SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 24, 1998
DAY RUNNER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19835 95-3624280
(Commission File Number) (I.R.S. Employer Identification No.)
15295 Alton Parkway
Irvine, CA 92618
(Address of principal executive offices)
Registrant's telephone number, including area code: 714/680-3500
<PAGE>
ITEM 5. OTHER EVENTS.
On September 23, 1998, Day Runner, Inc., a Delaware corporation (the
"Registrant"), and Day Runner UK, plc, a corporation organized under the laws of
the United Kingdom and a wholly-owned subsidairy of the Registrant (the
"Purchaser"), entered into a Revolving Loan Agreement (the "Loan Agreement")
with a bank. The Loan Agreement provides for borrowings through September 30,
2005 (the "Maturity Date"). Borrowings will bear interest either at fixed rates
based on the higher of the bank's prime rate and the Federal Funds Rate
published by the Federal Reserve Bank of New York or at floating rates
calculated by reference to the interest rates at which the bank offers deposits
in US dollars in amounts approximately equal to the amount of the relevant Loan
and for a period of time comparable to the number of days the relevant Loan will
remain outstanding, together with a margin. The maximum amount that may be
outstanding under the Loan Agreement is $160,000,000 through December 31, 2000.
Thereafter, the maximum amount of borrowings that may be outstanding under the
Loan Agreement is reduced by $20,000,000 in 2001 and by $10,000,000 in each of
the following calendar years up to the Maturity Date.
On September 24, 1998, Registrant announced a cash offer (the "Offer")
for Filofax Group plc ("Filofax"), a UK-based company traded on the London Stock
Exchange. The offer is for (pound)2.00 (approximately US $3.36) per share for a
total of approximately US $80,500,000. The acquisition is being made pursuant
to a tender offer by Purchaser to purchase all of the outstanding ordinary
shares of stock of Filofax.
The Offer has not been recommended by Filofax's Board of Directors. The
proposed acquisition will be funded by bank debt pursuant to the Loan Agreement.
Consummation of the Company's Offer is subject to, among other things,
the acceptance of Filofax's stockholders, regulatory approvals and the
satisfaction or waiver of various other conditions. There can be no assurance
that the acquisition will be consummated, or as to the terms on which it may be
consummated.
Copies of the Revolving Loan Agreement, Registrant's fiscal 1998
audited financial statements and the related press releases announcing the Offer
are attached as exhibits hereto and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Item No. Exhibit Index
10.1 Revolving Loan Agreement dated September 23, 1998
between the Registrant, Purchaser and Wells Fargo
Bank, National Association, including Revolving Line
of Credit Note
27.1 Financial Data Schedule
99.1 Fiscal 1998 audited financial statements of the
Registrant
99.2 Press Release (US version) issued September 24, 1998
by the Registrant
99.3 Press Release (UK version) issued September 24, 1998
by the Registrant
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAY RUNNER, INC.
by: /s/ JAMES E. FREEMAN, Jr.
-----------------------------
James E. Freeman, Jr.
Chief Executive Officer
Dated: September 24, 1998
EXHIBIT INDEX
Exhibit Number Description Page No.
10.1 Revolving Loan Agreement dated September 23, 1998
between the Registrant, Purchaser and Wells Fargo
Bank, National Association, including Revolving
Line of Credit Note
27.1 Financial Data Schedule
99.1 Fiscal 1998 audited financial statements of the Registrant
99.2 Press Release (US version) issued September 24, 1998
by the Registrant
99.3 Press Release (UK version) issued September 24, 1998
by the Registrant
EXHIBIT 10.1
EXECUTION COPY
REVOLVING LOAN AGREEMENT
Dated as of September 23, 1998
among
DAY RUNNER, INC.
ULTIMA DISTRIBUTION INC.
and
DAY RUNNER UK plc
as Borrowers
THE LENDERS HEREIN NAMED
as Lenders
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
1.1. Defined Terms..............................................................................1
1.2. Use of Defined Terms......................................................................28
1.3. Accounting Terms..........................................................................28
1.4. Rounding..................................................................................28
1.5. Exhibits and Schedules....................................................................28
1.6. References to.............................................................................28
1.7. Miscellaneous Terms.......................................................................28
ARTICLE 2 LOANS AND LETTERS OF CREDIT............................................................................29
2.1. Syndicated Loans..........................................................................29
2.2. Money Market Loans........................................................................30
2.3. Foreign Currency Loans....................................................................34
2.4. Type of Loans.............................................................................35
2.5. Funding of Loans..........................................................................35
2.6. Notes.....................................................................................36
2.7. Letters of Credit.........................................................................36
2.8. Voluntary Reduction of Commitments........................................................40
2.9. Swing Line Loans..........................................................................40
2.10. Guaranty.................................................................................42
ARTICLE 3 PAYMENTS AND FEES......................................................................................42
3.1. Interest..................................................................................42
3.2. Principal.................................................................................43
3.3. Commitment Fee............................................................................44
3.4. Administrative Agent Fees.................................................................44
3.5. Letter of Credit Fees.....................................................................44
3.6. Increased Commitment Costs................................................................45
3.7. Eurodollar Costs and Related Matters......................................................45
3.8. Foreign Currency Costs and Related Matters................................................49
3.9. Late Payments.............................................................................51
3.10. Computation of Interest and Fees.........................................................51
3.11. Non-Banking Days.........................................................................52
3.12. Manner and Treatment of Payments.........................................................52
3.13. Funding Sources..........................................................................53
3.14. Failure to Charge Not Subsequent Waiver..................................................53
3.15. Administrative Agent's Right to Assume Payments Will be Made.............................53
3.16. Fee Determination Detail.................................................................54
3.17. Survivability............................................................................54
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.........................................................................54
4.1. Existence and Qualification; Power; Compliance With Laws..................................54
4.2. Authority; Compliance With Other Agreements and Instruments and Government
Regulations...........................................................................55
4.3. No Governmental Approvals Required........................................................55
4.4. Subsidiaries..............................................................................55
4.5. Financial Statements......................................................................56
4.6. No Other Liabilities; No Material Adverse Changes.........................................56
4.7. Title to Property.........................................................................56
4.8. Intangible Assets.........................................................................57
4.9. Public Utility Holding Company Act........................................................57
4.10. Litigation...............................................................................57
4.11. Binding Obligations......................................................................57
4.12. No Default...............................................................................57
4.13. ERISA....................................................................................57
4.14. Regulations U and X; Investment Company Act..............................................58
4.15. Disclosure...............................................................................58
4.16. Tax Liability............................................................................58
4.17. Projections..............................................................................58
4.18. Environmental Matters....................................................................59
4.19. Solvency.................................................................................59
4.20. Year 2000 Matters........................................................................59
ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS)..............................60
5.1. Payment of Taxes and Other Potential Liens................................................60
5.2. Preservation of Existence.................................................................60
5.3. Maintenance of Properties.................................................................60
5.4. Maintenance of Insurance..................................................................61
5.5. Compliance With Laws......................................................................61
5.6. Inspection Rights.........................................................................61
5.7. Keeping of Records and Books of Account...................................................61
5.8. Compliance With Agreements................................................................61
5.9. Use of Proceeds...........................................................................61
5.10. Hazardous Materials Laws.................................................................61
5.11. Additional Borrowers and Additional Subsidiaries.........................................62
5.12. Syndication Process......................................................................63
5.13. Tender Offer.............................................................................63
5.14. Funded Debt..............................................................................64
ARTICLE 6 NEGATIVE COVENANTS.....................................................................................64
6.1. Payment of Subordinated Obligations.......................................................64
6.2. Disposition of Property...................................................................65
6.3. Mergers...................................................................................65
6.4. Hostile Acquisitions......................................................................65
6.5. Acquisitions..............................................................................65
6.6. Distributions.............................................................................65
6.7. ERISA.....................................................................................66
6.8. Change in Nature of Business..............................................................66
6.9. Liens and Sale Leasebacks.................................................................66
6.10. Indebtedness and Guaranty Obligations....................................................67
6.11. Transactions with Affiliates.............................................................67
6.12. Funded Debt Ratio........................................................................68
6.13. Fixed Charge Coverage Ratio..............................................................68
6.14. Stockholders' Equity.....................................................................68
6.15. Investments..............................................................................68
6.16. Capital Expenditures.....................................................................69
6.17. Payment Restrictions Affecting Subsidiaries..............................................69
6.18. Lease Obligations........................................................................69
ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS.................................................................70
7.1. Financial and Business Information........................................................70
7.2. Compliance Certificates...................................................................72
ARTICLE 8 CONDITIONS 72
8.1. Closing Date and Effectiveness of Commitment..............................................72
8.2. Tender Offer Loans........................................................................74
8.3. General Purpose Loans.....................................................................75
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT...................................................75
9.1. Events of Default.........................................................................75
9.2. Remedies Upon Event of Default............................................................77
9.3. Certain Funds Period......................................................................78
ARTICLE 10 THE ADMINISTRATIVE AGENT..............................................................................78
10.1. Appointment and Authorization............................................................78
10.2. Administrative Agent and Affiliates......................................................79
10.3. Lenders' Credit Decisions................................................................79
10.4. Action by Administrative Agent...........................................................79
10.5. Liability of Administrative Agent........................................................80
10.6. Indemnification..........................................................................81
10.7. Successor Administrative Agent...........................................................82
10.8. No Obligations of Borrowers..............................................................82
ARTICLE 11 MISCELLANEOUS.........................................................................................83
11.1. Cumulative Remedies; No Waiver...........................................................83
11.2. Amendments; Consents.....................................................................83
11.3. Costs, Expenses and Taxes................................................................84
11.4. Nature of Lenders' Obligations...........................................................85
11.5. Survival of Representations and Warranties...............................................85
11.6. Notices..................................................................................85
11.7. Execution of Loan Documents..............................................................85
11.8. Binding Effect; Assignment...............................................................86
11.9. Right of Setoff..........................................................................88
11.10. Sharing of Setoffs......................................................................88
11.11. Indemnity by Borrowers..................................................................89
11.12. Nonliability of the Lenders.............................................................90
11.13. No Third Parties Benefited..............................................................90
11.14. Confidentiality.........................................................................91
11.15. Further Assurances......................................................................91
11.16. Integration.............................................................................91
11.17. Governing Law...........................................................................91
11.18. Severability of Provisions..............................................................92
11.19. Headings................................................................................92
11.20. Time of the Essence.....................................................................92
11.21. Foreign Lenders and Participants........................................................92
11.22. Joint and Several Liability.............................................................92
11.23. Removal of a Lender.....................................................................93
11.24. Waiver of Right to Trial by Jury........................................................94
11.25. Purported Oral Amendments...............................................................94
</TABLE>
<PAGE>
EXHIBITS
Exhibit Number Exhibit Name
Exhibit A Form of Borrower Guaranty
Exhibit B Form of Commitments Assignment and Acceptance
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Opinion of Orrick, Herrington & Sutcliffe
Exhibit D-2 Form of Opinion of Skadden, Arps, Slate,
Meagher & Flom
Exhibit E Form of Pricing Certificate
Exhibit F Form of Request for Letter of Credit
Exhibit G Form of Subsidiary Guaranty
Exhibit H Notice of Syndicated Loan
Exhibit I Form of Money Market Quote Request
Exhibit J Form of Invitation for Money Market Quotes
Exhibit K Form of Money Market Quote
Exhibit L Notice of Money Market Loan
Exhibit M Form of Note
Exhibit N Notice of Swingline Loan
<PAGE>
SCHEDULES
Schedule Number Schedule Name
Schedule 1.1A Existing Letters of Credit
Schedule 1.1B Lender Pro Rata Shares
Schedule 4.1 Borrowers
Schedule 4.4 Subsidiaries
Schedule 4.6 Funded Debt
Schedule 4.7 Liens
Schedule 6.10 Existing Indebtedness
Schedule 6.16 Existing Investments
<PAGE>
REVOLVING LOAN AGREEMENT
Dated as of September 23, 1998
This REVOLVING LOAN AGREEMENT ("Agreement") is entered into by and
among Day Runner, Inc., a Delaware corporation ("Day Runner"), Ultima
Distribution Inc., a Canadian corporation and a wholly-owned subsidiary of Day
Runner ("Ultima"), Day Runner UK plc, a company incorporated with limited
liability under the laws of England and Wales and a wholly-owned subsidiary of
Day Runner ("Bidco"), each lender whose name is set forth on the signature pages
of this Agreement and each lender which may hereafter become a party to this
Agreement pursuant to Section 11.8 (collectively, the "Lenders" and
individually, a "Lender"), and Wells Fargo Bank, National Association, as
Administrative Agent and Issuing Lender.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.2.
