) all conditions to the
consummation of the Recapitalization in the Stock Purchase Agreement have been
satisfied substantially on the terms set forth therein and have not been waived
or amended without the Agent's prior written consent.
I. Immediately following the making of the Bridge Loan
by the Lenders, the Recapitalization shall be consummated without the waiver of
any conditions precedent thereto.
J. None of the Company or any of the Guarantors of the
Company 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 labor dispute or any
legal or governmental proceeding, which loss or interference, in the sole
judgment of the Agent, has had or could reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of the
Company and its subsidiaries to consummate the Transactions and to execute,
deliver and perform its respective obligations under the Loan Documents, the
Senior Credit Facility and each other document or instrument to be delivered in
connection with the Transactions executed or to be executed by it; there shall
not have been, in the reasonable judgment of the Agent, any Material Adverse
Change, or any development involving a prospective Material Adverse Change.
<PAGE>
-48-
K. No event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by the Notice
of Borrowing which would constitute an Event of Default or Potential Event of
Default.
L. No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain the Lenders from
making the Bridge Loan.
M. There shall not be pending or, to the knowledge of
the Company, threatened any action, suit, proceeding, governmental investigation
or arbitration against or affecting the Company or any property or asset of the
Company or any of its Affiliates which has not been disclosed by the Company in
writing to the Agent (and the Agent shall have received on the Closing Date an
Officer's Certificate dated the Closing Date attesting to the same) and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, which, in
each case, singly or in the aggregate, in the opinion of the Agent, could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Company, the Transactions or the making of the Bridge Loans. No
injunction or other restraining order shall have been issued and no hearing to
cause an injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to restrain,
enjoin, delay, prohibit or otherwise prevent the consummation of, or to recover
any damages or obtain relief as a result of, the Transactions. There shall not
be threatened, instituted or pending any action, proceeding or application
before or by any Tribunal, or any other Person, domestic or foreign (i)
challenging the Transactions or seeking to restrain, delay or prohibit the
consummation thereof; (ii) seeking to prohibit or impose material limitations on
the Company's ownership or operation of all or any portion of the Company's
business or assets (including the business or assets of any Subsidiary thereof)
or to compel the Company to dispose of or hold separate all or any portion of
the Company's business or assets (including the business or assets of any
Subsidiary thereof) as a result of the Recapitalization; (iii) which, in any
event, might adversely affect the Bridge Loan; or (iv) seeking to impose any
materially adverse conditions upon the Transactions.
N. The making of the Bridge Loan in the manner
contemplated in this Agreement shall not violate the applicable provisions of
Regulation G, T, U or X of the Board of Governors
<PAGE>
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of the Federal Reserve Board or any other regulation of the Board.
O. The pro forma consolidated capital structure of the
Company and its Subsidiaries and the LLCs, after giving effect to the
Transactions, shall be consistent with the capital structure contemplated in the
preliminary offering memorandum dated October 8, 1997.
P. There shall not have occurred (i) any general suspension
of, or limitation on times or prices for, trading in securities on the New York
Stock Exchange or American Stock Exchange or in the over-the-counter market in
the United States or minimum or maximum prices established on any such
exchanges; (ii) a declaration of a banking moratorium or any suspension of
payments in respect of the banks in the United States or New York; or (iii)
either (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 or any other national
or international calamity or emergency, or (C) any material change in the
financial markets of the United States, which, in the sole judgment of the
Agent, makes it impracticable or inadvisable to proceed with the consummation of
the Transactions or the Bridge Loan or any of the other transactions
contemplated hereby including, without limitation, the issuance and sale of the
Take-Out Notes or that would materially affect the ability to sell or syndicate
the Bridge Loan.
Q. The Agent shall be satisfied that audited, unaudited
and pro forma financial statements meeting the requirements of Regulation S-X
under the Securities Act of 1933, as amended, of the Company and its
Subsidiaries (including the LLCs) are available as of the Closing Date and the
Company shall have prepared an offering memorandum relating to the issuance of
Take-Out Securities (which offering memorandum shall contain audited, unaudited
and pro forma financial statements meeting the requirements of Regulation S-X
under the Securities Act of 1933, as amended, of the Company for the periods
required of a registrant on Form S-1).
R. The Agent and its counsel shall be satisfied that the
consummation of the Recapitalization and the related financing, including the
funding of the Bridge Loan, shall be in compliance with all applicable Laws.
There shall not have been any statute, rule, regulation, injunction or order
applicable to the Acquisition, or the financing thereof, promulgated, enacted,
entered or enforced by any state or federal
<PAGE>
-50-
government or governmental or regulatory authority or agency or by any federal
or state court, or by any Tribunal, nor shall there be pending any action or
proceeding by or before any such authority, court or tribunal, involving a
substantial likelihood of an order, that would prohibit, restrict, delay or
otherwise materially affect the Recapitalization or the financing thereof.
3.2 Conditions to Term Loan
-----------------------
The obligation of the Lenders to make the Term Loan on the
Conversion Date is subject to the prior or concurrent satisfaction or waiver of
the following conditions precedent:
A. The Agent shall have received in accordance with the
provisions of Section 2.2B an originally executed Notice of Conversion.
B. The Company or any of its Material Subsidiaries shall
not be subject to a Bankruptcy Order or a bankruptcy or other insolvency
proceeding and an Event of Default or Potential Event of Default shall not have
occurred under Section 7.6, 7.7 or 7.9.
C. No Event of Default or Potential Event of Default
(whether matured or not) shall have occurred under Section 7.1.
D. No Event of Default or Potential Event of Default shall
have occurred under Section 7.2; provided that if an event described in this
--------
Section 3.2D is continuing at the Conversion Date but 30 days has not passed
since the date of written notice of the commencement of such 30-day period from
the holder or holders of not less than 50% in aggregate principal amount of the
Loans then outstanding (the "Grace Period"), the Conversion Date shall be
deferred until the earlier to occur of (x) the cure of such event or (y) the
expiration of such Grace Period.
E. On the Conversion Date, the Agent shall have received
an Officers' Certificate from the Company, dated the Conversion Date and
satisfactory in form and substance to the Agent, to the effect that the
conditions in this Section 3.2 are satisfied on and as of the Conversion Date.
F. The Company shall have executed and delivered to the
Agent on the Conversion Date for delivery to the Lenders Term Notes dated the
Conversion Date substantially in the form
<PAGE>
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of Exhibit II to evidence the Term Loan, in the principal amount of (which
----------
principal amount shall be the aggregate principal amount of the Bridge Loan
outstanding on the Conversion Date) the Term Loan and with other appropriate
insertions.
G. The Company shall have paid any fees owing pursuant to
Section 2.4 in cash to First Union.
H. The making of the Term Loan shall not violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve Board or any other
regulation of the Board.
I. If requested by FUCMC, the Company shall have supplemented
the information previously provided to FUCMC and shall have assisted in sales
presentations to market the Take-Out Securities.
J. The warrants ("Warrants") held in escrow, pursuant to
the commitment letter and term sheet between FUCMC AND VS&A, shall be released
to the Agent, representing the following percentages (as of the Closing Date) of
fully-diluted common stock of the Company and unless the Term Notes have been
redeemed in full prior thereto at the following times: (i) upon such Conversion
Date, 1.875%; (ii) on each of the 90th day, 180th day and 270th day after the
Conversion Date, 1.406%; and (iii) on the 360th day after such Conversion Date,
1.407%.
SECTION 4 REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement
and to make the Loans, the Company represents and warrants to the Lenders that,
at the time of execution hereof and after consummation of the Transactions, the
following statements are true, correct and complete:
4.1 Organization and Good Standing;
Capitalization
-------------------------------
(a) Each of the Company and the Guarantors is a corporation duly
organized and existing and in good standing under the laws of its jurisdiction
of incorporation. Each of the Company and the Guarantors has the corporate power
and authority to own and operate its properties and to carry on its business as
now conducted and as proposed to be conducted and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which it is doing
business, except where failure to be so qualified or in good standing, singly or
in
<PAGE>
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the aggregate, has not had and will not have a Material Adverse Effect or a
material adverse effect on the ability of the Company or its subsidiaries to
consummate the Transactions and to execute, deliver and perform its respective
obligations under the Loan Documents, the Senior Credit Facility and each other
document or instrument to be delivered in connection with the Transactions
executed or to be executed by it.
(b) All of the Subsidiaries of the Company and all of the LLCs as of
the Closing Date are identified and their respective ownership structure and
jurisdiction of incorporation disclosed in Schedule B. The Capital Stock of each
----------
of the Subsidiaries of the Company and each LLC identified in Schedule B is duly
----------
authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock.
(c) As of the Closing Date and after giving effect to the
Transactions, there are issued and outstanding shares of Common Stock of the
Company. Such shares of Common Stock of the Company have been duly and validly
issued, fully paid and nonassessable. Except as provided in the Stockholders
Agreement, no stockholder of the Company has or will have any preemptive rights
to subscribe for any additional equity securities of the Company. Any issuance
and sale of Common Stock of the Company, upon such issuance and sale, will
either (a) have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
4.2 Authorization and Power
-----------------------
Each of the Company and its Subsidiaries has the corporate
power and requisite authority, and, to the extent a party thereto, has taken all
corporate action necessary, to consummate the Transactions and to execute,
deliver and perform its obligations under the Loan Documents, the Senior Credit
Facility and each other document and instrument to be delivered in connection
with the Transactions executed or to be executed by it and to issue the Notes
and the Exchange Notes.
4.3 No Conflicts or Consents
------------------------
(a) The execution and delivery of the Loan Documents, the Stock
Purchase Agreement and each other document to be executed and delivered in
connection with the Transactions, the consummation of each of the transactions
herein or therein contemplated, the compliance with each of the terms and
provisions hereof or thereof, and the issuance, delivery and performance of
the Notes, the Senior Credit Facility and the Ex-
<PAGE>
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change Notes, do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to any of the Company and its
Subsidiaries, the Certificate or Articles of Incorporation or bylaws of any of
them or any order, judgment or decree of any court or other agency of
government binding on any of them, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of any of the Company and its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect or have a
material adverse effect on the ability of the Company or its Subsidiaries to
consummate the Transactions and to execute, deliver and perform its
obligations under the Loan Documents, the Senior Credit Facility and each
other document and instrument to be delivered in connection with the
Transactions executed or to be executed by it, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or assets of any
of the Company and its Subsidiaries (other than any Liens created under the
Senior Credit Facility) or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contractual Obligation of any of
the Company and its Guarantors except for such approvals or consents which
will be obtained on or before the Closing Date and disclosed in writing to
Lenders or such approvals or consents the failure to obtain which could not
reasonably be expected to singly or in the aggregate result in a Material
Adverse Effect or have a material adverse effect on the ability of the Company
or its Subsidiaries to consummate the Transactions and to execute, deliver and
perform its obligations under the Loan Documents, the Senior Credit Facility
and each other document and instrument to be delivered in connection with the
Transactions executed or to be executed by it.
(b) No consent, approval, authorization or order of any Tribunal or
other Person is required in connection with the execution and delivery by the
Company or any of its Subsidiaries of the Loan Documents, the Senior Credit
Facility or any other document or instrument to be delivered in connection with
the Transactions or the consummation of the transactions contemplated hereby or
thereby, other than any such consent, approval, authorization or order which has
been obtained and remains in full force and effect or which has been waived in
writing by the Agent on behalf of the Lenders or the failure of which to obtain
would not, singly or in the aggregate, have a Material Adverse Effect or a
material adverse effect on the ability of the Company or its Subsidiaries to
consummate the Transactions and to execute, deliver and perform its respective
obligations under the Loan Documents, the Senior Credit Facil-
<PAGE>
-54-
ity and each other document or instrument to be delivered in connection with the
Transactions executed or to be executed by it.
4.4 Enforceable Obligations
-----------------------
Each of the Loan Documents, the Stock Purchase Agreement, the
Senior Credit Facility and each other document or instrument to be delivered in
connection therewith has been duly authorized; each of the Loan Documents, the
Stock Purchase Agreement, the Senior Credit Facility and each other document or
instrument to be delivered in connection therewith to be executed and delivered
on or prior to the Closing Date has been duly executed and delivered by the
Company and each of its Guarantors that are a party thereto; and each of the
Loan Documents, the Stock Purchase Agreement, the Senior Credit Facility and
each other document or instrument to be delivered in connection therewith to be
executed and delivered on or prior to the Closing Date is, and each of the Loan
Documents to be executed and delivered after the Closing Date will be, upon such
execution and delivery, the legal, valid and binding obligations of the Company
and each such Subsidiary (to the extent a party thereto), enforceable in
accordance with their respective terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.5 Properties; Liens
-----------------
Each of the Company and each Guarantor has, and after
consummation of the Recapitalization will have, good, sufficient and legal title
to all their respective properties and assets, and all properties held under
lease by any of them, are, and immediately after the consummation of the
Recapitalization will be, held under valid, subsisting and enforceable leases,
and none of the Company or its Subsidiaries and, to the knowledge of the
Company, any other party thereto, is in default under any lease, except in each
case for such defects or defaults that, singly or in the aggregate, would not
have a Material Adverse Effect. Except as permitted by this Agreement, all such
properties and assets owned or leased are so owned or leased free and clear of
Liens.
<PAGE>
-55-
4.6 Financial Condition
-------------------
(a) The audited consolidated balance sheets of the Company and
its Subsidiaries at December 31, 1996 and 1995 and the related consolidated
statements of income, shareholders equity and cash flows of the Company and its
Subsidiaries for the three-year period ended December 31, 1996, certified by the
independent certified public accountants of the Company, copies of which have
been delivered to the Agent, were prepared in accordance with GAAP, have been
prepared from, and are consistent with, the books and records of the Company and
its Subsidiaries, respectively, and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries,
respectively, as at the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its Subsidiaries, respectively, for
the periods then ended. None of the Company or any of its Subsidiaries had at
December 31, 1996 any material contingent liabilities, liabilities for Taxes or
long-term leases, unusual forward or long-term commitments or unrealized or
unanticipated losses from any unfavorable commitments which are not reflected or
reserved against in the foregoing statements or in the notes thereto.
(b) The unaudited consolidated balance sheets of the Company
and its Subsidiaries at June 30, 1997 and the related consolidated statements of
income, retained earnings (deficit) and cash flows of the Company and its
Subsidiaries for the period then ended, a copy of which has been delivered to
the Agent, were prepared in accordance with GAAP consistently applied (except to
the extent noted therein), have been prepared from, and are consistent with, the
books and records of the Company and its Subsidiaries and fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of such date and the consolidated results of operations and cash
flows of the Company and its Subsidiaries for the period covered thereby, in
each case subject to normal year-end audit adjustments (including footnotes),
consistent with past practices. None of the Company or any of its Subsidiaries
had on such date any material contingent liabilities, liabilities for Taxes or
long-term leases, unusual forward or long-term commitment or unrealized or
unanticipated losses from any unfavorable commitment which are not reflected or
reserved against in the foregoing statements or in the notes thereto. No events
which have had or could reasonably be expected to have a Material Adverse Effect
have occurred since June 30, 1997 except as reflected therein.
<PAGE>
-56-
(c) The pro forma balance sheet of the Company as of June 30,
1997, a copy of which has heretofore been furnished to the Agent, fairly
presents the estimated consolidated opening balance sheet of the Company
assuming the Transactions had occurred as of June 30, 1997, and the financial
condition of the Company on the Closing Date does not differ in any material
respect from the information therein set forth.
(d) Upon giving effect to the Transactions:
(i) The fair saleable value of the assets of the Company and
each of the Guarantors, on a stand-alone basis, exceeds the amount that
will be required to be paid on or in respect of the existing debts and
other liabilities (including contingent liabilities) of such Person as
they mature.
(ii) The assets of each of the Company and the Guarantors, on
a stand-alone basis, do not constitute unreasonably small capital for
any such Person to carry out its business as now conducted and as
proposed to be conducted including the capital needs of any such
Person, taking into account the particular capital requirements of the
business conducted by such Person, and projected capital requirements
and capital availability thereof.
(iii) The Company does not intend to, and will not permit any
of the Guarantors to, incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of debt of each of such Person). The cash
flow of the Company and each of its Subsidiaries, after taking into
account all anticipated uses of the cash of each such Person, will at
all times be sufficient to pay all amounts on or in respect of debt of
each such company when such amounts are required to be paid.
(iv) The Company does not intend, and does not believe, that
final judgments against any of the Company or the Guarantors in actions
for money damages will be rendered at a time when, or in an amount such
that, any such Person will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered).
The cash flow of the Company and each of the Guarantors, on a
stand-alone basis, after taking into account all other anticipated uses
<PAGE>
-57-
of the cash of each such Person (including the payments on or in
respect of debt referred to in paragraph (iii) of this Section 4.6(d)),
will at all times be sufficient to pay all such judgments promptly in
accordance with their terms.
4.7 Full Disclosure
---------------
The financial projections (including, without limitation, the
pro forma financial statements included therewith) heretofore furnished to the
- --- -----
Agent by the Company are complete, were prepared by or under the direction of an
officer of the Company and were prepared in good faith on the basis of
information and assumptions that the Company believed to be fair, complete and
reasonable as of the date of such information, and which assumptions are
believed to be fair, complete and reasonable as of the date hereof. All other
factual information heretofore or contemporaneously furnished in writing by or
on behalf of the Company or any of its Subsidiaries to the Agent or Lenders for
purposes of or in connection with this Agreement (including, but not limited to,
the Stock Purchase Agreement, the Senior Credit Facility and all exhibits and
appendices thereto) does not contain any untrue statement by such party or, to
its knowledge, any other party of a material fact or omit to state any material
fact necessary to keep the statements made by such party or, to its knowledge,
any other party contained herein or therein from being misleading in a material
respect. No fact is known, no condition exists nor has any event occurred which
has not been disclosed herein or in any other document, certificate or statement
furnished to the Agent or the Lenders for use in the transactions contemplated
hereby which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.8 No Default
----------
No event has occurred and is continuing which constitutes a
Potential Event of Default or an Event of Default.
4.9 Compliance with Contracts, Etc.
------------------------------
None of the Company or any of the Guarantors is in violation
of (A) its certificate of incorporation, by-laws or other organizational
documents or (B) any applicable law, ordinance, administrative or governmental
rule or regulation, except, with respect to this clause (B), for such violations
that would not, singly or in the aggregate, have a Material Adverse Effect, or
(C) any order, decree or judgment of any Tribunal
<PAGE>
-58-
having jurisdiction over any of them; no event of default or event that but for
the giving of notice or the lapse of time, or both, would constitute an event of
default on the part of the Company or any of the Guarantors exists under any
material Contractual Obligation which would have a Material Adverse Effect.
4.10 No Litigation
-------------
Except as disclosed in Schedule L, there is no Litigation
pending or, to the best knowledge of the Company after due investigation,
threatened, by, against, or which may relate to or affect (a) any benefit plan
or any fiduciary or administrator thereof, (b) the Transactions, or (c) the
Company or any of the Guarantors, which singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or that could
reasonably be expected to materially and adversely affect the ability of the
Company to consummate the Recapitalization in a timely manner. There are no
outstanding injunctions or restraining orders prohibiting consummation of any of
the transactions contemplated by the Loan Documents or the Senior Credit
Facility. Neither the Company nor any of the Guarantors is in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against any such
Person or its business or activities. None of the Company or any of the
Guarantors has been advised that there is a reasonable likelihood of an adverse
determination of any Litigation which adverse determination, should it occur,
would have a Material Adverse Effect or a material adverse effect on the ability
of the Company or its subsidiaries to consummate the Transactions and to
execute, deliver and perform its respective obligations under the Loan
Documents, the Senior Credit Facility and each other document or instrument to
be delivered in connection with the Transactions executed or to be executed by
it.
4.11 Use of Proceeds; Margin Stock, Etc.
----------------------------------
The proceeds of the Bridge Loan will be used solely for the
purposes specified herein. None of such proceeds will be used in violation of
Regulation G, T, U or X. Neither the Company nor any of its Subsidiaries has
taken or will take any action which might cause any of the Loan Documents to
violate the applicable provisions of Regulation G, T, U or X, or any other
regulation of the Board of Governors of the Federal Reserve System.
<PAGE>
-59-
4.12 Taxes
-----
All material tax returns, foreign and domestic, required to be
filed by the Company and each of its Subsidiaries in any jurisdiction have been
filed, and all material Taxes for which they are directly or indirectly liable
or to which any of their respective properties or assets are subject have been
paid prior to the time that such Taxes could give rise to a Lien thereon. There
is no material proposed tax assessment against the Company or any of its
Subsidiaries, and, to the best knowledge of the Company, there is no basis for
such assessment, except for Contested Claims.
4.13 ERISA
-----
A. The Company, its Subsidiaries and each of their respective
ERISA Affiliates are in material compliance with all applicable provisions and
requirements of the Internal Revenue Code and ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan,
and have performed all their material obligations under each Employee Benefit
Plan.
B. No ERISA Events have occurred or are reasonably expected to
occur which individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of the Company or any Subsidiary of the
Company or any of their respective ERISA Affiliates in excess of $500,000 during
the term of this Agreement.
C. Except as disclosed on Schedule C and except to the extent
----------
required under Section 4980B of the Internal Revenue Code, no Employee Benefit
Plan provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employees of the Company or any Subsidiary
of the Company or any of their respective ERISA Affiliates.
D. In accordance with the most recent actuarial valuations,
the Amount of Unfunded Benefit Liabilities individually or in the aggregate for
all Pension Plans (excluding for purposes of such computation any Pension Plans
which have a negative Amount of Unfunded Benefit Liabilities), does not exceed
$100,000.
E. None of the Company or any of its Subsidiaries is a party
to any Foreign Plans. For purposes hereof, the term "Foreign Plans" shall mean
any plan, program, policy, arrangement or agreement maintained or contributed to
by, or entered
<PAGE>
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into with, the Company or any of its Subsidiaries with respect to employees
employed outside the United States.
4.14 Compliance with Law
-------------------
The Company and each of its Subsidiaries is in compliance with
all Laws, except where the failure to comply, singly or in the aggregate, would
not have a Material Adverse Effect.
4.15 Government Regulation
---------------------
Neither the Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts have
been amended) or other Law which regulates the Incurrence by the Company or any
of its Subsidiaries of Indebtedness, including, but not limited to, Laws
relating to common contract carriers or the sale of electricity, gas, steam,
water or other public utility services.
4.16 Capital Structure and Subsidiaries
----------------------------------
After giving effect to the Transactions, the Company will have
no interest in any Person other than the Subsidiaries of the Company (and
control of all of the LLCs through ownership of the preferred interest of
Holdings LLC) set forth on Schedule B and other Investments of the Company as
----------
set forth on Schedule D and the Company will own, free and clear of all Liens,
----------
claims or restrictions on voting or transfer (other than as permitted by this
Agreement), 100% of all classes of outstanding Capital Stock of each of the
entities set forth on such Schedule B, except as specified on Schedule B. All of
---------- ----------
the issued and outstanding shares of Capital Stock of the Company and of each of
its Subsidiaries is, and at and as of the date of consummation of the
Transactions will be, duly authorized, validly issued, fully paid and
nonassessable.
4.17 Intellectual Property
---------------------
A. Schedule E sets forth a complete and correct list, as of
----------
the Closing Date, of: (i) all patented or registered Intellectual Property and
pending patent applications or applications for registration of Intellectual
Property owned or filed by or on behalf of the Company or any of the Guarantors;
(ii) all trade names and unregistered trademarks or service marks owned by or
used by the Company or any of its Subsidiar-
<PAGE>
-61-
ies; and (iii) all licenses of Intellectual Property to which the Company or any
of the Guarantors is a party, either as licensee or licensor. Except as set
forth on Schedule E, the Company and the Guarantors own or are licensed to use
----------
all Intellectual Property necessary to permit the operation of their businesses
as currently conducted.
B. Except as disclosed on Schedule E, no material claim has
----------
been asserted by any Person with respect to the use of any such Intellectual
Property, or challenging or questioning the validity or effectiveness of any
such Intellectual Property. Except as disclosed on Schedule E, the use of such
----------
Intellectual Property by the Company or any of its Subsidiaries does not
infringe on the rights of any Person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liabilities on the part of the
Company or any of the Guarantors that are material to the Company and the
Guarantors, taken as a whole. The consummation of the Transactions will not in
any material manner or to any material extent impair the ownership of (or the
license to use, as the case may be) any of such Intellectual Property by the
Company or any of the Guarantors.
4.18 Environmental Matters
---------------------
Except as set forth on Schedule F:
----------
(i) the operations of each of the Company and the Guarantors
(including, without limitation, all operations and conditions at or in
the Facilities) comply in all material respects with all Environmental
Laws except for any such noncompliance which would not reasonably be
expected to have a Material Adverse Effect;
(ii) each of the Company and the Guarantors has obtained all
Permits under Environmental Laws necessary to their respective
operations, and all such Permits are being maintained in good standing,
and each of the Company and the Guarantors is in compliance with all
material terms and conditions of such Permits except for any such
failure to obtain, maintain or comply which would not reasonably be
expected to have a Material Adverse Effect;
(iii) none of the Company or the Guarantors has received (a)
any notice or claim to the effect that it is or may be liable to any
Person under any Environmental Law, including without limitation, any
relating to any Hazardous Materials except as would not reasonably be
expected
<PAGE>
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to have a Material Adverse Effect or (b) any letter or request for
information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9604) or
comparable foreign or state laws regarding any matter which could
reasonably be expected to result in a Material Adverse Effect, and, to
the best of the Company's knowledge, none of the Company or its
Subsidiaries is involved in any investigation, response or corrective
action relating to or in connection with any Hazardous Materials at any
Facility or at any other location except for such of the foregoing
which would not reasonably be expected to have a Material Adverse
Effect;
(iv) none of the Company or the Guarantors is subject to any
judicial or administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely determined
could reasonably be expected to have a Material Adverse Effect;
(v) none of the Company or the Guarantors or any of their
respective Facilities or operations are subject to any outstanding
written order or agreement with any governmental authority or private
party relating to (a) any actual or potential violation of or liability
under Environmental Laws or (b) any Environmental Claims except for
such of the foregoing which would reasonably be expected to have a
Material Adverse Effect;
(vi) none of the Company or the Guarantors has any contingent
liability in connection with any Release or threatened Release of any
Hazardous Materials by any of the Company or the Guarantors except for
such of the foregoing which would not reasonably be expected to have a
Material Adverse Effect;
(vii) none of the Company or the Guarantors or, to the best of
the Company's knowledge, any predecessor of any of the Company or the
Guarantors has filed any notice under any Environmental Law indicating
past or present treatment, storage or disposal of hazardous waste, as
defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) no Hazardous Materials exist on, under or about any
Facility in a manner that would reasonably be expected to give rise to
an Environmental Claim having a Material Adverse Effect, and none of
the Company or its Subsidiaries has filed any notice or report of a
Release of any Hazardous Materials that would reasonably be expected to
<PAGE>
-63-
give rise to an Environmental Claim having a Material Adverse Effect;
(ix) none of the Company or the Guarantors or, to the best of
the Company's knowledge, any of their respective predecessors has
disposed of any Hazardous Materials in a manner that would reasonably
be expected to give rise to an Environmental Claim having a Material
Adverse Effect;
(x) no underground storage tanks or surface impoundments are
on or at any Facility; and
(xi) no Lien in favor of any Person relating to or in
connection with any Environmental Claim has been filed or has been
attached to any Facility or other assets of the Company or any of its
Subsidiaries except for any such Lien which would not reasonably be
expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 4.18 to the contrary, no event or
condition has occurred which may interfere with present compliance by the
Company or the Guarantors with any Environmental Law, or which may give rise to
any liability under any Environmental Law, including, without limitation, any
matter disclosed on Schedule F which, individually or in the aggregate, has had
----------
a Material Adverse Effect.
4.19 Survival of Representations and Warranties
------------------------------------------
Subject to Section 12.10B, all representations and warranties
in the Loan Documents shall survive delivery of the Bridge Notes and the making
of the Bridge Loan and shall continue until one year after repayment of the
Notes and the Obligations, and any investigation at any time made by or on
behalf of the Lenders shall not diminish the Lenders' right to rely thereon.
4.20 Permits
-------
Except as disclosed on Schedule G, the Company and the
----------
Guarantors have, and immediately after the consummation of the Transactions will
have, such certificates, permits, licenses, franchises, consents, approvals,
authorizations and clearances that are material to the condition (financial or
otherwise), business or operations of the Company and its Subsidiaries, taken as
a whole ("Permits"), and are (and will be immediately after the consummation of
the Transactions) in compliance in all material respects with all applicable
Laws of
<PAGE>
-64-
all Tribunals as are necessary to own, lease or operate their respective
properties and to conduct their businesses in the manner as presently conducted
and to be conducted immediately after the consummation of the Transactions, and
all such Permits are valid and in full force and effect and will be valid and in
full force and effect immediately upon consummation of the Transactions. The
Company and the Guarantors are, and immediately after the consummation of the
Transactions will be, in compliance in all material respects with their
respective obligations under such Permits and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination of such
Permits, except for any such revocation or termination as would not, singly or
in the aggregate, have a Material Adverse Effect.
4.21 Insurance
---------
The Company and the Guarantors carry or are entitled to the
benefits of insurance (including self-insurance) in such amounts and covering
such risks as is generally maintained by companies of established repute engaged
in the same or similar businesses, and all such insurance is (and will be
immediately after the consummation of the Transactions) in full force and
effect.
4.22 Labor Matters
-------------
No labor disturbance by the employees of the Company and the
Guarantors exists or, to the best knowledge of the Company, is threatened, and
the Company is not aware of any existing or imminent labor disturbance by the
employees of the Company's or the Guarantors' principal suppliers, manufacturers
or customers that could, singly or in the aggregate, have a Material Adverse
Effect.
4.23 Guarantees
----------
Each Guarantor shall, on the date it executes and delivers a
Guarantee hereunder, have the full corporate power, authority and capacity to
execute and deliver such Guarantee and to perform all of its obligations to be
performed thereunder; all corporate and other acts, conditions and things
required to be done and performed or to have occurred prior to such execution
and delivery to constitute such Guarantee as a valid and legally binding
obligation of such Guarantor enforceable in accordance with its terms shall have
been done and performed and shall have occurred in due compliance with all
applicable Laws; on the date of such execution and delivery, the
<PAGE>
-65-
execution, delivery and performance of such Guarantee by such Guarantor will not
(i) violate any provision of Law or any provision of the charter or bylaws of
such Guarantor, or (ii) result in a breach of, a default under (including,
without limitation, any event which with notice or lapse of time, or both, would
constitute a breach of or a default under), or the creation of any Lien on the
properties or assets of such Guarantor, the Company or any other Subsidiary of
the Company under any Contract to which such Guarantor or the Company or any
other Subsidiary of the Company is a party or by which the properties or assets
of such Guarantor, the Company or any other Subsidiary of the Company may be
bound or affected; on the date of such execution and delivery, each Guarantee
executed and delivered by a Guarantor shall constitute legal, valid, binding and
unconditional obligations of the Guarantor executing and delivering it to the
Lenders hereunder, enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law); and the foregoing representations and warranties of the Company
shall be deemed for all purposes to have been made on each date when a Guarantee
is delivered hereunder with respect solely to that Guarantee and the Guarantor
so issuing such Guarantee.
4.24 Senior Subordinated Indenture; Etc.
----------------------------------
Each of the Company and the Guarantors shall (to the extent
such documents are executed), on the date it executes and delivers the Senior
Subordinated Indenture and the Exchange Notes (or the guarantees related
thereto, as the case may be), have the full corporate power, authority and
capacity to do so and to perform all of its obligations to be performed
thereunder; all corporate and other acts, conditions and things required to be
done and performed or to have occurred prior to such execution and delivery to
constitute them as valid and legally binding obligations of the Company
enforceable against the Company and the Guarantors in accordance with their
respective terms except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law), shall have been
done and performed and shall have occurred in due compliance with all applicable
Laws; on the date, if any, of such execu-
<PAGE>
-66-
tion and delivery by the Company and the Guarantors, the Senior Subordinated
Indenture and the Exchange Notes (and the guarantees) shall constitute legal,
valid, binding and unconditional obligations of the Company and the Guarantors,
as the case may be, enforceable against the Company and the Guarantors, as the
case may be, in accordance with their respective terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
4.25 Broker's or Finder's Fees
-------------------------
No broker's or finder's fees or commissions will be payable by
the Company or any of the Guarantors with respect to any transaction
contemplated hereby or by the Senior Credit Facility and no similar fees or
commissions will be payable by the Company or any of the Guarantors for any
other services rendered to the Company or any of the Guarantors in connection
with the transactions contemplated hereby and thereby. The Company represents,
warrants, covenants and agrees that the Company will indemnify the Lenders and
the Agent against, and hold each of them completely harmless from and against,
any and all claims, demands or liabilities for broker's or finder's fees or
similar fees or commissions asserted to have been incurred in connection with
any of the transactions contemplated hereby or by the Senior Credit Facility.
4.26 Terms of Holdings LLC Preferred Equity Interest
-----------------------------------------------
All of the material terms of Holdings LLC Preferred Equity
Interests are disclosed on Schedule I.
----------
SECTION 5 AFFIRMATIVE COVENANTS
The Company covenants and agrees that, until the Loans and the
Notes and all other amounts due under this Agreement have been indefeasibly paid
in full it shall perform all covenants in this Section 5 required to be
performed by it:
5.1 Financial Statements and Other Reports
--------------------------------------
The Company will maintain, and cause each of its Subsidiaries
to maintain, a system of accounting established and administered in accordance
with sound business practices to
<PAGE>
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permit preparation of consolidated financial statements in conformity with GAAP.
The Company will deliver to each Lender and the Agent:
(i) as soon as available and in any event within 45 days
after the end of each month ending after the Closing Date, (1) the
consolidated balance sheets of the Company and its Subsidiaries and the
consolidating balance sheets of the Company and its major divisions, in
each case as at the end of such month, (2) the related summary
statements of income, stockholders' equity and cash flows, in each case
for such month and for the period from the beginning of the then
current fiscal year to the end of such month, setting forth in each
case in comparative form the corresponding consolidated figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the
current fiscal year delivered pursuant to Section 5.1(x), all certified
by the chief financial officer or the controller of the Company that
they fairly present in all material respects the financial condition of
such entities as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (3) a
conference call with senior management to discuss the operations of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the then current fiscal year to the end of such
monthly period;
(ii) as soon as available and in any event within 45 days
after the end of each of the first three fiscal quarters of each fiscal
year, (1) the consolidated balance sheets of the Company and its
Subsidiaries and the consolidating balance sheets of the Company and
its major divisions as at the end of such fiscal quarter, (2) the
related consolidated and consolidating statements of income,
stockholders' equity and cash flows for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan
and financial forecast for the current fiscal year delivered pursuant
to Section 5.1(x), all in reasonable detail and certified by the chief
financial officer or the controller of the Company that they fairly
present in all material respects the financial condition
<PAGE>
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of the Company and its Subsidiaries at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (3) the company's quarterly report on Form 10-Q for
such quarterly period, and (4) only if the Company does not file
quarterly reports on Form 10-Q with the Commission, a narrative report
describing the operations of the Company and its Subsidiaries (in the
form of management's discussion and analysis of such operations which
would comply with the disclosure requirements of the Exchange Act and
rules and regulations promulgated thereunder with respect to
management's discussion and analysis set forth in quarterly reports on
Form 10-Q) prepared for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter;
(iii) as soon as available and in any event within 100 days
after the end of each fiscal year, (1) the consolidated balance sheets
of the Company and its Subsidiaries and the consolidating balance
sheets of the Company and its major divisions as at the end of such
fiscal year, (2) the related consolidated and consolidating statements
of income, stockholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the corresponding
figures for the previous fiscal year and the corresponding figures from
the consolidated plan and financial forecast for the current fiscal
year delivered pursuant to Section 5.1(x) for the fiscal year covered
by such financial statements, all in reasonable detail and certified by
the chief financial officer or the controller of the Company that they
fairly present in all material respects the financial condition of the
Company and its Subsidiaries, at the dates and the results of their
operations and their cash flows for the periods indicated, (3) the
Company's annual report on Form 10-K for such year, (4) only if the
Company does not file annual reports on Form 10-K with the Commission,
a narrative report describing the operations of the Company and its
Subsidiaries (in the form of management's discussion and analysis of
such operations which would comply with the disclosure requirements of
the Exchange Act and rules and regulations promulgated thereunder with
respect to management's discussion and analysis set forth in annual
reports on Form 10-K) prepared for such fiscal year, and (5) in the
case of such consolidated financial statements, a report thereon of
independent certified public accountants of recognized national
standing, which report shall be un-
<PAGE>
-69-
qualified as to scope of audit, shall express no doubts about the
ability of the Company and its Subsidiaries to continue as a going
concern, and shall state that such consolidated financial statements
fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards;
(iv) together with each delivery of financial statements
pursuant to Sections 5.1(ii) and (iii) above, (a) an Officers'
Certificate of the Company stating that the signers have reviewed the
terms of this Agreement and the Notes and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and condition of the Company and its Subsidiaries during
the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of
such accounting period, and that the signers do not have knowledge of
the existence as of the date of the Officers' Certificate, of any
condition or event which constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Company has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance (as determined in accordance with GAAP) during and at
the end of such accounting periods with the restrictions contained in
Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.9 and 6.14;
(v) together with each delivery of consolidated financial
statements pursuant to Section (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating whether, in connection with their audit examination, any
condition or event that constitutes an Event of Default or Potential
Event of Default that relates to accounting matters has come to their
attention and, if any such condition or event has come to their
attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any
--------
failure to
<PAGE>
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obtain knowledge of any such Event of Default or Potential Event of
Default that would not be disclosed in the course of their audit
examination, and (b) stating that based on their audit examination
nothing has come to their attention that causes them to believe that
the information contained in the certificates delivered therewith is
not correct;
(vi) promptly upon receipt thereof (unless restricted by
applicable professional standards), copies of all reports in final form
(other than reports of a routine or ministerial nature which are not
material) submitted to the Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of the Company and its Subsidiaries made by
such accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(vii) promptly upon the sending or filing thereof, copies of
(a) all financial statements, reports, notices and proxy statements
sent or made available generally by the Company to their public
security holders or by any Subsidiary of the Company to its public
security holders other than the Company or another Subsidiary of the
Company, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses,
if any, filed by the Company or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or
any governmental authority (other than reports of a routine or
ministerial nature which are not material), and (c) all press releases
and other statements made available generally by the Company or any of
its Subsidiaries to the public concerning material developments in the
business of the Company or any of its Subsidiaries;
(viii) promptly upon any executive officer of the Company
obtaining knowledge (a) of any condition or event which constitutes an
Event of Default or Potential Event of Default, or becoming aware that
any Lender or Agent has given any notice or taken any other action with
respect to a claimed Event of Default or Potential Event of Default
under this Agreement, (b) that any Person has given any notice to the
Company or any Subsidiary of the Company or taken any other action with
respect to a claimed default or event or condition which might result
in an Event of Default referred to in Section 7.2, (c) of any condition
<PAGE>
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or event which would be required to be disclosed in a current report
filed with the Commission on Form 8-K whether or not the Company is
required to file such reports under the Exchange Act, or (d) of the
occurrence of any event or change that has caused or evidences, either
in any case or in the aggregate, a Material Adverse Effect, an
Officers' Certificate specifying the nature and period of existence of
any such condition or event, or specifying the notice given or action
taken by such holder or Person and the nature of such claimed default,
Event of Default, Potential Event of Default, event or condition, and
what action the Company has taken, is taking and proposes to take with
respect thereto;
(ix) promptly upon any executive officer of the Company
obtaining knowledge of (X) the institution of, or non-frivolous threat
of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or
affecting the Company or any of its Subsidiaries or any property of the
Company or any of its Subsidiaries (collectively, "Proceedings") not
previously disclosed in writing by the Company to Lenders or (Y) any
material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the Transactions;
written notice thereof together with such other information as may be
reasonably available to the Company or any of its Subsidiaries to
enable Lenders and their counsel to evaluate such matters;
(x) as soon as practicable but in any event no later than 40
days following the first day of each fiscal year a forecast for each of
the next succeeding twelve months of the consolidated balance sheet and
the consolidated statements of income, cash flow and cash position of
the Company and its Subsidiaries and the consolidating balance sheet
and the consolidating statements of income, cash flow and cash position
of the Company and its major divisions, together with an outline of the
major assumptions upon which the forecast is based; provided, however,
-------- -------
that
<PAGE>
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for fiscal 1998 such forecast may be for the four fiscal quarters.