"Acquisition" means any transaction, or any series of related
transactions, consummated after the Closing Date, by which any Borrower and/or
any of its Subsidiaries directly or indirectly (a) acquires any ongoing business
or all or substantially all of the assets of any Person engaged in any ongoing
business, whether through purchase of assets, merger or otherwise, (b) acquires
control of securities of a Person engaged in an ongoing business, which, when
aggregated with other securities controlled by such Borrower and/or such
Subsidiary, represent more than 50% of the ordinary voting power for the
election of directors or other governing body if the business affairs of such
Person are managed by a board of directors or other governing body or (c)
acquires control of more than 50% of the ownership interest in any partnership,
joint venture, limited liability company, business trust or other Person engaged
in an ongoing business that is not managed by a board of directors or other
governing body.
"Acquisition Purchase Price" means, with respect to any Acquisition by
any Borrower or any Subsidiary, the purchase price paid by such Borrower or such
Subsidiary in connection with such Acquisition, whether in Cash, Property
(valued at fair market value) or capital stock of such Person, and including
without limitation (a) the principal amount of any Indebtedness assumed by any
Borrower or any Subsidiary of any Borrower in connection with such Acquisition
and (b) the principal amount of any Funded Debt of any Person acquired, or with
respect to whom securities are acquired, pursuant to such Acquisition.
"Adjusted Eurodollar Rate" applicable to any Interest Period means a
rate per annum equal to the quotient obtained (rounded upward, if necessary, to
the next higher 1/100 of 1%) by dividing (i) the applicable Eurodollar Rate by
(ii) 1.00 minus the Eurodollar Reserve Percentage.
"Administrative Agent" means Wells Fargo Bank, National Association,
when acting in its capacity as the Administrative Agent under any of the Loan
Documents, or any successor Administrative Agent.
"Administrative Agent's Office" means the Administrative Agent's
address as set forth on the signature pages of this Agreement, or such other
address as the Administrative Agent hereafter may designate by written notice to
the Borrowers and the Lenders.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (and the correlative terms,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); provided that, in any event, any
Person that owns, directly or indirectly, 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation that has more than 100 record holders of such securities, or 20% or
more of the partnership or other ownership interests of any other Person that
has more than 100 record holders of such interests, will be deemed to be an
Affiliate of such corporation, partnership or other Person.
"Aggregate Effective Amount" means as of any date of determination and
with respect to all Letters of Credit then outstanding, the sum of (a) the
aggregate effective face amounts of all such Letters of Credit not then paid by
the Issuing Lender plus (b) the aggregate amounts paid by the Issuing Lender
under such Letters of Credit not then reimbursed to the Issuing Lender by
Borrowers.
"Agreement" means this Revolving Loan Agreement as it may from time to
time be supplemented, modified, amended, restated or extended.
"Alternate Base Rate" means, as of any date of determination, the rate
per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the
higher of (a) the Prime Rate in effect on such date or (b) the Federal Funds
Rate in effect on such date plus 1/2 of 1% (50 basis points).
"Alternate Base Rate Loan" means a Loan made hereunder and specified to
be an Alternate Base Rate Loan in accordance with Article 2.
"Applicable Base Rate Margin" means (a) for the Initial Pricing Period,
zero (0), (b) for the Second Pricing Period, the interest rate margin set forth
below (expressed in basis points per annum) opposite the Applicable Pricing
Level for the Fiscal Quarter ending on September 30, 1998 and (c) for each
Pricing Period thereafter, the interest rate margin set forth below (expressed
in basis points per annum) opposite the Applicable Pricing Level for the Fiscal
Quarter ending 55 days prior to the commencement of such Pricing Period:
-------------------------------- ---------------------------
Applicable Pricing Level Margin
-------------------------------- ---------------------------
-------------------------------- ---------------------------
I 0
-------------------------------- ---------------------------
-------------------------------- ---------------------------
II 0
-------------------------------- ---------------------------
-------------------------------- ---------------------------
III 12.5
-------------------------------- ---------------------------
-------------------------------- ---------------------------
IV 25.0
-------------------------------- ---------------------------
-------------------------------- ---------------------------
V 50.0
-------------------------------- ---------------------------
Any change in the Applicable Base Rate Margin based on a change in the
Applicable Pricing Level shall be effective immediately after the receipt by the
Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter
ending 55 days prior to the commencement of such Pricing Period; provided, that
(i) in the event that the Borrowers do not deliver a Pricing Certificate with
respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then
until (but only until) such Pricing Certificate is delivered the Applicable
Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is
subsequently determined to be in error, then any resulting change in the
Applicable Pricing Level shall be made retroactively to the beginning of the
relevant Pricing Period.
"Applicable Commitment Fee Rate" means (a) for the Initial Pricing
Period, 30 basis points per annum, (b) for the Second Pricing Period, the
commitment fee rate forth below (expressed in basis points per annum) opposite
the Applicable Pricing Level for the Fiscal Quarter ending on September 30, 1998
and (c) for each subsequent Pricing Period, the rate set forth below (expressed
in basis points per annum) opposite the Applicable Pricing Level for the Fiscal
Quarter ending 55 days prior to the commencement of such Pricing Period:
-------------------------------- ---------------------------
Applicable Pricing Level Commitment Fee Rate
-------------------------------- ---------------------------
-------------------------------- ---------------------------
I 22.50
-------------------------------- ---------------------------
-------------------------------- ---------------------------
II 25.00
-------------------------------- ---------------------------
-------------------------------- ---------------------------
III 30.00
-------------------------------- ---------------------------
-------------------------------- ---------------------------
IV 37.50
-------------------------------- ---------------------------
-------------------------------- ---------------------------
V 50.00
-------------------------------- ---------------------------
Any change in the Applicable Commitment Fee Rate based on a change in the
Applicable Pricing Level shall be effective immediately after the receipt by the
Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter
ending 55 days prior to the commencement of such Pricing Period; provided, that
(i) in the event that the Borrowers do not deliver a Pricing Certificate with
respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then
until (but only until) such Pricing Certificate is delivered the Applicable
Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is
subsequently determined to be in error, then any resulting change in the
Applicable Pricing Level shall be made retroactively to the beginning of the
relevant Pricing Period.
"Applicable Eurodollar Rate Margin" means (a) for the Initial Pricing
Period, 112.5 basis points per annum, (b) for the Second Pricing Period, the
interest rate margin set forth below (expressed in basis points per annum)
opposite the Applicable Pricing Level for the Fiscal Quarter ending on September
30, 1998 and (c) for each subsequent Pricing Period, the interest rate margin
set forth below (expressed in basis points per annum) opposite the Applicable
Pricing Level for the Fiscal Quarter ending 55 days prior to the commencement of
such Pricing Period::
-------------------------------- ---------------------------
Applicable Pricing Level Margin
-------------------------------- ---------------------------
-------------------------------- ---------------------------
I 75
-------------------------------- ---------------------------
-------------------------------- ---------------------------
II 100
-------------------------------- ---------------------------
-------------------------------- ---------------------------
III 112.5
-------------------------------- ---------------------------
-------------------------------- ---------------------------
IV 125
-------------------------------- ---------------------------
-------------------------------- ---------------------------
V 150
-------------------------------- ---------------------------
Any change in the Applicable Eurodollar Rate Margin based on a change in the
Applicable Pricing Level shall be effective immediately after the receipt by the
Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter
ending 55 days prior to the commencement of such Pricing Period; provided, that
(i) in the event that the Borrowers do not deliver a Pricing Certificate with
respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then
until (but only until) such Pricing Certificate is delivered the Applicable
Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is
subsequently determined to be in error, then any resulting change in the
Applicable Pricing Level shall be made retroactively to the beginning of the
relevant Pricing Period.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of an Alternate Base Rate Loan and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
"Applicable Pricing Level" means the pricing level set forth below
opposite the Funded Debt Ratio as of the last day of the Fiscal Quarter most
recently ended:
<TABLE>
<CAPTION>
<S> <C>
--------------------- ---------------------------------------------------------------------------
Pricing Level Funded Debt Ratio
--------------------- ----------------------------------------------------------------------------
--------------------- ----------------------------------------------------------------------------
I Less than or equal to 2.00 to 1.00
--------------------- ----------------------------------------------------------------------------
--------------------- ----------------------------------------------------------------------------
II Greater than 2.00 to 1.00, but less than or equal to 2.50 to 1.00
--------------------- ----------------------------------------------------------------------------
--------------------- ----------------------------------------------------------------------------
III Greater than 2.50 to 1.00, but less than or equal to 3.00 to 1.00
--------------------- ----------------------------------------------------------------------------
--------------------- ----------------------------------------------------------------------------
IV Greater than 3.00 to 1.00, but less than or equal to 3.50 to 1.00
--------------------- ----------------------------------------------------------------------------
--------------------- ----------------------------------------------------------------------------
V Greater than 3.50 to 1.00;
--------------------- ----------------------------------------------------------------------------
</TABLE>
provided that (i) in the event that the Borrowers do not deliver a Pricing
Certificate with respect to any Fiscal Quarter within the time set forth in
Section 7.1(b), then until (but only until) such Pricing Certificate is
delivered the Applicable Pricing Level shall be Pricing Level V and (ii) if any
Pricing Certificate is subsequently determined to be in error, then any
resulting change in the Applicable Pricing Level shall be made retroactively to
the beginning of the relevant Fiscal Quarter.
"Applicable Standby Letter of Credit Fee Rate" means, as of any date of
determination, the then effective Applicable Eurodollar Rate Margin.
"Arranger" means Wells Fargo Bank, National Association.
"Banking Day" means any Monday, Tuesday, Wednesday, Thursday or Friday,
other than a day on which banks are authorized or required to be closed in
California or New York.
"Bidco" has the meaning set forth in the preamble hereto.
"Bidco Loan Sublimit" means the aggregate amount necessary to purchase
or otherwise acquire Target Shares pursuant to and in accordance with the terms
of this Agreement.
"Borrower Guaranties" means the collective reference to each Guaranty
substantially in the form of Exhibit A executed by each of the Borrowers,
delivered pursuant to Article 8 and, to the extent applicable, Section 5.11 by
each Borrower, as the same may be amended, supplemented or otherwise modified
from time to time.
"Borrower" means each of Day Runner, Ultima and Bidco, and each
additional Borrower pursuant to Section 5.11, and "Borrowers" is a collective
reference to all of the Borrowers.
"Capital Expenditure" means any expenditure by any Borrower or any of
its Subsidiaries for or related to fixed assets or purchased intangibles that is
treated as a capital expenditure under GAAP, including any amount which is
required to be treated as an asset subject to a Capital Lease Obligation.
"Capital Lease" means any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease.
"Capital Lease Obligations" means all monetary obligations of a Person
under any Capital Lease.
"Cash" means, when used in connection with any Person, all monetary and
non-monetary items owned by that Person that are treated as cash in accordance
with GAAP, consistently applied.
"Cash Equivalents" means, when used in connection with any Person, that
Person's Investments in:
(a) Government Securities due within one year after
the date of the making of the Investment;
(b) readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such State or any
public agency or instrumentality thereof given on the date of such Investment a
credit rating of at least Aa by Moody's Investors Service, Inc. or AA by
Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in each case
due within one year from the making of the Investment;
(c) certificates of deposit issued by, bank deposits in,
eurodollar deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by any Lender or any bank incorporated
under the Laws of the United States of America, any State thereof or the
District of Columbia and having on the date of such Investment combined capital,
surplus and undivided profits of at least $250,000,000, or total assets of at
least $5,000,000,000, in each case due within one year after the date of the
making of the Investment;
(d) certificates of deposit issued by, bank deposits in,
eurodollar deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by any Lender or any branch or office
located in the United States of America of a bank incorporated under the Laws of
any jurisdiction outside the United States of America having on the date of such
Investment combined capital, surplus and undivided profits of at least
$500,000,000, or total assets of at least $15,000,000,000, in each case due
within one year after the date of the making of the Investment;
(e) readily marketable commercial paper or other debt
securities issued by corporations doing business in and incorporated under the
Laws of the United States of America or any State thereof or of any corporation
that is the holding company for a bank described in clause (c) or (d) above
given on the date of such Investment a credit rating of at least P-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Rating Group (a division of
McGraw-Hill, Inc.), in each case due within one year after the date of the
making of the Investment;
(f) a readily redeemable "money market mutual fund" sponsored
by a bank described in clause (c) or (d) hereof, or a broker or dealer
registered under Section 15(b) of the Securities Exchange Act of 1934, as
amended, having on the date of the Investment capital of at least $50,000,000,
that has and maintains an investment policy limiting its investments primarily
to instruments of the types described in clauses (a) through (e) hereof and
given on the date of such Investment a credit rating of at least Aa by Moody's
Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of
McGraw-Hill, Inc.);
(g) corporate notes or bonds having an original term to
maturity of not more than one year issued by a corporation incorporated under
the Laws of the United States of America, or a participation interest therein;
provided that (i) commercial paper issued by such corporation is given on the
date of such Investment a credit rating of at least Aa by Moody's Investors
Service, Inc. and AA by Standard & Poor's Rating Group (a division of
McGraw-Hill, Inc.), (ii) the amount of all such Investments issued by the same
issuer does not exceed $5,000,000 and (iii) the aggregate amount of all such
Investments does not exceed $15,000,000; and
(h) any security denominated in pounds sterling issued by or
on behalf of the government of the United Kingdom or any other unsubordinated
security, investment or instrument which is denominated in pounds sterling, has
a maturity of less than one year, and is given on the date of such Investment a
credit rating of at least P-1 by Moody's Investor's Service, Inc. or A-1 by
Standard & Poor's Ratings Group (a division of McGraw-Hill, Inc.).
"Certain Funds Period" means the period beginning on the Tender Offer
Commencement Date and ending on (a) if the condition specified in Section 429(1)
of the Companies Act for giving a notice under that sub-section in respect of
any Target Shares is not satisfied at the end of the period of four months
beginning with the date on which the offer document by which the Tender Offer is
made is distributed to holders of Target Shares, the twenty-eighth day following
the expiry of such four month period; or, as the case may be, (b) if such
condition is satisfied within such four month period, the third Banking Day
after the later of (i) the expiry of six weeks from the date on which such
condition is satisfied and (ii) the Tender Offer Termination Date. If, following
the Tender Offer Commencement Date, an offer to acquire the entire issued and to
be issued share capital of Target is commenced by a party other than Day Runner
or any of its Subsidiaries in competition with the Tender Offer, references in
this definition of Certain Funds Period to a period of four months shall be
deemed to be references to a period of seven months.
"Certificate" means a certificate signed by a Senior Officer or
Responsible Official (as applicable) of the Person providing the certificate.
"Change in Control" means (a) any transaction or series of related
transactions in which any Person or two or more Persons acting in concert (other
than a Permitted Stockholder) acquire beneficial ownership (within the meaning
of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of 25% or more of the outstanding Day Runner Common
Stock, (b) Day Runner consolidates with or merges into another Person or
conveys, transfers or leases its properties and assets substantially as an
entirety to any Person or any Person consolidates with or merges into Day
Runner, in either event pursuant to a transaction in which the outstanding Day
Runner Common Stock is changed into or exchanged for cash, securities or other
property, with the effect that any Person becomes the beneficial owner, directly
or indirectly, of 25% or more of Day Runner Common Stock or that the Persons who
were the holders of Day Runner Common Stock immediately prior to the transaction
hold less than 75% of the common stock of the surviving corporation after the
transaction, or (c) during any period of 24 consecutive months, individuals who
at the beginning of such period constituted the board of directors of Day Runner
(together with any new or replacement directors whose election by the board of
directors, or whose nomination for election, was approved by a vote of at least
a majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for reelection was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
"Closing Date" means the time and Banking Day on which the conditions
set forth in Section 8.1 are satisfied or waived. The Administrative Agent shall
notify the Borrowers and the Lenders of the date that is the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended or replaced
and as in effect from time to time.
"Commercial Letter of Credit" means each Letter of Credit issued to
support the purchase of goods by a Borrower which is determined to be a
commercial letter of credit by the Issuing Lender.
<TABLE>
"Commitment" means, subject to Section 2.8, the amounts set forth below
for the indicated time periods:
<CAPTION>
<S> <C>
-------------------------------- ---------------------------------
Time Period Commitment
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 1998 $160,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 1999 $160,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 2000 $160,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 2001 $140,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 2002 $130,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 2003 $120,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Calendar Year 2004 $110,000,000
-------------------------------- ---------------------------------
-------------------------------- ---------------------------------
Nine Months Ended September $110,000,000
30, 2005
-------------------------------- ---------------------------------
</TABLE>
"Commitment Reserve" means, at any time, the aggregate principal amount
of any Tender Offer Notes then outstanding.
"Commitments Assignment and Acceptance" means a commitment assignment
and acceptance substantially in the form of Exhibit B.
"Common Stock" means the common stock of any Borrower or its successor.
"Companies Act" means the Companies Act 1985 of Great Britain.
"Compliance Certificate" means a certificate in the form of Exhibit C,
properly completed and signed by a Senior Officer of Day Runner.
"Contractual Obligation" means, as to any Person, any provision of any
outstanding security issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or any
of its Property is bound.
"Day Runner Common Stock" means the Common Stock of Day Runner or its
successor.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar debtor relief Laws from time to time in
effect affecting the rights of creditors generally.
"Default" means any event that, with the giving of any applicable
notice or passage of time specified in Section 9.1, or both, would be an Event
of Default.
"Default Rate" means the interest rate prescribed in Section 3.9.
"Designated Capital Expenditures" means Capital Expenditures that are
either (i) financed directly or indirectly with the proceeds of a Loan or (ii)
not financed by the relevant Borrower by any third party financing source.
"Designated Deposit Account" means a deposit account to be maintained
by each Borrower with Wells Fargo Bank, National Association or one of its
Affiliates, as from time to time designated by such Borrower by written
notification to the Administrative Agent.
"Designated Eurodollar Market" means, with respect to any Eurodollar
Rate Loan, the London Eurodollar Market.
"Designated Foreign Currency Market" means, with respect to any Foreign
Currency Loan, the Foreign Currency Market designated by the Administrative
Agent as appropriate for that Foreign Currency Loan.
"Designated Funded Debt" has the meaning set forth in Section 5.14.
"Disqualified Stock" means any capital stock, warrants, options or
other rights to acquire capital stock (but excluding any debt security which is
convertible, or exchangeable, for 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, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
Maturity Date.
"Disposition" means the sale, transfer or other disposition in any
single transaction or series of related transactions of any asset, or group of
related assets, of any Borrower or any of its Subsidiaries other than (i)
inventory or Cash Equivalents sold or otherwise disposed of in the ordinary
course of business of such Borrower or such Subsidiary and (ii) equipment sold
or otherwise disposed of where either (x) such equipment is obsolete or no
longer useful in the ordinary course of business of such Borrower or such
Subsidiary or (y) substantially similar equipment in replacement thereof has
theretofore been acquired, or thereafter within 90 days is acquired, by such
Borrower or such Subsidiary.
"Distribution" means, with respect to any shares of capital stock or
any warrant or option to purchase an equity security or other equity security
issued by a Person, (a) any Stock Repurchase by such Person and (b) the
declaration or (without duplication) payment by such Person of any dividend in
Cash or in Property (except for Property constituting capital stock of such
Person that is not Disqualified Stock) on or with respect to any such security.
"Dollars" or "$" means United States of America dollars.
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" next to its signature
hereto, or such other office of such Lender as such Lender may from time to time
specify to the Borrowers and to the Administrative Agent.
"EBITDA" means, with respect to any period, the sum of (a) Net Income
for that period, plus (b) any extraordinary loss included in such Net Income,
minus (c) any extraordinary gain included in such Net Income, plus (d) Interest
Expense of Day Runner and its Subsidiaries for that period, plus (e) the
aggregate amount of taxes on or measured by income of Day Runner and its
Subsidiaries for that period (whether or not payable during that period), plus
(f) depreciation, amortization and all other non-cash expenses of Day Runner and
its Subsidiaries for that period, plus (g) to the extent deducted in determining
such Net Income, the amount of Tender Offer Transaction Expenses in such period,
plus (h) for any period that includes fiscal periods ended on or prior to June
30, 1999, to the extent deducted in determining such Net Income, the aggregate
amount of asset write downs with respect to Target recorded in any of such
fiscal periods, in each case as determined in accordance with GAAP, consistently
applied; provided, however, that, if any Person (or assets comprising
substantially all of a business unit) is or are acquired by Day Runner or any of
its Subsidiaries in a Permitted Acquisition that occurs during such period, such
Permitted Acquisition shall be deemed to have occurred as of the first day of
such period so long as the Administrative Agent has received financial
information for such Person or business unit for such period that is
substantially equivalent to the information described in Section 7.1; provided,
further, that, with respect to any Disposition of a Subsidiary of Day Runner or
division of a Borrower or such a Subsidiary, or any assets that constitute a
business unit or segment of a Borrower or such a Subsidiary, that occurs during
such period, such Disposition shall be deemed to have occurred as of the first
day of such period.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time.