Together with each delivery of financial statements pursuant to
Sections 5.1(ii) and (iii) above, the Company shall deliver a
comparison of the current year to date financial results against the
budget required to be submitted pursuant to this Section;
(xi) not later than the last day of each fiscal year of the
Company, a report in form and substance satisfactory to the Agent
outlining all material insurance coverage maintained as of the date of
such report by the Company and its Subsidiaries and all material
insurance coverage planned to be maintained by such Persons in the
subsequent fiscal year;
(xii) in writing, promptly upon an executive officer of the
Company obtaining knowledge that the Company or any of its Subsidiaries
has received notice or otherwise learned of any claim, demand, action,
event, condition, report or investigation indicating any potential or
actual liability arising in connection with (x) the non-compliance with
or violation of the requirements of any Environmental Law which could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (y) the release or threatened release of any
Hazardous Material, substance or constituent into the environment which
could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect or which release the Company or any of its
Subsidiaries would have a duty to report to a Tribunal under an
Environmental Law, or (z) the existence of any Environmental Lien on
any properties or assets of the Company or any of its Subsidiaries;
(xiii) promptly after the availability thereof, copies of all
material amendments to the certificate of incorporation or by-laws of
the Company or any of its Subsidiaries; and
(xiv) promptly upon any Person becoming a Subsidiary of the
Company, a written notice setting forth with respect to such Person (a)
the date on which such Person became a Subsidiary of the Company and
(b) all of the data required to be set forth in Schedule B with respect
----------
to all Subsidiaries of the Company;
(xv) with reasonable promptness, such other information and
data with respect to the Company or any of its
<PAGE>
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Subsidiaries or any of their respective property, business or assets as
from time to time may be reasonably requested by any Lender; provided
--------
that no information or data shall be required to be delivered hereunder
or under any other provision of this Agreement if it would violate any
applicable attorney-client or accountant-client privilege.
5.2 Corporate Existence, Etc.
------------------------
The Company will at all times preserve and keep in full force
and effect its corporate existence and rights and franchises to its business and
those of each of its Subsidiaries, except as permitted by Section 6.7 or where
the failure to so preserve or keep will not, singly or in the aggregate, have a
Material Adverse Effect.
5.3 Payment of Taxes and Claims; Tax
Consolidation
--------------------------------
A. The Company will, and will cause each of the Guarantors to,
pay all material Taxes, assessments and other governmental charges imposed upon
it or any of its material properties or assets or in respect of any of its
franchises, business, income or property before any material penalty accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a Lien upon any of its properties or assets
prior to the time when any material penalty or fine shall be incurred with
respect thereto; provided that no such charge or claim need be paid if the
--------
validity or amount of such charge or claim is being diligently contested in good
faith and if such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor.
B. The Company will not, nor will it permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person (other than the Company or any of its Subsidiaries so
long as the filing of such consolidated income tax return is permitted by
applicable law).
5.4 Maintenance of Properties; Insurance
------------------------------------
The Company will maintain or cause to be maintained in good
repair, working order and condition, ordinary wear and tear excepted, all
material properties used or useful in the business of the Company and its
Subsidiaries and from time to
<PAGE>
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time promptly will make or cause to be made all necessary repairs, renewals and
replacements thereof; provided that nothing in this Section 5.4 shall prevent
--------
the Company or any of its Subsidiaries from discontinuing the use, operation or
maintenance of any such properties, or disposing of any of them, if such action
is in the ordinary course of business or, in the reasonable good faith judgment
of the Company, necessary or desirable in the conduct of its business or
otherwise permitted by this Agreement. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers or with self insurance
programs, in each case to the extent consistent with prudent business practices
and customary in its industry, insurance with respect to its properties and
business and the properties and businesses of its Subsidiaries against loss or
damage of the kinds (including, in any event, business interruption insurance)
and in the amounts customarily carried or maintained under similar circumstances
by corporations of established reputation engaged in similar businesses and
owning similar properties in the same general respective areas in which the
Company and its Subsidiaries operate.
5.5 Inspection
----------
The Company shall permit any authorized representatives
designated by the Lenders to visit and inspect any of the properties of the
Company or its Subsidiaries, including, without limitation, its and their
financial and accounting records, and to receive copies and extracts therefrom,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that representatives of
the Company or any of its Subsidiaries may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
5.6 Equal Security for Loans and Notes
----------------------------------
If the Company or any of its Subsidiaries shall create, assume
or suffer to exist any Lien upon any of their respective property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of Section 6.2, the Company shall, at the request of the Agent, make
or cause to be made effective provision whereby the Obligations under this
Agreement will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured as long as any such Indebtedness shall be
secured; provided that this covenant shall not be construed as or deemed to be a
--------
con-
<PAGE>
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sent by the Lenders to any violation of the provisions of Section 6.2; and
provided, further, that the Company shall under no circumstances be required to
- -------- -------
make or cause to be made effective provision whereby the Obligations under this
Agreement will be secured, directly or indirectly, by Margin Stock.
5.7 Compliance with Laws, Etc.
-------------------------
The Company shall and shall cause each of its Subsidiaries to
comply with the requirements of all applicable Laws of any Tribunal, to the
extent noncompliance, singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
5.8 Maintenance of Accurate Records, Etc.
------------------------------------
The Company shall keep, and will cause each of its
Subsidiaries to keep, true books and records and accounts in which full and
correct entries will be made of all its respective business transactions, and
will reflect, and cause each of its Subsidiaries to reflect, in its respective
financial statements adequate accruals and appropriations to reserves all in
accordance with GAAP and consistent with prior business practices.
5.9 Recapitalization Documents
--------------------------
Promptly, but in no case more than 30 days after the Closing
Date, the Company shall provide all closing documents (in form and substance
satisfactory to the Agent) relating to the Recapitalization and all such
counterpart originals or certified copies of such documents, instruments,
certificates and opinions as the Agent may reasonably request, including, but
not limited to, the operating agreements of the LLCs.
5.10 Exchange of Term Notes
----------------------
The Company will, on the 5th Business Day following the
written request (the "Exchange Request") of the holder of any Term Note (or
beneficial owner of a portion thereof):
(i) Execute and deliver, cause each Subsidiary Guarantor to
execute and deliver, and cause a bank or trust company acting as
trustee thereunder to execute and deliver, the Senior Subordinated
Indenture containing covenants, subordination provisions and other
terms consistent with the Term Notes, if such Senior Subordinated
Indenture has not previously been executed and delivered;
<PAGE>
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(ii) Execute and deliver to such holder or beneficial owner
in accordance with the Senior Subordinated Indenture a note in the form
attached to the Senior Subordinated Indenture (the "Exchange Notes") in
exchange for such Term Note dated the date of the issuance of such
Exchange Note, payable to the order of such holder or owner, as the
case may be, in the same principal amount as such Term Note (or portion
thereof) being exchanged, and cause each Subsidiary Guarantor to
endorse its guarantee thereon; and
(iii) Execute and deliver, and cause each Subsidiary Guarantor
to execute and deliver, to such holder or owner, as the case may be, a
Registration Rights Agreement containing terms as are generally set
forth in Exhibit V hereto, if such Registration Rights Agreement has
---------
not previously been executed and delivered or, if such Registration
Rights Agreement has previously been executed and delivered and such
holder or owner is not already a party thereto, permit such holder or
owner to become a party thereto.
The Exchange Request shall specify the principal amount of the
Term Notes to be exchanged pursuant to this Section 5.10 which shall be at least
$5,000,000 and integral multiples of $10,000 in excess thereof. Term Notes
delivered to the Company under this Section 5.10 in exchange for Exchange Notes
shall be cancelled by the Company and the corresponding amount of the Term Loan
deemed repaid and the Exchange Notes shall be governed by and construed in
accordance with the terms of the Senior Subordinated Indenture.
The bank or trust company acting as trustee under the Senior
Subordinated Indenture shall at all times be a corporation organized and doing
business under the laws of the United States of America or the State of New
York, in good standing and having its principal offices in the Borough of
Manhattan, in The City of New York, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
Federal or State authority and which has a combined capital and surplus of not
less than $50,000,000.
5.11 ERISA Compliance
----------------
Each of the Company and its Subsidiaries will (i) make prompt
payment of all contributions which it is obligated to make under all Pension
Plans and which are required to meet the minimum funding standard set forth in
ERISA with respect to each of the Pension Plans, (ii) within 30 days after
<PAGE>
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the filing thereof, furnish to the Lenders each Schedule B to the annual
return/report (Form 5500 Series), required to be filed with the Department of
Labor and/or the Internal Revenue Service pursuant to ERISA, with respect to
each of the Pension Plans that is not a Multiemployer Plan for each Plan year,
and (iii) notify the Lenders promptly upon becoming aware of any fact, including
but not limited to, any Reportable Event arising in connection with any of the
Pension Plans that is not a Multiemployer Plan, which could be reasonably
expected to constitute grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Pension Plan, together with a statement as to the action, if
any, proposed to be taken with respect thereto.
5.12 Payments in U.S. Dollars
------------------------
All payments of any Obligations to be made hereunder or under
the Notes by the Company or any other obligor with respect thereto shall be made
solely in U.S. Dollars or such other currency as is then legal tender for public
and private debts in the United States of America.
5.13 Register
--------
The Company hereby designates the Agent to serve as the
Company's agent, solely for purposes of this Section 5.13, to maintain a
register (the "Register") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of the Loans of
each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect the Company's obligations in respect of such Loans.
With respect to any Lender, the transfer of the Loan Commitments of such Lender
and the rights to the principal of, and interest on, any Loan made pursuant to
such Loan Commitments shall not be effective until such transfer is recorded on
the Register maintained by the Agent with respect to ownership of such Loan
Commitments and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Loan Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of any
Loan Commitments and Loans shall be recorded by the Agent on the Register only
upon the receipt by the Agent of a properly executed and delivered assignment
and assumption agreement pursuant to Section 12.2A. Coincident with the delivery
of such an assignment and assumption agreement to the Agent for acceptance and
registration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable,
<PAGE>
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the assigning or transferor Lender shall surrender the Note evidencing such
Loan, and thereupon one or more new Notes of the same type and in the same
aggregate principal amount shall be issued to the assigning or transferor Lender
and/or the new Lender.
5.14 Lenders Meeting
---------------
The Company will participate in a meeting with the Lenders
once during each fiscal year during which any Obligations are outstanding
hereunder to be held at a location and a time selected by the Company and
reasonably satisfactory to the Lenders.
5.15 Additional Guarantors
---------------------
The Company will cause any Person which becomes a Subsidiary
of the Company (whether by creation, acquisition or otherwise) or upon the
formation of an LLC to execute and deliver a guarantee, in form and substance
satisfactory to the Agent (and with such documentation relating thereto as the
Agent shall require, including, without limitation, a supplement or amendment to
this Agreement and opinions of counsel as to the enforceability of such
guarantee) pursuant to which such Subsidiary or LLC shall become a Guarantor
under the Bridge Notes and this Agreement in accordance with Section 10 with the
same effect and to the same extent as if such Person had been named herein as a
Subsidiary Guarantor.
5.16 Marketing Take-Out Securities
-----------------------------
If requested by FUCMC, the Company will make appropriate
officers of the Company available to FUCMC for meetings with prospective
purchasers of the Take Out Securities and preparing and presenting to potential
investors road show material in a manner consistent with other new issuances of
high yield debt securities.
5.17 Warrants
--------
Within 45 days after the Closing Date, warrants (in a form to
be agreed upon), representing 7.50% of the fully-diluted common stock of the
Company, shall have been placed in escrow with a mutually agreeable escrow
agent, and will be released to the holders of the Term Notes on the Conversion
Date upon the issuance of such Term Notes and at such other dates as described
in Section 3.2.
<PAGE>
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SECTION 6 NEGATIVE COVENANTS
The Company covenants and agrees that until the satisfaction
in full of the Loans and the Notes and all other Obligations due under this
Agreement it will fully and timely perform all covenants in this Section 6.
6.1 Indebtedness
------------
The Company shall not, and shall not cause or permit any of
the Guarantors, directly or indirectly, to Incur, or remain or become directly
or indirectly liable with respect to, any Indebtedness, except for the following
("Permitted Indebtedness"):
(i) Indebtedness under the Bridge Notes, the Term Notes, the
Exchange Notes and the Guarantees;
(ii) Indebtedness incurred pursuant to the Senior Credit
Facility provided the principal amount at any time outstanding does not
exceed $25,000,000 in the aggregate, reduced by any required permanent
repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder;
(iii) other Indebtedness of the Company and its Subsidiaries
outstanding on the Closing Date described in Schedule H reduced by the
----------
amount of any scheduled amortization payments or mandatory prepayments
when actually paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Subsidiaries and Interest
Swap Obligations of any Subsidiary of the Company covering Indebtedness
of such Subsidiary; provided, however, that such Interest Swap
-------- -------
Obligations are entered into to protect the Company and its
Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with this Agreement and the Senior Credit
Facility to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness of the Company under Currency Agreements;
provided that in the case of Currency Agreements which relate to
--------
Indebtedness, such Currency Agreements do not increase the Indebtedness
of the Company and
<PAGE>
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its Subsidiaries outstanding other than as a result of fluctuations in
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Guarantor of the Company to the
Company or to a Guarantor of the Company for so long as such
Indebtedness is held by the Company or a Guarantor of the Company, in
each case subject to no Lien held by a Person other than the Company or
a Guarantor of the Company; provided that if as of any date any Person
--------
other than the Company or a Guarantor of the Company owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly-Owned Subsidiary
of the Company for so long as such Indebtedness is held by a
Wholly-Owned Subsidiary of the Company, in each case subject to no
Lien; provided that (a) any Indebtedness of the Company to any
--------
Wholly-Owned Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under
this Agreement and the Notes and (b) if as of any date any Person other
than a Wholly-Owned Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
--------
however, that such Indebtedness is extinguished within two business
-------
days of incurrence;
(ix) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of
business;
(x) Permitted Refinancing Indebtedness; and
<PAGE>
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(xi) additional Indebtedness of the Company and its
Subsidiaries in an aggregate principal amount not to exceed $5,000,000
at any one time outstanding.
In addition to the foregoing, at any time after the Conversion
Date, if no Potential Event of Default with respect to payment of principal of,
or interest on, the Notes or Event of Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness, the Company or any Subsidiary Guarantor may incur Indebtedness if
immediately before and immediately after giving effect to the incurrence of such
Indebtedness the Consolidated Fixed Charge Coverage Ratio of the Company would
be greater than (a) 2.00 to 1.0, if the date of such incurrence is on or prior
to November 1, 1999, or (b) 2.25 to 1.0, if the date of such incurrence is after
November 1, 1999.
6.2 Liens
-----
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of the
Company or of any of its Subsidiaries, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, other than the following
(collectively, the "Permitted Liens"):
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or the Guarantors
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
<PAGE>
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(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of the Guarantors;
(vi) any interest or title of a lessor under any Capitalized
Lease Obligation; provided that such Liens do not extend to any
-------
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of
the Company or a Guarantor acquired in the ordinary course of business;
provided, however, that (A) the related purchase money Indebtedness
-------- -------
shall not exceed the cost of such property or assets and shall not be
secured by any property or assets of the Company or any Guarantor other
than the property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
<PAGE>
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(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or a Guarantor, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is incurred under this
Agreement or the Senior Credit Facility;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens granted to secure the Senior Credit Facility;
(xiv) Liens securing Indebtedness permitted under Section 6.1;
and
(xv) Liens existing on the Closing Date as set forth on
Schedule A.
-----------
6.3 Restricted Payments
-------------------
(a) Except as contemplated by the Stock Purchase Agreement,
the Company shall not, and shall not cause or permit any of the Guarantors to,
directly or indirectly (i) declare or pay any dividend, or make any
distribution, on any Capital Stock of the Company or Holdings LLC (other than,
in the case of the Company, dividends or distributions payable solely in
Qualified Capital Stock of the Company or dividends or distributions payable to
the Company or any Wholly-Owned Subsidiary of the Company), (ii) purchase,
redeem or otherwise acquire or retire for value any of the Company's Capital
Stock, or any warrants, rights or options to acquire shares of any class of such
Capital Stock or (iii) make any principal payment on, purchase, defease, redeem,
prepay, or otherwise acquire or retire for value, other than any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Indebtedness or Pari Passu Indebtedness of the Company or of a
Guarantor (any such dividend, distribution, purchase, redemption, acquisition,
retirement, defeasance or prepayment set forth in clauses (i), (ii) and (iii)
above a "Restricted Pay-
<PAGE>
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ment"); provided, however, a Restricted Payment may be made after the Conversion
-------- -------
Date if (A) a Default or an Event of Default shall not have occurred and be
continuing and (B) the aggregate amount of Restricted Payments including such
proposed Restricted Payment (other than Permitted Tax Distributions and payments
contemplated by the Stock Purchase Agreement) shall not exceed 50% of the excess
of (x) the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Closing Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") minus (y) the aggregate amount of
Permitted Tax Distributions subsequent to the Closing Date.
(b) Notwithstanding the foregoing, the provisions set forth in
the immediately preceding paragraph will not prevent (a) if no Potential Event
of Default or Event of Default shall have occurred and be continuing or shall be
caused as a consequence of clause (1), (2) or (3), (1) the acquisition of any
shares of Capital Stock of the Company or the repurchase, redemption or other
repayment of any Subordinated Indebtedness or Pari Passu Indebtedness of the
Company or of a Subsidiary Guarantor in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to the Company or a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company,
(2) the repurchase, redemption or other repayment of any Subordinated
Indebtedness of the Company in exchange for or solely out of the proceeds of the
substantially concurrent sale (other than to the Company or a Subsidiary of the
Company) of Subordinated Indebtedness of the Company with a Weighted Average
Life to Maturity equal to or greater than the then remaining Weighted Average
Life to Maturity of the Subordinated Indebtedness repurchased, redeemed or
repaid, (3) the repurchase, redemption or other repayment of any Pari Passu
Indebtedness of the Company in exchange for or solely out of the proceeds of the
substantially concurrent sale (other than to the Company or a Subsidiary of the
Company) of Pari Passu Indebtedness or Subordinated Indebtedness of the Company
with a Weighted Average Life to Maturity equal to or greater than the then
remaining Weighted Average Life to Maturity of the Pari Passu Indebtedness
repurchased, redeemed or repaid or (b) if no Event of Default pursuant to
Section 7.1 shall have occurred, Permitted Tax Distributions.
6.4 Investments
-----------
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, make or own
<PAGE>
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any Investment in any Person, other than the following (collectively, "Permitted
Investments"):
(i) Investments by the Company or any Guarantor of the
Company in any Person that is or will become immediately after such
Investment a Guarantor of the Company or that will merge or consolidate
into the Company or a Guarantor of the Company;
(ii) Investments in the Company by any Guarantor of the
Company; provided that any Indebtedness evidencing such Investment is
--------
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Bridge Notes, Term Notes and Exchange
Notes;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the
Company and its Guarantors in the ordinary course of business for bona
fide business purposes not in excess of $500,000 at any one time
outstanding;
(v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its Guarantors'
businesses and otherwise in compliance with the Indenture;
(vi) Investments in Wholly-Owned Subsidiaries (including the
LLCs);
(vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors
or customers;
(viii) Investments made by the Company or its Guarantors as a
result of consideration received in connection with an Asset Sale made
in compliance with Section 6.14; and
(ix) Investments not to exceed $2,000,000 at any one time
outstanding; provided such Investments are made after the Closing Date.
--------
6.5 Contingent Obligations
----------------------
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, create or be-
<PAGE>
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come or remain liable with respect to any Contingent Obligation, except:
(i) the Company and the Guarantors may become and remain
liable with respect to Contingent Obligations outstanding on the
Closing Date described in Schedule H and in respect of any Interest
Rate Agreements entered into with any lender under the Senior Credit
Facility or any of their respective Affiliates and any guarantees
thereof;
(ii) the Guarantors may become and remain liable with respect
to Contingent Obligations under the Guarantees;
(iii) the Company and the Guarantors may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with the Acquisition, additional acquisitions of assets or
stock, Asset Sales or other sales of assets; provided that the maximum
assumable liability in respect of all such obligations shall at no time
exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such Asset Sales and other sales;
(iv) the Company and the Guarantors may become and remain
liable with respect to Contingent Obligations under guarantees made
under the Senior Credit Facility;
(v) the Company and its Subsidiaries may become and remain
liable with respect to guarantees of Indebtedness or Contingent
Obligations of a Wholly-Owned Subsidiary of the Company and a
Subsidiary of the Company may become and remain liable with respect to
guarantees of Indebtedness or Contingent Obligations of the Company or
a Wholly-Owned Subsidiary of the Company; and
(vi) after the Conversion Date, the Company and its
Subsidiaries may become and remain liable with respect to other
Contingent Obligations; provided that the maximum aggregate liability,
contingent or otherwise, of the Company and its Subsidiaries in respect
of all such Contingent Obligations shall at no time exceed $1,000,000.
6.6 Senior Subordinated Indebtedness
--------------------------------
Neither the Company nor any of the Guarantors shall, directly
or indirectly, Incur any Indebtedness that is by its terms (or by the terms of
any agreement governing such Indebt-
<PAGE>
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edness) subordinated in right of payment to any other Indebtedness of the
Company or of such Guarantor unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinate to the Loans and the Notes and the Guarantees to the same extent and
in the same manner as such Loans and Notes and Guarantees are subordinated to
the Senior Credit Facility.
6.7 Restriction on Fundamental Changes
----------------------------------
Subject to Section 5.2 and other than the sale of 100% of a
Subsidiary of the Company in accordance with Section 2.5A(ii)(a) and Section
6.15, the Company shall not, and shall not cause or permit any of the Guarantors
to, directly or indirectly, enter into any transaction, or series of related
transactions, of merger, amalgamation, consolidation or combination, or
consolidate, or liquidate, windup or dissolve itself (or suffer any liquidation
or dissolution), or convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or in a series of transactions, all or substantially all
of its business, property or assets, whether now owned or hereafter acquired,
except:
(i) in connection with the Recapitalization including the
merger or stock split and the contribution to Holdings LLC; and
(ii) any Subsidiary of the Company may be merged,
amalgamated, consolidated or combined with or into the Company or any
Wholly-Owned Subsidiary of the Company or be liquidated, wound up or
dissolved, or all or substantially all of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or in a series of transactions, to the Company
or to any Wholly-Owned Subsidiary of the Company; provided that (A) no
--------
Potential Event of Default or Event of Default shall have occurred and
be continuing or would result therefrom, (B) in the case of such a
merger, amalgamation, consolidation or combination of the Company and a
Subsidiary of the Company, the Company shall be the continuing or
surviving corporation, and (C) the surviving entity (I) continues to be
bound as such under this Agreement or the Guarantee of such Guarantor,
as the case may be, and (II) executes and delivers to the Agent
immediately upon consummation of such transaction a written
confirmation or acknowledgment to such effect, in form and substance
satisfactory to the Agent, together with evidence of appropriate
corporate power, authority and action
<PAGE>
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and a written legal opinion in form and substance satisfactory to the
Agent to the effect that this Agreement and such Guarantee continue to
be a legal, valid and binding obligation of such entity, enforceable
against such entity in accordance with its terms (subject to customary
exceptions in respect of bankruptcy, insolvency and other equitable
remedies) and with respect to such other matters as the Agent may
reasonably request.
6.8 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries
----------------------------------------
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, create or otherwise cause or permit
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions on its Capital Stock (other than with respect to the Capital Stock
of Holdings LLC) or any other interest or participation in, or measured by, such
Subsidiary's profits; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or (c)
transfer any of its property or assets to the Company or to any Subsidiary of
the Company (any such restriction or encumbrance a "Payment Restriction"),
except for such encumbrances or restrictions existing under or by reason of: (1)
any restrictions contained in (i) the Loan Documents, the Senior Subordinated
Indenture and any instrument governing the Take-Out Securities or Exchange Notes
to the extent Incurred in accordance with this Agreement; (ii) the Senior Credit
Facility as in effect on the Closing Date; (iii) the Indebtedness pertaining to
a Subsidiary of the Company that is not a Subsidiary of the Company on the
Closing Date in existence at the time such Subsidiary becomes a Subsidiary of
the Company; provided that any such Indebtedness was not incurred as a result
--------
of, in connection with or in anticipation of the transaction pursuant to which
such entity becomes a Subsidiary of the Company and it does not apply to any
Person, or the properties of assets of any Person, other than the Subsidiary
acquired and such Indebtedness is otherwise permitted to be incurred pursuant to
Section 6.1; or (iv) secured Indebtedness otherwise permitted to be incurred
pursuant to Sections 6.1 and 6.2 that limits the right of the debtor to dispose
of the assets securing such Indebtedness; (2) customary non-assignment
provisions of any lease governing a leasehold interest of any Subsidiary of the
Company; (3) customary net worth provisions contained in leases and other
agreements entered into by a Subsidiary in the ordinary course of business; (4)
customary restrictions with re-
<PAGE>
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spect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary; (5) applicable law; and (6) any instrument that
Refinances any Indebtedness effecting any such encumbrance or restriction
pursuant to clause (1) above; provided that the provisions relating to any such
--------
encumbrance or restriction in any such instrument are not materially less
favorable to the Company or its Subsidiaries or the Lenders than those contained
in the agreements referred to in clause (1).
6.9 Transactions with Shareholders and
Affiliates
----------------------------------
The Company will not, and will not permit or cause any of the
Guarantors to, enter into any transaction (including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any service)
with any officer, director, stockholder or other Affiliate of the Company or any
Guarantor, except in the ordinary course of its business and upon fair and
reasonable terms that are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person other than an Affiliate of the
Company or such Guarantor; provided, however, that nothing contained in this
-------- -------
Section shall prohibit:
(i) transactions described on Schedule J or otherwise
----------
expressly permitted under this Agreement;
(ii) the consummation on the Closing Date of the
Transactions; and
(iii) payments to VS&A and Fir Tree not to exceed $90,000 plus
expenses in any year for monitoring services pursuant to the
Stockholders Agreement as in effect on the Closing Date.
6.10 Subsidiary Stock
----------------
Except for any sale of 100% of the Capital Stock or other
equity securities of any of the Company's Subsidiaries in compliance with the
provisions of Section 6.7, the Company will not and will not permit any of the
Guarantors to directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of Capital Stock or other equity securities of any of
the Guarantors, except (i) to qualify directors if required by applicable law,
(ii) to the Company or to a Wholly-Owned Subsidiary of the Company, (iii) Asset
Sales made
<PAGE>
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in compliance with this Agreement, (iv) Liens in favor of the lenders under the
Senior Credit Facility and (v) the formation of and contribution to the LLCs.
6.11 Business Activities
-------------------
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, materially alter the nature of the
consolidated business of the Company and its Subsidiaries from that in existence
immediately after giving effect to the Transactions or similar or related
businesses.
6.12 Amendments or Waivers of Certain Documents
------------------------------------------
The Company shall not, and shall not cause or permit any of
the Guarantors to, directly or indirectly, enter into any amendment,
modification, supplement or waiver with respect to the Senior Credit Facility as
in effect on the Closing Date that would modify any of the provisions thereof or
any of the definitions relating thereof in a manner adverse to the Lenders.
6.13 Amendments to Charter Documents
-------------------------------
The Company shall not, and shall not cause or permit any of
its Subsidiaries to, amend its certificate of incorporation or bylaws or, in the
case of the LLCs, amend its certificate of formation or operating agreements in
any respect which could be materially adverse to the interests of the Lenders.
6.14 Asset Sales
-----------
The Company shall not, and shall not cause or permit any of
its Subsidiaries to, directly or indirectly, consummate any Asset Sale unless
(1) such Asset Sale occurs after the Conversion Date, (2) the Company or such
Subsidiary, as the case may be, receives consideration therefor at the time
thereof at least equal to the fair market value at the time of such Asset Sale
of the property, assets or stock that is the subject of such Asset Sale, (3) at
least 75% of the consideration received therefor by the Company or such
Subsidiary is in the form of cash or Cash Equivalents and (4) all of the Net
Cash Proceeds in respect thereof are applied by the Company or a Subsidiary of
the Company in accordance with Section 2.5A(ii)(a).
<PAGE>
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Nothing in this covenant shall be deemed to prevent the
exercise of remedies by secured creditors of the Company or any Subsidiary of
the Company.
6.15 Transfer of Assets to Subsidiaries
----------------------------------
The Company shall not, and shall not cause or permit any of
its Subsidiaries to, directly or indirectly, transfer (other than in the
ordinary course of business and other than pursuant to a Permitted Investment)
any assets or property to any Subsidiary of the Company unless such Subsidiary
pays fair market value therefor to the Company or to a Wholly-Owned Subsidiary
of the Company and except as provided in Sections 6.3, 6.4, 6.5, 6.7 and 6.9.
For purposes of this Section 6.15, the fair market value paid by such Subsidiary
shall not consist in whole or in part of any securities or debt instruments of
such Subsidiary or of any Affiliate of such Subsidiary.
6.16 Modification of the LLC Preferred Equity Interests
--------------------------------------------------
The Company shall not, and shall not and will not permit any
of the Guarantors to, amend or modify in any material respect or in any manner
adverse to the Company or the Lenders, including but not limited, to a change in
voting control with respect to Holdings LLC or the termination of Holdings LLC
Preferred Equity Interests for so long as this Agreement is in effect and until
the Notes, together with interest, fees and all other obligations incurred
hereunder, are paid in full, or permit such an amendment or modification of any
provision of, Holdings LLC Preferred Equity Interest.
Notwithstanding the foregoing Sections 5 and 6, nothing in
----------------------------------------------------------
this Agreement shall prohibit the Company from contributing certain assets and
- ------------------------------------------------------------------------------
liabilities to the LLCs in exchange for a $45.0 million preferred equity
- ------------------------------------------------------------------------
interest in the LLCs as described in the preliminary offering memorandum dated
- ------------------------------------------------------------------------------
October 8, 1997.
- ----------------
SECTION 7 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing:
<PAGE>
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7.1 Failure To Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Loans when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise (whether or not such payment is prohibited by Section 8); or failure
to pay any interest on the Loans or any other amount due under this Agreement
within ten days or more after the date due (whether or not such payment is
prohibited by Section 8); or
7.2 Default in Other Agreements
---------------------------
(A) Failure of the Company or any of its Subsidiaries to pay
at final maturity principal on one or more issues of Indebtedness or Contingent
Obligations of the Company or of any of its Subsidiaries (other than
Indebtedness referred to in Section 7.1) or (B) breach or default by the Company
or any of its Subsidiaries with respect to any other term of any one or more
issues of Indebtedness or Contingent Obligations of the Company or of any of its
Subsidiaries or any agreement or instrument evidencing or securing such
Indebtedness or Contingent Obligations and such breach or default results in the
acceleration of that Indebtedness or Contingent Obligation prior to its stated
maturity and, in any case of (A) or (B), the principal amount of such
Indebtedness or Contingent Obligation and all other such Indebtedness or
Contingent Obligations of the Company and its Subsidiaries in respect of which
there is such a failure to pay principal or which has been so accelerated equals
$5,000,000 or more; or
7.3 Breach of Certain Covenants
---------------------------
Failure of the Company to perform or comply with any covenant,
term or condition contained in Section 2.5A(ii), 2.5A(iv) or 5.2; or
7.4 Breach of Warranty
------------------
Any representation, warranty or certification made by the
Company in any Loan Document or in any statement or certificate at any time
given by the Company in writing pursuant hereto or thereto or in connection
herewith or therewith shall be false or incorrect in any material respect on the
date as of which made or deemed made; or
<PAGE>
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7.5 Other Defaults Under Agreement or Loan Documents
------------------------------------------------
The Company shall default in the performance of or compliance
with any covenant, term or condition contained in this Agreement or the other
Loan Documents (other than those covered by Section 7.1, 7.3, 7.4, 7.10 or 7.11)
and such default shall not have been remedied or waived in accordance with this
Agreement within 30 days after the date of written notice from the holder or
holders of not less than 25% in aggregate principal amount of the Loans then
outstanding of such default; or
7.6 Involuntary Bankruptcy; Appointment
of Custodian, Etc.
-----------------------------------
A court of competent jurisdiction enters a Bankruptcy Order
under any Bankruptcy Law that:
(A) is for relief against the Company or any Material
Subsidiary in an involuntary case or proceeding, or
(B) appoints a Custodian of the Company or any Material
Subsidiary for all or substantially all of its properties, or
(C) orders the liquidation of the Company or any Material
Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days.
7.7 Voluntary Bankruptcy; Appointment
of Custodian, Etc.
---------------------------------
The Company or any Material Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of a Bankruptcy Order for relief
against it in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors or files a proposal or scheme of arrangement
<PAGE>
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involving the rescheduling or composition of its indebtedness, or
(E) consents to the filing of a petition in bankruptcy against
it, or
(F) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts generally.
7.8 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar
process involving in any individual case or in the aggregate at any time an
amount in excess of $750,000 (to the extent not covered by third-party insurance
as to which the insurance company has acknowledged coverage) shall be entered or
filed against the Company or any of the Guarantors or any of their respective
properties or assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days or in any event later than five days prior to
the date of any proposed sale thereunder; or
7.9 Dissolution
-----------
Any order, judgment or decree shall be entered against the
Company or any Material Subsidiary decreeing the dissolution or split-up of the
Company or that Material Subsidiary and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
7.10 Guarantee
---------
(i) Any Guarantee or any provision thereof shall cease to be
in full force or effect (other than in accordance with its express terms), or
(ii) any Subsidiary Guarantor or any Person acting by or on behalf of such
Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's
obligations under its Guarantee, or (iii) any Subsidiary Guarantor shall default
in the due performance or observance of any term, covenant or agreement on its
part to be performed or observed, after giving effect to any applicable grace
periods, pursuant to its Guarantee; or
7.11 Foreclosure
-----------
The agent under the Senior Credit Facility or any other party
entitled to act thereunder commences judicial pro-
<PAGE>
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ceedings to foreclose on the collateral securing the Senior Credit Facility or
exercises any right under applicable law or any instrument evidencing a security
interest or other encumbrance in respect of such collateral to take ownership or
effect the transfer of such collateral in lieu of foreclosure.