"ERISA Affiliate" means each Person (whether or not incorporated) which
is required to be aggregated with Borrower pursuant to Section 414 of the Code.
"Eurodollar Auction" means a solicitation of Money Market Quotations
setting forth Money Market Margins based on the Eurodollar Rate pursuant to
Section 2.2.
"Eurodollar Banking Day" means any Banking Day on which dealings in
Dollar deposits are conducted by and among banks in the Designated Eurodollar
Market.
"Eurodollar Lending Office" means, as to each Lender, its office or
branch so designated by written notice to the Borrowers and the Administrative
Agent as its Eurodollar Lending Office. If no Eurodollar Lending Office is
designated by a Lender, its Eurodollar Lending Office shall be its office at its
address for purposes of notices hereunder.
"Eurodollar Market" means a regular established market located outside
the United States of America by and among banks for the solicitation, offer and
acceptance of Dollar deposits in such banks.
"Eurodollar Obligations" means eurocurrency liabilities, as defined in
Regulation D or any comparable regulation of any Governmental Agency having
jurisdiction over any Lender.
"Eurodollar Rate" means, with respect to any Eurodollar Rate Loan, the
average of the interest rates per annum (rounded upward, if necessary, to the
next 1/16 of 1%) at which deposits in Dollars are offered to Wells Fargo Bank,
National Association in the Designated Eurodollar Market at or about 11:00 A.M.
local time in the Designated Eurodollar Market, two (2) Eurodollar Banking Days
before the first day of the applicable Eurodollar Period in an aggregate amount
approximately equal to the amount of the Loan to be made by Wells Fargo Bank,
National Association with respect to such Eurodollar Rate Loan and for a period
of time comparable to the number of days in the applicable Eurodollar Period.
"Eurodollar Rate Loan" means a Loan made hereunder and specified to be
a Eurodollar Rate Loan in accordance with Article 2.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (as defined in Regulation D)) or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined.
"Event of Default" shall have the meaning provided in Section 9.1.
"Existing Letters of Credit" means the letters of credit described on
Schedule 1.1A issued under the Prior Loan Agreement.
"Federal Funds Rate" means, as of any date of determination, the rate
set forth in the daily statistical release designated as the Composite 3:30 P.M.
Quotations for U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
the "Composite 3:30 P.M. Quotation") for such date under the caption "Federal
Funds Effective Rate". If on any relevant date the appropriate rate for such
date is not yet published in the Composite 3:30 P.M. Quotations, the rate for
such date will be the arithmetic mean of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 A.M. (New York City time) on that
date by each of three leading brokers of Federal funds transactions in New York
City selected by the Administrative Agent. For purposes of this Agreement, any
change in the Alternate Base Rate due to a change in the Federal Funds Rate
shall be effective as of the opening of business on the effective date of such
change.
"Fiscal Quarter" means the fiscal quarter of Borrowers ending on each
March 31, June 30, September 30 and December 31.
"Fiscal Year" means the fiscal year of Borrowers ending on each June 30.
"Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of (a) EBITDA for the fiscal period consisting of the four
(4) Fiscal Quarters ended on that date, minus Designated Capital Expenditures
made by Day Runner and its Subsidiaries during such fiscal period, minus cash
payments for federal, state, local and foreign taxes actually paid during such
period by Day Runner and its Subsidiaries, minus cash dividends paid during such
period by Day Runner and its Subsidiaries, minus the fair market value of any
Stock Repurchases during such period to (b) the sum of (i) Interest Expense of
Day Runner and its Subsidiaries for such fiscal period plus (ii) the principal
portion of Capital Lease Obligations of Day Runner and its Subsidiaries during
such fiscal period actually paid or required to be paid (without duplication)
during such fiscal period plus (iii) any required principal repayments of
Indebtedness of Day Runner and its Subsidiaries during such fiscal period
(except respect to Intercompany Indebtedness), including without limitation
required principal repayments with respect to the Obligations, minus (iv) the
principal amount of any Indebtedness incurred by Day Runner and its Subsidiaries
during such fiscal period (excluding any Intercompany Indebtedness) the proceeds
of which is used during such period to refinance existing Indebtedness of Day
Runner and its Subsidiaries during such period.
"Foreign Currency" means, with respect to a Foreign Currency Loan or
Foreign Currency Letter of Credit, the foreign currency applicable to that
Foreign Currency Loan or Foreign Currency Letter of Credit.
"Foreign Currency Banking Day" means any Banking Day on which dealings
in deposits in the applicable Foreign Currency are conducted by and among banks
in the Designated Foreign Currency Market.
"Foreign Currency Equivalent" means, as of any date of determination,
the equivalent amount in Dollars of a Foreign Currency Loan or a Foreign
Currency Letter of Credit, as the case may be, using the currency exchange rate
for such date for the applicable Foreign Currency in the New York City wholesale
foreign currency exchange market in trading among banks in amounts of $1,000,000
or more, set at 11:00 A.M. London Time two (2) Foreign Currency Banking Days
prior to the date of determination, or, if not so set for such date, as
otherwise reasonably determined by the Administrative Agent.
"Foreign Currency Letter of Credit" means a Letter of Credit issued or
to be issued in (a) British pounds or Canadian dollars or (b) such other
currency (other than Dollars) as may be acceptable to all of the Lenders in
their sole and absolute discretion.
"Foreign Currency Limitation" means, at any time, fifty percent (50%)
of the Commitment in effect at such time.
"Foreign Currency Loan" means a Loan made or to be made in (a) pounds
sterling or Canadian dollars or (b) such other currency (other than Dollars) as
may be acceptable to all of the Lenders in their sole and absolute discretion.
"Foreign Currency Market" means a regular established market located
outside the United States of America by and among banks for the solicitation,
offer and acceptance of Foreign Currency deposits in such banks.
"Foreign Currency Period" means, as to each Foreign Currency Loan, the
period commencing on the date specified by the applicable Borrower pursuant to
Section 2.3 and ending 1, 2, 3, 6 or 12 months (or, with the written consent of
all of the Lenders, any other period) thereafter, as specified by the applicable
Borrower in the applicable Notice of Syndicated Loan or Notice of Money Market
Loan; provided that:
(a) The first day of any Foreign Currency Period shall be
a Foreign Currency Banking Day;
(b) Any Foreign Currency Period that would otherwise end on a
day that is not a Foreign Currency Banking Day shall be extended to the
immediately succeeding Foreign Currency Banking Day unless such Foreign Currency
Banking Day falls in another calendar month, in which case such Foreign Currency
Period shall end on the immediately preceding Foreign Currency Banking Day;
(c) No Foreign Currency Period shall extend beyond the
Maturity Date.
"Foreign Currency Rate" means, with respect to any Foreign Currency
Rate Loan, the interest rate per annum at which deposits in that Foreign
Currency are offered to the Administrative Agent in the Designated Foreign
Currency Market at 11:00 A.M. (London time) two (2) Foreign Currency Banking
Days before the first day of the applicable Foreign Currency Period in an
aggregate amount approximately equal to the amount of the Loan to be made with
respect to such Foreign Currency Rate Loan and for a period of time comparable
to the number of days in the applicable Foreign Currency Period.
"Foreign Subsidiary" means a Subsidiary of any Borrower that (a) is
organized under the Laws of a jurisdiction other than the United States of
America, any State thereof or the District of Columbia and (b) conducts all or
substantially all of its business outside the United States of America.
"Funded Debt" means, as to any Person (without duplication), (a)
indebtedness of such Person for borrowed money or for the deferred purchase
price of Property (excluding trade and other accounts payable in the ordinary
course of business in accordance with ordinary trade terms), including any
Guaranty Obligation for any such indebtedness, (b) all indebtedness of such
Person evidenced by notes, bonds, debentures, debentures or other similar
instruments, (c) indebtedness of such Person that is non-recourse to the credit
of such Person but is secured by assets of such Person, to the extent of the
fair market value of such assets as determined in good faith by such Person, (d)
the principal portion of Capital Lease Obligations of such Person required under
GAAP to be shown on the balance sheet of such Person, (e) indebtedness of such
Person arising under bankers' acceptance facilities or under facilities for the
discount of accounts receivable of such Person, and (f) any direct or contingent
obligations of such Person under letters of credit issued for the account of
such Person.
"Funded Debt Ratio" means, as of the last day of any Fiscal Quarter,
the ratio of (a) the principal amount of all Funded Debt of each Borrower and
its Subsidiaries on that date to (b) EBITDA for the fiscal period consisting of
the four (4) Fiscal Quarters ended on that date.
"GAAP" means, as of any date of determination, accounting principles
(a) set forth as generally accepted in then currently effective Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, (b) set forth as generally accepted in then currently effective
Statements of the Financial Accounting Standards Board or (c) that are then
approved by such other entity as may be approved by a significant segment of the
accounting profession in the United States of America. The term "consistently
applied," as used in connection therewith, means that the accounting principles
applied are consistent in all material respects with those applied at prior
dates or for prior periods.
"General Purpose Loan" means a Loan permitted hereunder that is not a
Tender Offer Loan.
"Government Securities" means readily marketable (a) direct full faith
and credit obligations of the United States of America or obligations guaranteed
by the full faith and credit of the United States of America and (b) obligations
of an agency or instrumentality of, or corporation owned, controlled or
sponsored by, the United States of America that are generally considered in the
securities industry to be implicit obligations of the United States of America.
"Governmental Agency" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, central
bank, commission, department, instrumentality or public body or (c) any court or
administrative tribunal of competent jurisdiction.
"Guaranty Obligation" means, as to any Person, any (a) guarantee by
that Person of Indebtedness of, or other obligation performable by, any other
Person or (b) assurance given by that Person to an obligee of any other Person
with respect to the performance of an obligation by, or the financial condition
of, such other Person, whether direct, indirect or contingent, including any
purchase or repurchase agreement covering such obligation or any collateral
security therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other Person or any
"keep-well" or other arrangement of whatever nature given for the purpose of
assuring or holding harmless such obligee against loss with respect to any
obligation of such other Person; provided, however, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation in respect of Indebtedness shall be deemed to be an amount equal to
the maximum reasonably anticipated liability in respect thereof as determined by
the Person in good faith. The amount of any other Guaranty Obligation shall be
deemed to be zero unless and until the amount thereof has been (or in accordance
with Financial Accounting Standards Board Statement No. 5 should be) quantified
and reflected or disclosed in the consolidated financial statements (or notes
thereto) of the applicable Borrower or Subsidiary of any Borrower.
"Hazardous Materials" means substances defined as "hazardous
substances" pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., or as "hazardous",
"toxic" or "pollutant" substances or as "solid waste" pursuant to the Hazardous
Materials Transportation Act, 49 U.S.C. (S) 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq., or as "friable
asbestos" pursuant to the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et
seq. or any other applicable Hazardous Materials Law, in each case as such Laws
are amended from time to time.
"Hazardous Materials Laws" means all Laws governing the treatment,
transportation or disposal of Hazardous Materials applicable to any of the Real
Property.
"Indebtedness" means, as to any Person (without duplication), (a) any
Funded Debt of such Person, (b) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any capital
stock of or other ownership or profit interest in such Person or any other
Person or any warrants, rights or options to acquire such capital stock, (c) all
Indebtedness of others referred to in clauses (a) and (b) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered)
or (iv) otherwise to assure a creditor against loss, and (d) all Indebtedness
referred to in clauses (a) through (c) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness.
"Initial Pricing Period" means the period from the Closing Date until
December 22, 1998.
"Intangible Assets" means assets that are considered intangible assets
under GAAP, including customer lists, goodwill, covenants not to compete,
copyrights, trade names, trademarks and patents.
"Intercompany Indebtedness" means any Indebtedness owed (i) by Day
Runner to any of its Subsidiaries, (ii) to any Day Runner Subsidiary by Day
Runner, or (iii) by any Day Runner Subsidiary to any other Day Runner
Subsidiary.
"Interest Expense" means, with respect to Day Runner and its
Subsidiaries as of the last day of any fiscal period, determined on a
consolidated basis, the sum of (a) all interest, fees, charges and related
expenses for that fiscal period by that Person to a lender in connection with
borrowed money (including any obligations for fees, charges and related expenses
payable to the issuer of any letter of credit) or the deferred purchase price of
assets that in each case are considered "interest expense" under GAAP plus (b)
the portion of rent paid or payable (without duplication) for that fiscal period
by that Person under Capital Lease Obligations that should be treated as
interest in accordance with Financial Accounting Standards Board Statement No.
13.
"Interest Period" means: (1) with respect to each Eurodollar Rate Loan,
the period commencing on the date specified by the applicable Borrower pursuant
to Section 2.1(a) and ending 1, 2, 3 or 6 months thereafter, as specified by the
applicable Borrower in the applicable Request for Loan; provided that:
(a) The first day of any Interest Period shall be a Eurodollar
Banking Day;
(b) Any Interest Period that would otherwise end on a day that
is not a Eurodollar Banking Day shall be extended to the immediately succeeding
Eurodollar Banking Day unless such Eurodollar Banking Day falls in another
calendar month, in which case such Eurodollar Period shall end on the
immediately preceding Eurodollar Banking Day; and
(c) No Interest Period shall extend beyond the Maturity Date;
(2) with respect to each Money Market LIBOR Loan, the period commencing
on the date of such Loan and ending such whole number of months thereafter as
the applicable Borrower may elect in accordance with Section 2.2; provided that:
(a)The first day of any Interest Period shall be a Eurodollar
Banking Day;
(b) Any Interest Period that would otherwise end on a day that
is not a Eurodollar Banking Day shall be extended to the immediately succeeding
Eurodollar Banking Day unless such Eurodollar Banking Day falls in another
calendar month, in which case such Eurodollar Period shall end on the
immediately preceding Eurodollar Banking Day; and
(c) No Interest Period shall extend beyond the Maturity Date;
(3) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of such Loan and ending such number of days thereafter
(but not less than 7 days) as the applicable Borrower may elect in accordance
with Section 2.2; provided that no interest period shall extend beyond the
Maturity Date.
"Interest Rate Protection Agreement" means a written agreement between
any Borrower and one or more financial institutions providing for "swap", "cap",
"collar" or other interest rate protection with respect to any Indebtedness.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of a
loan, advance creating a debt, capital contribution, guaranty or other debt or
equity participation or interest in any other Person, including any partnership
and joint venture interests of such Person. The amount of any Investment shall
be the amount actually invested (minus any return of capital with respect to
such Investment which has actually been received in Cash or has been converted
into Cash or a Cash Equivalent), without adjustment for subsequent increases or
decreases in the value of such Investment.
"Issuing Lender" means Wells Fargo Bank, National Association.
"Laws" means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"Lender" means each lender whose name is set forth in the signature
pages of this Agreement and each lender which may hereafter become a party to
this Agreement pursuant to Section 11.8.
"Letters of Credit" means any of the Commercial Letters of Credit or
Standby Letters of Credit issued by the Issuing Lender under the Commitment
pursuant to Section 2.7, as the same may be supplemented, modified, amended,
renewed, extended or supplanted.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, lien or charge of any
kind, whether voluntarily incurred or arising by operation of Law or otherwise,
affecting any Property, including any conditional sale or other title retention
agreement, any lease in the nature of a security interest.
"Loan" means a Syndicated Loan or a Money Market Loan (including
without limitation any such Syndicated Loan or Money Market Loan that is also a
Foreign Currency Loan) and "Loans" includes all of the foregoing.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Borrower Guaranty, the Subsidiary Guaranty and any other agreements of any type
or nature hereafter executed and delivered by any Borrower or any of their
respective Subsidiaries to the Administrative Agent or to any Lender in any way
relating to or in furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be supplemented,
modified, amended, restated, extended or supplanted.
"Loan Sublimit" means, with respect to any Borrower, the amount set
forth below opposite the name of such Borrower, which amount is the maximum
amount of Obligations available to be extended to such Borrower:
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------- ------------------------------
Borrower Sublimit
------------------------------------------- ------------------------------
------------------------------------------- ------------------------------
Day Runner $160,000,000
------------------------------------------- ------------------------------
------------------------------------------- ------------------------------
Bidco Bidco Loan Sublimit
------------------------------------------- ------------------------------
------------------------------------------- ------------------------------
Ultima Distribution Inc. $2,000,000
------------------------------------------- ------------------------------
</TABLE>
"Margin Stock" means "margin stock" as such term is defined in
Regulation U.
"Material Adverse Effect" means any circumstance or event, or series of
circumstances or events which (a) has had or could reasonably be expected to
have any material adverse effect whatsoever upon the validity or enforceability
of any Loan Document, (b) has been or could reasonably be expected to be
material and adverse to the business, condition (financial or otherwise),
operations, performance, Properties or prospects of Day Runner or Day Runner and
its Subsidiaries, taken as a whole or (c) has materially impaired or could
reasonably be expected to materially impair the ability of any Borrower to
perform the Obligations.
"Material Subsidiary" means a Subsidiary of Day Runner either (x)
owning at least five percent (5%) of the consolidated assets of Day Runner and
its Subsidiaries as of the end of the immediately prior Fiscal Quarter or (y) as
of the last day of any Fiscal Quarter, generating at least five percent (5%) of
the consolidated net sales of Day Runner and its Subsidiaries for the fiscal
period consisting of the four (4) Fiscal Quarters ended on that date.
"Maturity Date" means September 30, 2005.
"Money Market Absolute Rate" has the meaning set forth in Section 2.2.
"Money Market Absolute Rate Loan" means a loan made or to be made by a
Lender pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Lender, its office or
branch so designated by written notice to the Borrowers and the Administrative
Agent; provided that any Lender may from time to time by notice to the Borrowers
and the Administrative Agent designate separate Money Market Lending Offices for
its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute
Rate Loans, on the other hand, in which case all references herein to the Money
Market Lending office of such Lender shall be deemed to refer to either or both
of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Lender
pursuant to a Eurodollar Auction.
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.2(d).
"Money Market Quote" means an offer by a Lender to make a Money Market
Loan in accordance with Section 2.2.
"Multiemployer Plan" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA to which any Borrower or any of its
ERISA Affiliates contributes or is obligated to contribute.
"Net Cash Issuance Proceeds" means, with respect to the issuance of any
debt security or equity security by a Borrower or any of its Subsidiaries, the
Cash proceeds received by or for the account of a Borrower or such Subsidiary in
consideration of such issuance net of (a) underwriting discounts and commissions
actually paid to any Person not an Affiliate of any Borrower and (b) reasonable
professional fees and disbursements actually paid in connection therewith.
"Net Cash Sales Proceeds" means, with respect to any Disposition, the
sum of (a) the Cash proceeds received by or for the account of the Borrowers and
their respective Subsidiaries from such Disposition plus (b) the amount of Cash
received by or for the account of the Borrowers and their respective
Subsidiaries upon the sale, collection or other liquidation of any proceeds that
are not Cash from such Disposition, in each case net of (i) any amount required
to be paid to any Person owning an interest in the assets disposed of, (ii) any
amount applied to the repayment of Indebtedness secured by a Lien permitted
under Section 6.9 on the asset disposed of, (iii) any transfer, income or other
taxes payable as a result of such Disposition, (iv) reasonable professional fees
and expenses, fees due to any Governmental Agency, broker's commissions and
other out-of-pocket costs of sale actually paid to any Person that is not an
Affiliate of any Borrower attributable to such Disposition and (v) any reserves
established in accordance with GAAP in connection with such Disposition.
"Net Income" means, with respect to any period, the consolidated net
income of Day Runner and its Subsidiaries for that period, determined in
accordance with GAAP, consistently applied; provided, however, for any such
period for which net income of Target is included in such consolidated net
income, the net income of Target shall be determined without giving effect to
any increase in cost of goods sold attributable to any increase in the book
value of Target's inventory in connection with the acquisition of Target.
"Note" and "Notes" have the meanings set forth in Section 2.6(a).
"Notice of Money Market Loan" has the meaning set forth in Section
2.2(f).
"Notice of Syndicated Loan" has the meaning set forth in Section 2.1(b).
"Obligations" means all present and future obligations of every kind or
nature of the Borrowers or any of their respective Subsidiaries at any time and
from time to time owed to the Administrative Agent or the Lenders or any one or
more of them, under any one or more of the Loan Documents, whether due or to
become due, matured or unmatured, liquidated or unliquidated, or contingent or
noncontingent, including obligations of performance as well as obligations of
payment, and including interest that accrues after the commencement of any
proceeding under any Debtor Relief Law by or against any Borrower or any of its
Subsidiaries.
"Opinions of Counsel" means the favorable written legal opinions of
Orrick, Herrington & Sutcliffe and Skadden, Arps, Slate, Meagher & Flom, counsel
to the Borrowers and their Subsidiaries, substantially in the forms of Exhibits
D-1 and D-2.
"Panel" means the U.K. Panel on Takeovers and Mergers.
"Party" means any Person other than the Administrative Agent and the
Lenders, which now or hereafter is a party to any of the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereof established under ERISA.
"Pension Plan" means any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, which is
subject to Title IV of ERISA and is maintained by any Borrower or to which any
Borrower contributes or has an obligation to contribute.
"Permitted Acquisition" means (a) the Acquisition by Bidco of the
Target Shares pursuant to the Tender Offer; (b) the Acquisition by Bidco of the
Target Shares in accordance with the provisions of Sections 428-430F of the
Companies Act; (c) the Acquisition by Bidco of Target Shares outside the Tender
Offer; (d) the Acquisition by Day Runner of any Subsidiary of Day Runner (not
being an Acquisition falling within sub-clauses (a) to (c) above), (e) the
Acquisition of any existing Subsidiary of Day Runner by any Subsidiary
Guarantor; (f) the Acquisition (not being an Acquisition falling within
sub-clauses (a) to (c) above) by a Borrower or one of its Subsidiaries of a
Person engaged in the same or a closely-related line of business as either Day
Runner or such Borrower (provided that with respect to any Acquisition pursuant
to this clause (f), after giving effect thereto, the aggregate Acquisition
Purchase Prices paid by the Borrowers and their Subsidiaries do not exceed
$15,000,000 for all Acquisitions made by the Borrowers and their Subsidiaries
pursuant to this clause (f) during the preceding twelve (12) month period);
provided, further, that with respect to any such Acquisition pursuant to clauses
(d), (e), or (f), no Event of Default then exists or would result from such
Acquisition); and (g) any other Acquisition approved in accordance with the
terms hereof by the Requisite Lenders.