THEN (i) upon the occurrence of any Event of Default described
in the foregoing Sections 7.6 or 7.7, all of the unpaid principal amount of and
accrued interest on the Loans and all other outstanding Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company, and the commitments of the Lenders hereunder shall
thereupon terminate, and (ii) upon the occurrence of any other Event of Default,
the Agent shall, upon written notice of the holder or holders of a majority in
aggregate principal amount of the Loans then outstanding, by written notice to
the Company and the agent under the Senior Credit Facility, declare all of the
unpaid principal amount of and accrued interest on the Loans and all other
outstanding Obligations to be, and the same shall forthwith become, due and
payable, and the obligations of the Lenders hereunder shall thereupon terminate;
provided that if any declaration of acceleration under this Agreement occurs
- --------
solely because an Event of Default set forth in Section 7.2 has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
the holders of the Indebtedness which is the subject of such Event of Default
have rescinded their declaration of acceleration in respect of such Indebtedness
within thirty days of such acceleration of such Indebtedness and the Agent has
received written notice thereof within such time and if no other Event of
Default has occurred during such thirty-day period which has not been cured or
waived in accordance with this Agreement. Nevertheless, if at any time after
acceleration of the maturity of the Loans, the Company shall pay all arrears of
interest and all payments on account of the principal thereof which shall have
become due otherwise than by acceleration (with interest on principal and, to
the extent permitted by law, on overdue interest, at the rates specified in this
Agreement or the Notes) and all Events of Default and Potential Events of
Default (other than non-payment of principal of and accrued interest on the
Loans and the Notes due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to Section 12.6, then the Agent shall, upon written
notice of the holders of a majority in aggregate principal amount of the Loans
then outstanding, by written notice to the Company rescind and annul the
acceleration and its consequences; but such action shall not affect any
subsequent Event
<PAGE>
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of Default or Potential Event of Default or impair any right consequent thereon.
SECTION 8 SUBORDINATION
8.1 Obligations Subordinated to Senior
Indebtedness of the Company
----------------------------------
The Lenders covenant and agree that payments in respect of the
Obligations by the Company shall be subordinated in accordance with the
provisions of this Section 8 to the prior payment in full, in cash or Cash
Equivalents, of all amounts payable in respect of Senior Indebtedness of the
Company, whether now outstanding or hereafter created (including any interest
accruing subsequent to an event specified in Section 7.6 or 7.7 whether or not
such interest is an allowed claim against the Company), that the subordination
is for the benefit of the holders of Senior Indebtedness of the Company, and
that each holder of Senior Indebtedness of the Company whether now outstanding
or hereafter created, incurred, assumed or guaranteed shall be deemed to have
acquired Senior Indebtedness of the Company in reliance upon the covenants and
provisions contained in this Agreement.
8.2 Priority and Payment Over of Proceeds
in Certain Events
-------------------------------------
(a) Subordination on Dissolution, Liquidation or
--------------------------------------------
Reorganization of the Company. Upon any payment or distribution of assets or
- -----------------------------
securities of the Company of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial liquidation
or reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Senior
Indebtedness of the Company (including any interest accruing subsequent to an
event specified in Section 7.6 or 7.7 whether or not such interest is an allowed
claim enforceable against the Company) shall first be paid in full in cash or
Cash Equivalents, before the Lenders shall be entitled to receive any payment by
the Company in respect of any Obligations and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets or securities of the Company of any kind or character, whether in cash,
property or securities, to which the Lenders would be entitled except for the
provisions of this Section 8 shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment
<PAGE>
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or distribution, directly to the holders of the Senior Indebtedness of the
Company or their representatives to the extent necessary to pay all of the
Senior Indebtedness of the Company to the holders of such Senior Indebtedness of
the Company.
(b) Subordination on Default on Senior Indebtedness. Upon the
-----------------------------------------------
maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration or otherwise, all Senior Indebtedness of the Company then due and
payable shall first be paid in full in cash or Cash Equivalents, before any
payment is made by the Company or any Person acting on behalf of the Company
with respect to the Obligations. No direct or indirect payment by the Company or
any Person acting on behalf of the Company of any Obligations whether pursuant
to the terms of the Loans or upon acceleration or otherwise shall be made, if at
the time of such payment, there exists a Default (as defined in the document
governing any Senior Indebtedness of the Company) in the payment of all or any
portion of any principal, interest, fees, letter of credit reimbursement
obligations or other amounts payable in respect of any Senior Indebtedness of
the Company and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holders of such Senior
Indebtedness. In addition, during the continuation of any other event of default
with respect to the Senior Indebtedness of the Company pursuant to which the
maturity thereof may be accelerated, upon the (i) receipt by the Agent of
written notice from the agent or representative of the holders of such Senior
Indebtedness of such Default or (ii) if such Non-Payment Default results from
the acceleration of the Loans, the date of the acceleration of the Loans, no
such payment may be made by the Company upon or in respect of the Obligations,
for a period ("Payment Blockage Period") commencing on the date of receipt of
such notice or the date of such acceleration and ending on the earlier to occur
of 179 days after receipt of such notice (unless such Payment Blockage Period
shall be terminated by written notice to the Agent from such agent or
representative) or the date of such acceleration. Notwithstanding anything
herein to the contrary, (x) in no event will a Payment Blockage Period or
successive Payment Blockage Periods with respect to the same payment on the
Obligations extend beyond 179 days from the date the payment on the Obligations
was due and (y) there must be 180 consecutive days in any 365-day period during
which no Payment Blockage Period is in effect. For all purposes of this Section
8.2(b), no event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Senior
Indebtedness of the Company initiating such Payment Blockage Period shall be, or
be made, the basis for the commencement of a second Pay-
<PAGE>
-98-
ment Blockage Period by the holders or by the agent or other representative of
such Senior Indebtedness whether or not within a period of 365 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment in respect
of any Obligation (other than as permitted by Sections (a) and (b) of this
Section 8.2) at a time when such payment is prohibited by this Section 8.2, then
and in such event such payment or distribution shall be received and held in
trust for the holders of the Senior Indebtedness of the Company and shall be
paid over or delivered to the holders of the Senior Indebtedness of the Company
remaining unpaid to the extent necessary to pay in full in cash or Cash
Equivalents all Senior Indebtedness of the Company in accordance with their
terms after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness of the Company.
If payment in respect of the Obligations is accelerated
because of an Event of Default, the Company shall promptly notify the agent or
other representatives for Senior Indebtedness of the Company of such
acceleration.
Upon any payment or distribution of assets or securities
referred to in this Section 8, the Lenders (notwithstanding any other provision
of this Agreement) shall be entitled to rely upon any order or decree of a court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lenders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior 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 Section 8.
The Company shall promptly give written notice to each of the
Lenders of any default or event of default under any Senior Indebtedness of the
Company or under any agreement pursuant to which Senior Indebtedness of the
Company may have been issued, and, in the event of any such event of default,
shall provide to the Agent the names and address of the trus-
<PAGE>
-99-
tees or other representatives of holders of such Senior Indebtedness of the
Company.
With respect to the holders and owners of Senior Indebtedness
of the Company, each Lender undertakes to perform only such obligations on the
part of such Lender as are specifically set forth in this Section 8, and no
implied covenants or obligations with respect to the holders or owners of Senior
Indebtedness of the Company shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary duty to the
holders or owners of Senior Indebtedness of the Company or to any agent under
the Senior Credit Facility or any other representative of the holders of the
Senior Indebtedness of the Company.
8.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 8 or elsewhere in this
Agreement shall prevent or delay (i) the Company, except under the conditions
described in Section 8.2, from making payments at any time for the purpose of
making payments in respect of its Obligations, or from depositing with the Agent
any moneys for such payments, or (ii) subject to Section 8.2, the application by
the Agent of any moneys deposited with it for the purpose of making payments in
respect of Obligations.
8.4 Rights of Holders of Senior Indebtedness
of the Company Not To Be Impaired
----------------------------------------
No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as provided in this Section
8 shall at any time in any way be prejudiced or impaired by any act or failure
to act by any such holder, or by any noncompliance by the Company with the terms
and provisions and covenants herein, regardless of any knowledge thereof any
such holder may have or otherwise be charged with. Without in any way limiting
the generality of the foregoing Section, such holders of Senior Indebtedness of
the Company may, at any time and from time to time without impairing or
releasing the subordination provided in this Section 8 or the obligations of the
Lenders hereunder to the holders of Senior Indebtedness of the Company, do any
one or more of the following: (i) change the manner, place, terms or time of
payment of, or renew or alter, Senior Indebtedness of the Company or otherwise
amend or supplement in any manner Senior Indebtedness of the Company or any
instrument evidencing the same or any agreement under which any Senior
Indebtedness of the Company is outstanding; (ii) sell, exchange, release, or
otherwise deal
<PAGE>
-100-
with any property pledged, mortgaged, or otherwise securing Senior Indebtedness
of the Company or fail to perfect or delay in the perfection of the security
interest in such property; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness of the Company; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person. Each Lender
by purchasing or accepting a Note waives any and all notice of the creation,
modification, renewal, extension or accrual of any Senior Indebtedness of the
Company and notice of or proof of reliance by any holder or owner of Senior
Indebtedness of the Company upon this Section 8 and the Senior Indebtedness of
the Company shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Section 8, and all dealings between the Company
and the holders and owners of the Senior Indebtedness of the Company shall be
deemed to have been consummated in reliance upon this Section 8.
The provisions of this Section 8 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of the Senior
Indebtedness of the Company.
8.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of
Section 8.2 of all amounts payable under or in respect of the Senior
Indebtedness of the Company, the Lenders shall be subrogated to the rights of
the holders of such Senior Indebtedness of the Company to receive payments or
distributions of assets of Company made on such Senior Indebtedness of the
Company until the Obligations shall be paid in full in cash or Cash Equivalents;
and for purposes of such subrogation no payments or distributions to holders of
such Senior Indebtedness of the Company of any cash, property or securities to
which the Lenders would be entitled except for the provisions of this Section 8,
and no payment over pursuant to the provisions of this Section 8 to holders of
such Senior Indebtedness of the Company by the Lenders, shall, as between the
Company, its creditors other than holders of such Senior Indebtedness of the
Company and the Lenders, be deemed to be a payment by the Company to or on
account of such Senior Indebtedness of the Company, it being understood that the
provisions of this Section 8 are solely for the purpose of defining the relative
rights of the holders of such Senior Indebtedness of the Company, on the one
hand, and the Lenders, on the other hand. A release of any claim by any holder
of Senior Indebtedness of the Company shall not limit the Lenders' rights of
subrogation under this Section 8.5.
<PAGE>
-101-
If any payment or distribution to which the Lenders would
otherwise have been entitled but for the provisions of this Section 8 shall have
been applied, pursuant to the provisions of this Section 8, to the payment of
all amounts payable under the Senior Indebtedness of the Company, then and in
such case, the Lenders shall be entitled to receive from the holders of such
Senior Indebtedness of the Company at the time outstanding the full amount of
any such payments or distributions received by such holders of Senior
Indebtedness of the Company in excess of the amount sufficient to pay all Senior
Indebtedness of the Company payable under or in respect of the Senior
Indebtedness of the Company in full in cash or Cash Equivalents in accordance
with the terms of Section 8.2.
8.6 Obligations of the Company Unconditional
----------------------------------------
Nothing contained in this Section 8 or elsewhere in this
Agreement is intended to or shall impair as between the Company and the Lenders
the obligations of the Company, which are absolute and unconditional, to pay to
the Lenders the Obligations 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 Lenders and creditors of the Company other than the holders of the
Senior Indebtedness of the Company, nor shall anything herein or therein prevent
the Lenders from exercising all remedies otherwise permitted by applicable law
upon default under this Agreement, subject to the rights, if any, under this
Section 8 of the holders of such Senior Indebtedness of the Company in respect
of cash, property or securities of the Company received upon the exercise of any
such remedy.
The failure to make a payment in respect of Obligations by
reason of any provision of this Section 8 shall not prevent the occurrence of an
Event of Default under Section 7.
8.7 Lenders Authorize Agent to
Effectuate Subordination
--------------------------
Each Lender hereby authorizes and expressly directs the Agent
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Section 8 and appoints the Agent
its attorney in fact for such purpose, including, without limitation, 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)
<PAGE>
-102-
tending towards liquidation of the business and assets of the Company, the
immediate filing of a claim for the unpaid balance of the Obligations in the
form required in said proceedings and causing said claim to be approved. If the
Agent 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 the Senior Indebtedness of the Company are hereby
authorized to have the right to file and are hereby authorized to file an
appropriate claim for and on behalf of the Lenders. In the event of any such
proceeding, until the Senior Indebtedness of the Company is paid in full in cash
or Cash Equivalents, without the consent of the holders of a majority in
principal amount outstanding of Senior Indebtedness of the Company, no Lender
shall waive, settle or compromise any such claim or claims relating to the
Obligations that such Lender now or hereafter may have against the Company.
SECTION 9 THE AGENT
9.1 Appointment
-----------
Each Lender hereby irrevocably designates and appoints First
Union as Agent of such Lender to act as specified herein and in the other Loan
Documents, and each Lender hereby irrevocably authorizes First Union as the
Agent to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Agent agrees to act as such upon the express conditions
contained in this Section 9. Notwithstanding any provision to the contrary
elsewhere in this Agreement or in any other Loan Document, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the other Loan Documents, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 9 are solely for the benefit of the Agent
and the Lenders, and neither the Company nor any of its Subsidiaries shall have
any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Lenders and the Agent does not assume and shall not be
deemed
<PAGE>
-103-
to have assumed any obligation or relationship of agent or trust with or for the
Company or any of its Subsidiaries.
9.2 Delegation of Duties
--------------------
The Agent may execute any of its duties under this Agreement
or any other Loan Document by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care except to
the extent otherwise required by Section 9.3.
9.3 Exculpatory Provisions
----------------------
Neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by the Company, any of its Subsidiaries or any of their
respective officers contained in this Agreement, any other Loan Documents, or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for any failure of the Company, any of its Subsidiaries
or any of their respective officers to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or the other Loan
Documents, or to inspect the properties, books or records of the Company or any
of its Subsidiaries. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any other Loan Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Lenders or by or on behalf of
the Company or any of its Subsidiaries to the Agent or any Lender or be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of
<PAGE>
-104-
the Loans or of the existence or possible existence of any Potential Event of
Default or Event of Default.
9.4 Reliance by Agent
-----------------
The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, facsimile, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including,
without limitation, counsel to the Company or any of its Subsidiaries),
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
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. As between the Agent and the Lenders, the Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
9.5 Notice of Default
-----------------
The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Potential Event of Default or Event of Default hereunder
unless the Agent has actually received notice from a Lender or the Company
referring to this Agreement, describing such Potential Event of Default or Event
of Default and stating that such notice is a "notice of default." In the event
that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall take such action with respect to such
Potential Event of Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that, as between the Agent and the Lenders
--------
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Potential Event of Default or Event of Default as
it shall deem advisable in the best interests of the Lenders.
<PAGE>
-105-
9.6 Non-Reliance on Agent and Other Lenders
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor
any of its respective officers, directors, employees, agents, attorneys-in-fact
or affiliates have made any representations or warranties to it and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Company and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Company and its Subsidiaries. The Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial and
other condition, prospects or creditworthiness of the Company or any of its
Subsidiaries which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification
---------------
The Lenders agree to indemnify the Agent in its capacity as
such ratably according to their respective "percentages" as used in determining
the Required Lenders at such time, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
reasonable expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment in full
of the Obligations) be imposed on, incurred by or asserted against the Agent in
its capacity as such in any way relating to or arising out of this Agreement or
any other Loan Document, or any documents contemplated by or referred to herein
or the transactions contemplated hereby or any action taken or omitted to be
taken by the
<PAGE>
-106-
Agent under or in connection with any of the foregoing, but only to the extent
that any of the foregoing is not paid by the Company or any of its Subsidiaries;
provided that no Lender shall be liable to the Agent for the payment of any
- --------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or willful misconduct of the Agent. If any indemnity furnished
to the Agent for any purpose shall, in the opinion of the Agent be insufficient
or become impaired, the Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional indemnity
is furnished. The agreements in this Section 9.7 shall survive the payment in
full of all Obligations.
9.8 Agent in Its Individual Capacity
--------------------------------
The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Company and
its Subsidiaries as though the Agent were not the Agent hereunder. With respect
to the Loans made by it and all Obligations owing to it, the Agent shall have
the same rights and powers under this Agreement as any Lender and may exercise
the same as though it were not the Agent and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
9.9 Resignation of the Agent; Successor Agent
-----------------------------------------
The Agent may resign as the Agent upon 20 days' notice to the
Lenders and the Company. Upon the resignation of the Agent, the Required Lenders
shall appoint from among the Lenders a successor Agent which is a bank or a
trust company for the Lenders subject to prior approval by the Company (such
approval not to be unreasonably withheld or delayed), whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall include such successor agent effective upon its appointment, and
the resigning Agent's rights, powers and duties as the Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement. After the resignation of the
Agent hereunder, the provisions of this Section 9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
<PAGE>
-107-
SECTION 10 GUARANTEE
10.1 Unconditional Guarantee
-----------------------
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee"), subject
to Section 11, to each of the Lenders and to the Agent and their respective
successors and assigns that (i) the principal of and interest on the Loans will
be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Loans and all other obligations of the Company to the Lenders or the Agent
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any extension
of time of payment or renewal of any of the Loans or of any such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 10.5. Each Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Loans or this Agreement, the absence of any action to
enforce the same, any waiver or consent by any of the Lenders with respect to
any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Subsidiary
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Loans, this Agreement and in this Guarantee. If any Lender or
the Agent is required by any court or otherwise to return to the Company, any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor, any amount paid by the
Company or any Guarantor to the Agent or such Lender, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Lenders and the Agent, on the other hand, (x) the maturity of the
<PAGE>
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obligations guaranteed hereby may be accelerated as provided in Section 7 for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Section 7, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of this
Guarantee.
10.2 Subordination of Guarantee
--------------------------
The obligations of each Guarantor to the Lenders and to the
Agent pursuant to the Guarantee of such Subsidiary Guarantor and this Agreement
are expressly subordinate and subject in right of payment to the prior payment
in full of all Guarantor Senior Indebtedness of such Subsidiary Guarantor, to
the extent and in the manner provided in Section 11.
10.3 Severability
------------
In case any provision of this Guarantee 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.
10.4 Limitation of Guarantor's Liability
-----------------------------------
Each Guarantor and by its acceptance hereof each of the
Lenders hereby confirms that it is the intention of all such parties that the
guarantee by such Subsidiary Guarantor pursuant to its Guarantee not constitute
a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the Lenders
and such Guarantor hereby irrevocably agree that the obligations of such
Guarantor under the Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, but not limited to, the Guarantor Senior Indebtedness of
such Guarantor) and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to Section 10.6, result in the
obligations of such Guarantor under the Guarantee not constituting such
fraudulent transfer or conveyance.
<PAGE>
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10.5 Guarantors May Consolidate, etc.,
on Certain Terms
---------------------------------
(a) Nothing contained in this Agreement or in the Loans
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety, to the
Company or another Guarantor. Upon any such consolidation, merger, sale or
conveyance, the Guarantee given by such Guarantor shall no longer have any force
or effect.
(b) Except as set forth in Section 6.7, nothing contained in
this Agreement or in the Loans shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Company or
another Guarantor (whether or not affiliated with the Guarantor); provided that,
--------
subject to Section 10.5(a), (i) immediately after such transaction, and giving
effect thereto, no Potential Event of Default or Event of Default shall have
occurred as a result of such transaction and be continuing, and (ii) upon any
such consolidation, merger, sale or conveyance, the Guarantee of such Guarantor
set forth in this Section 10, and the due and punctual performance and
observance of all of the covenants and conditions of this Agreement to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form to the Agent, executed and delivered to the
Agent, by the corporation formed by such consolidation, or into which the
Guarantor shall have merged, or by the corporation that shall have acquired such
property. In the case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture
executed and delivered to the Agent and satisfactory in form and substance to
the Agent of the due and punctual performance of all of the covenants and
conditions of this Agreement to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor.
10.6 Contribution
------------
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
-----
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other
<PAGE>
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Guarantors in a pro rata amount based on the Adjusted Net Assets of each
--- ----
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Obligations. "Adjusted Net Assets" of such
Guarantor at any date shall mean the lesser of (x) the amount by which the fair
value of the property of such Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving effect to
all other fixed and contingent liabilities incurred or assumed on such date
(other than liabilities of such Guarantor under Subordinated Indebtedness)), but
excluding liabilities under the Guarantee, of such Guarantor at such date and
(y) the amount by which the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liabilities of such Guarantor on its debts including, without
limitation, Guarantor Senior Indebtedness (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Guarantor in respect
of the obligations of such Subsidiary under the Guarantee), excluding debt in
respect of the Guarantee of such Guarantor, as they become absolute and matured.
10.7 Waiver of Subrogation
---------------------
Each Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Guarantor's
obligations under its Guarantee and this Agreement, including, without
limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Lender against the Company, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Guarantor in violation of the preceding sentence and the Loans shall not have
been paid in full, such amount shall be deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the Lenders,
and shall, subject to the provisions of Section 8, Section 10.2 and Section 11,
forthwith be paid to the Agent for the benefit of such Lenders to be credited
and applied upon the Loans, whether matured or unmatured, in accordance with the
terms of this Agreement. Each Guarantor acknowledges that it will re-
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ceive direct and indirect benefits from the financing arrangements contemplated
by this Agreement and that the waiver set forth in this Section 10.7 is
knowingly made in contemplation of such benefits.
10.8 Evidence of Guarantee
---------------------
To evidence their guarantees to the Lenders set forth in this
Section 10, each of the Guarantors hereby agrees to execute the notation of
Guarantee in substantially the form included in Exhibit VIII. Each such notation
------------
of Guarantee shall be signed on behalf of each Guarantor by two Officers, or an
Officer and an assistant Secretary or one Officer shall sign and one Officer or
an assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) shall attest to such notation of
Guarantee.
10.9 Waiver of Stay, Extension or Usury Laws
---------------------------------------
Each Guarantor covenants that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law that would prohibit
or forgive such Guarantor from performing its Guarantee as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Agreement; and each Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Agent, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS
11.1 Guarantee Obligations Subordinated to
Guarantor Senior Indebtedness
-------------------------------------
The Lenders covenant and agree that payments in respect of the
obligations by a Guarantor in respect of its Guarantee (collectively, as to any
Guarantor, its "Guarantee Obligations") shall be subordinated in accordance with
the provisions of this Section 11 to the prior payment in full, in cash or Cash
Equivalents, of all amounts payable in respect of Guarantor Senior Indebtedness
of such Guarantor whether now outstanding or hereafter created (including any
interest accruing subsequent to an event specified in Section 7.6 or 7.7 whether
or not such interest is an allowed claim against such Guaran-
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tor), that the subordination is for the benefit of the holders of Guarantor
Senior Indebtedness, and that each holder of Guarantor Senior Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Guarantor Senior Indebtedness in reliance upon
the covenants and provisions contained in this Agreement.
11.2 Priority and Payment Over of
Proceeds in Certain Events
----------------------------
(a) Subordination of Guarantee Obligations on Dissolution,
-----------------------------------------------------
Liquidation or Reorganization of Such Guarantor. Upon any payment or
- -----------------------------------------------
distribution of assets or securities of any Guarantor of any kind or character,
whether in cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of such Guarantor, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings (other than a liquidation or dissolution of such Guarantor into the
Company or another Guarantor), all Guarantor Senior Indebtedness of such
Guarantor (including any interest accruing subsequent to an event specified in
Section 7.6 or 7.7 whether or not such interest is an allowed claim enforceable
against such Guarantor) shall first be paid in full in cash or Cash Equivalents,
before the Lenders shall be entitled to receive any payment with respect to any
Guarantee Obligations of such Guarantor and upon any such dissolution or winding
up or liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities, to which the Lenders would be entitled except for the provisions
of this Section 11 shall be made by such Guarantor or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, directly to the holders of the Guarantor Senior Indebtedness of
such Guarantor or their representatives to the extent necessary to pay all of
the Guarantor Senior Indebtedness of such Guarantor to the holders of such
Guarantor Senior Indebtedness.
(b) Subordination of Guarantee Obligations on Default on
----------------------------------------------------
Senior Indebtedness. Upon the maturity of any Senior Indebtedness of a Guarantor
- -------------------
by lapse of time, acceleration or otherwise, all Senior Indebtedness of such
Guarantor then due and payable shall first be paid in full in cash or Cash
Equivalents, before any payment is made by such Guarantor or any Person acting
on behalf of such Guarantor with respect to the Guarantee Obligations of such
Guarantor. No direct or indirect payment by any Guarantor or any Person acting
on behalf of such Guarantor of any Guarantee Obligations of such Guarantor
<PAGE>
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whether pursuant to the terms of the Loans or upon acceleration or otherwise
shall be made, if at the time of such payment, there exists a default (as
defined in the document governing any Senior Indebtedness of such Guarantor) in
the payment of all or any portion of any principal, interest, fees, letter of
credit reimbursement obligations or other amounts payable in respect of any
Senior Indebtedness of such Guarantor and such default shall not have been cured
or waived or the benefits of this sentence waived by or on behalf of the holders
of such Senior Indebtedness. In addition, during the continuation of any other
event of default with respect to any Senior Indebtedness of such Guarantor
pursuant to which the maturity thereof may be accelerated, upon the earlier of
(i) receipt by the Agent of written notice from the agent or representative of
the holders of such Senior Indebtedness or (ii) if such non-payment default
results from the acceleration of the Loans, the date of acceleration of the
Loans, no such payment may be made by such Guarantor under its Guarantee for a
period ("Guarantor Payment Blockage Period") commencing on the date of receipt
of such notice or the date of the acceleration referred to in clause (ii) above,
as the case may be, and ending on the earlier to occur of 179 days after receipt
of such written notice by the Agent (unless such Guarantor Payment Blockage
Period shall be terminated by written notice to the Agent from such agent) or
the date of the acceleration of the Loans, as the case may be (provided such
Guarantor Senior Indebtedness shall theretofore not have been accelerated).
Notwithstanding anything herein to the contrary, (x) in no event will a
Guarantor Payment Blockage Period or successive Guarantor Payment Blockage
Periods with respect to the same payment on such Guarantee extend beyond 179
days from the date the payment on such Guarantee was due and (y) there must be
180 consecutive days in any 365-day period during which no Guarantor Payment
Blockage Period is in effect. For all purposes of this Section 11.2(b), no event
of default which existed or was continuing on the date of the commencement of
any Guarantor Payment Blockage Period with respect to the Senior Indebtedness
initiating such Guarantor Payment Blockage Period shall be, or be made, the
basis for the commencement of a second Guarantor Payment Blockage Period by the
holders or by the agent or other representative of such Senior Indebtedness
whether or not within a period of 365 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment in respect
of any Guarantee Obliga-
<PAGE>
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tion with respect to the Loans (other than as permitted by Sections (a) and (b)
of this Section 11.2) at a time when such payment is prohibited by this Section
11.2, then and in such event such payment or distribution shall be received and
held in trust for the holders of the Guarantor Senior Indebtedness and shall be
paid over or delivered to the holders of the Guarantor Senior Indebtedness
remaining unpaid to the extent necessary to pay in full in cash or Cash
Equivalents all Guarantor Senior Indebtedness in accordance with their terms
after giving effect to any concurrent payment or distribution to the holders of
such Guarantor Senior Indebtedness.
Nothing contained in this Section 11 will limit the right of
the Lenders to take any action to accelerate the maturity of the Loans pursuant
to Section 7 or to pursue any rights or remedies hereunder or otherwise.
Upon any payment or distribution of assets or securities
referred to in this Section 11, the Lenders (notwithstanding any other provision
of this Agreement) shall be entitled to rely upon any order or decree of a court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lender for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Guarantor Senior Indebtedness, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 11.
The Guarantors shall promptly give written notice to each of
the Lenders of any default or event of default under any Guarantor Senior
Indebtedness or under any agreement pursuant to which Guarantor Senior
Indebtedness may have been issued, and, in the event of any such event of
default, shall provide to the Agent the names and address of the trustees or
other representatives of holders of such Guarantor Senior Indebtedness.
With respect to the holders and owners of Guarantor Senior
Indebtedness, each Lender undertakes to perform only such obligations on the
part of such Lender as are specifically set forth in this Section 11, and no
implied covenants or obligations with respect to the holders or owners of
Guarantor Senior Indebtedness shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary
<PAGE>
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duty to the holders or owners of Guarantor Senior Indebtedness or to the agent
under the Senior Credit Facility or any other representative of the holders of
the Guarantor Senior Indebtedness.
11.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 11 or elsewhere in this
Agreement shall prevent or delay (i) Subsidiary Guarantors, except under the
conditions described in Section 11.2, from making payments at any time for the
purpose of making payments in respect of their respective Guarantee Obligations,
or from depositing with the Agent any moneys for such payments, or (ii) subject
to Section 11.2, the application by the Agent of any moneys deposited with it
for the purpose of making payments in respect of Guarantee Obligations.
11.4 Rights of Holders of Subsidiary Guarantor
Senior Indebtedness Not To Be Impaired
-----------------------------------------
No right of any present or future holder of any Guarantor
Senior Indebtedness to enforce subordination as provided in this Section 11
shall at any time in any way be prejudiced or impaired by any act or failure to
act by any such holder, or by any noncompliance by the Guarantors with the terms
and provisions and covenants herein, regardless of any knowledge thereof any
such holder may have or otherwise be charged with. Without in any way limiting
the generality of the foregoing Section, such holders of Guarantor Senior
Indebtedness may, at any time and from time to time without impairing or
releasing the subordination provided in this Section 11 or the obligations of
the Lenders hereunder to the holders of Guarantor Senior Indebtedness, do any
one or more of the following: (i) change the manner, place, terms or time of
payment of, or renew or alter, Guarantor Senior Indebtedness or otherwise amend
or supplement in any manner Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which any Guarantor Senior
Indebtedness is outstanding; (ii) sell, exchange, release, or otherwise deal
with any property pledged, mortgaged, or otherwise securing Guarantor Senior
Indebtedness or fail to perfect or delay in the perfection of the security
interest in such property; (iii) release any Person liable in any manner for the
collection of Guarantor Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Guarantors and any other Person. Each Lender
by purchasing or accepting a Note waives any and all notice of the creation,
modification, renewal, extension or accrual of any Guarantor Senior Indebtedness
and notice of or
<PAGE>
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proof of reliance by any holder or owner of Guarantor Senior Indebtedness upon
this Section 11 and the Guarantor Senior Indebtedness shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this
Section 11, and all dealings between the Guarantors and the holders and owners
of the Guarantor Senior Indebtedness shall be deemed to have been consummated in
reliance upon this Section 11.
The provisions of this Section 11 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of the Guarantor
Senior Indebtedness.
11.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of
Section 11.2 of all amounts payable under or in respect of the Guarantor Senior
Indebtedness, the Lenders shall be subrogated to the rights of the holders of
such Guarantor Senior Indebtedness to receive payments or distributions of
assets of the Guarantors made on such Guarantor Senior Indebtedness until the
Guarantee Obligations shall be paid in full in cash or Cash Equivalents in a
manner satisfactory to the holders of such Guarantor Senior Indebtedness in
accordance with the terms of Section 11.2; and for purposes of such subrogation
no payments or distributions to holders of such Guarantor Senior Indebtedness of
any cash, property or securities to which the Lenders would be entitled except
for the provisions of this Section 11, and no payment over pursuant to the
provisions of this Section 11 to holders of such Guarantor Senior Indebtedness
by the Lenders, shall, as between such Guarantor, its creditors other than
holders of such Guarantor Senior Indebtedness and the Lenders, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior
Indebtedness, it being understood that the provisions of this Section 11 are
solely for the purpose of defining the relative rights of the holders of such
Guarantor Senior Indebtedness, on the one hand, and the Lenders, on the other
hand. A release of any claim by any holder of Guarantor Senior Indebtedness
shall not limit the Lenders' rights of subrogation under this Section 11.5.
If any payment or distribution to which the Lenders would
otherwise have been entitled but for the provisions of this Section 11 shall
have been applied, pursuant to the provisions of this Section 11, to the payment
of all amounts payable under the Guarantor Senior Indebtedness, then and in such
case, the Lenders shall be entitled to receive from the holders of such
Guarantor Senior Indebtedness at the time outstanding the full amount of any
payments or distributions received by such
<PAGE>
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holders of Guarantor Senior Indebtedness in excess of the amount sufficient to
pay all Guarantor Senior Indebtedness payable under or in respect of the
Guarantor Senior Indebtedness in full in cash or Cash Equivalents in accordance
with the terms of Section 11.2.
11.6 Obligations of the Guarantors
Unconditional
-----------------------------
Nothing contained in this Section 11 or elsewhere in this
Agreement or in the Guarantees is intended to or shall impair as between the
Guarantors and the Lenders the obligations of the Guarantors, which are absolute
and unconditional, to pay to the Lenders the Guarantee Obligations 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 Lenders and creditors of
the Guarantors other than the holders of the Guarantor Senior Indebtedness, nor
shall anything herein or therein prevent the Lenders from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 11 of the holders
of such Guarantor Senior Indebtedness in respect of cash, property or securities
of the Guarantors received upon the exercise of any such remedy.
The failure to make a payment in respect of Guarantee
Obligations by reason of any provision of this Section 11 shall not prevent the
occurrence of an Event of Default under Section 7.
11.7 Lenders Authorize Agent to
Effectuate Subordination
--------------------------
Each Lender hereby authorizes and expressly directs the Agent
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Section 11 and appoints the Agent
its attorney in fact for such purpose, including, without limitation, in the
event of any dissolution, winding up, liquidation or reorganization of any
Guarantor (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 any Guarantor, the immediate filing of a claim for the unpaid
balance of the Guarantee Obligations in the form required in said proceedings
and causing said claim to be approved. If the Agent does not file a proper claim
or proof of debt in the form required in such proceeding prior to 30 days before
the expira-
<PAGE>
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tion of the time to file such claim or claims, then the holders of the Guarantor
Senior Indebtedness are hereby authorized to have the right to file and are
hereby authorized to file an appropriate claim for and on behalf of the Lenders.
In the event of any such proceeding, until the Guarantor Senior Indebtedness is
paid in full in cash or Cash Equivalents, without the consent of the holders of
a majority in principal amount outstanding of Guarantor Senior Indebtedness, no
Lender shall waive, settle or compromise any such claim or claims relating to
the Obligations that such Lender now or hereafter may have against the
Guarantors.
SECTION 12 MISCELLANEOUS
12.1 Representation of the Lenders
-----------------------------
Each Lender hereby represents that it is a commercial lender
which makes loans in the ordinary course of its business and that it will make
the Loans hereunder for its own account or the account of its affiliates in the
ordinary course of such business.
12.2 Participations in and Assignments
of Loans and Notes
---------------------------------
A. Each Lender shall have the right at any time to sell,
assign, transfer or negotiate all or any portion of its Notes or its Loan
Commitment in an aggregate amount of not less than $1,000,000 to any Eligible
Assignee, other than to an Eligible Assignee which has, or has an Affiliate
which has, a principal line of business similar to any principal line of
business of the Company or any of its Subsidiaries. In the case of any sale,
transfer or negotiation of all or part of the Notes or any Loan Commitment
authorized under this Section 12.2A, the assignee, transferee or recipient shall
become a party to this Agreement as a Lender by execution of an assignment and
assumption agreement; provided that (i) at such time Section 2.1A or 2.2A, as
--------
the case may be, shall be deemed modified to reflect the Loan Commitment of such
new Lender and of the existing Lenders, (ii) upon surrender of the Notes, new
Notes will be issued, at the Company's expense, to such new Lender and to the
assigning Lender, such new Notes to be in conformity with the requirements of
Section 2.1D or 2.2E as the case may be (with appropriate modifications) to the
extent needed to reflect the revised Loan Commitment, and (iii) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Lender, the payment of a non-
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refundable assignment fee of $3,500; and provided, further, that such transfer
-------- -------
or assignment will not be effective until recorded by the Agent on the Register
pursuant to Section 5.13. To the extent of any assignment pursuant to this
Section 12.2A, the assigning Lender shall be relieved of its obligations
hereunder with respect to its assigned Loan Commitment, and the assignee,
transferee or recipient shall have, to the extent of such sale, assignment,
transfer or negotiation, the same rights, benefits and obligations as it would
if it were a Lender with respect to such Notes or Loan Commitment, including,
without limitation, the right to approve or disapprove actions which, in
accordance with the terms hereof, require the approval of a Lender. At the time
of each assignment pursuant to this Section 12.2A to an Eligible Assignee which
is not already a Lender hereunder and which is not a United States Person (as
such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for
Federal income tax purposes, the respective Eligible Assignee shall provide to
the Company and the Agent the appropriate Internal Revenue Service Forms (and,
if applicable, a Section 12.2E(ii) Certificate) described in Section 12.2E.
B. Each Lender may grant participations in all or any part of
its Notes or its Loan Commitment in an aggregate amount of not less than
$1,000,000 to any Eligible Assignee, other than to an Eligible Assignee which
has, or has an Affiliate which has, a principal line of business similar to any
principal line of business of the Company or any of its Subsidiaries.
C. The Company shall, at its own cost and expense, provide
such certificates, acknowledgments and further assurances in respect of this
Agreement and the Loans as any Lender may reasonably require in connection with
any participation, transfer or assignment pursuant to this Section 12.2.
D. Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loan and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank.