"Permitted Encumbrances" means:
(a) Inchoate Liens incident to construction on or maintenance
of Property; or Liens incident to construction on or maintenance of Property now
or hereafter filed of record for which adequate reserves have been set aside (or
deposits made pursuant to applicable Law) and which are being contested in good
faith by appropriate proceedings and have not proceeded to judgment, provided
that, by reason of nonpayment of the obligations secured by such Liens, no such
Property is subject to a material impending risk of loss or forfeiture;
(b) Liens for taxes and assessments on Property which are not
yet delinquent; or Liens for taxes and assessments on Property for which
adequate reserves have been set aside and are being contested in good faith by
appropriate proceedings, provided that, by reason of nonpayment of the
obligations secured by such Liens, no such Property is subject to a material
impending risk of loss or forfeiture;
(c) defects and irregularities in title to any Property which
in the aggregate do not materially impair the fair market value or use of the
Property for the purposes for which it is or may reasonably be expected to be
held;
(d) easements, exceptions, reservations, or other agreements
for the purpose of pipelines, conduits, cables, wire communication lines, power
lines and substations, streets, trails, walkways, drainage, irrigation, water,
and sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or
other minerals, and other like purposes affecting Property which in the
aggregate do not materially burden or impair the fair market value or use of
such Property for the purposes for which it is or may reasonably be expected to
be held;
(e) easements, exceptions, reservations, or other agreements
for the purpose of facilitating the joint or common use of Property in or
adjacent to a shopping center or similar project affecting Property which in the
aggregate do not materially burden or impair the fair market value or use of
such Property for the purposes for which it is or may reasonably be expected to
be held;
(f) rights reserved to or vested in any Governmental Agency to
control or regulate, or obligations or duties to any Governmental Agency with
respect to, the use of any Property;
(g) rights reserved to or vested in any Governmental Agency to
control or regulate, or obligations or duties to any Governmental Agency with
respect to, any right, power, franchise, grant, license, or permit;
(h) present or future zoning laws and ordinances or other laws
and ordinances restricting the occupancy, use, or enjoyment of Property;
(i) statutory Liens, other than those described in clauses (a)
or (b) above, arising in the ordinary course of business with respect to
obligations which are not delinquent or are being contested in good faith,
provided that, if delinquent, adequate reserves have been set aside with respect
thereto and, by reason of nonpayment, no Property is subject to a material
impending risk of loss or forfeiture;
(j) covenants, conditions, and restrictions affecting the use
of Property which in the aggregate do not materially impair the fair market
value or use of the Property for the purposes for which it is or may reasonably
be expected to be held;
(k) rights of tenants under leases and rental agreements
covering Property entered into in the ordinary course of business of the Person
owning such Property;
(l) Liens consisting of pledges or deposits to secure
obligations under workers' compensation laws or similar legislation, including
Liens of judgments thereunder which are not currently dischargeable;
(m) Liens consisting of pledges or deposits of Property to
secure performance in connection with operating leases made in the ordinary
course of business, provided the aggregate value of all such pledges and
deposits in connection with any such lease does not at any time exceed 20% of
the annual fixed rentals payable under such lease;
(n) Liens consisting of deposits of Property to secure bids
made with respect to, or performance of, contracts (other than contracts
creating or evidencing an extension of credit to the depositor);
(o) Liens consisting of any right of offset, or statutory
bankers' lien, on bank deposit accounts maintained in the ordinary course of
business so long as such bank deposit accounts are not established or maintained
for the purpose of providing such right of offset or bankers' lien;
(p)Liens consisting of deposits of Property to secure
statutory obligations of a Borrower; and
(q) Liens consisting of deposits of Property to secure (or in
lieu of) surety, appeal or customs bonds.
"Permitted Stockholder" means Jill Tate Higgins and her heirs, devisees
and legatees, trusts for the sole benefit of such Persons, and Persons
wholly-owned by such Persons.
"Person" means any individual or entity, including a trustee,
corporation, limited liability company, general partnership, limited
partnership, joint stock company, trust, estate, unincorporated organization,
business association, firm, joint venture, Governmental Agency, or other entity.
"Pricing Certificate" means a certificate in the form of Exhibit E,
properly completed and signed by a Senior Officer of Day Runner.
"Pricing Period" means (a) the Initial Pricing Period, (b) the Second
Pricing Period, and (c) on and after February 24, 1999, the period beginning 55
days after the end of each Fiscal Quarter and ending 55 days after the end of
the subsequent Fiscal Quarter.
"Prime Rate" means the rate of interest announced from time to time by
the Administrative Agent in San Francisco, California (or other headquarters
city of the Administrative Agent), as its "prime rate." The "prime rate" is one
of several base rates used by the Administrative Agent and serves as the basis
upon which effective rates of interest are calculated for loans and other
credits making reference thereto. The "prime rate" is evidenced by the recording
thereof after its announcement in such internal publication or publications as
the Administrative Agent may designate. Any change in the Prime Rate shall take
effect at the opening of business on the day such change is internally announced
within the offices of the Administrative Agent.
"Prior Loan Agreement" means that certain Loan Agreement dated as of
February 1, 1998 (as heretofore amended) between Wells Fargo Bank, National
Association and Day Runner.
"Projections" means (i) the projected financial information dated
August 18, 1998 prepared by Borrowers and (ii) any budget and projection
delivered by Borrowers pursuant to Section 7.1(d).
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Pro Rata Share" means, with respect to each Lender, the percentage of
the Commitments set forth opposite the name of that Lender on Schedule 1.1B, as
such percentage may be increased or decreased pursuant to a Commitments
Assignment and Acceptance executed in accordance with Section 11.8.
"Quarterly Payment Date" means the last Banking Day of each March,June,
September and December.
"Real Property" means, as of any date of determination, all real
property then or theretofore owned, leased or occupied by any of the Borrowers
or their respective Subsidiaries.
"Regulation D" means Regulation D, as at any time amended, of the Board
of Governors of the Federal Reserve System, or any other regulation in substance
substituted therefor.
"Regulations G and U" means Regulations G and U, as at any time
amended, of the Board of Governors of the Federal Reserve System, or any other
regulations in substance substituted therefor.
"Request for Letter of Credit" means a written request for a Letter of
Credit substantially in the form of Exhibit F, signed by a Responsible Official
of Day Runner and properly completed to provide all information required to be
included therein.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, or judgment, award, decree, writ or
determination of a Governmental Agency, in each case applicable to or binding
upon such Person or any of its Property or to which such Person or any of its
Property is subject.
"Requisite Lenders" means (a) as of any date of determination if the
Commitments are then in effect, Lenders having in the aggregate more than 50% of
the Commitments then in effect and (b) as of any date of determination if the
Commitments have then been suspended or terminated and there is then any
Indebtedness evidenced by the Notes, Lenders holding Notes evidencing in the
aggregate more than 50% of the aggregate Indebtedness then evidenced by the
Notes.
"Responsible Official" means (a) any Senior Officer of Day Runner and
(b) any other responsible official of any Borrower so designated in a written
notice thereof from a Senior Officer to the Administrative Agent. The Lenders
shall be entitled to conclusively rely upon any document or certificate that is
signed or executed by a Responsible Official of a Borrower or any of its
Subsidiaries as having been authorized by all necessary corporate, partnership
and/or other action on the part of such Borrower or such Subsidiary.
"SEC Document" means any document, exhibit, report, form or other
document filed by any Borrower or required to be filed by any Borrower with the
Securities and Exchange Commission, including without limitation annual reports
on Form 10-K and quarterly reports on Form 10-Q.
"Second Pricing Period" means the period from December 22, 1998 to
February 24, 1999.
"Senior Officer" means (a) with respect to any Person, if, at any
relevant time, such office exists and any person is then incumbent in such
office, (i) the chairman, (ii) the chief executive officer, (iii) the president,
(iv) any executive vice president, (v) the chief operating officer, (vi) the
general counsel, (vii) the chief financial officer, (viii) the treasurer, or
(ix) the controller of such Person and, in each case, if such office does not
exist or no person is then incumbent in such office, any individual with
comparable executive, management or financial responsibilities or functions and
(b) with respect to each Subsidiary of Day Runner not organized under the laws
of the United States of America, any other senior executive officer.
"Solvent", when used with respect to any Person, means that at the time
of determination:
(i) the fair market value of its assets (including any
rights of reimbursement and contribution) is in excess of the total
amount of its liabilities (including, without limitation, contingent
liabilities); and
(ii) the present fair saleable value of its assets is
greater than its probable liability on its existing debts as such debts
become absolute and matured; and
(iii) it is then able and expects to be able to pay its
debts (including, without limitation, contingent debts and other
commitments) as they mature; and
(iv) it has capital sufficient to carry on its business
as conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Special Eurodollar Circumstance" means the application or adoption
after the Closing Date of any Law or interpretation, or any change therein or
thereof, or any change in the interpretation or administration thereof by any
Governmental Agency, central bank or comparable authority charged with the
interpretation or administration thereof, or compliance by any Lender or its
Eurodollar Lending Office with any request or directive (whether or not having
the force of Law) of any such Governmental Agency, central bank or comparable
authority.
"Standby Letter of Credit" means each Letter of Credit that is not a
Commercial Letter of Credit.
"Stock Repurchase" means, with respect to any Person, the retirement,
redemption, purchase or other acquisition for Cash or for Property (except for
Property constituting capital stock of such Person that is not Disqualified
Stock) by such Person of any shares of capital stock or any warrant or option to
purchase an equity security or other equity security issued by such Person.
"Stockholders' Equity" means, as of any date of determination and with
respect to any Person, the consolidated stockholders' equity of the Person as of
that date determined in accordance with GAAP; provided that there shall be
excluded from Stockholders' Equity any amount attributable to Disqualified
Stock.
"Subordinated Obligations" means any Indebtedness of a Borrower that
(i) does not have any scheduled principal payment, mandatory principal
prepayment or sinking fund payment due prior to December 31, 2005, (ii) is not
secured by any Lien on any Property of any Borrower or any of its Subsidiaries,
(iii) is not guarantied by any Subsidiary of any Borrower, (iv) is subordinated
by its terms in right of payment to the Obligations pursuant to provisions
acceptable to the Requisite Lenders, (v) is subject to such financial and other
covenants and events of default as may be acceptable to the Requisite Lenders
and (vi) is subject to customary payment blockage and delayed acceleration
provisions as may be acceptable to the Requisite Lenders.
"Subsidiary" means, as of any date of determination and with respect to
any Person, any corporation, limited liability company or partnership (whether
or not, in any case, characterized as such or as a "joint venture"), whether now
existing or hereafter organized or acquired: (a) any Person which is required to
be treated as a "consolidated subsidiary" under GAAP, or (b) any Person (i) in
the case of a corporation or limited liability company, of which a majority of
the securities having ordinary voting power for the election of directors or
other governing body (other than securities having such power only by reason of
the happening of a contingency) are at the time beneficially owned by such
Person and/or one or more Subsidiaries of such Person, or (ii) in the case of a
partnership, of which a majority of the partnership or other ownership interests
are at the time beneficially owned by such Person and/or one or more of its
Subsidiaries.