E. Each Lender that is an assignee or transferee of an
interest under this Agreement pursuant to Section 12.2A (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or
transfer) and that is not a United States Person (as such term is defined in
Section 7701(a)(30) of the Internal Revenue Code) agrees to deliver to the
Company and the Agent, on the date of such assignment or
<PAGE>
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transfer to such Lender, (i) two accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to
such Lender's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this Agreement and under any Note,
or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A)
of the Internal Revenue Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, two accurate and complete
original signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Lender agrees that, when a
lapse in time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the Company
and the Agent two new accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001, or Form W-8, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Company and the Agent of its inability to
deliver any such Form or Certificate. Subject to Section 12.2A and the
immediately succeeding sentence, the Company shall be entitled, to the extent it
is required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder or
made on any other Loan Document for the account of any Lender which is not a
United States Person (as such term is defined in Section 7701(a)(30) of the
Internal Revenue Code) for U.S. Federal income tax purposes to the extent that
such Lender has not provided to the Company U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 12.2E and except as set forth in Section 12.2A, the
Company agrees to pay additional amounts and to indemnify and hold harmless each
Lender (without regard to the identity of the jurisdiction requiring the
deduction or withholding), and reimburse such Lender upon its written request,
in respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the date of any
assignment or transfer in any applicable law, treaty, governmental rule,
regulation, guide-
<PAGE>
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line or order, or in the interpretation thereof, relating to the deducting or
withholding of income or similar Taxes.
12.3 Expenses
--------
Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of the Loan Documents and all the
costs of furnishing all opinions by counsel for the Company (including without
limitation any opinions requested by the Lenders as to any legal matters arising
hereunder), and of the Company's performance of and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with; (ii) the actual and reasonable fees, expenses and disbursements
of Cahill Gordon & Reindel in connection with the negotiation, preparation,
execution and administration of the Loan Documents and the Loans hereunder, and
any amendments, modifications and waivers hereto or thereto and consents to
departures from the terms hereof and thereof; and (iii) after the occurrence of
an Event of Default, actual and reasonable all costs and expenses (including
actual and reasonable attorneys fees, including allocated costs of internal
counsel, and costs of settlement) incurred by the Lenders or the Agent in
enforcing any Obligations of or in collecting any payments due from the Company
hereunder or under the Notes by reason of such Event of Default or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings.
12.4 Indemnity
---------
In addition to the payment of expenses pursuant to Section
12.3, whether or not the transactions contemplated hereby shall be consummated,
the Company agrees to indemnify, pay and hold each of the Lenders, the Agent and
any holder of any of the Notes, and each of their respective officers,
directors, employees, agents, representatives and affiliates (collectively
called the "Indemnitees"), harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the actual and reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated as a party thereto), which may be suffered
by, imposed on, incurred by, or asserted against that Indemnitee,
<PAGE>
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in any manner resulting from, connected with, in respect of, relating to or
arising out of this Agreement, the other Loan Documents, the Commitment Letter,
the Lenders' agreements to make the Loans or the use or intended use of any of
the proceeds of the Loans hereunder, the issuance of the Exchange Notes or the
Take-Out Securities or the Recapitalization (the "Indemnified Liabilities");
provided that the Company shall have no obligation to an Indemnitee hereunder
- --------
with respect to Indemnified Liabilities (i) to the extent such liabilities are
finally judicially determined to have resulted solely from (A) the gross
negligence or willful misconduct of that Indemnitee or (B) the failure of such
Indemnitee to perform its obligations under any Loan Document or (C) such
Indemnitee's violation of law or (ii) in connection with the obligations of any
Indemnitee under any Loan Document or for any transfer fees. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
12.5 Setoff
------
Subject to Section 8, in addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender, the Agent and each subsequent holder of any Note is hereby
authorized by the Company at any time or from time to time, without notice to
the Company, or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured but not including trust
accounts or any other accounts held for the benefit of another Person) and any
other Indebtedness at any time held or owing by such Person or any such
subsequent holder to or for the credit or the account of the Company against and
on account of the obligations and liabilities of the Company to such Person or
such subsequent holder under this Agreement and the Notes, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement or the Notes, irrespective of whether or not (a) such Person
or such subsequent holder shall have made any demand hereunder or (b) such
Person or such subsequent holder shall have declared the principal of or the
interest on its portion of the Loans
<PAGE>
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and its Notes and other amounts due hereunder to be due and payable as permitted
by Section 7 and although said obligations and liabilities, or any of them, may
be contingent or unmatured.
12.6 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term
or provision of this Agreement, of the Notes, any Guarantee or, prior to the
execution and delivery thereof, of the form of the Registration Rights Agreement
or the form of the Senior Subordinated Indenture or consent to any departure by
the Company or any Guarantor therefrom, shall in any event be effective without
the prior written concurrence of the Company or such Guarantor, as the case may
be, and the Agent and the Required Lenders, and, upon the request of any Lender,
the receipt of a written opinion of counsel of the Company addressed to the
Lenders to the effect that such amendment, modification, termination, waiver or
consent does not violate or conflict with any of the terms and provisions of the
Senior Credit Facility or any other Contractual Obligation of the Company;
provided that, notwithstanding the third sentence of Section 12.15, without the
- --------
prior written consent of each Lender affected, an amendment, modification,
termination or waiver of this Agreement, any Notes, any Guarantee, and, prior to
the execution and delivery thereof, of the form of Registration Rights Agreement
and the form of Senior Subordinated Indenture or consent to departure from a
term or provision hereof or thereof may not: (i) reduce the principal amount of
Notes whose holders must consent to any such amendment, modification,
termination, waiver or consent; (ii) reduce the rate of or extend the time for
payment of principal or interest on any Note; (iii) reduce the principal amount
of any Note; (iv) make any Note payable in money other than that stated in the
Note; (v) make any change in Section 2.5A(iv) or in the definition of Change of
Control, in the last paragraph of Section 7 or in Section 8.5, 11.5 or 12.6;
(vi) reduce the rate or extend the time of payment of fees or other compensation
payable to the Lenders hereunder; (vii) modify the provisions of Section 8 or
any of the defined terms related thereto in any manner adverse to the Lenders;
or (viii) waive performance by the Company of its obligations under, or consent
to any departure from any of the terms and provisions of, Section 2.5A(iv); and
provided, further, that without the consent of the Agent, no such amendment,
- -------- -------
modification, termination or waiver may amend, modify, terminate or waive any
provision of Section 9 as the same applies to the Agent or any other provision
of this Agreement as it relates to the rights or obligations of the Agent. No
<PAGE>
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amendment, modification or waiver of any provision of this Agreement, the Notes,
any Guarantee or the form of the Senior Subordinated Indenture shall adversely
affect the rights of the holders of Senior Indebtedness or the holders of
Guarantor Senior Indebtedness without their consent. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Company in any case shall
entitle the Company to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 12.6 shall be binding upon each holder
of the Notes at the time outstanding, each further holder of the Notes, and, if
signed by the Company or a Guarantor, on the Company and such Guarantor.
12.7 Independence of Covenants
-------------------------
All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitation of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
12.8 Entirety
--------
The Loan Documents, the Commitment Letter and the Assignment
Agreement embody the entire agreement of the parties and supersede all prior
agreements and understandings, if any, relating to the subject matter hereof and
thereof.
12.9 Notices
-------
Unless otherwise provided herein, any notice or other
communications herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by mail and shall be
deemed to have been given when delivered in person, upon receipt of telecopy or
telex against receipt of answer back or four Business Days after depositing it
in the mail, registered or certified, with postage prepaid and properly
addressed; provided that notices shall not be effective until received. For the
--------
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 12.9) shall be set forth under
each party's name on the signature pages hereto.
<PAGE>
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12.10 Survival of Warranties and Certain Agreements
---------------------------------------------
A. All agreements, representations and warranties made herein
shall survive the execution and delivery of this Agreement and the Commitment
Letter, the making of the Loans hereunder and the execution and delivery of the
Notes and, notwithstanding the making of the Loans, the execution and delivery
of the Notes or any investigation made by or on behalf of any party, shall
continue in full force and effect. The closing of the transactions herein
contemplated shall not prejudice any right of one party against any other party
in respect of anything done or omitted hereunder or in respect of any right to
damages or other remedies.
B. Notwithstanding anything in this Agreement or implied by
law to the contrary, the agreements of the Company set forth in Sections 12.3,
12.4, 12.14, 12.15, 12.17, 12.19 and 12.22 shall survive the payment of the
Loans and the Notes and the termination of this Agreement.
12.11 Failure or Indulgence Not Waiver;
Remedies Cumulative
---------------------------------
No failure or delay on the part of the Agent or any Lender or
any holder of any Note in the exercise of any power, right or privilege
hereunder, under a Guarantee or under the Notes shall impair such power, right
or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement, under
a Guarantee or the Notes are cumulative to and not exclusive of any rights or
remedies otherwise available.
12.12 Severability
------------
In case any provision in or obligation under this Agreement,
under a Guarantee or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
12.13 Headings
--------
Section and Section headings in this Agreement are included
herein for convenience of reference only and shall not
<PAGE>
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constitute a part of this Agreement for any other purpose or be given any
substantive effect.
12.14 Applicable Law
--------------
THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
12.15 Successors and Assigns; Subsequent
Holders of Notes
----------------------------------
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of the Lenders. The terms and
provisions of this Agreement and each Guarantee shall inure to the benefit of
any assignee or transferee of the Notes pursuant to Section 12.2A, and in the
event of such transfer or assignment, the rights and privileges herein conferred
upon the Lenders shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. Except as provided
in Section 12.6, in determining whether the holders of a sufficient aggregate
principal amount of the Loans shall have consented to any action under this
Agreement, any amount of the Loans owned or held by the Company, any Subsidiary
Guarantor or any of their respective Affiliates shall be disregarded. The
Company's rights or any interest therein hereunder may not be assigned without
the prior express written consent of each of the Lenders.
12.16 Counterparts; Effectiveness
---------------------------
This Agreement and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto, and delivery thereof to the Agent or, in the case of the Lenders,
written telex or facsimile notice or telephonic notification (confirmed in
writing) of such execution and delivery. The Agent will give the Company and
each Lender prompt notice of the effectiveness of this Agreement.
<PAGE>
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12.17 Consent to Jurisdiction; Venue;
Waiver of Jury Trial
-------------------------------
A. Any legal action or proceeding with respect to this
Agreement, any Note or any Guarantee may be brought in the courts of the State
of New York or of the United States for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement hereby irrevocably accepts for itself and in respect of its respective
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the parties to this Agreement hereby further irrevocably waives
any claim that any such courts lack jurisdiction over such party, and agrees not
to plead or claim, in any legal action or proceeding with respect to this
Agreement, the Notes or the Guarantees brought in any of the aforesaid courts,
that any such court lacks jurisdiction over such party. Each of the parties to
this Agreement irrevocably consents to the service of process in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party, at its respective address for notices pursuant
to Section 12.9, such service to become effective 30 days after such mailing. To
the extent permitted by law, each of the parties to this Agreement hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any Note or any Guarantee that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
any party to this Agreement to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against any party in
any other jurisdiction.
B. Each of the parties to this Agreement hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement, the Notes or the Guarantees brought in the courts referred
to in clause A above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
C. Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the Notes or the Guarantees or the
transactions contemplated hereby or thereby.
<PAGE>
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12.18 Payments Pro Rata
-----------------
A. The Agent agrees that promptly after its receipt of each
payment of any interest or premium on or principal of the Notes from or on
behalf of the Company or any Subsidiary Guarantor, it shall, except as otherwise
provided in this Agreement, distribute such payment to the Lenders (other than
any Lender that has consented in writing to waive its pro rata share of such
--- ----
payment) pro rata based upon their respective pro rata shares, if any, of such
--- ----
payment.
B. Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Loans of a sum which with respect to the related sum or sums received by other
Lenders is in a greater proportion than the total of such Obligation then owed
and due to such Lender bears to the total of such Obligation then owed and due
to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Company to
such Lenders in such amount as shall result in a proportional participation by
all of the Lenders in such amount; provided that, if all or any portion of such
--------
excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.19 Taxes
-----
A. Any and all payments by the Company hereunder or under any
of the other Loan Documents shall be made free and clear of and without
deduction or withholding for any and all present or future Taxes, unless such
Taxes are required by law or the administration thereof to be deducted or
withheld and excluding (i) in the case of each Lender and the Agent, Taxes
imposed on its net income and franchise taxes imposed on it by the jurisdiction
under the laws of which such Person is organized or any political subdivision
thereof, (ii) in the case of each such Lender and the Agent, any Taxes that are
in effect and that would apply to a payment
<PAGE>
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to such Person, as applicable, as of the Closing Date, and (iii) if any Person
acquires any interest in this Agreement (a "Transferee"), any Taxes to the
extent that they are in effect and would apply to a payment to such Transferee
as of the date of the acquisition of such interest, as the case may be (all such
nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). If the
Company shall be required by Law or the administration thereof to deduct or
withhold any Covered Taxes from or in respect of any sum payable hereunder or
under any other Loan Document, (a) unless such requirement results from the
failure of the payee to perform its obligations under Section 12.2E, the sum
payable shall be increased as may be necessary so that after making all required
deductions or withholdings (including deductions or withholdings applicable to
additional amounts paid under this paragraph), the Lender receives an amount
equal to the sum it would have received if no such deduction or withholding had
been made; (b) the Company shall make such deductions or withholdings; and (c)
the Company forthwith shall pay the full amount deducted or withheld to the
relevant taxation or other authority in accordance with applicable Law.
B. The Company agrees to pay forthwith any present or future
stamp documentary taxes or any other excise or property taxes, charges or
similar levies (all such taxes, charges and levies being herein referred to as
"Other Taxes") imposed by any jurisdiction (or any political subdivision or
taxing authority thereof or therein) which arise from any payment made by the
Company hereunder or under any of the other Loan Documents or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any of the other Loan Documents.
C. The Company agrees to indemnify the Agent and each of the
Lenders for the full amount of Covered Taxes or Other Taxes not deducted or
withheld and paid by the Company in accordance with Sections 12.19A and 12.19B
to the relevant taxation or other authority and any Taxes other than Covered
Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the
Company under this Section 12.19 paid by the Lender or the Agent and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not any such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days from the date the Agent or such Lender makes written demand therefor. A
certificate as to the amount of such Taxes or Other Taxes and evidence of
payment thereof submitted to the Company shall be prima facie evidence, absent
manifest error, of the amount due from the Company to the Agent or such Lender.
<PAGE>
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D. The Company shall furnish to the Agent and each of the
Lenders the original or a certified copy of a receipt evidencing any payment of
Taxes or Other Taxes made by the Company as soon as such receipt becomes
available.
E. The provisions of this Section 12.19 shall survive the
termination of the Agreement and repayment of all Obligations.
12.20 Waiver of Stay, Extension or Usury Laws
---------------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Loans as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Agreement; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Agent, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
12.21 Requirements of Law
-------------------
(a) In the event that any change in law occurring after the date that any lender
becomes a Lender party to this Agreement with respect to such Lender shall, in
the opinion of such Lender, require that any Bridge Loan Commitment of such
Lender be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by such Lender or
any corporation controlling such Lender, and such change in law shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such corporation, as the
case may be, could have achieved but for such change in law (taking into account
such Lender's or such corporation's policies, as the case may be, with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time following notice by such Lender to the Company of such change
in law as provided in paragraph (b) of this Section 12.21, within 15 days after
demand by such Lender, the Company shall pay to such Lender such
<PAGE>
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additional amount or amounts as will compensate such Lender or such corporation,
as the case may be, for such reduction.
(b) The Company shall not be required to make any payments to
any Lender for any additional amounts pursuant to this Section 12.21 unless such
Lender has given written notice to the Company, through the Agent, of its intent
to request such payments prior to or within 60 days after the date on which such
Lender became entitled to claim such amounts. If any Lender requests
compensation from the Company under this Section 12.21, the Company may, by
notice to such Lender (with a copy to the Agent), suspend the obligation of such
Lender thereafter to make or continue Loans, until the requirement of law giving
rise to such request ceases to be in effect; provided that such suspension shall
not affect the right of such Lender to receive the compensation so requested.
12.22 Confidentiality
---------------
Each Lender shall hold all non-public information obtained
pursuant to the requirements of or in connection with this Agreement which has
been identified as confidential by the Company in accordance with such Lender's
customary procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, it being understood and agreed
by the Company that (i) in any event a Lender may make disclosures reasonably
required by any bona fide assignee, transferee or participant in connection with
the contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided that unless
--------
specifically prohibited by applicable law or court order, each Lender shall
notify the Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information and
(ii) a Lender may share with any of its affiliates, and such affiliates may
share with any Lender, any information related to the Company or the Company's
affiliates (including information relating to creditworthiness), the
Recapitalization or the financing therefor; and provided, further, that in no
-------- -------
event shall any Lender be obligated or required to return any materials
furnished by the Company or any Subsidiaries of the Company. In connection with
any sales, assignments or transfers referred to in Section 12.2A, a Lender shall
obtain agreements from the purchasers, assignees or transferees, as the case may
be, rea-
<PAGE>
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sonably satisfactory to the Company, that such parties will comply with this
Section 12.22.
<PAGE>
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WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
COMPANY:
T/SF COMMUNICATIONS CORPORATION
By:______________________________
Name:
Title:
Notice Address:
2407 Skelly Drive
Tulsa, Oklahoma 74105
Attention:
Telephone:
Telecopy:
GUARANTORS:
Atwood Convention Publishing
CORESEARCH
Crimesearch, Inc.
Expo Magazine, Inc.
Galaxy Design & Printing, Inc.
Galaxy Registration, Inc.
G.E.M. Communications, Inc.
Transportation Communications
Services, Inc.
T/SF Europe, Inc.
T/SF Investment Co.
T/SF of Nevada Co.
Transportation Information
Services, Inc.
By:______________________________
Name:
Title:
<PAGE>
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Notice Address:
Telephone:
Telecopy:
<PAGE>
-135-
AGENT:
FIRST UNION CORPORATION
as agent
By:______________________________
Name:
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention:
Telephone: (704)
Telecopy: (704)
LENDERS:
Commitment: $80,000,000 FIRST UNION CORPORATION
By:______________________________
Name:
Title:
Notice Address:
301 South College Street
Charlotte, NC 28288
Attention:
Telephone: (704)
Telecopy: (704)
<PAGE>
EXHIBIT 10.2
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of October 9, 1997, among T/SF COMMUNICATIONS
CORPORATION, a Delaware corporation (hereinafter the "Borrower"), the several
--------
banks, financial institutions and other investors from time to time parties to
this Agreement (the "Lenders"), and FIRST UNION NATIONAL BANK, as administrative
-------
agent for the Lenders (in such capacity, the "Agent" or the "Administrative
----- -------------
Agent.")
- -----
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower has requested the Lenders to make loans and other
financial accommodations in an amount up to $25,000,000 as more particularly
described herein;
WHEREAS, the Lenders are willing to make such loans on the terms and
conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined in the
-------------
preamble to this Agreement have the meanings therein indicated, and the
following terms have the following meanings:
"Adjusted EBITDA": of any Person for any period, EBITDA for such
---------------
period ("Unadjusted EBITDA") plus (i) if such Person made any
----------------- ----
acquisition permitted by Section 6.5(b) during such period, EBITDA
generated from such acquired businesses ("Acquired EBITDA") as if such
---------------
acquisitions occurred at the beginning of the applicable period except
to the extent such Acquired EBITDA has already been included in the
calculation of Unadjusted EBITDA for such period, minus (ii) if such
-----
Person has sold or otherwise divested any information or publishing or
information or publishing related businesses or business trade
show/exposition or business trade show/exposition related businesses
during such period, EBITDA generated from such sold or divested
information or publishing or information or publishing related
businesses as if such sales or divestitures occurred at the beginning of
the applicable period.
"Affiliate": as to any Person, any other Person (excluding any
---------
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, a Person shall be deemed to be "controlled
by" a Person if such Person possesses, directly or indirectly, power
either (a) to vote 10%
1
<PAGE>
or more of the securities having ordinary voting power for the election
of directors of such Person or (b) to direct or cause the direction of
the management and policies of such Person whether by contract or
otherwise.
"Aggregate Revolving Committed Amount": the aggregate amount of
------------------------------------
all of the Revolving Committed Amounts in effect from time to time, as
reduced from time to time as provided in Section 2.6.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
modified from time to time in accordance with its terms.
"Applicable Interest Rate Percentage": for any day, the rate per
-----------------------------------
annum set forth below opposite the applicable Total Leverage Ratio then
in effect, it being understood that the Applicable Interest Rate
Percentage for (i) Base Rate Loans shall be the percentage set forth
under the column "Base Rate Margin", and (ii) LIBOR Rate Loans shall be
the percentage set forth under the column "LIBOR Rate Margin":
LIBOR
Total Base Rate Rate
Leverage Ratio Margin Margin
-------------- ---------- ------
greater than or = to 5.50 1.5% 2.75%
greater than or = to 5.0 but less than 5.5 1.25% 2.5%
greater than or = to 4.5 but less than 5.0 1.0% 2.25%
greater than or = to 4.0 but less than 4.5 .75% 2.0%
less than 4.0 .50% 1.75%
The Applicable Interest Rate Percentage shall, in each case, be
determined and adjusted quarterly on the date five (5) Business Days
after the date of delivery of the quarterly compliance certificate and
financial information provided in accordance with Sections 5.1(b) and
5.2(b) (each an "Interest Determination Date").
---------------------------
Such Applicable Interest Rate Percentage shall be effective from such
Interest Determination Date until the next such Interest Determination
Date. The initial Applicable Interest Rate Percentages shall be 1.25% in
the case of the Base Rate Margin and 2.5% in the case of the LIBOR Rate
Margin until the first Interest Determination Date occurring after the
Closing Date.
"Asset Disposition": means any sale, lease, transfer or other
-----------------
disposition (including any such transaction effected by way of merger,
amalgamation or
2
<PAGE>
consolidation) by the Borrower or any Restricted Subsidiary subsequent
to the Closing Date of any asset (including stock or other equity
interests in any Restricted Subsidiary), including without limitation
any sale leaseback transaction (whether or not involving a Capital
Lease), but excluding Specified Sales.
"Authorized Signatory": such senior personnel of the Borrower as
--------------------
may be duly authorized and designated in writing by the Borrower from
time to time to execute documents, agreements and instruments on the
Borrower's behalf.
"Bankruptcy Code": the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to
time.
"Base Rate": for any day, a rate per annum equal to the greater
---------
of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "Prime Rate" shall mean, at any time, the rate of interest per
----------
annum publicly announced from time to time by First Union at its
principal office in Charlotte, North Carolina as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of
business on the day such change in the Prime Rate occurs. The parties
hereto acknowledge that the rate announced publicly by First Union as
its Prime Rate is an index or base rate and shall not necessarily be its
lowest or best rate charged to its customers or other banks; and
"Federal Funds Effective Rate" shall mean, for any day, 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 on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published on the next
succeeding Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. If for any
reason the Administrative Agent shall have determined (which
determination shall be conclusive in the absence of manifest error) that
it is unable to ascertain the Federal Funds Effective Rate, including
the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Base
Rate shall be determined without regard to clause (b) of the first
sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Base
Rate due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective on the opening of business on the date of such
change.
"Base Rate Loans": Revolving Loans that bear interest at an
---------------
interest rate based on the Base Rate.
"Borrower": as defined in the first paragraph of this Agreement.
--------
"Borrowing Date": in respect of any Revolving Loan, the date such
--------------
Revolving Loan is made.
3
<PAGE>
"Business": as defined in subsection 3.10(b).
--------
"Business Day": a day other than a Saturday, Sunday or other day
------------
on which commercial banks in Charlotte, North Carolina or New York, New
York are authorized or required by law to close; provided, however, that
-------- -------
when used in connection with a rate determination, borrowing or payment
in respect of a LIBOR Rate Loan, the term "Business Day" shall also
exclude any day on which banks in London, England are not open for
dealings in Dollar deposits in the London interbank market.
"Bridge Loan": means the loan of $80,000,000 made by First Union
-----------
Corporation to the Borrower pursuant to the terms of that certain Senior
Subordinated Credit Agreement, dated as of the Closing Date, by and
between the Borrower and First Union Corporation.
"Capital Expenditures": all expenditures which in accordance with
--------------------
GAAP would be classified as capital expenditures, including without
limitation, Capital Lease Obligations; but excluding for purposes hereof
the aggregate amount of Capital Expenditures financed directly with the
proceeds of capital contributions and identified in the Borrower's
compliance certificate provided in accordance with the provisions of
Section 5.2(b).
"Capital Lease": any lease of property, real or personal, the
-------------
obligations with respect to which are required to be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations": the capitalized lease obligations
-------------------------
relating to a Capital Lease determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests (including
partnership and limited liability company interests) in a Person (other
than a corporation) and any and all warrants or options to purchase any
of the foregoing.
"Cash Equivalents": means (i) securities issued or directly and
----------------
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition ("Government Obligations"), (ii) U.S. dollar denominated (or
----------------------
foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits and Eurodollar certificates of deposit of (y)
any domestic commercial bank of recognized standing having capital and
surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any
such bank being an "Approved Bank"), in each case with maturities of not
-------------
more than 364 days from the date of acquisition, (iii) commercial paper
and variable or fixed rate notes issued by any Approved
4
<PAGE>
Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof)
or better by Moody's and maturing within six months of the date of
acquisition, (iv) repurchase agreements with a bank or trust company
(including a Lender) or a recognized securities dealer having capital
and surplus in excess of $500,000,000 for direct obligations issued by
or fully guaranteed by the United States of America, (v) obligations of
any state of the United States or any political subdivision thereof for
the payment of the principal and redemption price of and interest on
which there shall have been irrevocably deposited Government Obligations
maturing as to principal and interest at times and in amounts sufficient
to provide such payment, (vi) auction preferred stock rated in the
highest short-term credit rating category by S&P or Moody's and (vii)
U.S. dollar denominated time and demand deposit accounts or money market
accounts with those domestic banks meeting the requirements of item (y)
or (z) of clause (ii) above and any other domestic commercial banks
insured by the FDIC with an aggregate balance not to exceed $100,000 in
the aggregate at any time at any such bank.
"Cash Tax Liabilities": the cash tax liability for income taxes
--------------------
paid by the Borrower or any Restricted Subsidiary or required to be
distributed to members or stockholders of the Borrower or any Restricted
Subsidiary.
"Closing Date": the date of this Agreement, being also the date
------------
on which each of the conditions specified in subsection 4.1 are
satisfied in full or waived in accordance with this Agreement.
"Code": the Internal Revenue Code of 1986, as amended from time
----
to time.
"Commitment Fee: such term as defined in Section 2.7.
--------------
"Commitment Letter": the letter agreement dated as of August 15,
-----------------
1997 between the Borrower and First Union.
"Commitment Period": the period from and including the Closing
-----------------
Date to but not including the Termination Date.
"Commitment Transfer Supplement": a Commitment Transfer
------------------------------
Supplement, substantially in the form of Schedule 9.6(c).
"Commonly Controlled Entity": an entity, whether or not
--------------------------
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Borrower and which is treated as a single employer under Section
414(b) or (c) of the Code, or solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
5
<PAGE>
"Consolidated Adjusted EBITDA": Adjusted EBITDA of the Borrower
----------------------------
and the Restricted Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis; provided, however,
Adjusted EBITDA of any Non-Guarantor Restricted Subsidiary shall be
reduced by an amount equal to such Adjusted EBITDA multiplied by the
percentage ownership interests of any minority stockholders in such
Non-Guarantor Restricted Subsidiary.
"Consolidated Capital Expenditures": Capital Expenditures of the
---------------------------------
Borrower and the Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
"Consolidated Cash Tax Liabilities": Cash Tax Liabilities of the
---------------------------------
Borrower and the Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
"Consolidated Fixed Charges": at any date, the sum of (i)
--------------------------
Consolidated Interest Expense for the four (4) consecutive quarters
ending as of the date of computation plus (ii) the amount, if positive,
equal to the aggregate principal amount of Revolving Loans outstanding
on the first day of the period of four (4) consecutive quarters ending
as of the date of computation minus the Aggregate Revolving Committed
-----
Amount existing on the date of computation (exclusive, for purposes
hereof, of any voluntary reductions in the Revolving Commitments
pursuant to Section 2.6(a) or any mandatory reduction on account of any
Asset Disposition pursuant to Section 2.6(b)(ii)), plus (iii) payments
of principal made on all Indebtedness of the Borrower and the Restricted
Subsidiaries (other than payments on the Revolving Loans and the Bridge
Loan) during the four (4) consecutive quarters ending as of the date of
computation plus (iv) Consolidated Capital Expenditures made or incurred
----
during the four (4) consecutive quarters ending as of the date of
computation other than with the proceeds from equity contributions made
during such period, plus (v) Commitment Fees paid during the period of
----
four (4) consecutive quarters ending as of the date of computation, plus
----
(vi) Consolidated Cash Tax Liabilities paid or distributed during the
period of four (4) consecutive quarters ending as of the date of
computation, net of tax refunds during that period.
"Consolidated Interest Expense": Interest Expense of the Borrower
-----------------------------
and the Restricted Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis.
"Consolidated Senior Funded Debt: Senior Funded Debt of the
-------------------------------
Borrower and the Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
"Consolidated Total Funded Debt": Total Funded Debt of the
------------------------------
Borrower and the Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
6
<PAGE>
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any material agreement, instrument
or undertaking to which such Person is a party or by which it or any of
its material property is bound.
"Copyrights": (i) all copyrights in all works, now existing or
----------
hereafter created or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United
States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 3.13 to the Credit Agreement, and (ii)
-------------
all renewals thereof including, without limitation, any thereof referred
to in Schedule 3.13 to the Credit Agreement.
-------------
"Credit Documents": this Agreement, each of the Revolving Notes,
----------------
the Guaranty and the Security Documents.
"Credit Parties": means, collectively, the Borrower, VS&A-T/SF,
--------------
Fir Tree and the Guarantors.
"Debt Issuance" means the issuance of any Indebtedness for
-------------
borrowed money by the Borrower.
"Default": any of the events specified in Section 7, whether or
-------
not any requirement for the giving of notice or the lapse of time, or
both, or any other condition, has been satisfied.
"Defaulting Lender": at any time, any Lender that, at such time
-----------------
(a) has failed to make a Revolving Loan required pursuant to the terms
of this Agreement, (b) has failed to pay to the Administrative Agent or
any Lender an amount owed by such Lender pursuant to the terms of this
Agreement, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
"Dollars" and "$": dollars in lawful currency of the United
-------- ---
States of America.
"Domestic Lending Office": initially, the office of each Lender
-----------------------
designated as such Lender's Domestic Lending Office shown on Schedule
--------
9.2; and thereafter, such other office of such Lender as such Lender may
---
from time to time specify to the Administrative Agent and the Borrower
as the office of such Lender at which Base Rate Loans of such Lender are
to be made.
"EBITDA": of any Person for any period, net income for such
------
period, plus (i) Interest Expense to the extent deducted in determining
----
such net income, plus (ii) depreciation, amortization and all other
----
non-cash charges deducted in determining such net income, all determined
in accordance with GAAP consistently applied, minus (iii) extraordinary
-----
income (including, for purposes hereof, gain from the sale of assets in
the
7
<PAGE>
ordinary course of business, such as obsolete equipment), plus (iv)
----
extraordinary expenses (including, for purposes hereof, loss from the
sale of the assets in the ordinary course of business, such as obsolete
equipment), plus (v) income taxes to the extent deducted to determine
----
net income plus or minus (vi) the adjustments described on Schedule 1.1A
---- ----- -------------
for the 12-month period through the Closing Date plus the allowances
----
described on Schedule 1.1B for the periods after the Closing Date.
-------------
"Environmental Laws": any and all applicable foreign, Federal,
------------------
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirement of Law (including common law) regulating, relating
to or imposing liability or standards of conduct concerning protection
of human health or the environment, as now or may at any time be in
effect during the term of this Agreement.
"Equity Issuance" means any issuance by the Borrower to any
--------------
Person which is not a Credit Party of (a) any shares of its Capital
Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to
the conversion of any debt securities to equity.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurodollar Reserve Percentage": for any day, the percentage
-----------------------------
(expressed as a decimal and rounded upwards, if necessary, to the next
higher 1/100th of 1%) which is in effect for such day as prescribed by
the Federal Reserve Board (or any successor) for determining the maximum
reserve requirement (including without limitation any basic,
supplemental or emergency reserves) in respect of Eurocurrency
liabilities, as defined in Regulation D of such Board as in effect from
time to time, or any similar category of liabilities for a member bank
of the Federal Reserve System in New York City.
"Event of Default": any of the events specified in Section 7;
----------------
provided, however, that any requirement for the giving of notice or the
-------- ------
lapse of time, or both, or any other condition, has been satisfied.
"Federal Funds Effective Rate": as defined in the definition of
----------------------------
"Base Rate".
"First Union": First Union National Bank, a national banking
-----------
association.
"Fir Tree" means Fir Tree Value Fund L.P., Fir Tree Institutional
--------
Value Fund L.P. and Fir Tree Value Partners LDC.
"Fixed Charge Coverage Ratio": at the end of any fiscal quarter
---------------------------
of the Borrower, the ratio of Consolidated Adjusted EBITDA (computed for
the four fiscal quarterly periods then ending) plus Cash Equivalents in
----
excess of $1,000,000 owned by the Borrower and the Restricted
Subsidiaries as of the first day of the four fiscal quarterly
8
<PAGE>
periods then ending to Consolidated Fixed Charges (computed for the four
fiscal quarterly periods then ending and computed after giving effect to
the Interim Adjustments for the calculations occurring on December 31,
1997, March 31, 1998, June 30, 1998 and September 30, 1998).
"GAAP": generally accepted accounting principles in effect in the
----
United States of America applied on a consistent basis, subject,
-------
however, in the case of determination of compliance with the financial
-------
covenants set out in Section 5.9 to the provisions of Section 1.3.
"Governmental Authority": any nation or government, any state or
---------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
------------------- ------------
person"), any obligation of (a) the guaranteeing person or (b) another
------
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
-------------------
any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the
-------- -------
term Guarantee Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount
of any Guarantee Obligation of any guaranteeing person shall be deemed
to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of
such Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantors": (i) each of the wholly owned Restricted
----------
Subsidiaries of the Borrower existing as of the Closing Date, (ii) each
of the LLCs and (iii) any Subsidiary of the Borrower or any LLC acquired
or formed to acquire assets in connection with any Permitted
Acquisition.
9
<PAGE>
"Guaranty": the Guaranty Agreement to be executed and delivered
--------
by the Guarantors in favor of the Administrative Agent relating to the
Revolving Loans and obligations owing under this Agreement, as amended,
supplemented or otherwise modified from time to time.
"Holdings LLC": T/SF Holdings LLC.
------------
"Indebtedness": of any Person at any date, (a) all indebtedness
------------
of such Person for borrowed money or for the deferred purchase price of
property or services (other than trade liabilities and other normal
accrued liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person
under Capital Leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for
the payment thereof (other than liabilities securing carriers',
warehousemen's, mechanics', repairmen's or other like nonconsensual
statutory Liens arising in the ordinary course of business), (f) all
obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person
(other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (g) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements (other than supply
agreements and other similar arrangements entered into in the ordinary
course of business), (h) all Guarantee Obligations of such Person, (i)
all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price
hedging agreements, and (j) the maximum amount of all letters of credit
issued for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent not theretofore reimbursed). For
purposes of this Agreement, Indebtedness shall not include any
Indebtedness owing by the Borrower to any of the Guarantors or by any
Guarantor to the Borrower or by any Guarantor to any other Guarantor or
any contingent obligation in respect thereof. It is understood and
agreed that the amount of any Indebtedness described in clause (e) shall
be the lower of the amount of the obligation or the fair market value of
the collateral securing such obligation, and the amount of any
obligation described in clause (i) shall be the termination payments
that would be required to be paid to a counterparty upon early
termination (in accordance with customary industry standards) rather
than any notional amount with regard to which payments may be
calculated.
"Insolvency": with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of such term as
used in Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
10
<PAGE>
"Intellectual Property": such term as defined in Section 3.13.
---------------------
"Interest Coverage Ratio": at the end of any fiscal quarter of
-----------------------
the Borrower, the ratio of Consolidated Adjusted EBITDA (computed for
the four fiscal quarters then ending) to Consolidated Interest Expense
for the four consecutive quarters ending as of the date of computation
(after giving effect to the Interim Adjustments for the calculations
occurring on December 31, 1997, March 31, 1998, June 30, 1998 and
September 30, 1998).
"Interest Expense": for any Person for any period, the sum of all
----------------
interest expense, including amortization of debt discount and premium
and the interest component under Capital Leases for such Person but
excluding the amortization of debt financing expenses; provided that
--------
there shall be added to and included in Interest Expense for purposes
hereof the net amount payable (other than amounts payable in respect of
up-front or one-time fees, which shall be excluded from Interest
Expense) by such Person in respect of any Interest Protection Agreement
and Interest Expense shall be reduced by the net amount receivable by
such Person under any Interest Protection Agreement in respect of such
period.
"Interest Payment Date": (a) as to any Base Rate Loan, the last
---------------------
Business Day of each March, June, September and December to occur while
such Loan is outstanding, (b) as to any LIBOR Rate Loan having an
Interest Period of three months or less, the last day of such Interest
Period and (c) as to any LIBOR Rate Loan having an Interest Period
longer than three months, each day which is three months after the first
day of such Interest Period and the last day of such Interest Period.
"Interest Period": with respect to any LIBOR Rate Loan,
---------------
(i) initially, the period commencing on the
Borrowing Date or conversion date, as the case may be, with
respect to such LIBOR Rate Loan and ending one, two, three or six
months thereafter, as selected by the Borrower in the notice of
borrowing or notice of conversion given with respect thereto; and
(ii) thereafter, each period commencing on the last
day of the immediately preceding Interest Period applicable to
such LIBOR Rate Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to
the Administrative Agent not less than three Business Days prior
to the last day of the then current Interest Period with respect
thereto;
provided that the foregoing provisions are subject to the following:
--------
(A) if any Interest Period pertaining to a LIBOR
Rate Loan would otherwise end on a day that is not a Business
Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension
11
<PAGE>
would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the
immediately preceding Business Day;
(B) any Interest Period pertaining to a LIBOR 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 the relevant calendar month;
(C) if the Borrower shall fail to give notice as
provided above, the Borrower shall be deemed to have selected a
Base Rate Loan to replace the affected LIBOR Rate Loan as
provided in Section 2.3(b);
(D) any Interest Period in respect of any Revolving
Loan that would otherwise extend beyond the Termination Date
shall end on the Termination Date; and
(E) no more than 6 LIBOR Rate Loans may be in
effect at any time. For purposes hereof, LIBOR Rate Loans with
different Interest Periods shall be considered as separate LIBOR
Rate Loans, even if they shall begin on the same date and have
the same duration, although borrowings, extensions and
conversions may, in accordance with the provisions hereof, be
combined at the end of existing Interest Periods to constitute a
new LIBOR Rate Loan with a single Interest Period.
"Interest Protection Agreement": any interest rate protection
-----------------------------
agreement or interest rate future, option, cap, collar or other hedging
arrangement.
"Interim Adjustments": for the first four fiscal quarters
-------------------
following the Closing Date, the Fixed Charge Coverage Ratio and the
Interest Coverage Ratio shall be calculated using the adjustments and
assumptions regarding Interest Expense set forth below:
(a) for the partial fiscal quarter ending December
31, 1997 and for the three full fiscal quarters ending March 31,
1998, June 30, 1998 and September 30, 1998, Interest Expense for
the twelve month period for which the Fixed Charged Coverage
Ratio and the Interest Coverage Ratio is being calculated shall
be deemed to be the result obtained by multiplying (i) the actual
Interest Expense for the period from the Closing Date through the
last day of such fiscal quarter times (ii) a ratio equal to (A)
365 divided by (B) the number of days elapsed from the Closing
Date until the last day of such quarter; and
(b) for the fiscal quarter ending December 31, 1998
and each fiscal quarter thereafter, Interest Expense shall be the
actual Interest Expense for the twelve month period ending on
such date.
12
<PAGE>
"LIBOR": the arithmetic mean (rounded to the nearest 1/100th of
-----
1%) of the offered rates for deposits in Dollars for a period equal to
the Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 A.M. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such
rate is not available, then "LIBOR" shall mean the rate per annum at
which, as determined by the Administrative Agent, Dollars in the amount
of $5,000,000 are being offered to leading banks at approximately 11:00
A.M. London time, two (2) Business Days prior to the commencement of the
applicable Interest Period for settlement in immediately available funds
by leading banks in the London interbank market for a period equal to
the Interest Period selected.
"LIBOR Lending Office": initially, the office of each Lender
--------------------
designated as such Lender's LIBOR Lending Office shown on Schedule 9.2;
------------
and thereafter, such other office of such Lender as such Lender may from
time to time specify to the Administrative Agent and the Borrower as the
office of such Lender at which the LIBOR Rate Loans of such Lender are
to be made.
"LIBOR Rate": a rate per annum (rounded upwards, if necessary, to
----------
the next higher 1/100th of 1%) determined by the Administrative Agent
pursuant to the following formula:
LIBOR Rate = LIBOR
-------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan": Revolving Loans the rate of interest
---------------
applicable to which is based on the LIBOR Rate.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
---
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Capital Lease having substantially the same
economic effect as any of the foregoing).
"LLC Preferred Stock": means the preferred stock of Holdings LLC
-------------------
held in its entirety by the Borrower.
"LLCs": Holdings LLC and the Operating LLCs.
----
"Majority Lenders": Lenders holding in the aggregate more than
----------------
50% of the sum of (i) all Revolving Loans then outstanding at such time
and (ii) the aggregate unused Revolving Commitment at such time;
provided, however, that if any Lender shall be a Defaulting Lender at
-------- -------
such time, then there shall be excluded from the determination of
Majority Lenders those Revolving Loans owing to such Defaulting Lender
and such Defaulting Lender's Revolving
13
<PAGE>
Commitment, or after termination of the Revolving Commitment, the
principal balance of the Revolving Loans owing to such Defaulting
Lender.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and the Guarantors taken as a whole, exclusive
of events or occurrences affecting the economy generally, (b) the
ability of the Borrower and the Guarantors to perform their obligations,
when such obligations are required to be performed, under this Agreement
or any of the Revolving Notes or (c) the validity or enforceability of
this Agreement, any of the Revolving Notes or any of the other Credit
Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Moody's": Moody's Investors Service, Inc.
-------
"Multiemployer Plan": a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Net Sales Proceeds": the gross cash proceeds (including cash by
------------------
way of deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received from the sale, lease,
conveyance, disposition or other transfer of assets or from a Recovery
Event (if and to the extent not used to repair or replace the property
which was the subject of the Recovery Event), net of (i) reasonable
transactions costs payable to third parties, (ii) the estimated taxes
payable with respect to such proceeds (based upon the highest marginal
federal and state tax rates), whether payable by the Borrower or a
Guarantor or its stockholders or direct or indirect members (including,
without duplication, withholding taxes), (iii) Indebtedness (other than
Indebtedness of the Lenders pursuant to this Agreement and the other
Credit Documents) which is secured by, or otherwise related to, the
assets which are the subject of such event to the extent such
Indebtedness is paid with a portion of the proceeds therefrom, (iv)
proceeds needed to pay liabilities directly related to the assets which
are the subject of such event to the extent such liabilities are not
assumed by a purchaser of the assets and are paid with a portion of the
proceeds received from the disposition of such assets and (v) other
costs which may occur as a result of, and are reasonably associated
with, discontinuing operations, shut-downs or otherwise resulting from,
the disposition of such assets; provided, however, Net Sales Proceeds
relating to any assets of a Non-Guarantor Restricted Subsidiary or the
stock of a Non-Guarantor Restricted Subsidiary shall be reduced by an
amount equal to such Net Sales Proceeds multiplied by the percentage
ownership interests of any minority stockholder in such Non-Guarantor
Restricted Subsidiary.
14
<PAGE>
"Non-Guarantor Restricted Subsidiary": any non-wholly owned
-----------------------------------
Restricted Subsidiary of the Borrower.
"Notice of Account Designation": shall have the meaning assigned
-----------------------------
thereto in Section 2.1(b)(iii).
"Notice of Borrowing": the written notice of borrowing as
-------------------
referenced and defined in Section 2.1(b)(i).
"Notice of Conversion": the written notice of extension or
--------------------
conversion as referenced and defined in Section 2.3.
"Operating LLCs": Galaxy Registration, LLC, Atwood, LLC and GEM
--------------
Gaming, LLC.
"Participant": as defined in subsection 9.6(b).
-----------
"Patents": (i) all letters patent of the United States or any
-------
other country, now existing or hereafter arising, and all improvement
patents, reissues, reexaminations, patents of additions, renewals and
extensions thereof, including, without limitation, any thereof referred
to in Schedule 3.13 to the Credit Agreement, and (ii) all applications
-------------
for letters patent of the United States or any other country, now
existing or hereafter arising, and all provisionals, divisions,
continuations and continuations-in-part and substitutes thereof,
including, without limitation, any thereof referred to in Schedule 3.13
-------------
to the Credit Agreement.
"PBGC": the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Acquisition" as defined in Section 6.5(b)(ii).
---------------------
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
---------------------
receivables owing to the Borrower or any of the Restricted Subsidiaries
or any receivables and advances to suppliers, in each case if created,
acquired or made in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, (iii)
investments in and to the Borrower or any of the Restricted
Subsidiaries; provided, however, the sum of (A) the aggregate amount of
such equity investments made to Non-Guarantor Restricted Subsidiaries
plus (B) the aggregate outstanding amount of Indebtedness incurred by
Non-Guarantor Restricted Subsidiaries pursuant to Section 6.1(c) plus
(C) the aggregate amount of all sales, transfers, leases or other
dispositions of property or assets to Non-Guarantor Restricted
Subsidiaries pursuant to Section 6.5(a)(iii) shall not exceed $5,000,000
at any time, (iv) investments in entities in which there is only an
minority ownership interest position provided the aggregate amount of
such investments shall not exceed $2,000,000 at any time, (v) loans and
advances to officers,
15
<PAGE>
directors, employees and Affiliates in an aggregate amount not to exceed
$500,000 at any time outstanding, (v) investments (including debt
obligations, stock, securities or other property) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business, and
(vi) investments, acquisitions or transactions permitted under Section
6.5(b). As used herein, "investment" means all investments, in cash or
by delivery of property made, directly or indirectly in, to or from any
Person, whether by acquisition of shares of capital stock or partnership
interest or other equity interest, property, assets, indebtedness or
other obligations or securities or by loan advance, capital contribution
or otherwise.
"Permitted Liens":
---------------
(i) Liens created by or otherwise existing under or in
connection with this Agreement or the other Credit Documents in
favor of the Lenders;
(ii) Liens in favor of a Lender hereunder as the provider
of interest rate protection relating to the Revolving Loans
hereunder, but only (A) to the extent such Liens secure
obligations under such interest rate protection agreements
permitted under Section 6.1, (B) to the extent such Liens are on
the same collateral as to which the Lenders also have a Lien (or
shall have been offered the opportunity to have a Lien in such
collateral) and (C) if such provider and the Lenders shall share
pari passu in the collateral subject to such Liens;
---- -----
(iii) Liens for taxes, assessments, charges or other
governmental levies not yet due or as to which the period of
grace (not to exceed 60 days), if any, related thereto has not
expired or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto
--------
are maintained on the books of the Borrower or any of the
Guarantors, as the case may be, in conformity with GAAP (or, in
the case of the Guarantors with significant operations outside of
the United States of America, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(iv) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days
or which are being contested in good faith by appropriate
proceedings;
(v) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
16
<PAGE>
(vi) deposits to secure the performance of bids, trade
contracts, (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business; and
(vii) Liens in connection with attachments or judgments
(including judgment or appeal bonds), provided that the judgments
secured shall, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall
have been discharged within 60 days after the expiration of any
such stay;
(viii) easements, rights-of-way, restrictions (including
zoning restrictions), minor defects or irregularities in title
and other similar charges or encumbrances not, in any material
respect, impairing the use of the encumbered property for its
intended purpose;
(ix) leases or subleases of real property granted to
others not interfering in any material respect with the business
of the Borrower or any of the Guarantors;
(x) purchase money Liens securing purchase money
indebtedness (and refinancing thereof) to the extent such
indebtedness is permitted under Section 6.1(f);
(xi) Liens on Unrestricted Margin Stock;
(xii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of
any Lien referred to in the foregoing clauses; provided that such
--------
extension, renewal or replacement Lien shall be limited to all or
a part of the property which secured the Lien so extended,
renewed or replaced (plus improvements on such property).
"Person": an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at any particular time, any employee benefit plan which
----
is covered by Title IV of ERISA and in respect of which the Borrower or
a Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements": (i) the Pledge Agreement(s) to be executed
-----------------
and delivered by VS&A-T/SF and FirTree as pledgors, pledging all of the
capital stock of the Borrower now or hereafter owned by such pledgors,
as such Pledge Agreement(s) are amended, supplemented or otherwise
modified from time to time, (ii) the Pledge Agreement(s) to be executed
and delivered by VS&A-T/SF and FirTree as pledgors, pledging 100% of the
17
<PAGE>
common interests of Holdings LLC, as such Pledge Agreement(s) are
amended, supplemented or otherwise modified from time to time, (iii) the
Pledge Agreement to be executed and delivered by the Borrower as
pledgor, pledging the LLC Preferred Stock and all of the capital stock
of each of the Subsidiaries of the Borrower now or hereafter owned by
the Borrower, as such Pledge Agreement is amended, supplemented or
otherwise modified from time to time, and (iv) the Pledge Agreement to
be executed and delivered by Holdings LLC as pledgor, pledging 100% of
the interests of each of the Subsidiaries of Holdings LLC, as such
Pledge Agreement is amended, supplemented or otherwise modified from
time to time.
"Prime Rate": as defined in the definition of Base Rate.
----------
"Properties": as defined in subsection 3.10(a).
----------
"Purchase Agreement": means that certain Stock Purchase
------------------
Agreement, dated August 15, 1997, by and among VS&A Communications
Partners II, L.P., VS&A-T/SF and the Borrower.
"Purchasing Lenders": as defined in subsection 9.6(c).
------------------
"Recovery Event": the receipt by the Borrower or any of the
--------------
Guarantors of any cash insurance proceeds or condemnation award payable
by reason of theft, loss, physical destruction or damage, taking or
similar event with respect to any property or assets of the Borrower or
any of the Guarantors.
"Register": as defined in subsection 9.6(d).
-------
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
----------------
4043(b) of ERISA, other than those events as to which the thirty-day
notice period is waived under subsections .11, .12, .13, .14, .16, .18,
.19 or .20 of PBGC Reg. ss.4043.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws, partnership agreement, operating agreement or
other organizational or governing documents of such Person, and each
law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its material property is subject.
"Restricted Payment": (i) any payment by the Borrower or any of
------------------
the Restricted Subsidiaries of a payment, distribution or dividend
(other than a dividend or distribution payable solely in stock or equity
interest of the Borrower) on, or any payment on account
18
<PAGE>
of the purchase, redemption, defeasance or retirement of, or any other
distribution on, any partnership interest, limited liability company
interest, share of any class of stock or other ownership interest in the
Borrower or any of the Restricted Subsidiaries (including any such
payment or distribution in cash or in property or obligations of a
Borrower or any of the Restricted Subsidiaries), (ii) any loan or
advance by the Borrower or any of the Restricted Subsidiaries to any
Affiliate of the Borrower or any of the Restricted Subsidiaries other
than as permitted by Sections 6.6 or 6.7, or (iii) the payment by the
Borrower or any of the Restricted Subsidiaries of any management or
administrative fee to any Affiliate of the Borrower or any of the
Restricted Subsidiaries or of any salary, bonus or other form of
compensation other than in the ordinary course of business to any Person
who is a significant partner, shareholder, member, owner or executive
officer of any such Affiliate other than as permitted by Section 6.7.
The transactions contemplated by the Merger (as defined in the Purchase
Agreement) or the Stock Split (as defined in the Purchase Agreement)
shall not constitute Restricted Payments.
"Restricted Subsidiaries": all Subsidiaries of the Borrower other
-----------------------
than Unrestricted Subsidiaries. "Restricted Subsidiaries" includes the
-----------------------
LLCs.
"Revolving Commitment": as to any Lender, the obligation of such
--------------------
Lender to make Revolving Loans to the Borrower hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on Schedule 2.1, as such amount
------------
may be reduced from time to time in accordance with the provisions of
this Agreement.
"Revolving Commitment Percentage": for each Lender, a fraction
-------------------------------
(expressed as a percentage) the numerator of which is the Revolving
Commitment of such Lender at such time and the denominator of which is
the aggregate Revolving Commitment at such time. The initial Revolving
Commitment Percentages are set out on Schedule 2.1.
------------
"Revolving Committed Amount": collectively, the aggregate amount
--------------------------
of all of the Revolving Commitments as referenced in Section 2.1(a) and,
individually, the amount of each Lender's Revolving Commitment as
specified in Schedule 2.1.
------------
"Revolving Loans": as defined in Section 2.1.
---------------
"Revolving Note" or "Revolving Notes": the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Lenders evidencing the Revolving
Loans provided pursuant to Section 2.1(e), individually or collectively,
as appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"S&P": Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc.
"Security Agreement: the Security Agreement to be executed and
------------------
delivered on behalf of the Borrower and the Guarantors by authorized
signatories, as amended, supplemented or otherwise modified from time to
time.
19
<PAGE>
"Security Documents": collectively, the Security Agreement, the
------------------
Pledge Agreements and all other security documents hereafter delivered
to the Administrative Agent granting a Lien on any asset or assets of
any Person to secure the obligations and obligations of the Borrower and
the Guarantors hereunder and under any of the other Credit Documents,
including UCC financing statements and other similar instruments.
"Senior Funded Debt": Total Funded Debt less Subordinated Debt.
------------------
"Senior Leverage Ratio": at any time, the ratio of Consolidated
---------------------
Senior Funded Debt at such time less Cash Equivalents in excess of
$1,000,000 owned by the Borrower and the Restricted Subsidiaries as of
the first day of the twelve month period then ending to Consolidated
Adjusted EBITDA for the twelve month period then ending.
"Single Employer Plan": any Plan which is not a Multi-Employer
--------------------
Plan.
"Specified Sales" means (i) the sale, transfer, lease or other
---------------
disposition of inventory and materials in the ordinary course of
business, (ii) the sale, transfer, lease or other disposition of
machinery, parts and equipment in the ordinary course of business, (iii)
the sale, transfer or other disposition of Permitted Investments, (iv)
the sale, transfer or other disposition of articles in the ordinary
course of business or the granting of permission for reprints in the
ordinary course of business and (v) the sale, lease or disposition of
space and related property and assets in the ordinary course of
business.
"Subordinated Debt": means the indebtedness of up to $100,000,000
-----------------
which is on terms satisfactory to the Agent and which has been
subordinated to the repayment of the indebtedness hereunder on terms
satisfactory to the Agent.
"Subordinated Debt Documents": means any and all documents now or
---------------------------
hereafter executed in connection with the Subordinated Debt.
"Subsidiary": as to any Person, a corporation, partnership or
----------
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, the LLCs shall be Subsidiaries of
the Borrower and all references to a "Subsidiary" or to "Subsidiaries"
in this Agreement shall refer to a Subsidiary or Subsidiaries of the
Borrower.
"Taxes": as defined in subsection 2.15.
-----
20
<PAGE>
"Termination Date": the earlier of (a) September 30, 2004 or (b)
----------------
the date on which the Revolving Commitments shall terminate in
accordance with the provisions of this Agreement.
"Total Funded Debt": of any Person at any date, (a) all
-----------------
indebtedness of such Person for borrowed money, (b) all obligations of
such Person under Capital Leases, (c) all Guarantee Obligations of such
Person, and (d) the maximum amount of all letters of credit issued or
bankers' acceptances created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent not theretofore
reimbursed).
"Total Leverage Ratio": at any time, the ratio of Consolidated
--------------------
Total Funded Debt at such time less Cash Equivalents in excess of
$1,000,000 owned by the Borrower and the Restricted Subsidiaries as of
the first day of the twelve month period then ending to Consolidated
Adjusted EBITDA for the twelve month period then ending.
"Trademarks": (i) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, service marks,
logos and other source or business identifiers, together with the
goodwill of the business symbolized by said marks, names, logos and
identifiers now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof
or any other country or any political subdivision thereof, or otherwise,
including, without limitation, any thereof referred to in Schedule 3.13
-------------
to the Credit Agreement, and (ii) all renewals thereof including,
without limitation, any thereof referred to in Schedule 3.13 to the
-------------
Credit Agreement.
"Tranche": the collective reference to LIBOR Rate Loans whose
-------
Interest Periods begin and end on the same day. A Tranche may sometimes
be referred to as a "Eurodollar Tranche".
"Transfer Effective Date": as defined in each Commitment Transfer
-----------------------
Supplement.
"2.15 Certificate": as defined in Section 2.15.
----------------
"Type": as to any Loan, its nature as a Base Rate Loan or LIBOR
----
Rate Loan, as the case may be.
"Unrestricted Margin Stock": means the capital stock of the
-------------------------
Borrower which has been repurchased by the Borrower as of the Closing
Date which constitutes "margin stock" (as defined in Regulation U of the
Board of Governors of the Federal Reserve System as from time to time in
effect), if, and to the extent that the value of such margin stock
exceeds 25% of the total assets of the Borrower and the Guarantors and
their respective Subsidiaries; provided that it is understood that upon
completion of the Merger (as defined in the Purchase Agreement) or the
Stock Split (as defined in the Purchase Agreement) there shall be no
Unrestricted Margin Stock outstanding.
21
<PAGE>
"Unrestricted Subsidiaries": the Subsidiaries of the Borrower set
-------------------------
forth in Schedule 1.1C.
"VSA-T/SF": VS&A-T/SF, Inc., a Delaware corporation, prior to the
--------
Merger (as defined in the Purchase Agreement), and VS&A-T/SF LLC
thereafter.
1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or
other Credit Documents or any certificate or other document made or
delivered pursuant hereto.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement, and
Section, subsection, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Accounting Terms. Unless otherwise specified herein, all accounting
----------------
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP applied on a basis consistent (except
for changes concurred in by the Borrower's independent public accountants) with
the most recent reviewed or audited (as the case may be) financial statements of
the Borrower delivered to the Lenders; provided that, if the Borrower notifies
--------
the Administrative Agent that it wishes to amend any covenant in Section 5.9 to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if the Administrative Agent notifies the Borrower that the Majority Lenders wish
to amend Section 5.9 for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Majority Lenders.
The Borrower shall deliver to the Administrative Agent and each Lender
at the same time as the delivery of any annual or quarterly financial statements
given in accordance with the provisions of Section 5.1, (i) a description in
reasonable detail of any material change in the application of accounting
principles employed in the preparation of such financial statements from those
applied in the most recently preceding quarterly or annual financial statements
as to which no objection shall have been made in accordance with the provisions
above and (ii) a reasonable estimate of the effect on the financial statements
on account of such changes in application.
22
<PAGE>
SECTION 2. THE LOANS; AMOUNT AND TERMS
2.1 Revolving Loans.
---------------
(a) Revolving Commitment. During the Commitment Period, subject
--------------------
to the terms and conditions hereof, each Lender severally agrees to make
revolving credit loans ("Revolving Loans") to the Borrower from time to
---------------
time for the purposes hereinafter set forth; provided, however, that (i)
--------- -------
with regard to each Lender individually, such Lender's share of
outstanding Revolving Loans shall not exceed such Lender's Revolving
Committed Amount, and (ii) with regard to the Lenders collectively, the
sum of the aggregate amount of outstanding Revolving Loans shall not
exceed TWENTY FIVE MILLION DOLLARS ($25,000,000) (as such aggregate
maximum amount may be reduced from time to time as provided herein, the
"Revolving Committed Amount"). Revolving Loans may consist of Base Rate
--------------------------
Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may
request, and may be repaid and reborrowed in accordance with the
provisions hereof. LIBOR Rate Loans shall be made by each Lender at its
LIBOR Lending Office and Base Rate Loans at its Domestic Lending Office.
(b) Revolving Loan Borrowings.
-------------------------
(i) Notice of Borrowing. The Borrower shall request
-------------------
a Revolving Loan borrowing by written notice (or telephone notice
promptly confirmed in writing which confirmation may be by fax)
to the Administrative Agent not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day prior to the date of
requested borrowing in the case of Base Rate Loans, and on the
third Business Day prior to the date of the requested borrowing
in the case of LIBOR Rate Loans. Each such request for borrowing
shall be irrevocable and shall specify (A) that a Revolving Loan
is requested, (B) the date of the requested borrowing (which
shall be a Business Day), (C) the aggregate principal amount to
be borrowed, and (D) whether the borrowing shall be comprised of
Base Rate Loans, LIBOR Rate Loans or a combination thereof, and
if LIBOR Rate Loans are requested, the Interest Period(s)
therefor. A form of Notice of Borrowing (a "Notice of Borrowing")
-------------------
is attached as Schedule 2.1(b)(i). If the Borrower shall fail to
------------------
specify in any such Notice of Borrowing (I) an applicable
Interest Period in the case of a LIBOR Rate Loan, then such
notice shall be deemed to be a request for an Interest Period of
one month, or (II) the type of Revolving Loan requested, then
such notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Administrative Agent shall give notice to each
Lender promptly upon receipt of each Notice of Borrowing, the
contents thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Revolving Loan borrowing
---------------
shall be in a minimum aggregate amount of $1,000,000, in the case
of Base Rate Loans, and integral multiples of $100,000 in excess
thereof, and $1,000,000, in the case of
23
<PAGE>
LIBOR Rate Loans and integral multiples of $100,000 in excess
thereof (or the remaining amount of the Revolving Commitment, if
less).
(iii) Advances. Each Lender will make its Revolving
--------
Commitment Percentage of each Revolving Loan borrowing available
to the Administrative Agent for the account of the Borrower at
the office of the Administrative Agent specified in Schedule 9.2,
-------------
or at such other office as the Administrative Agent may designate
in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the
date specified in the applicable Notice of Borrowing in Dollars
and in funds immediately available to the Administrative Agent.
Such borrowing will then be made available to the Borrower by the
Administrative Agent by crediting the account of the Borrower on
the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent. The Borrower
hereby irrevocably authorizes the Administrative Agent to
disburse the proceeds of each Borrowing requested pursuant to
this Section 2.1 in immediately available funds by crediting such
proceeds to a deposit account of the Borrower maintained with the
Administrative Agent or by wire transfer to any other account of
the Borrower in each such case as may be specified by the
Borrower from time to time in a written notice in the form
attached hereto as Schedule 2.1(b)(iii) (a "Notice of Account
Designation"). Unless otherwise specified by the Borrower, the
Notice of Account Designation most recently provided to the
Administrative Agent shall control.
(c) Repayment. The principal amount of all Revolving Loans shall
---------
be due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 2.5, Revolving
--------
Loans shall bear interest as follows:
(i) Base Rate Loans. During such periods as
---------------
Revolving Loans shall be comprised of Base Rate Loans, each such
Base Rate Loan shall bear interest at a per annum rate equal to
the sum of the Base Rate plus the Applicable Interest Rate
----
Percentage; and
(ii) LIBOR Rate Loans. During such periods as Revolving Loans
----------------
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan
shall bear interest at a per annum rate equal to the sum of the
LIBOR Rate plus the Applicable Interest Rate Percentage.
----
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Revolving Notes. The Revolving Loans shall be evidenced by a
---------------
duly executed promissory note of the Borrower to each Lender in
substantially the form of Schedule 2.1(e). Each Lender is hereby
---------------
authorized to record the date, Type and amount
24
<PAGE>
of each Revolving Loan made by such Lender, each continuation thereof,
each conversion of all or a portion thereof to another Type, the date
and amount of each payment or prepayment of principal thereof and, in
the case of LIBOR Rate Loans, the length of each Interest Period with
respect thereto, on the schedule annexed to and constituting a part of
its Revolving Note, and any such recordation shall constitute prima
-----
facie evidence of the accuracy of the information so recorded; provided
----- --------
that neither the failure to make, nor any error in the making of, any
such recordation shall limit or otherwise affect the obligation of the
Borrower hereunder or under such Revolving Note with respect to any
Revolving Loan and payments of principal or interest on such Revolving
Note. Each Revolving Note shall be dated the Closing Date and provide
for the payment of interest in accordance with subsection 2.1(d).
2.2 [Intentionally left blank]
2.3 Conversion Options.
------------------
(a) The Borrower may elect from time to time to convert Base Rate
Loans to LIBOR Rate Loans, by giving the Administrative Agent at least
three Business Days' prior irrevocable written notice of such election
and elect from time to time to convert LIBOR Rate Loans to Base Rate
Loans, by giving the Administrative Agent at least one Business Day's
prior irrevocable written notice of such election. A form of Notice of
Conversion is attached as Schedule 2.3. If the date upon which a Base
------------
Rate Loan is to be converted to a LIBOR Rate Loan is not a Business Day,
then such conversion shall be made on the next succeeding Business Day
and during the period from such last day of an Interest Period to such
succeeding Business Day such Revolving Loan shall bear interest as if it
were a Base Rate Loan. All or any part of outstanding LIBOR Rate Loans
and Base Rate Loans may be converted as provided herein, provided that
--------
(i) a Revolving Loan may be converted into a LIBOR Rate Loan only if no
Event of Default has occurred and is continuing, (ii) partial
conversions into a LIBOR Rate Loan shall be in an aggregate principal
amount of $1,000,000 or a whole multiple of $100,000 in excess thereof
and (iii) partial conversions into a Base Rate Loan shall be in an
aggregate principal amount of $1,000,000 or a whole multiple of $100,000
in excess thereof.
(b) Any LIBOR Rate Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by
the Borrower with the notice provisions contained in subsection 2.3(a);
provided, that a LIBOR Rate Loan may be continued as such only if no
--------
Event of Default has occurred and is continuing, in which case such Loan
shall be automatically converted to a Base Rate Loan at the end of the
applicable Interest Period with respect thereto. Where the Borrower
shall fail to give timely notice of an election to continue a LIBOR Rate
Loan, or where continuation of LIBOR Rate Loans is not permitted
hereunder, such LIBOR Rate Loans shall be automatically converted to
Base Rate Loans at the end of the applicable Interest Period with
respect thereto.
25
<PAGE>
2.4 Minimum Principal Amount of Tranches. All borrowings, payments and
------------------------------------
prepayments in respect of Revolving Loans shall be in such amounts and be made
pursuant to such elections so that after giving effect thereto the aggregate
principal amount of the Revolving Loans comprising any Tranche shall not be less
than $1,000,000, in the case of Base Rate Loans, and integral multiples in
excess of $500,000 in excess thereof, and $1,000,000, in the case of LIBOR Rate
Loans, and integral multiples of $100,000 in excess thereof.
2.5 Default Rate and Payment Dates.
------------------------------
(a) If all or a portion of the principal amount of any Revolving
Loan which is a LIBOR Rate Loan shall not be paid when due or continued
as a LIBOR Rate Loan in accordance with the provisions of Section 2.3
(whether at the stated maturity, by acceleration or otherwise), such
overdue principal amount of such Revolving Loan shall be converted to a
Base Rate Loan at the end of the Interest Period applicable thereto.
(b) If all or a portion of (i) the principal amount of any
Revolving Loan, (ii) any interest payable thereon or (iii) any fee or
other amount payable hereunder shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), such overdue amount
shall bear interest at a rate per annum which is in the case of overdue
principal, the rate that would otherwise be applicable thereto plus 2%
or in the case of overdue interest, fees or other amounts, the Base Rate
plus 2%, in each case from the date of such non-payment until such
amount is paid in full (as well after as before judgment).
(c) Interest on each Revolving Loan shall be payable in arrears
on each Interest Payment Date, provided that interest accruing pursuant
to paragraph (b) of this subsection shall be payable from time to time
on demand.
2.6 Reductions in Revolving Commitments and Prepayments.
---------------------------------------------------
(a) Voluntary Reduction in Revolving Commitments. The Borrower
--------------------------------------------
may from time to time permanently reduce the aggregate amount of the
Revolving Commitments in whole or in part without premium or penalty
except as provided in Section 2.14 upon three (3) Business Days' prior
written notice to the Administrative Agent; provided that after giving
--------
effect to any such voluntary reduction the Revolving Loans then
outstanding shall not exceed the Aggregate Revolving Committed Amount,
as reduced. Partial reductions in the aggregate Revolving Commitment
shall in each case be in a minimum aggregate amount of $1,000,000 and
integral multiples of $500,000 in excess thereof.
(b) Mandatory Reductions in Revolving Commitments and Mandatory
-----------------------------------------------------------
Prepayments.
-----------
(i) Net Sales Proceeds. The Borrower shall make a
------------------
prepayment of the Revolving Loans in an amount equal to the Net
Sales Proceeds from Asset Dispositions in excess of $1,000,000
which are not reinvested by the Borrower
26
<PAGE>
and the Restricted Subsidiaries in businesses permitted to be
engaged in by the Borrower and the Restricted Subsidiaries
pursuant to Section 6.4 within 270 days after the applicable date
of disposition. Any such required prepayment of Net Sales
Proceeds shall be made on the date 270 days from the date of the
applicable Asset Disposition and shall be applied to the
outstanding principal balance of the Revolving Loans.
(ii) Debt Issuances; Equity Issuances. Immediately upon
--------------------------------
receipt by the Borrower of cash proceeds from any Debt Issuance
(other than any Debt Issuance relating to Indebtedness permitted
by Section 6.1) or Equity Issuance, the Borrower shall make a
prepayment of the Revolving Loans in an amount equal to such
proceeds.
(iii) Mandatory Prepayment on Revolving Loans. If at any
---------------------------------------
time the aggregate amount of Revolving Loans then outstanding
shall exceed the Aggregate Revolving Committed Amount, as reduced
from time to time, the Borrower shall immediately make payment on
the Revolving Loans in an amount sufficient to eliminate the
deficiency. Any such payments shall be applied first to Base Rate
Loans and then to LIBOR Rate Loans in direct order of their
Interest Period maturities.
(c) Voluntary Prepayments. Revolving Loans may be prepaid in
---------------------
whole or in part without premium or penalty; provided that (i) LIBOR
--------
Rate Loans may be prepaid other than at the end of the Interest Period
applicable thereto only upon payment of amounts owing under Section 2.14
and only then on three (3) Business Days' prior written notice to the
Administrative Agent, (ii) Base Rate Loans may be prepaid on one (1)
Business Day's prior written notice to the Administrative Agent if such
notice is received by 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of prepayment, and (iii) each such
partial prepayment shall be in a minimum aggregate principal amount of
$1,000,000, in the case of Base Rate Loans, and integral multiples of
$100,000 in excess thereof, and $1,000,000, in the case of LIBOR Rate
Loans, and integral multiples of $100,000 in excess thereof. Amounts
prepaid on the Revolving Loans may be reborrowed in accordance with the
provisions hereof.
(d) Notice. The Borrower will provide notice to the
------
Administrative Agent of any prepayment by 11:00 A.M. (Charlotte, North
Carolina time) one or three Business Days prior to the date of
prepayment as specified herein.
2.7 Commitment Fee. In consideration of the Revolving Commitments, the
--------------
Borrower agrees to pay to the Administrative Agent for the ratable benefit of
the Lenders a commitment fee (the "Commitment Fee") for each calendar quarter
--------------
(or portion thereof) during the Commitment Period, computed at the rate of .50%
per annum on the average daily amount by which the Aggregate Revolving Committed
Amount exceeds the aggregate principal amount of Revolving Loans outstanding
(for the subject calendar quarter). The Commitment Fee shall be
27
<PAGE>
payable quarterly in arrears on the last Business Day of each March, June,
September and December (commencing December 31, 1997) and on the Termination
Date.
2.8 Computation of Interest and Fees.
--------------------------------
(a) Interest payable hereunder with respect to LIBOR Rate Loans
shall be calculated on the basis of a year of 360 days for the actual
days elapsed. All other fees, interest and all other amounts payable
hereunder shall be calculated on the basis of a 365/6 day year for the
actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of
a LIBOR Rate on the Business Day of the determination thereof. Any
change in the interest rate on a Revolving Loan resulting from a change
in the Base Rate shall become effective as of the opening of business on
the day on which such change in the Base Rate shall become effective.
The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each
such change.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower and the Lenders in the absence of manifest
error.
2.9 Pro Rata Treatment and Payments. Each borrowing of Revolving Loans
-------------------------------
and any reduction of the Revolving Commitments shall be made pro rata according
to the respective Revolving Commitment Percentages of the Lenders. Each payment
under this Agreement or any Revolving Note shall be applied, first, in the case
of a payment on the Revolving Notes (or in respect of the Revolving Loans), to
any fees then due and owing by the Borrower pursuant to subsection 2.7, second,
to interest then due and owing in respect of the Revolving Notes of the Borrower
and, third, to principal then due and owing hereunder and under the Revolving
Notes of the Borrower. Except as otherwise provided herein, each payment on
account of any fees pursuant to subsection 2.7 shall be made pro rata to the
Lenders in accordance with the respective amounts due and owing. Each payment by
the Borrower on account of principal of and interest on the Revolving Loans
shall be made pro rata according to the respective amounts due and owing. Each
prepayment on account of principal of the Revolving Loans shall be applied to
such of the Revolving Loans as the Borrower may designate (to be applied pro
rata among the Lenders); provided, that prepayments made pursuant to subsection
--------
2.10(a) or 2.12 shall be applied in accordance with such subsection. All
payments (including prepayments) to be made by the Borrower on account of
principal, interest and fees shall be made without defense, set-off or
counterclaim (except as provided in subsection 2.15(b)) and shall be made to the
Administrative Agent for the account of the Lenders at the Administrative
Agent's office specified in Schedule 9.2 in Dollars and in immediately available
------------
funds. The Administrative Agent shall distribute such payments to the Lenders
entitled thereto promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a LIBOR Rate Loan becomes due and payable on a day other than a
Business Day, the maturity thereof
28
<PAGE>
shall be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day.
2.10 Non-Receipt of Funds by the Administrative Agent.
------------------------------------------------
(a) Unless the Administrative Agent shall have been notified by a
Lender prior to the date a Revolving Loan is to be made by such Lender
(which notice shall be effective upon receipt) that such Lender does not
intend to make the proceeds of such Revolving Loan available to the
Administrative Agent, the Administrative Agent may assume that such
Lender has made such proceeds available to the Administrative Agent on
such date, and the Administrative Agent may in reliance upon such
assumption (but shall not be required to) make available to the Borrower
a corresponding amount. If such amount is made available to the
Administrative Agent on a date after such Borrowing Date, such Lender
shall pay to the Administrative Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Effective Rate during
such period, times (ii) the amount of such Lender's Revolving Commitment
Percentage of such borrowing, times (iii) a fraction, the numerator of
which is the number of days that elapse from and including such
Borrowing Date to the date on which such Lender's Revolving Commitment
Percentage of such borrowing shall have become immediately available to
the Administrative Agent and the denominator of which is 360. If such
Lender's Revolving Commitment Percentage is not in fact made available
to the Administrative Agent by such Lender within two (2) Business Days
of such Borrowing Date, the Administrative Agent shall be entitled to
recover such amount with interest thereon at the rate per annum
applicable to Base Rate Loans hereunder, on demand, from the Borrower.