"Subsidiary Guarantors" means all Subsidiaries of any Borrower that are
or become parties to the Subsidiary Guaranty.
"Subsidiary Guaranty" means the continuing guaranty of the Obligations
to be executed and delivered pursuant to Article 8 and, to the extent
applicable, Section 5.11 by each Subsidiary Guarantor, in the form of Exhibit G,
either as originally executed or as it may from time to time be supplemented,
modified, amended, extended or supplanted.
"Swing Line" means the revolving line of credit established by the
Swing Line Lender in favor of the Borrowers pursuant to Section 2.9.
"Swing Line Documents" means the promissory note and any other
documents executed by the Borrowers in favor of the Swing Line Lender in
connection with the Swing Line.
"Swing Line Lender" means Wells Fargo Bank, National Association.
"Swing Line Loans" means loans made by the Swing Line Lender to the
Borrowers pursuant to Section 2.9.
"Swing Line Outstandings" means, as of any date of determination, the
aggregate principal Indebtedness of all Borrowers on all Swing Line Loans then
outstanding.
"Syndicated Loan" means a loan made pursuant to Section 2.1 or Section
2.9(d). "Syndicated Loan" shall not include any Swing Line Loan or any Money
Market Loan.
"Takeover Code" means the UK City Code on Takeovers and Mergers.
"Target" means Filofax Group plc, a public company incorporated with
limited liability under the laws of England and Wales.
"Target Shares" means ordinary shares of 5 pence each in the capital of
Target.
"Tender Offer" means an offer to be made by Wasserstein Perella & Co.
Limited on behalf of Bidco to acquire the entire issued and to be issued share
capital of Target, as such offer may be increased and/or revised and/or extended
from time to time in accordance with the terms hereof.
"Tender Offer Commencement Date" means the date on which Bidco publicly
announces in accordance with the requirements of the Takeover Code its firm
intention to make the Tender Offer.
"Tender Offer Loan" means a Loan, the proceeds of which are used
directly or indirectly (i) to purchase Target Shares pursuant to the Tender
Offer, (ii) to acquire Target Shares in accordance with the provisions of
Sections 428-430F of the Companies Act or (iii) to pay stamp duties and stamp
duty reserve taxes in connection with the Target Shares purchased by Bidco
pursuant to the Tender Offer.
"Tender Offer Notes" means unsecured promissory notes made by Bidco and
guaranteed, by unsecured guaranty, by Day Runner, such notes to be issued to
holders of Target Shares who elect to receive such notes instead of all or part
of the cash consideration to which such holders would otherwise be entitled
under the Tender Offer.
"Tender Offer Termination Date" means, in relation to the Tender Offer,
the earliest date (as notified by the Borrower to the Administrative Agent in
writing) on which all of the following have occurred: (a) all payments of cash
and the issuance of any Tender Offer Notes in respect of acceptances of the
Tender Offer have been made in full; (b) no further such acceptances are
possible; and (c) all procedures pursuant to Sections 428 - 430(F) of the
Companies Act which are capable of being implemented have been completed and all
payments of cash and the issuance of any Tender Offer Notes pursuant thereto to
or for the benefit of shareholders in the Target have been made in full.
"Tender Offer Transaction Expenses" means the reasonable out-of-pocket
costs and expenses of Day Runner and its Subsidiaries incurred in connection
with the Tender Offer, including without limitation such reasonable and
out-of-pocket fees and expenses of attorneys, accountants and other professional
advisors to Day Runner and its Subsidiaries, and of attorneys to Wasserstein
Perella & Co. Limited, for services rendered in connection with the Tender
Offer.
"to the best knowledge of" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation described
therein is known by the Person (or, in the case of a Person other than a natural
Person, known by any Senior Officer of that Person) making the representation,
warranty or other statement, or with the exercise of reasonable due diligence
under the circumstances (in accordance with the standard of what a reasonable
Person in similar circumstances would have done) would have been known by the
Person (or, in the case of a Person other than a natural Person, would have been
known by a Senior Officer of that Person).
"type", when used with respect to any Loan, means the designation of
whether such Loan is an Alternate Base Rate Loan or a Eurodollar Rate Loan.
"Unconditional Date" means the date upon which the Tender Offer has
become or has been declared unconditional in all respects.
"Wholly-Owned Subsidiary" means a Subsidiary of any Borrower, 100% of
the capital stock or other equity interest of which is owned, directly or
indirectly, by any Borrower, except for director's qualifying shares required by
applicable Laws.
1.2 Use of Defined Terms. Any defined term used in the plural shall
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required by this Agreement to be submitted by the Borrowers, or any of them, to
the Administrative Agent or the Lenders, shall be prepared in conformity with,
GAAP applied on a consistent basis, except as otherwise specifically prescribed
herein. In the event that GAAP changes during the term of this Agreement such
that the covenants contained in Sections 6.12 through 6.15, inclusive, would
then be calculated in a different manner, (a) the Borrowers and the Lenders
agree to negotiate in good faith to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating the Borrowers'
financial condition to substantially the same criteria as were effective prior
to such change in GAAP and (b) the Borrowers shall be deemed to be in compliance
with the covenants contained in the aforesaid Sections if and to the extent that
the Borrowers would have been in compliance therewith under GAAP as in effect
immediately prior to such change, but shall have the obligation to deliver each
officer's certificate set forth in Section 7.1 to the Administrative Agent and
the Lenders, on the dates therein specified, with an attached detailed
reconciliation demonstrating such compliance and setting forth the differences
in calculation of such covenants under GAAP as amended as compared with GAAP as
in effect immediately prior to such change.
1.4 Rounding. Any financial ratios required to be maintained by the
Borrowers pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
1.5 Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.
1.6 References to "Borrowers and their Subsidiaries". Any reference
herein to "Borrowers and their Subsidiaries" or the like shall refer solely to
the Borrowers during such times, if any, as the Borrowers shall have no
Subsidiaries.
1.7 Miscellaneous Terms. The term "or" is disjunctive; the term "and"
is conjunctive. The term "shall" is mandatory; the term "may" is permissive.
Masculine terms also apply to females; feminine terms also apply to males. The
term "including" is by way of example and not limitation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Syndicated Loans
(a) Syndicated Loans. Subject to the terms and conditions set
forth in this Agreement, at any time and from time to time from the Closing Date
through the Banking Day prior to the Maturity Date, each Lender shall, pro rata
according to and limited by that Lender's Pro Rata Share of the Commitment as
then in effect, make Syndicated Loans to each Borrower under the Commitment in
such amounts as such Borrower may request that, after giving effect to any
repayments of Loans and Letter of Credit reimbursement obligations and Tender
Offer Notes made on the same Banking Day (or for which provision has been made
for payment on the same Banking Day that is satisfactory to the Administrative
Agent in its sole and absolute discretion) do not cause the sum of (i) the
aggregate outstanding principal amount of the Loans plus (ii) the Aggregate
Effective Amount of all outstanding Letters of Credit plus (iii) the Swing Line
Outstandings to exceed the Commitment less the Commitment Reserve; provided,
however, that at no time shall the sum with respect to a single Borrower of (i)
the aggregate principal amount of the Loans to such Borrower plus (ii) the
Aggregate Effective Amount of all outstanding Letters of Credit issued for the
account of such Borrower plus (iii) as applicable, the Swing Line Outstandings
to such Borrower exceed such Borrower's Loan Sublimit. Subject to the
limitations set forth herein, each Borrower may borrow, repay and reborrow under
the Commitment without premium or penalty.
(b) Notice of Syndicated Loan. The applicable Borrower shall
give the Administrative Agent a notice in the form set forth hereto as Exhibit H
(a "Notice of Syndicated Loan") not later than (x) 9:00 A.M. (California time)
on the date (which must be a Banking Day) of any requested Alternate Base Rate
Loan, (y) 9:00 A.M. (California time) at least three Eurodollar Banking Days
before the first day of the applicable Interest Period with respect to any
Eurodollar Rate Loan and (z) 9:00 A.M. (California time) not later than four
Foreign Currency Banking Days before the first day of the applicable Foreign
Currency Period with respect to any Foreign Currency Loan. Such Notice of
Syndicated Loan shall specify the requested (i) date of such Loan, which shall
be a Banking Day in the case of an Alternate Base Rate Loan or a Eurodollar
Banking Day in the case of a Eurodollar Rate Loan, (ii) type of Loan, (iii)
amount of such Loan, (iv) in the case of a Eurodollar Rate Loan, the Interest
Period for such Loan, (v) in the case of a Foreign Currency Loan, the Foreign
Currency and the Foreign Currency Period for such Loan and (vi) whether such
Loan is a Tender Offer Loan or a General Purpose Loan. A Notice of Syndicated
Loan shall be irrevocable upon the Administrative Agent's receipt thereof.
(c) Minimum Amounts with respect to Syndicated Loans. Each
Alternate Base Rate Loan (other than a Swing Line Loan) shall be in a principal
amount not less than $500,000 and in a multiple of $100,000. Each Eurodollar
Rate Loan shall be in a principal amount not less than $3,000,000 and in a
multiple of $1,000,000. Each Foreign Currency Loan shall be in a principal
amount not less than the Foreign Currency Equivalent of $3,000,000 and in a
multiple of $1,000,000.
(d)Conversion/Continuation of Syndicated Eurodollar Rate Loans
(i) Subject to Section 3.7, the Borrowers shall have
the option (A) to convert at any time all or any part of outstanding
Alternate Base Rate Loans (other than Swing Line Loans) to Eurodollar
Rate Loans; (B) to convert all or any part of outstanding Eurodollar
Rate Loans having Interest Periods which expire on the same date to
Alternate Base Rate Loans on such expiration date; or (C) to continue
all or any part of outstanding Eurodollar Rate Loans having Interest
Periods which expire on the same date as Eurodollar Rate Loans, and the
succeeding Interest Period of such continued Loans shall commence on
such expiration date; provided, however, no such outstanding Loan may
be continued as, or be converted into, a Eurodollar Rate Loan if an
Event of Default or Default would occur or has occurred and is
continuing. Any conversion into or continuation of Eurodollar Rate
Loans under this Section 2.1(d) shall be in a minimum amount of
$3,000,000 and in integral multiples of $1,000,000 in excess of that
amount.
(ii) To convert or continue a Loan under Section
2.1(d), the Borrowers shall deliver a Notice of Conversion/Continuation
to the Administrative Agent no later than 9:00 A.M. (California time)
at least three (3) Banking Days in advance of the proposed
conversion/continuation date. A Notice of Conversion/Continuation shall
specify (A) the proposed conversion/continuation date (which shall be a
Banking Day), (B) the principal amount of the Loan to be
converted/continued, (C) whether such Loan shall be converted and/or
continued, and (D) in the case of a conversion to, or continuation of,
a Eurodollar Rate Loan, the requested Interest Period. Promptly after
receipt of a Notice of Conversion/Continuation under this Section
2.1(d)(ii), the Administrative Agent shall notify each Lender by telex
or telecopy, or other similar form of transmission, of the proposed
conversion/continuation. Any Notice of Conversion/Continuation for
conversion to, or continuation of, a Loan shall be irrevocable, and the
Borrowers shall be bound to convert or continue in accordance
therewith.