(b) Unless the Administrative Agent shall have been notified by
the Borrower, prior to the date on which any payment is due from it
hereunder (which notice shall be effective upon receipt) that the
Borrower does not intend to make such payment, the Administrative Agent
may assume that the Borrower has made such payment when due, and the
Administrative Agent may in reliance upon such assumption (but shall not
be required to) make available to each Lender on such payment date an
amount equal to the portion of such assumed payment to which such Lender
is entitled hereunder, and if the Borrower has not in fact made such
payment to the Administrative Agent, such Lender shall, on demand, repay
to the Administrative Agent the amount made available to such Lender. If
such amount is repaid to the Administrative Agent on a date after the
date such amount was made available to such Lender, such Lender shall
pay to the Administrative Agent on demand an amount equal to the product
of (i) the daily average Federal Funds Effective Rate during such
period, times (ii) the amount made available to such Lender by the
Administrative Agent pursuant to this paragraph (b), times (iii) a
fraction, the numerator of which is the number of days that elapse from
and including the date on which such amount was made available to such
Lender to the date on which such amount shall have been repaid to the
Administrative Agent by such Lender and become immediately available to
the Administrative Agent and the denominator of which is 360.
29
<PAGE>
(c) A certificate of the Administrative Agent submitted to the
Borrower or any Lender with respect to any amount owing under this
subsection shall be conclusive in the absence of manifest error.
2.11 Inability to Determine Interest Rate. Notwithstanding any other
------------------------------------
provision of this Agreement, if (i) the Administrative Agent shall reasonably
determine (which determination shall be conclusive and binding absent manifest
error) that, by reason of circumstances affecting the relevant market,
reasonable and adequate means do not exist for ascertaining LIBOR for such
Interest Period, or (ii) the Majority Lenders shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that the
LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of
funding LIBOR Rate Loans that the Borrower has requested be outstanding as a
Eurodollar Tranche during such Interest Period, the Administrative Agent shall
forthwith give telephone notice of such determination, confirmed in writing, to
the Borrower, and the Lenders at least two Business Days prior to the first day
of such Interest Period. Unless the Borrower shall have notified the
Administrative Agent upon receipt of such telephone notice that it wishes to
rescind or modify its request regarding such LIBOR Rate Loans, any Loans that
were requested to be made as LIBOR Rate Loans shall be made as Base Rate Loans
and any Revolving Loans that were requested to be converted into or continued as
LIBOR Rate Loans shall be converted into Base Rate Loans. Until any such notice
has been withdrawn by the Administrative Agent, no further Revolving Loans shall
be made as, continued as, or converted into, LIBOR Rate Loans for the Interest
Periods so affected.
2.12 Illegality. Notwithstanding any other provision of this Agreement,
----------
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof, in each case occurring after the Closing
Date, by the relevant Governmental Authority to any Lender shall make it
unlawful for such Lender or its LIBOR Lending Office to make or maintain LIBOR
Rate Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Administrative Agent and
the Borrower thereof, (b) the commitment of such Lender hereunder to make LIBOR
Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended
until the Administrative Agent shall give notice that the condition or situation
which gave rise to the suspension shall no longer exist, and (c) such Lender's
Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the
last day of the Interest Period for such Loans or within such earlier period as
required by law to Base Rate Loans. The Borrower hereby agrees promptly to pay
any Lender, upon its demand, any additional amounts necessary to compensate such
Lender for actual and direct costs (but not including anticipated profits)
reasonably incurred by such Lender in making any repayment in accordance with
this subsection including, but not limited to, any interest or fees payable by
such Lender to lenders of funds obtained by it in order to make or maintain its
LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender, through the Administrative
Agent, to the Borrower shall be conclusive in the absence of manifest error.
Each Lender agrees to use reasonable efforts (including reasonable efforts to
change its LIBOR Lending Office) to avoid or to minimize any amounts which may
otherwise be payable pursuant to this subsection; provided, however, that
-------- -------
30
<PAGE>
such efforts shall not cause the imposition on such Lender of any additional
costs or legal or regulatory burdens deemed by such Lender to be material.
2.13 Requirements of Law.
-------------------
(a) If the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof or compliance by any Lender
with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority, in each case made
subsequent to the date hereof:
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any LIBOR Rate Loan made by it, or
change the basis of taxation of payments to such Lender in
respect thereof (except for taxes covered by subsection 2.15
(including any taxes imposed by reason of any failure of such
Lender to comply with its obligations under subsection 2.15(b)),
or changes in the rate of tax on the net income, or franchise
tax, of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or
any other acquisition of funds by, any office of such Lender
which is not otherwise included in the determination of the LIBOR
Rate hereunder; or
(iii) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining LIBOR Loans or to reduce any amount
receivable hereunder or under any Revolving Note, then, in any such
case, the Borrower shall promptly pay such Lender, within 15 days after
its demand, any additional amounts necessary to compensate such Lender
for such additional cost or reduced amount receivable which such Lender
reasonably deems to be material as determined by such Lender with
respect to its LIBOR Rate Loans. A certificate as to any additional
amounts payable pursuant to this subsection submitted by such Lender,
through the Administrative Agent, describing in reasonable detail the
nature of such event and a reasonably detailed explanation of the
calculation thereof, to the Borrower shall be conclusive in the absence
of manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Domestic Lending Office or
LIBOR Lending Office, as the case may be) to avoid or to minimize any
amounts which might otherwise be payable pursuant to this paragraph of
this subsection; provided, however, that such efforts shall not cause
--------- -------
the imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender to be material.
(b) If any Lender shall have reasonably determined that the
adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or
31
<PAGE>
application thereof as a consequence of its obligations hereunder or
compliance by such Lender or any corporation controlling such Lender
with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or Governmental Authority
made subsequent to the date hereof as a consequence of its obligations
hereunder does or shall have the effect of reducing the rate of return
on such Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount
reasonably deemed by such Lender to be material, then from time to time,
within 15 days after demand by such Lender, the Borrower shall pay to
such Lender such additional amount as shall be certified by such Lender
as being required to compensate it for such reduction. Such a
certificate as to any additional amounts payable under this subsection
submitted by a Lender (which certificate shall include a description in
reasonable detail of the basis for the computation), through the
Administrative Agent, to the Borrower shall be conclusive absent
manifest error.
(c) Notwithstanding anything to the contrary contained herein,
the Borrower shall not have any obligation to pay to any Lender amounts
owing under this subsection 2.13 for any period which is more than 180
days prior to the date (but not in any event prior to the Closing Date)
upon which the request for payment therefor is delivered to the
Borrower.
(d) The agreements in this subsection shall survive the
termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
2.14 Indemnity. The Borrower hereby agrees to indemnify each Lender and
---------
to hold such Lender harmless from any funding loss or expense which such Lender
may sustain or incur (other than as a result of such Lender's gross negligence
or willful misconduct) as a consequence of (a) default by the Borrower in
payment of the principal amount of or interest on any LIBOR Rate Loan by such
Lender in accordance with the terms hereof, (b) default by the Borrower in
accepting a LIBOR Rate Loan after the Borrower has given a notice in accordance
with the terms hereof, (c) default by the Borrower in making any prepayment of a
LIBOR Rate Loan after the Borrower has given a notice in accordance with the
terms hereof, and/or (d) the making by the Borrower of a prepayment of a LIBOR
Rate Loan, or the conversion thereof, on a day which is not the last day of the
Interest Period with respect thereto, in each case equal to (i) the amount of
interest which would have accrued on the amount so prepaid, or not so paid,
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to pay, borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure), in each case at the applicable rate of interest for such Loans
provided for herein (excluding the Applicable Interest Rate Percentage included
therein), over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. A certificate as to any additional amounts payable pursuant
to
32
<PAGE>
this subsection submitted by any Lender, through the Administrative Agent, to
the Borrower (which certificate must be delivered to the Administrative Agent
within thirty days following such default, prepayment or conversion) shall be
conclusive in the absence of manifest error. The agreements in this subsection
shall survive termination of this Agreement and payment of the Revolving Notes
and all other amounts payable hereunder.
2.15 Taxes.
-----
(a) All payments made by the Borrower hereunder or under any
Revolving Note will be, except as provided in Section 2.15(b), made free
and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any Governmental
Authority or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding (i) any tax imposed
on or measured by the net income or profits of a Lender pursuant to the
laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Lender
is located or any subdivision thereof or therein and (ii) any franchise
taxes, branch taxes, taxes on doing business or taxes on the overall
capital or net worth of any Lender pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the
principal office or its applicable lending office is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the
-----
Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any such Taxes, will not be less than the
amount provided for herein or in such Note. The Borrower will furnish to
the Administrative Agent as soon as practicable after the date the
payment of any Taxes is due pursuant to applicable law certified copies
(to the extent reasonably available and required by law) of tax receipts
evidencing such payment by the Borrower. Except as provided in this
Section 2.l5, the Borrower agrees to indemnify and hold harmless each
Lender, and reimburse such Lender upon its written request, for the
amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender or Participant that is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) agrees to
deliver to the Borrower and the Administrative Agent on or prior to the
Closing Date, or in the case of a Lender or Participant that is an
assignee or transferee of an interest under this Agreement pursuant to
Section 9.6 (unless the respective Lender or Participant was already a
Lender or Participant hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender,
(i) if the Lender or Participant is a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or
successor forms) certifying such Lender's or Participant's entitlement
to a complete exemption from United States withholding tax with respect
to payments to be made under this Agreement
33
<PAGE>
and under any Note, or (ii) if the Lender or Participant is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, either Internal
Revenue Service Form 1001 or 4224 as set forth in clause (i) above, or
(x) a certificate substantially in the form of Schedule 2.15 (any such
-------------
certificate, a "2.15 Certificate") and (y) two accurate and complete
----------------
original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying such Lender's or Participant's entitlement to
an exemption from United States withholding tax with respect to payments
of interest to be made under this Agreement and under any Note. In
addition, each Lender and Participant agrees that it will deliver upon
the Borrower's request (or upon such Lender's or Participant's becoming
aware that any version is no longer accurate) updated versions of the
foregoing, as applicable, whenever the previous certification has become
obsolete or inaccurate in any material respect, together with such other
forms as may be required in order to confirm or establish the
entitlement of such Lender or Participant to a continued exemption from
or reduction in United States withholding tax with respect to payments
under this Agreement and any Note. Notwithstanding anything to the
contrary contained in Section 2.15(a), but subject to the immediately
succeeding sentence, (x) the Borrower shall be entitled, to the extent
it is required to do so by law, to deduct or withhold Taxes imposed by
the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Lender or Participant which is not a
United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such
Lender or Participant has not provided to the Borrower U.S. Internal
Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated
pursuant to Section 2.15(a) hereof to gross-up payments to be made to a
Lender or Participant or otherwise indemnify such Lender or Participant
in respect of Taxes imposed by the United States if (I) such Lender or
Participant has not provided to the Borrower the Internal Revenue
Service Forms required to be provided to the Borrower pursuant to this
Section 2.15(b) or (II) in the case of a payment, other than interest,
to a Lender or Participant described in clause (ii) above, to the extent
that such Forms do not establish a complete exemption from withholding
of such Taxes. Notwithstanding anything to the contrary contained in the
preceding sentence or elsewhere in this Section 2.15 but subject in any
event to clause (y)(I) in the immediately preceding sentence, the
Borrower agrees to pay additional amounts and to indemnify each Lender
in the manner set forth in Section 2.15(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by them as described in the
immediately preceding sentence as a result of any changes after the
Closing Date (or, in the case of an assignee or transferee, after the
date such assignee or transferee became a Lender or Participant
hereunder) in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the
deducting or withholding of Taxes.
(c) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Domestic Lending Office or LIBOR
Lending Office, as the case may be) to avoid or to minimize any amounts
which might otherwise be payable pursuant to this subsection; provided,
--------
however, that such efforts shall not cause the imposition on such
-------
34
<PAGE>
Lender of any additional costs or legal or regulatory burdens deemed by
such Lender to be material unless in the case of costs the Borrower has
agreed to reimburse such Lender for such costs.
(d) If the Borrower pays any additional amount pursuant to this
subsection 2.15 with respect to a Lender or Participant, such Lender or
Participant shall use reasonable efforts to obtain a refund of tax or
credit against its tax liabilities on account of such payment; provided
--------
that such Lender or Participant shall have no obligation to use such
reasonable efforts if either (i) it is in an excess foreign tax credit
position or (ii) it believes in good faith, in its sole discretion, that
claiming a refund or credit would cause adverse tax consequences to it.
In the event that such Lender or Participant receives such a refund or
credit, such Lender or Participant shall pay to the Borrower an amount
that such Lender reasonably determines is equal to the net tax benefit
obtained by such Lender or Participant as a result of such payment by
the Borrower. In the event that no refund or credit is obtained with
respect to the Borrower's payments to such Lender pursuant to this
subsection 2.15, then such Lender or Participant shall upon request
provide a certification that such Lender or Participant has not received
a refund or credit for such payments. Nothing contained in this
subsection 2.15 shall require a Lender or Participant to disclose or
detail the basis of its calculation of the amount of any tax benefit or
any other amount or the basis of its determination referred to in the
proviso to the first sentence of this subsection 2.15 to the Borrower or
any other party.
(e) The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Revolving Notes and
all other amounts payable hereunder.
2.16 Replacement of Agent. If any Lender becomes a Defaulting Lender, if
--------------------
any Lender delivers a notice pursuant to Section 2.12, 2.13 or 2.15 or if any
Lender fails to consent to a waiver or amendment which requires the consent of
each of the Lenders (hereinafter any such Lender shall be referred to as a
"Replaced Lender"), then in such case, the Borrower may, upon at least five (5)
Business Days' notice to the Administrative Agent and such Replaced Lender,
designate a replacement lender (a "Replacement Lender") acceptable to the
Administrative Agent in its reasonable discretion, to which such Replaced Lender
shall, subject to its receipt (unless a later date for the remittance thereof
shall be agreed upon by the Borrower and the Replaced Lender) of all amounts
owed to such Replaced Lender hereunder, assign all (but not less than all) of
its rights and obligations hereunder. Upon any assignment by any Lender pursuant
to this Section 2.16 becoming effective, the Replacement Lender shall thereupon
be deemed to be a "Lender" for all purposes of this Agreement and such Replaced
Lender shall thereupon cease to be a "Lender" for all purposes of this Agreement
and shall have no further rights or obligations hereunder (other than pursuant
to Sections 2.12, 2.13, 2.15 and 9.5 while such Replaced Lender was a Lender).
35
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Revolving Loans herein provided for, the Borrower hereby represents and warrants
to the Administrative Agent and to each Lender that:
3.1 Financial Condition. The financial statements provided to the
-------------------
Administrative Agent and the Lenders, consisting of,
(i) an audited balance sheet of the Borrower dated as of December
31, 1996, together with related statements of income and retained
earnings and statements of cash flows, audited by Arthur Andersen, LLP,
and
(ii) a company-prepared balance sheet of the Borrower dated as of
June 30, 1997 together with related statements of income and cash flows
for the period ended June 30, 1997,
copies of which have heretofore been provided to each of the Lenders, are
complete and correct in all material respects and present fairly in all material
respects the financial condition and results from operations of the entities and
for the periods specified, except as noted therein and in the report of the
accountants and subject in the case of interim company-prepared statements to
normal year-end adjustments.
3.2 No Change. Since June 30, 1997 there has been no development or
---------
event which has had a Material Adverse Effect.
3.3 Existence; Compliance with Law. Each of the Borrower and each
------------------------------
Restricted Subsidiary (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
limited liability company, corporate or partnership power and authority and the
legal right to own and operate all its material property, to lease the material
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign limited liability company,
corporation or partnership and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification except to the extent that the
failure to so qualify or be in good standing would not, in the aggregate, have a
Material Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations. Each of the Borrower
---------------------------------------------
and each Guarantor has full power and authority and the legal right to make,
deliver and perform the Credit Documents to which it is party and has taken all
necessary company, corporate or partnership action to authorize the execution,
delivery and performance by it of the Credit Documents to which it is party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection
36
<PAGE>
with the borrowings hereunder or with the execution, delivery or performance of
any Credit Document by the Borrower or any Guarantor (other than those which
have been obtained) or with the validity or enforceability of any Credit
Document against the Borrower or any Guarantor (except such filings as are
necessary in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which the Borrower or any Guarantor is a
party has been duly executed and delivered on behalf of the Borrower or any
Guarantor. Each Credit Document to which it is a party constitutes a legal,
valid and binding obligation of the Borrower or any Guarantor enforceable
against the Borrower or any Guarantor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar; No Default. The execution, delivery and performance of
------------------------
the Credit Documents, the borrowings thereunder and the use of the proceeds of
the Revolving Loans will not violate any Requirement of Law or any Contractual
Obligation of the Borrower or any Guarantor (except those as to which waivers or
consents have been obtained), and will not result in, or require, the creation
or imposition of any Lien on any of the properties or revenues of the Borrower
or any Guarantor pursuant to any Requirement of Law or Contractual Obligation
other than the Liens arising under or contemplated in connection with the Credit
Documents. Neither the Borrower nor any Restricted Subsidiary is in default
under or with respect to any of its Contractual Obligations in any respect which
would reasonably be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
3.6 No Material Litigation. Except as set forth in Schedule 3.6, no
---------------------- ------------
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Borrower,
threatened by or against Borrower or any Restricted Subsidiary or against any of
the respective properties or revenues of the Borrower or any Restricted
Subsidiary (a) with respect to the Credit Documents or any Revolving Loan or any
of the transactions contemplated hereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
3.7 Investment Company Act. Neither the Borrower nor any Restricted
----------------------
Subsidiary is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
3.8 Federal Regulations. No part of the proceeds of any Revolving Loan
-------------------
hereunder will be used directly or indirectly for any purpose which violates, or
which would be inconsistent with, the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System as now and from time to
time hereafter in effect.
3.9 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable
37
<PAGE>
provisions of ERISA and the Code, except to the extent that any such occurrence
or failure to comply would not reasonably be expected to have a Material Adverse
Effect. No termination of a Single Employer Plan has occurred resulting in any
liability that has remained underfunded, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period which would reasonably be expected
to have a Material Adverse Effect. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by an amount which, as determined
in accordance with GAAP, would reasonably be expected to have a Material Adverse
Effect. Neither the Borrower, any Restricted Subsidiary nor any Commonly
Controlled Entity is currently subject to any liability for a complete or
partial withdrawal from a Multiemployer Plan which would reasonably be expected
to have a Material Adverse Effect.
3.10 Environmental Matters. Except to the extent that all of the
---------------------
following, in the aggregate, would not reasonably be expected to have a Material
Adverse Effect:
(a) To the best knowledge of the Borrower, the facilities and
properties owned, leased or operated by the Borrower and the Restricted
Subsidiaries (the "Properties") do not use, store, generate, dispose of
----------
or handle any Materials of Environmental Concern in amounts or
concentrations which (i) constitute a violation of or (ii) could give
rise to liability under, any Environmental Law.
(b) To the best knowledge of the Borrower, the Properties and all
operations at the Properties are in compliance, and have in the last
five years been in compliance, in all material respects with all
applicable Environmental Laws, and there is no contamination at, under
or about the Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the Borrower (the
"Business").
--------
(c) Neither the Borrower nor any Restricted Subsidiary has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties
or the Business, nor does the Borrower have knowledge that any such
notice is being threatened.
(d) To the best knowledge of the Borrower, all Materials of
Environmental Concern have been generated, treated, stored or disposed
of at, on or under any of the Properties in accordance with applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the best of the knowledge of the Borrower,
threatened, under any Environmental Law to which the Borrower or any
Restricted Subsidiary is or will be named as a party with respect to the
Properties or the Business or any facility that has received materials
of environmental concern generated by the Borrower, nor are there any
consent decrees or other decrees, consent orders, administrative orders
or other orders, or
38
<PAGE>
other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business.
(f) To the best knowledge of the Borrower, there has been no
release or threat of release of Materials of Environmental Concern at or
from the Properties arising from or related to the operations of the
Borrower or any Restricted Subsidiary in connection with the Properties
or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under
Environmental Laws.
3.11 Purpose of Loan. The initial disbursement of the proceeds of the
---------------
loans will be used by the Borrower to repurchase shares of its capital stock, to
repurchase certain employee stock options and to pay the fees and expenses
related thereto. Subsequent disbursements of the proceeds of the Revolving Loans
will be used for general corporate and working capital purposes (including
Capital Expenditures and acquisitions permitted pursuant to the terms hereof).
3.12 Subsidiaries. Set forth on Schedule 3.12 is a complete and accurate
------------ -------------
list of all Subsidiaries of the Borrower and of Holdings LLC as of the Closing
Date. As of the Closing Date, information on the attached Schedule includes
state of organization; the number of shares of each class of capital stock or
partnership or other equity interests (identified by type) outstanding; the
number and percentage of outstanding shares of each class of stock or percentage
of ownership interest; and the number and effect, if exercised, of all
outstanding options, warrants, rights of conversion or purchase and similar
rights. The outstanding capital stock and partnership and other equity interests
of all such Subsidiaries are validly issued, fully paid and non-assessable and
are owned, free and clear of all Liens (other than those arising under or
contemplated in connection with the Credit Documents). As of the Closing Date,
except as set forth on Schedule 3.12, there are no outstanding options or other
-------------
rights pertaining to the partnership or other equity interests of the Borrower
or Holdings LLC, and no voting trusts, shareholders' or partners' agreements
(other than the operating or partnership agreements relating to the formation,
organization, operation and governance of the partnerships or limited liability
companies, copies of which have been provided to the Administrative Agent and
the Lenders) or similar agreement affecting either ownership of or the right to
vote such partnership interests.
3.13 Intellectual Property Rights. The Borrower and the Restricted
----------------------------
Subsidiaries own or have the right to use, subject to any of their obligations
under any valid and binding license agreement, the Intellectual Property (as
defined below) disclosed in Schedule 3.13 hereto, which represents all
Intellectual Property individually or in the aggregate material to the conduct
of the businesses of the Borrower and the Restricted Subsidiaries taken as a
whole on the date hereof. Except as disclosed in Schedule 3.13 hereto or where
the failure shall not have a Material Adverse Effect, (i) the Borrower or a
Restricted Subsidiary has the right to use the Intellectual Property disclosed
in Schedule 3.13 hereto in perpetuity and without payment of royalties, (ii) all
registrations with and applications to Governmental or Regulatory Authorities in
respect of such Intellectual Property are valid and in full force and effect and
are not subject to the payment of any taxes or maintenance fees or the taking of
any other actions by the Borrower or a Restricted Subsidiary to maintain their
validity or effectiveness, and (iii) there are no restrictions on the direct or
indirect transfer of any Contractual Obligation, or any interest therein, held
by the
39
<PAGE>
Borrower or any Restricted Subsidiary in respect of such Intellectual Property.
Neither the Borrower nor any Restricted Subsidiary is in default (or with the
giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property the loss of which would reasonably be
expected to have a Material Adverse Effect, to the best of the Borrower's and
the Restricted Subsidiaries' knowledge such Intellectual Property is not being
infringed by any third party the loss of which may have a Material Adverse
Effect, and to the best of the Borrower and its Subsidiaries' knowledge neither
the Borrower nor any Restricted Subsidiary is infringing any Intellectual
Property of any third party the infringement of which would reasonably be
expected to have a Material Adverse Effect. For purposes of this Section 3.13,
"Intellectual Property" means patents and patent rights, trademarks and
---------------------
trademark rights, trade names and trade name rights, service marks and service
mark rights, copyrights and copyright rights, including the right to sue for
past infringement, licenses, proprietary information, designs, processes,
inventions, software and related intellectual property rights and all pending
applications for and registrations of any of the foregoing.
3.14 No Burdensome Restrictions. No Requirement of Law or Contractual
--------------------------
Obligation of the Borrower or any Restricted Subsidiary could reasonably be
expected to have a Material Adverse Effect.
3.15 Taxes. Except as previously disclosed to the Agent, the Borrower
-----
and the Restricted Subsidiaries have filed, or caused to be filed, all material
tax returns (Federal, state, local and foreign) required to be filed and paid
all taxes shown thereon to be due (including interest and penalties) and have
paid all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing (or necessary to preserve any Liens in favor of the Lenders) by
them, except for such taxes (i) which are not yet delinquent or (ii) as are
being contested in good faith and by proper proceedings, and against which
adequate reserves are being maintained in accordance with GAAP. The Borrower is
not aware of any proposed material tax assessments against it or any of the
Restricted Subsidiaries.
3.16 [Intentionally Omitted]
3.17 No Interest in Real Estate. Other than the leasehold interests
--------------------------
reflected on Schedule 3.17 and the ownership by the Borrower of certain real
property in Tulsa, Oklahoma, neither Borrower nor any Restricted Subsidiary has
any interest in any real property.
3.18 Printing. Except for the printing conducted by Galaxy Classics as
--------
disclosed to the Agent, neither the premises leased by the Borrower or any
Restricted Subsidiary nor any other real estate owned or leased by the Borrower
has been used by the Borrower or any Restricted Subsidiary or any predecessor in
interest for printing including without limitation, printing of any
publications, including newspapers, magazines, circulars, pamphlets, books or
similar items, but excluding printing of office correspondence and ordinary
printing for customary office purposes.
3.19 Unrestricted Subsidiaries. No Unrestricted Subsidiary owns assets
-------------------------
having a value of more than $100,000 and no Unrestricted Subsidiary engages in
any active business activities.
40
<PAGE>
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Closing Date. This Agreement shall become effective
--------------------------
upon the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Administrative Agent shall have
----------------------
received (i) multiple counterparts of this Agreement for each Lender,
executed by a duly authorized officer of each party hereto, (ii) for the
account of each Lender a Revolving Note, (iii) multiple counterparts of
the Guaranty for each Lender executed by each Guarantor, and (iv)
multiple counterparts of the Security Agreement, the Pledge Agreements
and other Security Documents for each Lender and UCC financing
statements relating thereto executed by a duly authorized officer of
each party thereto, in each case conforming to the requirements of this
Agreement and executed by a duly authorized officer of the Borrower and
the Guarantors, as applicable.
(b) Liability and Casualty Insurance. The Administrative Agent
--------------------------------
shall have received copies of insurance policies or certificates of
insurance evidencing liability and casualty insurance meeting the
requirements set forth herein or in the Security Agreement.
(c) Operating Company and Corporate Documents. The Administrative
-----------------------------------------
Agent shall have received the following:
(i) Articles of Incorporation. Copies of the
---------------------------
certificate of formation, articles of organization, articles of
incorporation or charter documents of the Borrower and each
Guarantor certified to be true and complete as of a recent date
by the appropriate governmental authority of the state of its
organization or incorporation.
(ii) Resolutions. Copies of the certified
-----------
corporate resolutions and certificates of action of the action of
the Borrower and the Guarantors approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by a manager, secretary
or assistant secretary as of the Closing Date to be true and
correct and in full force and effect as of such date.
(iii) Operating Agreement and Bylaws. A copy of
-------------------------------
the operating agreement or the bylaws of the Borrower and the
Guarantors certified by a manager, secretary or assistant
secretary as of the Closing Date to be true and correct and in
full force and effect as of such date.
(iv) Good Standing. Copies of (i) certificates
-------------
of good standing, existence or its equivalent with respect to the
Borrower and the
41
<PAGE>
Guarantors certified as of a recent date by the appropriate
governmental authorities of the state of incorporation and each
other state in which the failure to so qualify and be in good
standing would have a material adverse effect on the business or
operations of the Borrower and the Guarantors in such state and
(ii) a certificate indicating payment of all corporate franchise
taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(d) Secretary's Certificate. The Administrative Agent shall have
-----------------------
received a certificate of a duly authorized secretary, assistant
secretary, managing member or officer of each of the Borrower and the
Guarantors dated the Closing Date, substantially in the form of Schedule
--------
4.1(d) with appropriate insertions and attachments.
------
(e) Legal Opinion of Counsel. The Administrative Agent shall have
------------------------
received, with a copy for each Lender, opinions of various counsel for
the Credit Parties, dated the Closing Date and addressed to the
Administrative Agent and the Lenders, in form and substance satisfactory
to Administrative Agent and the Lenders.
(f) Compliance and Solvency Certificates. The Administrative
------------------------------------
Agent shall have received from an Authorized Signatory (i) a compliance
certificate substantially the form of Schedule 4.1(f)(i) demonstrating,
------------------
among other things, the Borrower's compliance on a pro forma basis with
the financial covenants set forth in Section 5.9 hereof and (ii) a
solvency certificate substantially in the form of Schedule 4.1(f)(ii)
-------------------
demonstrating the solvency of the Borrower and the Guarantors.
(g) Fees. The Administrative Agent shall have received all fees,
----
if any, owing pursuant to the Commitment Letter.
(h) Corporate Structure. The company capital and ownership
-------------------
structure of the Borrower and the Guarantors shall be as described in
Schedule 4.1(h).
(i) Government Consent. Receipt by the Administrative Agent of
------------------
evidence that all governmental, shareholder and material third party
consents (including Hart-Scott-Rodino clearance, to the extent
necessary) and approvals necessary in connection with the transactions
contemplated hereby and expiration of all applicable waiting periods
without any action being taken by any authority that could reasonably be
likely to restrain, prevent or impose any material adverse conditions on
such transactions or that could reasonably be likely to seek or threaten
any of the foregoing, and no law or regulation shall be applicable which
in the judgment of the Administrative Agent could reasonably be likely
to have such effect.
(j) Litigation. There shall not exist any (i) order, decree,
----------
judgment, ruling or injunction which restrains the consummation of the
transactions contemplated hereby or (ii) any pending or threatened
action, suit, investigation or proceeding against a Credit
42
<PAGE>
Party that would have or would reasonably be expected to have a Material
Adverse Effect.
(k) Purchase Agreement. There shall not have been any material
------------------
modification, amendment, supplement or waiver to the Purchase Agreement
without the prior written consent of the Administrative Agent and the
transactions contemplated thereby shall have been consummated in
accordance with the terms thereof. The Administrative Agent shall have
received the final Purchase Agreement, together with all exhibits and
schedules thereto, certified by an officer of the Borrower.
(l) Equity Investment. The Administrative Agent shall have
----------------
received evidence of receipt by the Borrower of $35,500,000 of cash
equity and the availability to the Borrower of an additional $4,500,000
of cash equity.
(m) Subordinated Debt. The Administrative Agent shall have
-----------------
received evidence of receipt by the Borrower of at least $80,000,000
from the issuance of the Subordinated Debt.
(n) Opening Consolidated Adjusted EBITDA. The Borrower's
------------------------------------
Consolidated Adjusted EBITDA for the 12 months ended June 30, 1997,
shall be at least $18,395,000.
(o) Notice of Account Designation. The Borrower shall have
-----------------------------
executed and delivered to the Administrative Agent a Notice of Account
Designation.
(p) Subsection 4.2 Conditions. The conditions specified in
-------------------------
subsections 4.2(a) and (b) shall be satisfied on the Closing Date as if
Loans were to be made on such date.
(q) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative
Agent and its counsel.
4.2 Conditions to All Loans. The obligation of each Lender to make any
-----------------------
Revolving Loan hereunder (including the initial Revolving Loans to be made
hereunder) is subject to the satisfaction of the following conditions precedent
on the date of making such Revolving Loan:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Credit Parties in the Credit Documents or which
are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects
on and as of the date of such Revolving Loan as if made on and as of
such date.
(b) No Default or Event of Default. No Default or Event of
------------------------------
Default shall have occurred and be continuing on such date or after
giving effect to the Revolving Loan to be made on such date unless such
Default or Event of Default shall have been waived in accordance with
this Agreement.
43
<PAGE>
Each request for a Revolving Loan and each acceptance by the Borrower of
a Revolving Loan shall be deemed to constitute a representation and warranty by
the Borrower as of the date of such Revolving Loan that the applicable
conditions in paragraphs (a) and (b) have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Revolving
Commitments have terminated, no Revolving Note remains outstanding and unpaid
and the Revolving Loans, together with interest, Commitment Fees and all other
amounts owing to the Administrative Agent or any Lender hereunder, are paid in
full, the Borrower shall, and in the case of subsections 5.3, 5.4, 5.5, 5.6, 5.7
and 5.8 shall cause each of the Restricted Subsidiaries, to:
5.1 Financial Statements. Furnish to the Administrative Agent and each
--------------------
of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
---------------------------
event within 90 days after the end of each fiscal year of the Borrower,
a copy of the consolidated and consolidating balance sheet of the
Borrower and the Restricted Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of income
and retained earnings and of cash flows of the Borrower and the
Restricted Subsidiaries for such year, audited (as to the consolidated
statements) by Arthur Andersen, LLP or other firm of independent
certified public accountants of nationally recognized standing
reasonably acceptable to the Majority Lenders, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification; and
(b) Quarterly Financial Statements. As soon as available and in
------------------------------
any event within 45 days after the end of each of the first three fiscal
quarters of the Borrower, a company-prepared consolidated and
consolidating balance sheet of the Borrower and the Restricted
Subsidiaries as at the end of such period and related company-prepared
statements of income and retained earnings and of cash flows for the
Borrower and the Restricted Subsidiaries for such quarterly period and
for the portion of the fiscal year ending with such period, in each case
setting forth in comparative form consolidated and consolidating figures
for the corresponding period or periods of (i) the preceding fiscal year
and (ii) the annual budget plan (subject in each case to normal
recurring year-end audit adjustments);
(c) Monthly Financial Statements. As soon as available and in any
----------------------------
event within 45 days after the end of each month, a company-prepared
consolidated and
44
<PAGE>
consoldiating balance sheet of the Borrower and the Restricted
Subsidiaries as at the end of such month and related company-prepared
statements of income and retained earnings and of cash flows for the
Borrower and the Restricted Subsidiaries for such monthly period and for
the portion of the fiscal year ending with such period, in each case in
summary form and in each case setting forth in comparative form
consolidated and consolidating figures for the corresponding period or
periods of (i) the preceding fiscal year and (ii) the annual budget plan
(subject in each case to normal recurring year-end audit adjustments);
(d) Annual Budget Plan. As soon as available, but in any event no
------------------
more than 45 days after the end of each fiscal year, a copy of the
detailed annual budget or plan for the next fiscal year set out by
month, in form and detail reasonably acceptable to the Administrative
Agent and the Majority Lenders, together with a summary of the material
assumptions made in the preparation of the budget or plan;
all such consolidating statements to be as to the five operating divisions of
the Borrowers and all such monthly and quarterly financial statements to fairly
present in all material respects the financial condition and results from
operations of the entities and for the periods specified (subject, in the case
of interim statements, to normal recurring year-end audit adjustments) and to be
prepared in reasonable detail and, in the case of the annual and quarterly
financial statements provided in accordance with subsections (a) and (b) above,
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as approved by such accountants or Authorized Signatory, as the
case may be, and disclosed therein) and further accompanied by a description of,
and an estimation of the effect on the financial statements on account of, a
change in the application of accounting principles as provided in Section 1.3.
5.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent and each of the Lenders:
(a) Accountant's Certificate. Concurrently with the delivery of
------------------------
the financial statements referred to in subsection 5.1(a) above, a
certificate of the independent certified public accountants reporting on
such financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
(b) Compliance Certificate. Concurrently with the delivery of the
----------------------
financial statements referred to in Sections 5.1(a) and 5.1(b) above, a
certificate of a Authorized Signatory stating that, to the best of such
Authorized Signatory's knowledge, the Borrower and the Restricted
Subsidiaries during such period observed or performed in all material
respects all of their covenants and other agreements, and satisfied in
all material respects every material condition, contained in this
Agreement to be observed, performed or satisfied by them, and that such
Authorized Signatory has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and such certificate
shall include the calculations required to indicate compliance with
Section 5.9 and
45
<PAGE>
information as to Restricted Payments made in the applicable period in
accordance with Section 6.12;
(c) Public Notices. Within thirty days after the same are sent,
--------------
copies of all reports (other than those otherwise provided pursuant to
subsection 5.1 and those which are of a promotional nature) and other
financial information which the Borrower sends to its public
stockholders or to the holders of any public Subordinated Debt, and
within thirty days after the same are filed, copies of all financial
statements and non-confidential reports which the Borrower may make to,
or file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) Other Information. Promptly, such additional financial and
-----------------
other information as the Administrative Agent, on behalf of any Lender,
may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, in
accordance with industry practice (subject, where applicable, to specified grace
periods) all its material obligations of whatever nature and any additional
costs that are imposed as a result of any failure to so pay, discharge or
otherwise satisfy such obligations, except when the amount or validity of such
obligations and costs is currently being contested in good faith by appropriate
proceedings and reserves, if applicable, in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or any Restricted
Subsidiary, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. Preserve, renew
------------------------------------------------
and keep in full force and effect its company, corporate or partnership
existence and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business; comply
with all Contractual Obligations and Requirements of Law applicable to it except
to the extent that failure to comply therewith would not, in the aggregate, have
a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. Keep all material property
----------------------------------
useful and necessary in its business in reasonably good working order and
condition (ordinary wear and tear excepted); maintain with financially sound and
reputable insurance companies insurance on all its material property in at least
such amounts and against at least such risks as are usually insured against in
the same general area by companies engaged in the same or a similar business;
and furnish to the Administrative Agent, upon written request, full information
as to the insurance carried.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
------------------------------------------------------
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its businesses and activities; and permit,
during regular business hours and upon reasonable notice by the Administrative
Agent or any Lender, the Administrative Agent at the Borrower's expense or any
Lender at such Lender's expense to visit and inspect any of its properties and
examine and make
46
<PAGE>
abstracts from any of its books and records (other than materials protected by
the attorney-client privilege and materials which the Borrower may not disclose
without violation of a confidentiality obligation binding upon it) at any
reasonable time and as often as may reasonably be desired, and to discuss the
business, operations, properties and financial and other condition of the
Borrower and the Restricted Subsidiaries with officers and employees of the
Borrower and the Restricted Subsidiaries and with their independent certified
public accountants.
5.7 Notices. Give notice to the Administrative Agent (which shall
-------
promptly transmit such notice to each Lender) of:
(a) within five Business Days after the Borrower knows of the
occurrence of any material Default or Event of Default;
(b) promptly, any default or event of default under any
Contractual Obligation of the Borrower or any Restricted Subsidiary
which would reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or proceeding
known to the Borrower, affecting the Borrower or any Restricted
Subsidiary which, if adversely determined, would reasonably be expected
to have a Material Adverse Effect;
(d) as soon as possible and in any event within 30 days after the
Borrower knows: (i) the occurrence of any Reportable Event with respect
to any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or the Borrower, any Restricted
Subsidiary or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the terminating, Reorganization
or Insolvency of, any Plan, provided that in each case in clause (i) and
(ii) above, such event or condition could have a Material Adverse
Effect; and
(e) promptly, any other development or event which would
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Authorized Signatory setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
5.8 Environmental Laws.
------------------
(a) Comply in all material respects with, and take reasonable
actions to ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain
and comply in all material respects with and maintain, and take
reasonable actions to ensure that all tenants and subtenants obtain and
47
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comply in all material respects with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so
would not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings and the failure to do
or the pendency of such proceedings would not reasonably be expected to
have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective employees, agents, officers and
directors, from and against any and all claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever
kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of
the Borrower, any Restricted Subsidiary or the Properties, or any
orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response costs,
court costs and litigation expenses, except to the extent that any of
the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. The agreements in this
paragraph shall survive repayment of the Revolving Notes and all other
amounts payable hereunder.
5.9 Financial Covenants.
-------------------
(a) Total Leverage Ratio. The Borrower will maintain, as of the end of
--------------------
each fiscal quarter to occur during the periods shown, a Total Leverage Ratio of
not greater than:
Period Maximum Total Leverage Ratio
------ ----------------------------
Closing Date through December 31, 1999 6.0 to 1.0
January 1, 2000 through December 31, 2000 5.5 to 1.0
January 1, 2001 through December 31, 2001 5.0 to 1.0
January 1, 2002 and thereafter 4.5 to 1.0
(b) Senior Leverage Ratio. The Borrower will maintain, as of the end of
---------------------
each fiscal quarter, a Senior Leverage Ratio of not greater than 3.5 to 1.0.
(c) Interest Coverage Ratio. The Borrower will maintain, as of the end
-----------------------
of each fiscal quarter to occur during the periods shown, an Interest Coverage
Ratio of at least:
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Period Minimum Interest Coverage Ratio
------ -------------------------------
Closing Date through March 31, 1999 1.5 to 1.0
April 1, 1999 through March 31, 2000 1.75 to 1.0
April 1, 2000 and thereafter 2.0 to 1.0
(d) Fixed Charge Coverage Ratio. The Borrower will maintain, as of the
---------------------------
end of each fiscal quarter (commencing with the fiscal quarter ending September
30, 1998), a Fixed Charge Coverage Ratio of at least 1.05 to 1.0.
5.10 Covenants Regarding Patents, Trademarks and Copyrights.
------------------------------------------------------
(a) The Borrower shall notify the Administrative Agent promptly if it
knows or has reason to know that any application, letters patent or registration
relating to any Patent or Trademark which is material to the business of the
Borrower and the Restricted Subsidiaries taken as a whole may become abandoned,
or of any adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office or any court) regarding the
Borrower's or such Restricted Subsidiary's ownership of any Patent or Trademark
which is material to the business of the Borrower and the Restricted
Subsidiaries taken as a whole, its right to patent or register the same, or to
enforce, keep and maintain the same.
(b) The Borrower shall notify the Administrative Agent promptly after it
knows or has reason to know of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in any court) regarding any Copyright which is
material to the business of the Borrower and the Restricted Subsidiaries taken
as a whole, whether (i) such Copyright may become invalid or unenforceable prior
to its expiration or termination, or (ii) the Borrower's or such Restricted
Subsidiary's ownership of such Copyright, its right to register the same or to
enforce, keep and maintain the same may become affected.
(c)(i) The Borrower shall promptly notify the Administrative Agent of
any filing by the Borrower or any Restricted Subsidiary, either itself or
through any agent, employee, licensee or designee (but in no event later than
the fifteenth day following such filing), of any application for the
registration of any Copyright, Trademark or Patent with the United States
Copyright Office or United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof.
(ii) Concurrently with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, the Borrower shall
provide the Administrative Agent and its counsel a complete and correct list of
all Copyrights, Patents and Trademarks owned by the Borrower or any of the
Restricted Subsidiaries that have not been set forth as annexes of such
documents and instruments showing all filings and recordings for the protection
of the security interest of the Administration Agent therein pursuant to the
agreements of the United States Patent and Trademark Office or the United States
Copyright Office.
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(iii) Upon request of the Administrative Agent, the Borrower shall
execute and deliver any and all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent's security interest in the Copyrights, Patents, Trademarks
and the General Intangibles referred to in clauses (i) and (ii), including,
without limitation, the goodwill of the Borrower or such Restricted Subsidiary,
relating thereto or represented thereby (or such other Copyrights, Trademarks,
Patents or the General Intangibles relating thereto or represented thereby as
the Administrative Agent may reasonably request).
(d) The Borrower will take all necessary actions, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office or the United States Copyright Office, to maintain each letters patent
for the Patents or registration of the Trademarks and Copyrights which are
material to the business of the Borrower and the Restricted Subsidiaries taken
as a whole, including, without limitation, payment of maintenance fees, filing
of applications for renewal, affidavits of use, affidavits of incontestability
and opposition, interference and cancellation proceedings.
(e) In the event that any Trademark, Copyright or Patent is infringed,
misappropriated or diluted by a third party, the Borrower shall notify the
Administrative Agent promptly after it learns thereof and shall, unless the
Borrower or the relevant Restricted Subsidiary, as the case may be, shall
reasonably determine that such Trademark, Copyright or Patent is not material to
the business of the Borrower and the Restricted Subsidiaries taken as a whole,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as the Borrower or such Restricted Subsidiary, as the case
may be, shall reasonably deem appropriate under the circumstances to protect
such Trademark , Copyright or Patent.
5.11 Lender Fee, Etc. Pay to the Administrative Agent the annual Lender
----------------
Fee and comply with the other agreements provided for in the Commitment Letter,
dated as of the date hereof, between the Borrower and the Administrative Agent.
5.12 Subsidiaries. In the event the Borrower or any Guarantor shall
-------------
acquire or otherwise obtain any Subsidiary on or after the Closing Date, the
Borrower shall promptly notify the Administrative Agent of the existence of such
Subsidiary, shall provide the Administrative Agent with the information required
by Section 3.12 with respect thereto, shall cause the ownership interests in
such Subsidiary to be pledged to the Agent pursuant to a pledge agreement in
form and substance similar to the Pledge Agreement and shall cause such
Subsidiary to enter into and deliver to the Administrative Agent on behalf of
the Lenders (i) a guaranty agreement with respect to the obligations of the
Borrower under the Credit Documents, such guaranty agreement to be in form and
substance reasonably acceptable to the Administrative Agent, and (ii) a security
agreement in form and substance similar to the Security Agreement pursuant to
which the Subsidiary shall pledge, assign and transfer, and grant to the
Administrative Agent on behalf of the Lenders a first priority perfected
security interest in all of its tangible and intangible properties. In
connection therewith, the Borrower shall cause the Subsidiary to deliver to the
Administrative Agent on behalf of the Lenders certified organizational
documents, evidences of
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authority and opinion letters and to take such other action in connection
therewith, including without limitation the filing of appropriate financing
statements, as the Administrative Agent may reasonably require.
5.13 Subsequently Acquired Real Property. In the event the Borrower or
-----------------------------------
any Guarantor shall acquire any interest in real property on or after the
Closing Date (other than the fee and leasehold interests set forth on Schedule
3.17 as of the Closing Date), the Borrower or such Guarantor, as the case may
be, shall enter into and deliver to the Administrative Agent on behalf of the
Lenders a deed of trust or mortgage, together with evidences of authority and
opinion letters, in form and substance reasonably acceptable to the
Administrative Agent pursuant to which the Borrower or such Guarantor grants a
deed of trust or mortgage to the Administrative Agent (or its trustee) on behalf
of the Lenders in such real property interest free and clear of all Liens other
than Permitted Liens. In connection therewith, the Borrower or such Guarantor
shall deliver to the Administrative Agent such surveys, environmental reports
and title insurance policies and take such other action in connection therewith,
including without limitation the filing of appropriate fixture filings, as shall
be reasonably required by the Administrative Agent.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Revolving
Commitments have terminated, no Revolving Note remains outstanding and unpaid
and the Revolving Loans, together with interest, Commitment Fees and all other
amounts owing to the Administrative Agent or any Lender hereunder, are paid in
full.
6.1 Indebtedness. The Borrower will not, nor will it permit any
------------
Restricted Subsidiary to, contract, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement and the
other Credit Documents;
(b) Indebtedness existing as of the Closing Date as referenced in
the financial statements referenced in Section 3.1 (and set out more
specifically in Schedule 6.1(b)) and renewals, refinancings or
----------------
extensions thereof in a principal amount not in excess of that
outstanding as of the date of such renewal, refinancing or extension;
(c) unsecured intercompany Indebtedness among the Borrower and
the Restricted Subsidiaries; provided, however, the sum of (A) the
aggregate outstanding amount of such Indebtedness incurred by
Non-Guarantor Restricted Subsidiaries pursuant to Section 6.1(c) plus
(B) the aggregate amount of all sales, transfers, leases or other
dispositions of property or assets to Non-Guarantor Restricted
Subsidiaries pursuant to Section 6.5(a)(iii) plus (C) the aggregate
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amount of equity investments made in Non-Guarantor Restricted
Subsidiaries pursuant to subsection (iii) of the definition of
"Permitted Investments" shall not exceed $5,000,000 at any time;
---------------------
(d) Subordinated Debt;
(e) other unsecured Indebtedness of up to $10,000,000 at any
time outstanding incurred in connection with Permitted Acquisitions so
long as the Borrower demonstrates to the reasonable satisfaction of the
Administrative Agent that the Borrower will be in pro forma compliance
with all of the terms and provisions of this Agreement after incurring
any such Indebtedness; and
(f) other Indebtedness (including purchase money indebtedness)
which does not exceed $5,000,000 in the aggregate at any time
outstanding.
6.2 Liens. The Borrower will not, nor will it permit any Restricted
-----
Subsidiary to, contract, create, incur, assume or permit to exist any Lien with
respect to any of their respective property or assets of any kind (whether real
or personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
6.3 Guaranty Obligations. The Borrower will not, nor will it permit any
--------------------
Restricted Subsidiary to, enter into or otherwise become or be liable in respect
of any Guaranty Obligations (excluding specifically therefrom endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) other than (i) those in favor of the Lenders in connection herewith,
(ii) Guaranty Obligations by the Borrower or any Restricted Subsidiary of other
Indebtedness permitted under Section 6.1 (except, as regards Indebtedness under
subsection (b) thereof, only if and to the extent such Indebtedness was
guaranteed on the Closing Date) and (iii) other Guaranty Obligations which do
not exceed $5,000,000 at any time outstanding.
6.4 Lines of Business. The Borrower will not, nor will it permit any of
-----------------
the Restricted Subsidiaries to, alter its line or lines of business activity if
as a result thereof the Borrower and the Restricted Subsidiaries would not be
predominantly engaged in the business of publishing through print and electronic
media trade and business magazines, operating or providing services to trade and
business expositions and conferences and providing marketing and information
services and similar or related businesses.
6.5 Consolidation, Merger, Sale or Purchase of Assets, etc. The
------------------------------------------------------
Borrower will not, nor will it permit any Restricted Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell, transfer,
lease or otherwise dispose of all or any substantial part of its
property or assets outside of the ordinary course of business or agree
to do so at a future time except the following, without duplication,
shall be expressly permitted:
(i) Specified Sales;
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(ii) the sale, transfer, lease or other disposition of
property or assets not in the ordinary course of business (other than
Specified Sales), where and to the extent that they are the result of a
Recovery Event or otherwise and the net proceeds therefrom are used to
repair or replace damaged property or to purchase or otherwise acquire
new assets or property provided that such purchase or acquisition is
committed to within 90 days of receipt of the net proceeds and such
purchase or acquisition is consummated within 180 days of such receipt;
(iii) the sale, transfer, lease or other disposition of
property or assets to the Borrower or any Restricted Subsidiary;
provided, however, the sum of (A) the aggregate amount of such sales,
transfers, leases or other dispositions to Non-Guarantor Restricted
Subsidiaries plus (B) the aggregate outstanding amount of Indebtedness
incurred by Non-Guarantor Restricted Subsidiaries pursuant to Section
6.1(c) plus (C) the aggregate amount of equity investments made in
Non-Guarantor Restricted Subsidiaries pursuant to subsection (iii) of
the definition of "Permitted Investments" shall not exceed $5,000,000 at
---------------------
any time; and
(iv) sales of Unrestricted Margin Stock for fair market
value in cash (provided that notwithstanding anything contained herein
to the contrary, the proceeds of such sales may only be invested in cash
and Cash Equivalents).
Provided no Default or Event of Default then exists, the Administrative
Agent shall, without obtaining the consent of any Lender, release its
lien on any collateral sold or otherwise transferred in accordance with
this Section upon the consummation of such sale or transfer and upon the
performance by the Borrower of all of its obligations hereunder on
account of such sale or transfer.
As used herein, "substantial part" shall mean business, property or
----------------
assets which have contributed
(i) 10% or more, in any instance, or
(ii) 15% or more, when aggregated with all other such
sales or dispositions which have occurred within a period of one
year,
of Consolidated Adjusted EBITDA for the four (4) consecutive fiscal
quarters most recently ending prior to the date thereof; or
(b) purchase, lease or otherwise acquire (in a single transaction
or a series of related transactions) all or any substantial part of the
property or assets of any Person (other than purchases or other
acquisitions of inventory, leases, materials, property and equipment in
the ordinary course of business, except as otherwise limited or
prohibited herein), or enter into any merger or consolidation, except
for (i) investments or acquisitions permitted pursuant to Section 6.6,
(ii) acquisitions of types of businesses
53
<PAGE>
permitted to be engaged in by the Borrower and the Restricted
Subsidiaries pursuant to Section 6.4 (the "Permitted Acquisitions") so
long as with respect to the acquisition of each such business, (A) no
Default or Event of Default then exists or would exist after giving
effect thereto and (B) the Borrower demonstrates to the reasonable
satisfaction of the Administrative Agent that the Borrower will be in
pro forma compliance with all of the terms and provisions of this
Agreement after giving effect thereto, (iii) the merger or consolidation
of the Borrower or a Restricted Subsidiary into the Borrower or a
Guarantor, or a sale, transfer or lease of all or a substantial part of
the properties of the Borrower or any Restricted Subsidiary (at fair
value) to, the Borrower or any Guarantor and (iv) the merger of any
Person into the Borrower or any Guarantor, provided that the Borrower or
any Guarantor shall be the surviving entity, and in any such case no
Default or Event of Default would exist after giving effect thereto.
6.6 Advances, Investments and Loans. The Borrower will not, nor will it
-------------------------------
permit any Restricted Subsidiary to, lend money or extend credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person except for Permitted Investments.
6.7 Transactions with Affiliates. Except (i) as permitted in subsection
----------------------------
(iv) of the definition of Permitted Investments, and (ii) for the payments and
issuances permitted by Section 6.8 or 6.12, the Borrower will not, nor will it
permit any Restricted Subsidiary to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder or
Affiliate.
6.8 Ownership of Subsidiaries. The Borrower will not, nor will it permit
-------------------------
any Restricted Subsidiary to, create, form or acquire a Subsidiary other than
any Subsidiary acquired or formed to acquire assets in connection with any
Permitted Acquisition, provided such Subsidiary guarantees all of the
obligations of the Borrower hereunder, pledges substantially all of its assets
to secure such guarantee and has its stock or other equity interests pledged to
the Administrative Agent, all on terms reasonably satisfactory to the
Administrative Agent. Further, the Borrower will not, nor will it permit any of
the Restricted Subsidiaries to, issue, sell, transfer, pledge or otherwise
dispose of any partnership interests, limited liability company interest, shares
of capital stock or other equity or ownership interests ("Equity Interests") in
----------------
themselves or in any of their Subsidiaries, except (i) Equity Interests that are
issued, sold or transferred to the Borrower or a wholly-owned Subsidiary of the
Borrower and (ii) in connection with a transaction permitted under Section 6.5.
6.9 Fiscal Year. The Borrower will not, nor will it permit any
-----------
Restricted Subsidiary to, change its fiscal year.
6.10 [intentionally left blank].
54
<PAGE>
6.11 Prepayments of Indebtedness, etc. Neither the Borrower nor any of
--------------------------------
the Restricted Subsidiaries will (i) after the issuance thereof, amend or modify
(or permit the amendment or modification of), if reasonably and materially
adverse to the interests of the Lenders (including, without limitation, any
acceleration or shortening of amortization of principal thereof, or modification
of the terms of subordination relating thereto), any of the terms of any Total
Funded Debt (other than any Indebtedness permitted by Section 6.1(e) or (f) or
any Indebtedness hereunder), (ii) make (or give any notice with respect thereto)
any voluntary or optional payment or prepayment or redemption or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due) or exchange of any Total Funded Debt (other than any Indebtedness permitted
by Section 6.1(e) or (f), any Indebtedness hereunder, any prepayment of
Subordinated Debt with Net Sales Proceeds remaining after the Borrower has made
all required prepayments hereunder or any refinancing of any issue of
Subordinated Debt with any subsequent issue of Subordinated Debt and other than
the redemption or repurchase of up to $10,000,000 of the Subordinated Debt) or
(iii) make any regularly scheduled payment of Subordinated Debt in violation of
the subordination provisions contained in the Subordinated Debt Documents.
6.12 Restricted Payments. The Borrower will not, nor will it permit any
-------------------
of the Restricted Subsidiaries to, make any Restricted Payment; provided,
--------
however, Holdings LLC or any Subsidiary of the Borrower may make Restricted
- -------
Payments to the Borrower and any Subsidiary of Holdings LLC may make Restricted
Payments to Holdings LLC; provided further, that notwithstanding any other
----------------
restriction in this Section 6.12, (i) the Borrower may pay an annual monitoring
fee of $90,000.00 to Veronis, Suhler & Associates Inc. or its Affiliates so long
as no Event of Default shall then exist, (ii) the Borrower may reimburse
Veronis, Suhler & Associates Inc. or its Affiliates, for out-of-pocket expenses
incurred by Veronis, Suhler & Associates Inc. or its Affiliates in connection
with its monitoring of the Borrower so long as no Event of Default shall then
exist, (iii) the Borrower may pay reasonable and customary investment banking
fees to Veronis, Suhler & Associates, Inc. in connection with investment banking
services rendered to the Borrower in connection with any sale or Permitted
Acquisition or proposed sale or Permitted Acquisition which does not close and
(iv) so long as no Event of Default under Section 7(a) shall then exist,
Holdings LLC may distribute from time to time such amounts to enable each direct
or indirect member of Holdings LLC to pay any Federal, state or local income tax
liability (based upon the maximum applicable tax rates) attributable to the
inclusion in such member's individual income of his or its distributive share of
the income and gain of Holdings LLC (irrespective of any losses any such member
may otherwise have). The Borrower shall be permitted to pay to Fir Tree all or
any portion of the amounts otherwise payable to Veronis, Suhler & Associates
Inc. in accordance with subsections (i), (ii) and (iii) above. The compliance
certificate provided pursuant to Section 5.2(b) will include a detailed
computation of the portion of Restricted Payments relating to income taxes and a
summary of the Restricted Payments made in the applicable period.
6.13 Organizational Documents; Purchase Agreement; Subordinated Debt
---------------------------------------------------------------
Documents; LLC Preferred Stock. The Borrower will not, nor will it permit any of
- ------------------------------
the Restricted Subsidiaries to, amend or otherwise modify their articles of
limited partnership, limited liability limited partnership, incorporation,
limited liability company or other similar organizational or
55
<PAGE>
charter document, or their limited partnership agreement, limited liability
limited partnership agreement, limited liability company agreement, bylaws,
operating agreement or other similar governing document or the Purchase
Agreement or any of the Subordinated Debt Documents or the LLC Preferred Stock
in a manner which is adverse to the interest of the Lenders, without the prior
written consent of the Administrative Agent and the Majority Lenders, which
consent will not be unreasonably withheld.
6.14 No Printing. No portion of any real property owned or leased by the
-----------
Borrower or any Restricted Subsidiary will be used for the printing of any
publications, including without limitation, newspapers, magazines, circulars,
pamphlets, books or similar items, but excluding printing of office
correspondence and ordinary printing for customary office purposes.
6.15 Unrestricted Subsidiaries. The Borrower shall not permit any
-------------------------
Unrestricted Subsidiary to acquire any additional assets or to undertake any
additional business activities (including the incurring of any Indebtedness).
SECTION 7. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) (i) The Borrower shall fail to pay any principal on any
Revolving Note when due in accordance with the terms thereof or hereof;
or (ii) the Borrower shall fail to pay any interest on any Revolving
Note or any fee or other amount payable hereunder when due in accordance
with the terms thereof or hereof and such failure shall continue
unremedied for three (3) days; or
(b) Any representation or warranty made or deemed made by the
Borrower or any Guarantor herein, in the Security Agreement or in any of
the other Credit Documents or which is contained in any certificate,
document or financial or other statement furnished at any time under or
in connection with this Agreement shall prove to have been incorrect,
false or misleading in any material respect on or as of the date made or
deemed made; or
(c) The Borrower or other Credit Party shall
(i) default in the due performance or observance
of subsections 5.7(a) or (b) or Section 5.9, or
(ii) default in any material respect in the
observance or performance of any other term, covenant or
agreement contained in this Agreement (other than as
described in subsections 7(a) or 7(c)(i) above) or any of
the other Credit Documents, and such default shall
continue unremedied for a period of 30 days or more after
the earlier of any
56
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executive officer of the Borrower becoming aware of such
default or the receipt by the Borrower or such Credit
Party of written notice from the Administrative Agent
thereof; or
(d) The Borrower or any of the Restricted Subsidiaries shall (i)
default in any payment of principal of or interest on any Indebtedness
(other than the Revolving Notes) in a principal amount outstanding of at
least $1,000,000 in the aggregate for the Borrower and the Restricted
Subsidiaries or in the payment of any matured Guarantee Obligation in a
principal amount outstanding of at least $1,000,000 in the aggregate for
the Borrower and the Restricted Subsidiaries beyond the period of grace
(not to exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness in a principal amount
outstanding of at least $1,000,000 in the aggregate for the Borrower and
the Restricted Subsidiaries or Guarantee Obligation in a principal
amount outstanding of at least $1,000,000 in the aggregate for the
Borrower and the Restricted Subsidiaries or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; or
(e) (i) The Borrower or any of the Restricted Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Borrower or any of the Restricted Subsidiaries shall make
a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Borrower or any of the Restricted
Subsidiaries any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Borrower or any of the Restricted
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) the Borrower or any of the Restricted
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Borrower or any of the
Restricted
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Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(f) One or more judgments or decrees shall be entered against the
Borrower or any of the Restricted Subsidiaries involving in the
aggregate a liability (to the extent not paid when due or covered by
insurance) of $1,000,000 or more and all such judgments or decrees shall
not have been paid and satisfied, vacated, discharged, stayed or bonded
pending appeal within 45 days from the entry thereof; or
(g) (i) The Borrower, any Restricted Subsidiary or any Commonly
Controlled Entity shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, other than a transaction for which a statutory exemption is
available or an administrative exemption has been obtained, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Single-Employer
Plan or any Lien in favor of the PBGC or a Single-Employer Plan shall
arise on the assets of the Borrower, any Restricted Subsidiary or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a Trustee is, in the reasonable opinion of
the Majority Lenders, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (v) the Borrower, any
Restricted Subsidiary or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Majority Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, any Multiemployer Plan; and in each case in clauses
(i) through (v) above, such event or condition, together with all other
such events or conditions, if any, could have a Material Adverse Effect;
or
(h) (i) VS&A Communications Partners II, L.P., a Delaware limited
partnership, together with its Affiliates shall fail at any time to own
at least 51% of the voting interests in VS&A-T/SF, (ii) VS&A-T/SF
together with its Affiliates, shall fail at any time to own at least 51%
of the voting interests of the Borrower or at least 51% of the common
interests of Holdings LLC, (iii) the Borrower shall fail to own the LLC
Preferred Stock, (iv) the Borrower shall at any time fail to own 100% of
the capital stock of each of its Subsidiaries which are Guarantors, (v)
the Borrower shall at any time fail to own at least 51% of the voting
interests in each Non-Guarantor Restricted Subsidiary, (vi) Holdings LLC
shall at any time fail to own 100% of the capital stock or interests of
each of its Subsidiaries or (vii) the occurrence of a Change of Control
under any of the Subordinated Debt Documents; or
(i) Any other Credit Document shall fail to be in full force and
effect or to give the Administrative Agent and/or the Lenders the
security interests, liens, rights, powers and privileges purported to be
created thereby and such failure shall have a material adverse effect on
the rights and remedies of the Administrative Agent or the
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Lenders thereunder (except to the extent any such failure is caused by
------
the Administrative Agent and except as such documents may be terminated
------
or no longer in force and effect in accordance with the terms thereof,
other than those indemnities and provisions which by their terms shall
survive);
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (e) above, automatically the Revolving Commitments shall
immediately terminate and the Revolving Loans (with accrued interest thereon),
and all other amounts under the Credit Documents shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the written consent of the
Majority Lenders, the Administrative Agent may, or upon the written request of
the Majority Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Revolving Commitments to be terminated forthwith, whereupon the
Revolving Commitments shall immediately terminate; and (ii) with the written
consent of the Majority Lenders, the Administrative Agent may, or upon the
written request of the Majority Lenders, the Administrative Agent shall, by
notice of default to the Borrower, declare the Revolving Loans (with accrued
interest thereon) and all other amounts owing under this Agreement and the
Revolving Notes to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section 7, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
-----------
First Union National Bank as the Administrative Agent of such Lender under this
Agreement, and each such Lender irrevocably authorizes First Union National
Bank, as the Administrative Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein and in the other
Credit Documents, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent may execute any of
--------------------
its duties under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to rely on advice of counsel concerning all matters pertaining
to such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care. Without limiting the foregoing, the Administrative Agent may
appoint an Affiliate as its agent to perform the functions of the Administrative
Agent hereunder relating to the advancing of funds to the Borrower and
distribution of funds to the Lenders and to perform such other related functions
of the Administrative Agent hereunder as are
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reasonably incidental to such functions. No such appointment shall relieve the
Administrative Agent of its responsibilities hereunder.
8.3 Exculpatory Provisions. Neither the Administrative Agent nor any of
----------------------
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement (except for its or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by the Borrower or any officer thereof contained in this
Agreement or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any of the Credit Documents or for
any failure of the Borrower to perform its obligations hereunder or thereunder.
The Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance by the Borrower of
any of the agreements contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Borrower.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be
--------------------------------
entitled to rely, and shall be fully protected in relying, upon any Revolving
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Borrower), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent may deem and treat the payee
of any Revolving Note as the owner thereof for all purposes unless (a) a written
notice of assignment, negotiation or transfer thereof shall have been filed with
the Administrative Agent and (b) the Administrative Agent shall have received
the written agreement of such assignee to be bound hereby as fully and to the
same extent as if such assignee were an original Lender party hereto, in each
case in form satisfactory to the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under any of the Credit Documents in accordance with a
request of the Majority Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Revolving Notes.
8.5 Notice of Default. The Administrative Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to each of the Lenders. The Administrative Agent
shall
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take such action with respect to such Default or Event of Default as shall
be directed by the Majority Lenders, including, without limitation, exercise of
remedies and initiation of litigation; provided, however, that unless and until
-------- -------
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
------------------------------------------------------
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representation or warranty to it and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of the Borrower, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Revolving Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Administrative
---------------
Agent in its capacity hereunder (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower to do so), ratably according
to their respective Revolving Commitment Percentages in effect on the date on
which indemnification is sought under this subsection, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Revolving Notes) be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of any Credit
Document or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
provided, however, that no Lender shall be liable for the payment of any portion
- -------- -------
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent resulting from
the Administrative Agent's gross negligence or willful
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<PAGE>
misconduct. The agreements in this subsection shall survive the termination of
this Agreement and payment of the Revolving Notes and all other amounts payable
hereunder.
8.8 Administrative Agent in Its Individual Capacity. The Administrative
-----------------------------------------------
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the Administrative
Agent were not the Administrative Agent hereunder. With respect to its Revolving
Loans made or renewed by it and any Revolving Note issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign
------------------------------
or be removed as Administrative Agent upon 30 days' prior notice to the Borrower
and the Lenders. The Administrative Agent may be removed by the written consent
of the Majority Lenders. If the Administrative Agent shall resign or be removed
as Administrative Agent under this Agreement and the Revolving Notes, then the
Majority Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall be approved by the Borrower, or if the
Majority Lenders cannot agree on a successor within 30 days from the notice of
resignation by the Administrative Agent, the Administrative Agent may appoint a
bank or trust company with capital and surplus of at least $500,000,000 as
successor Administrative Agent within 30 days thereafter, whereupon such
successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Notes. After any retiring Administrative Agent's resignation or
renewal as Administrative Agent, the provisions of this subsection shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. Resignation by the Administrative
Agent shall become effective upon appointment of, and acceptance by, a successor
Administrative Agent, or the passage of the applicable periods without
appointment of a successor.
SECTION 9. MISCELLANEOUS
9.1 Amendments, Waivers and Release of Collateral. Neither this
---------------------------------------------
Agreement, nor any of the Revolving Notes, nor any of the other Credit
Documents, nor any terms hereof or thereof may be amended, supplemented, waived
or modified except in accordance with the provisions of this subsection nor may
Collateral be released except as specifically provided herein or in the Security
Agreement or in accordance with the provisions of this subsection. The Majority
Lenders affected thereby may, or, with the written consent of the Majority
Lenders affected thereby, the Administrative Agent may, from time to time, (a)
enter into with the Borrower written amendments, supplements or modifications
hereto and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit
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Documents or (b) waive, on such terms and conditions as the Majority Lenders may
specify in such instrument, any of the requirements of this Agreement or the
other Credit Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, waiver,
- -------- -------
supplement, modification or release shall (i) reduce the amount or extend the
scheduled final date of maturity of any Revolving Loan or Revolving Note or any
installment thereon, or reduce the stated rate of any interest or fee payable
hereunder (other than interest at the increased post-default rate) or extend the
scheduled date of any payment thereof or increase the amount or extend the
expiration date of any Lender's Revolving Commitment, in each case without the
written consent of each Lender directly affected thereby, or (ii) amend, modify
or waive any provision of this subsection or reduce the percentage specified in
the definition of Majority Lenders, or consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement, in each
case without the written consent of all the Lenders, or (iii) amend, modify or
waive any provision of Section 8 without the written consent of the then
Administrative Agent, or (iv) release all or substantially of the collateral
without the written consent of all of the Lenders except to the extent such
releases are provided for in this Agreement or the other Credit Documents. Any
such waiver, any such amendment, supplement or modification and any such release
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Administrative Agent and all future holders of the
Revolving Notes. In the case of any waiver, the Borrower, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the outstanding Loans and Revolving Notes and other Credit
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
9.2 Notices. Except as otherwise provided in Section 2, all notices,
-------
requests and demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (i) when
delivered by hand, (ii) when transmitted via telecopy (or other facsimile
device) on a Business Day between the hours of 10:00 A.M. and 7:00 P.M. (EST or
EDT, as appropriate) (or on the following Business Day if sent after 7:00 P.M.)
to the number set out herein, (iii) the day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (iv) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case, addressed
as follows in the case of the Borrower and the Administrative Agent, and as set
forth on Schedule 9.2 in the case of the Lenders, or to such other address as
------------
may be hereafter notified by the respective parties hereto and any future
holders of the Notes:
The Borrower: c/o VS&A Communications Partners II, L.P.
350 Park Avenue - 20th Floor
New York, NY 10022
Attn: Mr. S. Gerard Benford
Telecopier: (212) 935-0877
Telephone: (212) 935-4990
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The Administrative
Agent: First Union National Bank
c/o First Union Capital Markets Group
One First Union Center, TW-5
301 South College Street
Charlotte, North Carolina 28288-00735
Attention: Hilda Weathers
Telecopier: (704) 374-4092
Telephone: (704) 374-4897
with a copy to:
First Union Capital Markets Group
One First Union Center, TW-5
Charlotte, North Carolina 28288-0735
Attn: George L. Cole
Telecopier: (704) 374-4092
Telephone: (704) 374-4105
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Revolving Notes and the making of the
Revolving Loans, provided that all such representations and warranties shall
--------
terminate on the date upon which the Revolving Commitments have been terminated
and all amounts owing hereunder and under any Revolving Notes have been paid in
full.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
-----------------------------
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the preparation and execution of, and
any amendment, supplement or modification to, the Credit Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, together
with the reasonable fees and disbursements of counsel to the Administrative
Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all
its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Revolving Notes and any
such other documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent and to
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the Lenders (including reasonable allocated costs of in-house legal counsel),
and (c) on demand, to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, the Credit Documents and any such other documents, and (d) to
pay, indemnify, and hold each Lender and the Administrative Agent and their
Affiliates harmless from and against, any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of the Credit
Documents and any such other Documents and the use, or proposed use, of proceeds
of the Loans (all the foregoing, collectively, the "indemnified liabilities");
-----------------------
provided, however, that the Borrower shall not have any obligation hereunder to
- -------- -------
the Administrative Agent or any Lender with respect to indemnified liabilities
arising from (i) the gross negligence or willful misconduct of the
Administrative Agent or any such Lender, (ii) legal proceedings commenced
against the Administrative Agent or any such Lender by any security holder or
creditor thereof arising out of and based upon rights afforded such security
holder or creditor solely in its capacity as such, (iii) legal proceedings
commenced against the Administrative Agent or any Lender by any other Lender or
the Administrative Agent or its participants or (iv) a breach of any of the
Credit Documents by the Lenders. The agreements in this subsection shall survive
repayment of the Revolving Loans, Revolving Notes and all other amounts payable
hereunder.
9.6 Successors and Assigns; Participations; Purchasing Lenders.
----------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Lenders, the Administrative Agent, all future
holders of the Revolving Notes and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement or the other Credit Documents
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating
------------
interests in any Revolving Loan owing to such Lender, any Revolving Note
held by such Lender, any Revolving Commitment of such Lender, or any
other interest of such Lender hereunder. In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for
the performance thereof, such Lender shall remain the holder of any such
Revolving Note for all purposes under this Agreement, and the Borrower
and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement. No Lender shall transfer or grant any
participation under which the Participant shall have rights to approve
any amendment to or waiver of this Agreement or
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any other Credit Document except to the extent such amendment or waiver
would (i) extend the final maturity of any Revolving Loan or Revolving
Note in which such Participant is participating, or reduce the stated
rate or extend the time of payment of interest or Fees thereon (except
in connection with a waiver of interest at the increased post-default
rate) or reduce the principal amount thereof, or increase the amount of
the Participant's participation over the amount thereof then in effect
(it being understood that a waiver of any Default or Event of Default
shall not constitute a change in the terms of such participation, and
that an increase in any Revolving Commitment or Revolving Loan shall be
permitted without consent of any Participant if the Participant's
participation is not increased as a result thereof), (ii) except as
otherwise expressly provided in a Credit Document, release all or
substantially all of the collateral, or (iii) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under
this Agreement. In the case of any such participation, the Participant
shall not have any rights under this Agreement or any of the other
Credit Documents (the Participant's rights against such Lender in
respect of such participation to be those set forth in the agreement
executed by such Lender in favor of the Participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as
if such Lender had not sold such participation, provided that each
--------
Participant shall be entitled to the benefits of subsections 2.13, 2.14,
2.15 and 9.5 with respect to its participation in the Revolving
Commitments and the Revolving Loans outstanding from time to time;
provided, that no Participant shall be entitled to receive any greater
--------
amount pursuant to such subsections than the transferor Lender would
have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell
or assign to any Lender or any affiliate thereof and, so long as no
Event of Default has occurred and is continuing with the consent of the
Administrative Agent and the Borrower (in each case, which consent shall
not be unreasonably withheld), to one or more additional banks or
financial institutions ("Purchasing Lenders"), all or any part of its
------------------
rights and obligations under this Agreement and the Revolving Notes in
minimum amounts of $5,000,000 (or, if less, the entire amount of such
Lender's obligations) if the Purchasing Lender is not a Lender
hereunder, or with no minimum amount if the Purchasing Lender is a
Lender hereunder, pursuant to a Commitment Transfer Supplement, executed
by such Purchasing Lender, such transferor Lender (and, in the case of a
Purchasing Lender that is not then a Lender or an affiliate thereof so
long as no Event of Default has occurred and is continuing, by the
Borrower and the Administrative Agent), and delivered to the
Administrative Agent for its acceptance and recording in the Register.
Each such assignment must be of a constant, not varying, percentage of
all of such Lender's rights and obligations hereunder. Upon such
execution, delivery, acceptance and recording, from and after the
Transfer Effective Date specified in such Commitment Transfer
Supplement, (x) the Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have
the rights and obligations of a Lender hereunder with a Revolving
Commitment as set forth therein, and (y) the transferor Lender
thereunder
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shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement (and, in the case of
a Commitment Transfer Supplement covering all or the remaining portion
of a transferor Lender's rights and obligations under this Agreement,
such transferor Lender shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition
of such Purchasing Lender and the resulting adjustment of Revolving
Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Revolving Notes. On or
prior to the Transfer Effective Date specified in such Commitment
Transfer Supplement, the Borrower, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the Revolving Note
delivered to the Administrative Agent pursuant to such Commitment
Transfer Supplement a new Revolving Note to the order of such Purchasing
Lender in an amount equal to the Revolving Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, unless the
transferor Lender has not retained a Revolving Commitment hereunder, a
new Revolving Note to the order of the transferor Lender in an amount
equal to the Revolving Commitment retained by it hereunder. Such new
Revolving Note shall be dated the Closing Date and shall otherwise be in
the form of the Revolving Note replaced thereby. The Revolving Note
surrendered by the transferor Lender shall be returned by the
Administrative Agent to the Borrower marked "canceled".
(d) The Administrative Agent shall maintain at its address
referred to in subsection 9.2 a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the
--------
recordation of the names and addresses of the Lenders and the Revolving
Commitment of, and principal amount of the Revolving Loans owing to,
each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Revolving Loan recorded
therein for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed
by a transferor Lender and a Purchasing Lender (and, in the case of a
Purchasing Lender that is not then a Lender or an affiliate thereof, by
the Borrower and the Administrative Agent) together with payment to the
Administrative Agent (by the transferor Lender or the Purchasing Lender,
as agreed between them) of a registration and processing fee of $2,500
for each Purchasing Lender listed in such Commitment Transfer
Supplement, and the Revolving Notes subject to such Commitment Transfer
Supplement, the Administrative Agent shall (i) accept such Commitment
Transfer Supplement, (ii) record the information contained therein in
the Register and (iii) give prompt notice of such acceptance and
recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any
----------
prospective Transferee any and all
67
<PAGE>
financial information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such Lender by
or on behalf of the Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement; in each case
subject to subsection 9.14.
(g) At the time of each assignment pursuant to this subsection
9.6 to a Person which is not already a Lender hereunder and which is not
a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for Federal income tax purposes, the respective assignee
Lender shall provide to the Borrower and the Administrative Agent the
appropriate Internal Revenue Service Forms (and, if applicable, a 2.15
Certificate) described in subsection 2.15.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under this Agreement (including, without
limitation, any right to payment of principal and interest under any
Revolving Note) to any Federal Reserve Agent in accordance with
applicable laws.
9.7 Adjustments; Set-off.
--------------------
(a) Each Lender agrees that if any Lender (a "benefited Lender")
----------------
shall at any time receive any payment of all or part of its Revolving
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (e) of Section 7, or
otherwise) in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such
other Lender's Revolving Loans, or interest thereon, such benefited
Lender shall purchase for cash from the other Lenders a participating
interest in such portion of each such other Lender's Revolving Loan, or
shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided,
--------
however, that if all or any portion of such excess payment or benefits
-------
is thereafter recovered from such benefited Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. The Borrower agrees that
each Lender so purchasing a portion of another Lender's Loans may
exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law (including, without limitation, other rights of
set-off), each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon the occurrence of any Event of
Default, to setoff and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or
68
<PAGE>
claims, in any currency, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any time held or owing
by such Lender or any branch or agency thereof to or for the credit or
the account of the Borrower, or any part thereof in such amounts as such
Lender may elect, against and on account of the obligations and
liabilities of the Borrower to such Lender hereunder and claims of every
nature and description of such Lender against the Borrower, in any
currency, whether arising hereunder, under the Revolving Notes or under
any documents contemplated by or referred to herein or therein, as such
Lender may elect, whether or not such Lender has made any demand for
payment and although such obligations, liabilities and claims may be
contingent or unmatured. The aforesaid right of set-off may be exercised
by such Lender against the Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of the Borrower,
or against anyone else claiming through or against the Borrower or any
such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off shall not
have been exercised by such Lender prior to the occurrence of any Event
of Default. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice shall
-------- -------
not affect the validity of such set-off and application.
9.8 Table of Contents and Section Headings. The table of contents and
--------------------------------------
the Section and subsection headings herein are intended for convenience only and
shall be ignored in construing this Agreement.
9.9 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Administrative Agent.
9.10 Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.11 Integration. This Agreement and the Revolving Notes represent the
-----------
agreement of the Borrower, the Administrative Agent and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent, the Borrower or any
Lender relative to the subject matter hereof not expressly set forth or referred
to herein or in the Notes.
69
<PAGE>
9.12 Governing Law. This Agreement and the Notes and the rights and
-------------
obligations of the parties under this Agreement and the Revolving Notes shall be
governed by, and construed and interpreted in accordance with, the law of the
State of North Carolina.
9.13 Arbitration; Consent to Jurisdiction and Service of Process.
-----------------------------------------------------------
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial action, any dispute, claim or controversy
arising out of or connected herewith or with the Credit Documents
("Disputes") shall be resolved by binding arbitration as provided
herein. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions and claims arising
herefrom or from Credit Documents executed in the future. Arbitration
shall be conducted under the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association
and Title 9 of the U.S. Code. All arbitration hearings shall be
conducted in Charlotte, Mecklenburg County, North Carolina, or such
other place as agreed to in writing by the parties. A judgment upon the
award may be entered in any court having jurisdiction, and all decisions
shall be in writing. The panel from which all arbitrators are selected
shall be comprised of licensed attorneys having at least ten years'
experience representing parties in secured lending transactions.
Notwithstanding the foregoing, this arbitration provision does not apply
to disputes under or related to Interest Protection Agreements.
(b) Notwithstanding the preceding binding arbitration provision,
the Administrative Agent, on behalf of the Lenders, preserves certain
remedies that may be exercised during a Dispute. The Administrative
Agent, on behalf of the Lenders, shall have the right to proceed in any
court of proper jurisdiction or by self help to exercise or prosecute
the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a
power of sale granted in the Credit Documents or under applicable law,
(ii) all rights of self help including peaceful occupation of real
property and collection of rents, set-off and peaceful possession of
personal property, (iii) obtaining provisional or ancillary remedies
including injunctive relief, sequestration, garnishment, attachment and
appointment of receiver, (iv) when applicable, a judgment by confession
of judgment and (v) other remedies. Preservation of these remedies does
not limit the power of an arbitrator to grant similar remedies that may
be requested by a party in a Dispute.
(c) By execution and delivery of this Agreement, each of the
parties hereto accepts, for itself and in connection with its
properties, generally and unconditionally, the non-exclusive
jurisdiction relating to any arbitration proceedings conducted under the
Arbitration Rules in Charlotte, Mecklenburg County, North Carolina and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with this Agreement from which no appeal has been taken or is
available. Each of the parties hereto irrevocably agrees that all
process in any such arbitration proceedings or otherwise may be effected
by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to it at its
address set forth herein) or
70
<PAGE>
at such other address of which such party shall have been notified
pursuant thereto, such service being hereby acknowledged by each party
hereto to be effective and binding service in every respect. Each party
hereto irrevocably waives any objection, including, without limitation,
any objection to the laying of venue or based on the grounds of forum
non conveniens which it may now or hereafter have to the bringing of any
such action or proceeding in any such jurisdiction. Nothing herein shall
affect the right to serve process in any other manner permitted by law.
9.14 Confidentiality. The Administrative Agent and each of the Lenders
---------------
agrees that it will use reasonable and customary efforts not to disclose without
the prior consent of the Borrower (other than to its employees, Subsidiaries,
Affiliates, auditors or counsel or to another Lender) any information with
respect to the Borrower and its Subsidiaries which is furnished pursuant to this
Agreement, any other Credit Document or any documents contemplated by or
referred to herein or therein and which is designated by the Borrower to the
Lenders in writing as confidential or as to which it is otherwise reasonably
clear such information is not public, except that any Lender may disclose any
such information (a) as has become generally available to the public other than
by a breach of this subsection 9.14, (b) as may be required or appropriate in
any report, statement or testimony submitted to any municipal, state or federal
regulatory body having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board or the Federal Deposit Insurance Corporation or the
OCC or similar organizations (whether in the United States or elsewhere) or
their successors or the National Association of Insurance Commissioners, (c) as
may be required or appropriate in response to any summons or subpoena or any
law, order, regulation or ruling applicable to such Lender, or (d) to any
prospective Participant or assignee in connection with any contemplated transfer
pursuant to Section 9.6, provided that such prospective transferee shall have
--------
been made aware of this Section 9.14 and shall have agreed to be bound by its
provisions as if it were a party to this Agreement.
9.15 Acknowledgments. The Borrower hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation, execution
and delivery of each Credit Document;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement and the relationship between
Administrative Agent and Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith is solely that of debtor and
creditor; and
(c) no joint venture exists among the Lenders or among the
Borrower and the Lenders.
[Remainder of Page Intentionally Left Blank]
71
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
T/SF COMMUNICATIONS CORPORATION,
AS BORROWER
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
[Signatures continued on the following page]
Credit Agreement
T/SF Communications Corporation
<PAGE>
FIRST UNION NATIONAL BANK,
AS AGENT AND AS A LENDER
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Credit Agreement
T/SF Communications Corporation
<PAGE>
EXHIBIT 10.13
CONSULTING AGREEMENT
October 9, 1997
---------------
The parties to this agreement are T/SF Communications Corporation, a
Delaware corporation (the "Company"), and Howard G. Barnett, Jr. (the
"Consultant").
Pursuant to a Stock Purchase Agreement dated August 15, 1997, VS&A-
T/SF, Inc. has today purchased shares of the Company's common stock and the
Consultant has ceased to be Chairman, President and Chief Executive Officer of
the Company.
The Consultant has agreed to provide consulting services to the
Company on the terms and conditions set forth in this agreement.
Accordingly, it is agreed as follows:
1. Consulting Services.
-------------------
For a period of one year commencing on the date of this agreement, the
Consultant shall provide consulting services to the Company in connection with
(a) the transition of the ownership and management of the Company and its
subsidiaries, (b) the severance of members of the Company's corporate staff who
the Consultant agrees to participate in the severance of, (c) the development of
earn-out, stock option and other incentive plans for senior management of the
Company and its subsidiaries, (d) the realization upon the Company's
investments, (e) the review, renewal and negotiation of material agreements,
including, but not limited to, real estate leases, agreements regarding
FocalPoint Entertainment, Inc. and agreements regarding entities in which the
Company or its subsidiaries own minority interests, (f) the development and
implementation of strategic plans for the businesses of the Company and its
subsidiaries, and (g) such other matters as the Company shall reasonably
request. The Consultant shall report directly to the Company's Chairman,
President and Chief Executive Officer and shall provide consulting services in
such manner (in person, by telephone or by correspondence) and at such locations
as shall be agreed upon. The Consultant shall be provided with reasonable
support services and shall be based in Tulsa, Oklahoma. The Consultant shall not
be required to devote his full business time to the performance of services on
behalf of the Company and shall be permitted to be unavailable occasionally for
reasonable vacation and other personal time, provided that he gives reasonable
prior notice of such unavailability.
<PAGE>
2. Compensation.
------------
(a) As full consideration for the performance by the Consultant of his
obligations under this agreement, the Company shall pay him an aggregate amount
of $282,500, payable in equal monthly installments of $23,542 on the last day of
each month during the term of this agreement.
(b) The Company shall also reimburse the Consultant for all legitimate
business expenses incurred by him in connection with the performance of his
duties under this agreement upon presentation by him of appropriate vouchers
evidencing such expenses in accordance with the Company's usual procedures, up
to a limit of $2,500 per month. Any expenses in excess of that amount must be
pre-approved by the Company.
(c) To the extent permitted under the Company's medical insurance
plan, the Company shall continue to provide medical coverage for the Consultant
and his immediate family during the term of this agreement on the same terms as
provided to the Consultant in his capacity as employee of the Company
immediately prior to the date of this agreement. The parties intend for the
Consultant to be treated as a "covered employee" for purposes of such medical
insurance coverage so that Consultant's COBRA rights begin upon the termination
of this Agreement. If such treatment is not permitted under applicable law, the
Consultant's COBRA rights will begin to run at the date of this Agreement, with
the Company, in effect, paying for the Consultant's coverage during a portion of
the COBRA period.
3. Non-Competition: Non-Solicitation: Confidentiality.
--------------------------------------------------
(a) For a period of one year (or two years if the term of this
agreement is extended pursuant to section 5) commencing on the date of this
agreement, the Consultant shall not, directly or indirectly, engage or be
interested in (as owner, stockholder, partner, member, manager, lender,
employee, agent, consultant or otherwise) any business or entity that engages,
anywhere in the world, in any business competitive with any business in which
the Company or any of its subsidiaries is engaged or has under active
consideration as of the date of this agreement. However, this section shall not
prevent the Consultant from owning as an investment up to 20% of a class of
equity securities issued by any corporation whose shares are publicly traded and
registered under the Securities Exchange Act of 1934 or subject to Section 15(d)
of such Act.
(b) For a period of one year (or two years if the term of this
agreement is extended pursuant to section 5) commencing on the date of this
agreement, the Consultant shall not, directly or indirectly, employ or solicit
for employment or consulting, on his own behalf or on behalf of any other person
or entity, or otherwise encourage the resignation of, any employee of the
Company or any of its subsidiaries, except that the Consultant may employ any
employee of the Company's corporate
2
<PAGE>
headquarters whose employment is terminated by the Company or who resigns
without encouragement from the Consultant.
(c) The Consultant shall not, for a period of five years after the
end of the term of this agreement, as extended (if applicable), disclose to
anyone, or use in competition with the Company or any of its subsidiaries, any
non-public information with respect to any confidential or secret aspect of the
business of the Company or any of its subsidiaries.
(d) The Consultant acknowledges that the remedy at law for breach of
the provisions of this section 3 will be inadequate and that, in addition to any
other remedy the Company may have, it shall be entitled to an injunction
restraining any breach or threatened breach, without any bond or other security
being required and without the necessity of showing actual damages. If any court
construes the covenant in this section 3 or any part thereof, to be
unenforceable in any respect, the court may reduce the duration or area to the
extent necessary so that the provision is enforceable, and the provision, as
reduced, shall then be enforceable.
4. Representations and Warranties by the Consultant. The Consultant
------------------------------------------------
represents and warrants to the Company that (a) this agreement is valid and
binding upon, and enforceable against, him in accordance with its terms, (b) he
is not bound by or subject to any contractual or other obligation or any law
that would be violated by his execution or performance of this agreement, and
(c) he is not the subject of any pending or, to his knowledge, threatened,
claim, action, judgment, order, or investigation that could adversely affect his
ability to perform his obligations under this agreement.
5. Extension of Agreement. The Company shall have the right to extend
----------------------
the term of this agreement for an additional twelve months on substantially the
same terms by giving written notice thereof to the Consultant at least four
months prior to the expiration of the original term.
6. Termination of Agreement. The Consultant shall have the right to
------------------------
terminate this agreement, effective at any time after ten months from the date
of this agreement, upon at least two months prior written notice to the Company.
Upon the effective date of such termination, all of the Consultant's and the
Company's rights and obligations under this agreement shall terminate, except
that (a) the Consultant's obligations set forth in sections 3(a) and 3(b) above
shall continue until the later of: (i) 18 months after the date of this
agreement, or (ii) if the Company has extended the term of this agreement
pursuant to section 5 above, two years after the date of this agreement, and (b)
the Consultant's obligation under section 3(c) above shall continue for a period
of five years from the effective date of such termination.
3
<PAGE>
7. Miscellaneous.
-------------
(a) Neither party may assign any of his or its rights or delegate any
of his or its duties under this agreement without the written consent of the
other.
(b) Any notice or other communication under this agreement shall be in
writing and shall be considered given when delivered personally or mailed by
registered mail, return receipt requested, to the parties at their respective
addresses set forth below their signatures hereto or at such other address as a
party may specify by notice to the other in accordance with this provision. Any
notice to the Company shall be directed to the attention of its President.
(c) This agreement shall be governed by and construed in accordance
with the law of the state of New York applicable to agreements made and to be
performed in New York.
(d) The failure of a party to insist upon strict adherence to any term
of this agreement on any occasion shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this agreement. Any waiver must be in writing.
(e) This agreement contains a complete statement of all of the
arrangements between the parties with respect to its subject matter, supersedes
all previous agreements and understandings between or on behalf of them with
respect to that subject matter and cannot be changed or terminated orally.
(f) The Consultant shall perform the services to be rendered under
this agreement as an independent contractor and shall not have any authority to
assume or create any obligation or liability on behalf of or in the name of the
Company or to bind the Company in any respect. As an independent contractor, the
Consultant shall not be entitled to any of the benefits generally available to
the Company's employees.
(g) The Company and the Consultant acknowledge that the Company
currently (i) owns a certain term life insurance policy on the life of the
Consultant and holds and pays the premiums on a certain disability insurance
policy covering the Consultant (the "Insurance Policies"), and (ii) is the
lessee of an automobile which is and has been used by the Consultant (the
"Lease"). Promptly after the date of this agreement, the Company shall transfer
the Insurance Policies and the Lease to the Consultant, effective as of the date
of this agreement, and the Consultant shall assume all
4
<PAGE>
of the obligations under the Insurance Policies and the Lease as of the date of
this agreement.
T/SF COMMUNICATIONS CORPORATION
By: /s/ I L M Thomas
---------------------------------
2407 East Skelly Drive Ian L.M. Thomas
Tulsa, Oklahoma 74105 President & CEO
By: /s/ Howard G. Barnett, Jr.
---------------------------------
Howard G. Barnett, Jr.
6742 S. Guanston
Tulsa, OK 74136
5
<PAGE>
EXHIBIT 10.14
CONSULTING AGREEMENT
October 9, 1997
---------------
The parties to this agreement are T/SF Communications Corporation, a
Delaware corporation (the "Company"), and Robert F. Craine, Jr. (the
"Consultant").
Pursuant to a Stock Purchase Agreement dated August 15, 1997, VS&A-
T/SF, Inc. has today purchased shares of the Company's common stock and the
Consultant has ceased to be Executive Vice President of the Company.
The Consultant has agreed to provide consulting services to the
Company on the terms and conditions set forth in this agreement.
Accordingly, it is agreed as follows:
1. Consulting Services.
-------------------
For a period of ninety days commencing on the date of this
agreement, the Consultant shall provide consulting services to the Company in
connection with (a) the transition of the ownership and management of the
Company and its subsidiaries, (b) the resolution of matters that may arise in
the Company and its subsidiaries from time to time, and (c) such other matters
as the Company shall reasonably request. The Consultant shall report directly to
the Company's Chairman, President and Chief Executive Officer and shall provide
consulting services in such manner (in person, by telephone or by
correspondence) and at such locations as shall be agreed upon. The Company
acknowledges that the Consultant shall not be required to devote his full
business time to the performance of services on behalf of the Company and shall
be based in Tulsa, Oklahoma.
2. Compensation.
------------
(a) As full consideration for the performance by the Consultant of his
obligations under this agreement, the Company shall pay him an aggregate amount
of $41,750, payable in equal monthly installments of $13,917 on the last day of
each month during the term of this agreement.
(b) The Company shall also reimburse the Consultant for all previously
approved expenses incurred by him in connection with the performance of his
<PAGE>
duties under this agreement upon presentation by him of appropriate vouchers
evidencing such expenses in accordance with the Company's usual procedures.
(c) To the extent permitted under the Company's medical insurance
plan, the Company shall continue to provide medical coverage for the Consultant
and his immediate family during the term of this agreement on the same terms as
provided to the Consultant in his capacity as employee of the Company
immediately prior to the date of this agreement. The parties intend for the
Consultant to be treated as a "covered employee" for purposes of such medical
insurance coverage so that Consultant's COBRA rights begin upon the termination
of this Agreement. If such treatment is not permitted under applicable law, the
Consultant's COBRA rights will begin to run at the date of this Agreement, with
the Company, in effect, paying for the Consultant's coverage during a portion of
the COBRA period.
3. Non-Competition; Non-Solicitation; Confidentiality.
---------------------------------------------------
(a) For a period of ninety days commencing on the date of this
agreement, the Consultant shall not, directly or indirectly, engage or be
interested in (as owner, stockholder, partner, member, manager, lender,
employee, agent, consultant or otherwise) any business or entity that engages,
anywhere in the world, in any business competitive with any business in which
the Company or any of its subsidiaries is engaged or has under active
consideration as of the date of this agreement. However, this section shall not
prevent the Consultant from owning as an investment up to 20% of a class of
equity securities issued by any corporation whose shares are publicly traded and
registered under the Securities Exchange Act of 1934 or subject to Section 15(d)
of such Act.
(b) For a period of ninety days commencing on the date of this
agreement, the Consultant shall not, directly or indirectly, employ or solicit
for employment or consulting, on his own behalf or on behalf of any other person
or entity, or otherwise encourage the resignation of, any employee of the
Company or any of its subsidiaries, except that the Consultant may employ any
employee of the Company's corporate headquarters whose employment is terminated
by the Company or who resigns without encouragement from the Consultant.
(c) The Consultant shall not, for a period of five years after the end
of the term of this agreement, disclose to anyone, or use in competition with
the Company or any of its subsidiaries, any non-public information with respect
to any confidential or secret aspect of the business of the Company or any of
its subsidiaries.
(d) The Consultant acknowledges that the remedy at law for breach of
the provisions of this section 3 will be inadequate and that, in addition to any
other remedy the Company may have, it shall be entitled to an injunction
restraining any breach or threatened breach, without any bond or other security
being required and without the necessity of showing actual damages. If any court
construes the covenant in
2
<PAGE>
this section 3 or any part thereof, to be unenforceable in any respect, the
court may reduce the duration or area to the extent necessary so that the
provision is enforceable, and the provision, as reduced, shall then be
enforceable.
4. Representations and Warranties by the Consultant. The Consultant
------------------------------------------------
represents and warrants to the Company that (a) this agreement is valid and
binding upon, and enforceable against, him in accordance with its terms, (b) he
is not bound by or subject to any contractual or other obligation or any law
that would be violated by his execution or performance of this agreement, and
(c) he is not the subject of any pending or, to his knowledge, threatened,
claim, action, judgment, order, or investigation that could adversely affect his
ability to perform his obligations under this agreement.
5. Miscellaneous.
-------------
(a) Neither party may assign any of his or its rights or delegate
any of his or its duties under this agreement without the written consent of the
other.
(b) Any notice or other communication under this agreement shall be
in writing and shall be considered given when delivered personally or mailed by
registered mail, return receipt requested, to the parties at their respective
addresses set forth below their signatures hereto or at such other address as a
party may specify by notice to the other in accordance with this provision. Any
notice to the Company shall be directed to the attention of its President.
(c) This agreement shall be governed by and construed in accordance
with the law of the state of New York applicable to agreements made and to be
performed in New York.
(d) The failure of a party to insist upon strict adherence to any
term of this agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. Any waiver must be in writing.
(e) This agreement contains a complete statement of all of the
arrangements between the parties with respect to its subject matter, supersedes
all previous agreements and understandings between or on behalf of them with
respect to that subject matter and cannot be changed or terminated orally.
(f) The Consultant shall perform the services to be rendered under
this agreement as an independent contractor and shall not have any authority to
assume or create any obligation or liability on behalf of or in the name of the
Company or to bind the
3
<PAGE>
Company in any respect. As an independent contractor, the Consultant shall not
be entitled to any of the benefits generally available to the Company's
employees.
T/SF COMMUNICATIONS CORPORATION
By: /s/ I L M Thomas
------------------------------
2407 East Skelly Drive Ian L.M. Thomas
Tulsa, Oklahoma 74105 President & CEO
/s/ Robert E. Craine, Jr.
------------------------------
Robert E. Craine, Jr.
5118 E. 107 Pl.
Tulsa, Okla 74107
4
<PAGE>
EXHIBIT 10.15
CONSULTING AGREEMENT
October 9, 1997
---------------
The parties to this agreement are T/SF Communications Corporation, a
Delaware corporation (the "Company"), and J. Gary Mourton (the "Consultant").
Pursuant to a Stock Purchase Agreement dated August 15, 1997, VS&A-
T/SF, Inc. has today purchased shares of the Company's common stock and the
Consultant has ceased to be Senior Vice President-Finance of the Company.
The Consultant has agreed to provide consulting services to the
Company on the terms and conditions set forth in this agreement.
Accordingly, it is agreed as follows:
1. Consulting Services.
--------------------
For a period of one year commencing on the date of this agreement, the
Consultant shall provide consulting services to the Company in connection with
(a) the transition of the ownership and management of the Company and its
subsidiaries, (b) the financial, management, accounting and statistical
reporting requirements of the Company and its subsidiaries and the
implementation of plans to satisfy those requirements, (c) the development and
finalization of the 1998 and 1999 business plans for each business of the
Company and its subsidiaries, (d) the development and implementation of
accounting functions for G.E.M. Communications, Inc., (e) the preparation of
historical financial, accounting and statistical information for 1996 and 1997
and the coordination and standardization of that information among the Company
and its subsidiaries, (f) the resolution of tax, accounting and audit issues
that may arise in the Company and its subsidiaries from time to time, and (g)
such other matters as the Company shall reasonably request. The Consultant shall
report directly to the Company's Chairman, President and Chief Executive Officer
and shall provide consulting services in such manner (in person, by telephone or
by correspondence) and at such locations as shall be agreed upon. The Consultant
shall be provided with reasonable support services and shall be based in Tulsa,
Oklahoma. The Consultant shall not be required to devote his full business time
to the performance of services on behalf of the Company and the parties
acknowledge that his time commitment to the Company shall diminish during the
term of this agreement. The Consultant shall be permitted to be unavailable
occasionally for reasonable vacation and other personal time, provided that he
gives reasonable prior notice of such unavailability.
<PAGE>
2. Compensation.
------------
(a) As full consideration for the performance by the Consultant of his
obligations under this agreement, the Company shall pay him an aggregate amount
of $130,800, payable on the last day of each month during the term of this
agreement at the rate of $14,533 per month for the first six months and $7,267
per month for the remaining six months.
(b) The Company shall also reimburse the Consultant for all legitimate
business expenses incurred by him in connection with the performance of his
duties under this agreement upon presentation by him of appropriate vouchers
evidencing such expenses in accordance with the Company's usual procedures, up
to a limit of $500 per month. Any expenses in excess of that amount must be pre-
approved by the Company.
(c) To the extent permitted under the Company's medical insurance
plan, the Company shall continue to provide medical coverage for the Consultant
and his immediate family during the term of this agreement on the same terms as
provided to the Consultant in his capacity as employee of the Company
immediately prior to the date of this agreement. The parties intend for the
Consultant to be treated as a "covered employee" for purposes of such medical
insurance coverage so that Consultant's COBRA rights begin upon the termination
of this Agreement. If such treatment is not permitted under applicable law, the
Consultant's COBRA rights will begin to run at the date of this Agreement, with
the Company, in effect, paying for the Consultant's coverage during a portion of
the COBRA period.
3. Non-Competition; Non-Solicitation; Confidentiality.
--------------------------------------------------
(a) For a period of one year commencing on the date of this agreement,
the Consultant shall not, directly or indirectly, engage or be interested in (as
owner, stockholder, partner, member, manager, lender, employee, agent,
consultant or otherwise) any business or entity that engages, anywhere in the
world, in any business competitive with any business in which the Company or any
of its subsidiaries is engaged or has under active consideration as of the date
of this agreement. However, this section shall not prevent the Consultant from
owning as an investment up to 2% of a class of equity securities issued by any
corporation whose shares are publicly traded and registered under the Securities
Exchange Act of 1934 or subject to Section 15(d) of such Act.
(b) For a period of one year commencing on the date of this agreement,
the Consultant shall not, directly or indirectly, employ or solicit for
employment or consulting, on his own behalf or on behalf of any other person or
entity, or otherwise encourage the resignation of, any employee of the Company
or any of its subsidiaries, except that the Consultant may employ any employee
of the Company's
2
<PAGE>
corporate headquarters whose employment is terminated by the Company or who
resigns without encouragement from the Consultant.
(c) The Consultant shall not, for a period of five years after the end
of the term of this agreement, disclose to anyone, or use in competition with
the Company or any of its subsidiaries, any information with respect to any non-
public confidential or secret aspect of the business of the Company or any of
its subsidiaries.
(d) The Consultant acknowledges that the remedy at law for breach of
the provisions of this section 3 will be inadequate and that, in addition to any
other remedy the Company may have, it shall be entitled to an injunction
restraining any breach or threatened breach, without any bond or other security
being required and without the necessity of showing actual damages. If any court
construes the covenant in this section 3 or any part thereof, to be
unenforceable in any respect, the court may reduce the duration or area to the
extent necessary so that the provision is enforceable, and the provision, as
reduced, shall then be enforceable.
4. Representations and Warranties by the Consultant. The Consultant
------------------------------------------------
represents and warrants to the Company that (a) this agreement is valid and
binding upon, and enforceable against, him in accordance with its terms, (b) he
is not bound by or subject to any contractual or other obligation or any law
that would be violated by his execution or performance of this agreement, and
(c) he is not the subject of any pending or, to his knowledge, threatened,
claim, action, judgment, order, or investigation that could adversely affect his
ability to perform his obligations under this agreement.
5. Miscellaneous.
-------------
(a) Neither party may assign any of his or its rights or delegate any
of his or its duties under this agreement without the written consent of the
other.
(b) Any notice or other communication under this agreement shall be in
writing and shall be considered given when delivered personally or mailed by
registered mail, return receipt requested, to the parties at their respective
addresses set forth below their signatures hereto or at such other address as a
party may specify by notice to the other in accordance with this provision. Any
notice to the Company shall be directed to the attention of its President.
(c) This agreement shall be governed by and construed in accordance
with the law of the state of New York applicable to agreements made and to be
performed in New York.
(d) The failure of a party to insist upon strict adherence to any term
of this agreement on any occasion shall not be considered a waiver or deprive
that
3
<PAGE>
party of the right thereafter to insist upon strict adherence to that term or
any other term of this agreement. Any waiver must be in writing.
(e) This agreement contains a complete statement of all of the
arrangements between the parties with respect to its subject matter, supersedes
all previous agreements and understandings between or on behalf of them with
respect to that subject matter and cannot be changed or terminated orally.
(f) The Consultant shall perform the services to be rendered under
this agreement as an independent contractor and shall not have any authority to
assume or create any obligation or liability on behalf of or in the name of the
Company or to bind the Company in any respect. As an independent contractor, the
Consultant shall not be entitled to any of the benefits generally available to
the Company's employees.
(g) The Company and the Consultant acknowledge that the Company
currently (i) holds and pays the premiums on a certain disability insurance
policy covering the Consultant (the "Insurance Policy"), and (ii) is the lessee
of an automobile which is and has been used by the Consultant (the "Lease").
Promptly after the date of this agreement, the Company shall transfer the
Insurance Policy and the Lease to the Consultant, effective as of the date of
this agreement, and the Consultant shall assume all of the obligations under the
Insurance Policy and the Lease as of the date of this agreement.
T/SF COMMUNICATIONS CORPORATION
By: /s/ I L M Thomas
-----------------------------
2407 East Skelly Drive Ian L.M. Thomas
Tulsa, Oklahoma 74105 President & CEO
/s/ J. Gary Mourton
-----------------------------
J. Gary Mourton
4220 Colonial Dr.
Sapulpa, OK 74066
4
<PAGE>
EXHIBIT 12
T/SF COMMUNICATIONS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before in-
come taxes ............ $4,227 $4,011 $8,522 $16,112 $6,134 $(11,739) $23,694
Fixed charges........... 401 413 581 859 736 1,921 2,692
Undistributed earnings
in equity investments.. (156) -- -- -- -- -- --
------ ------ ------ ------- ------ -------- -------
Adjusted Earnings....... 4,472 4,424 9,103 16,971 6,870 (9,818) 26,386
====== ====== ====== ======= ====== ======== =======
Fixed charge coverage... 11.2x 10.7x 15.7x 19.8x 9.3x -- 9.8x
Coverage Deficiency (if
applicable)............ $ -- $ -- $ -- $ -- $ -- $11.7 $ --
====== ====== ====== ======= ====== ======== =======
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 21,
1997 included in T/SF Communications Corporation's form 10-K for the year
ended December 31, 1996 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
November 25, 1997
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
----------------
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-5375195
(JURISDICTION OF (I.R.S.
INCORPORATION EMPLOYER
OR ORGANIZATION IF NOT A IDENTIFICATION
U.S. NATIONAL BANK) NO.)
ONE STATE STREET, NEW YORK, 10004
NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
LUIS PEREZ, ASSISTANT VICE PRESIDENT
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
(212) 858-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
T/SF COMMUNICATIONS CORPORATION
(EXACT NAMES OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-1341805
(STATE OR OTHER JURISDICTION (I.R.S.
OF EMPLOYER
INCORPORATION OR IDENTIFICATION
ORGANIZATION) NO.)
888 SEVENTH AVENUE, 28TH 10106
FLOOR (ZIP CODE)
NEW YORK, NEW YORK
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
$100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
----------------
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1.GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York
Second District,
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2.AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 13.DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligors are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
None
ITEM 16.LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as amended
to date. (See Exhibit 1A to Form T-1, Securities and Exchange
Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate trust
powers, as amended to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date (See
Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 22-
19146).
2
<PAGE>
5. Not Applicable
6. The consent of United States institutional trustee required by Section
321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
- --------
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and Exchange
Commission, to which there have been no amendments or changes.
3
<PAGE>
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base responsive answers to Item 2, the answer to said
Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated in
Item 13, the obligor is not in default under any indenture under which the
applicant is trustee.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility & qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 13th day of November, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
/s/ Luis Perez
By___________________________________
Luis Perez
Assistant Vice President
5
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issuance by T/SF Communications
Corporation, of its $100,000,000 10 3/8% Senior Subordinated Notes Due 2007,
we hereby consent that reports of examinations by Federal, State, Territorial,
or District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
/s/ Luis Perez
By___________________________________
Luis Perez
Assistant Vice President
Dated: November 13, 1997
6
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C>
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin........... $ 41,319
Interest-bearing balances.................................... 314,579
Securities: Held-to-maturity securities....................... 180,111
Available-for-sale securities................................. 47,600
Federal Funds sold and Securities purchased under agreements
to resell................................................... 694,859
Loans and lease financing receivables:
Loans and leases, net of unearned income......... $ 1,955,686
LESS: Allowance for loan and lease losses........ 62,876
LESS: Allocated transfer risk reserve............ --
Loans and leases, net of unearned income, allowance, and
reserve..................................................... 1,892,810
Trading assets held in trading accounts....................... 603
Premises and fixed assets (including capitalized leases)...... 3,709
Other real estate owned....................................... 202
Investments in unconsolidated subsidiaries and associated
companies.................................................... --
Customers' liability to this bank on acceptances outstanding.. 81
Intangible assets............................................. --
Other assets.................................................. 67,092
TOTAL ASSETS.................................................. $3,242,965
LIABILITIES
Deposits:
In domestic offices.......................................... $1,694,675
Noninterest-bearing............................. $ 263,641
Interest-bearing................................ 1,431,034
In foreign offices, Edge and Agreement subsidiaries, and
IBFs....................................................... 1,121,075
Noninterest-bearing............................. 17,535
Interest-bearing................................ 1,103,540
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements
to repurchase............................................... 25,000
Demand notes issued to the U.S. Treasury...................... 60,000
Trading Liabilities........................................... 140
Other borrowed money:
a) With a remaining maturity of one year or less............. 38,369
b) With a remaining maturity of more than one year........... 1,763
c) With a remaining maturity of more than three years........ 2,242
Bank's liability on acceptances executed and outstanding...... 81
Subordinated notes and debentures............................. --
Other liabilities............................................. 69,908
TOTAL LIABILITIES............................................. 3,013,253
Limited-life preferred stock and related surplus.............. $ --
EQUITY CAPITAL
Perpetual preferred stock and related surplus................. $ --
Common stock.................................................. 29,649
Surplus (exclude all surplus related to preferred stock)...... 217,008
Undivided profits and capital reserves........................ (17,000)
Net unrealized gains (losses) on available-for-sale
securities................................................... 55
Cumulative foreign currency translation adjustments........... --
TOTAL EQUITY CAPITAL.......................................... 229,712
TOTAL LIABILITIES AND EQUITY CAPITAL.......................... $3,242,965
</TABLE>
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM S-4 REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,894
<SECURITIES> 0
<RECEIVABLES> 11,868
<ALLOWANCES> (593)
<INVENTORY> 224
<CURRENT-ASSETS> 21,939
<PP&E> 16,500
<DEPRECIATION> 9,086
<TOTAL-ASSETS> 62,828
<CURRENT-LIABILITIES> 18,163
<BONDS> 3,713
0
0
<COMMON> 331
<OTHER-SE> 39,297
<TOTAL-LIABILITY-AND-EQUITY> 62,828
<SALES> 53,711
<TOTAL-REVENUES> 54,666
<CGS> 33,474
<TOTAL-COSTS> 33,474
<OTHER-EXPENSES> 16,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 401
<INCOME-PRETAX> 4,227
<INCOME-TAX> 1,803
<INCOME-CONTINUING> 2,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,424
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
</TABLE>