2.2 Money Market Loans.
(a) The Money Market Option. Subject to the terms and
conditions set forth in this Agreement, at any time and from time to time from
December 22, 1998 through the last Banking Day that is at least seven (7) days
prior to the Maturity Date, each Borrower may, as set forth in this Section,
request the Lenders to make offers to make Money Market Loans to such Borrower,
in such amounts as such Borrower may request that, after giving effect to any
repayments of Loans and Letter of Credit reimbursement obligations and Tender
Offer Notes made on the same Banking Day (or for which provision has been made
for payment on the same Banking Day that is satisfactory to the Administrative
Agent in its sole and absolute discretion), do not do not cause the sum of (i)
the aggregate principal amount of the Loans plus (ii) the Aggregate Effective
Amount of all outstanding Letters of Credit plus (iii) the Swing Line
Outstandings to exceed the Commitment less the Commitment Reserve; provided,
however, that at no time shall the sum with respect to a single Borrower of (i)
the aggregate principal amount of the Loans plus (ii) the Aggregate Effective
Amount of all outstanding Letters of Credit plus (iii) as applicable, the Swing
Line Outstandings to such Borrower exceed such Borrower's Loan Sublimit. Each
Lender may, but shall have no obligation to, make such offers and each Borrower
may, but shall have no obligation to, accept any such offers in the manner set
forth in this Section.
(b) Money Market Quote Request. When a Borrower wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Administrative Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit I hereto so as to be received
no later than 9:00 A.M. (California time) on (x) the fifth Eurodollar Banking
Day prior to the date of the Loan proposed therein, in the case of a Eurodollar
Auction or (x) the Banking Day next preceding the date of the Loan proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the applicable Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Lenders not later than the date
of the Money Market Quote Request for the first Eurodollar Auction or Absolute
Rate Auction for which such change is to be effective), specifying: (i) the
proposed date of the Loan, which shall be a Eurodollar Banking Day in the case
of a Eurodollar Auction or a Banking Day in the case of an Absolute Rate
Auction; (ii) the aggregate amount of such Loan, which shall be $3,000,000 or a
larger multiple of $1,000,000; (iii) the duration of the Interest Period
applicable thereto; (iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate and (v) in the case
of a Foreign Currency Loan, the Foreign Currency and the Foreign Currency Period
for such Loan. Promptly upon transmission of such Money Market Quote Request,
the applicable Borrower shall pay to the Administrative Agent a Money Market
Quote Request processing fee of $1,500.
(c) Invitation for Money Market Quotes. Promptly upon receipt
of a Money Market Quote Request from a Borrower, the Administrative Agent shall
send to the Lenders by telex or facsimile transmission an Invitation for Money
Market Quotes substantially in the form of Exhibit J hereto, which shall
constitute an invitation by such Borrower to each Lender to submit Money Market
Quotes offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (1) Each
Lender may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this Section (d) and
must be submitted to the Administrative Agent by telex or facsimile transmission
not later than (x) 11:00 A.M. (California time) on the fourth Eurodollar Banking
Day prior to the proposed date of the Loan, in the case of a Eurodollar Auction
or (y) 10:00 A.M. (California time) on the proposed date of the Loan, in the
case of an Absolute Rate Auction; provided that Money Market Quotes submitted by
the Administrative Agent in the capacity of a Lender may be submitted, and may
only be submitted, if the Administrative Agent notifies the applicable Borrower
of the terms of the offer or offers contained therein not later than (x) one
hour prior to the deadline for the other Lenders, in the case of a Eurodollar
Auction or (y) 15 minutes prior to the deadline for the other Lenders, in the
case of an Absolute Rate Auction. Subject to Articles 8 and 9, any Money Market
Quote so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(2) Each Money Market Quote shall be substantially in
the form of Exhibit K hereto and shall in any case specify: (A) the
proposed date of the Loan, (B) the principal amount of the Money Market
Loan for which each such offer is being made, which principal amount
(x) may be greater than or less than the Pro Rata Share of the
Commitment of the quoting Lender, (x) must be $3,000,000 or a larger
multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount of Money
Market Loans for which offers being made by such quoting Lender may be
accepted, (C) in the case of a Eurodollar Auction, the margin above or
below the applicable Eurodollar Rate (the "Money Market Margin")
offered for such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate, (D) in the case of an Absolute Rate
Auction, the rate of interest per annum (specified to the nearest
1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each
such Money Market Loan, and (E) the identity of the quoting Lender. A
Money Market Quote may set forth up to five separate offers by the
quoting Lender with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(3) Any Money Market Quote shall be disregarded if
it: (A) is not substantially in conformity with Exhibit K hereto or
does not specify all of the information required by subsection (d)(2)
above; (B) contains qualifying, conditional or similar language; (C)
proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or (D) arrives after the
time set forth in subsection (d)(1) above.
(e) Notice to Applicable Borrower. The Administrative Agent
shall promptly notify the applicable Borrower of the terms of (x) any Money
Market Quote submitted by a Lender that is in accordance with subsection (d) and
(y) any Money Market Quote that amends, modifies or is otherwise inconsistent
with a previous Money Market Quote submitted by such Lender with respect to the
same Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the applicable Borrower shall
specify (1) the aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified in the related
Money Market Quote Request, (B) the respective principal amounts and Money
Market Margins or Money Market Absolute Rates, as the case may be, so offered
and (C) if applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Applicable Borrower. Not later
than (x) 9:00 A.M. (California time) on the third Eurodollar Banking Day prior
to the proposed date of the Loan, in the case of a Eurodollar Auction or (y)
11:00 A.M. (California time) on the proposed date of the Loan, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
applicable Borrower and the Administrative Agent shall have mutually agreed and
shall have notified to the Lenders not later than the date of the Money Market
Quote Request for the first Eurodollar Auction or Absolute Rate Auction for
which such change is to be effective), the applicable Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Loan"), in substantially the form attached
hereto as Exhibit L, shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. Subject to the applicable limitation in
subsection (a) of this Section, the Borrower initiating the Money Market Quote
Request may accept any Money Market Quote Request in whole or in part; provided,
that (1) the aggregate principal amount of each Money Market Loan may not exceed
the applicable amount set forth in the related Money Market Quote Request, (2)
the principal amount of each Money Market Loan must be $3,000,000 or a larger
multiple of $1,000,000, (3) acceptance of offers may only be made on the basis
of ascending Money Market Margins or Money Market Absolute Rates, as the case
may be, and (iv) the applicable Borrower may not accept any offer that is
described in subsection (d)(3) or that otherwise fails to comply with the
requirements of this Agreement. A Notice of Money Market Loan shall be
irrevocable upon the Administrative Agent's receipt thereof.
(g) Allocation by Administrative Agent. If offers are made by
two or more Lenders with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect of which such
offers are accepted shall be allocated by the Administrative Agent among such
Lenders as nearly as possible (in multiples of $1,000,000, as the Administrative
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
(h) Notification of Lenders by Agent. Not later than (x) 9:30
A.M. (California time) on the third Eurodollar Banking Day prior to the proposed
date of the Money Market LIBOR Loan, in the case of a Eurodollar Auction, or (y)
11:30 A.M. (California time) on the proposed date of the Money Market Absolute
Rate Loan, in the case of an Absolute Rate Auction, the Administrative Agent
shall notify each Lender that submitted a Money Market Quote with respect to
such auction of the acceptance or non-acceptance of such Lender's Money Market
Quote. No Lender whose Money Market Quote has been accepted pursuant to the
terms hereof shall be relieved of its obligation to fund such Money Market Loan
prior to the time the applicable Money Market Loan is funded. Any Lender whose
Money Market Quote has been accepted shall, not later than 1:00 P.M. (California
time) on the date specified for the making of such Money Market Loan, make the
amount of such Money Market Loan available to the Administrative Agent in
immediately available funds, for the account of the applicable Borrower. The
amount so received by the Administrative Agent shall, subject to the terms and
conditions of this Agreement, be made available to the applicable Borrower
promptly upon receipt by the Administrative Agent by depositing the same, in
immediately available funds, in the Designated Deposit Account.
(i) Maturity of Money Market Loans. Each Money Market Loan
shall be due and payable in full on the last day of the Interest Period with
respect thereto. No prepayment of any Money Market Loan shall be made without
the consent of the Lender with respect to such Money Market Loan (which such
consent may be given or withheld in the sole discretion of such Lender).
2.3 Foreign Currency Loans. Subject to the limitations contained in
Sections 2.1 and 2.2 above, Loans in an aggregate principal amount up to the
Foreign Currency Equivalent of the Foreign Currency Limitation shall be
available under the Commitment, at the election of the Borrowers, in the form of
one or more Foreign Currency Loans. With respect to Foreign Currency Loans:
(a) All principal of, and interest on, any Foreign Currency
Loan shall be payable in the same currency as that Foreign Currency Loan;
(b) Each Foreign Currency Loan shall be due and payable on the
earlier of (A) the last day of the related Foreign Currency Period or (B) the
Maturity Date;
(c) Determination of credit availability under Section 2.1(a)
and 2.1(b), as of any date, if there are then any outstanding Foreign Currency
Loans or Foreign Currency Letters of Credit, shall be based on the Foreign
Currency Equivalent thereof as of such date;
(d) The Requisite Lenders may suspend the obligation of the
Lenders to make Foreign Currency Loans with respect to a particular Foreign
Currency if the Requisite Lenders determine that current or reasonably expected
market conditions for that Foreign Currency are unusually unstable or make it
unlawful, impossible or impracticable for the Lenders to fund or hedge their
obligations with respect to a Foreign Currency Loan;
(e) Concurrently with any Notice of Syndicated Loan with
respect to a Foreign Currency Loan, the requesting Borrower shall pay to the
Administrative Agent, for the account of the Lenders pro rata in accordance with
their Pro Rata Share of the Commitment, a processing fee of $2,500;
(f) Unless the Administrative Agent and the Requisite Lenders
otherwise consent, no more than ten (10) Foreign Currency Periods and Interest
Periods with respect to Eurodollar Loans shall exist at any one time;
(g) the applicable Borrower shall execute and deliver, to any
Lender requesting it, a promissory note payable in the applicable Foreign
Currency in a form consistent with this Agreement covering that Lender's Pro
Rata Share of any Foreign Currency Loan that is a Syndicated Loan; and
(h) the applicable Borrower shall execute and deliver, to any
Lender to which it is an obligor pursuant to a Money Market Loan that is a
Foreign Currency Loan, upon the request of such Lender, a promissory note
payable in the applicable Foreign Currency in a form consistent with this
Agreement.
2.4 Type of Loans.
(a) If no Notice of Syndicated Loan has been made within the
requisite notice period set forth in Section 2.1 prior to the end of the
Interest Period for any outstanding Eurodollar Rate Loan, then on the last day
of such Interest Period, such Loan shall be automatically converted into an
Alternate Base Rate Loan in the same amount.
(b) Each Syndicated Loan (other than a Foreign Currency Loan)
shall constitute an Alternate Base Rate Loan unless properly designated as a
Eurodollar Rate Loan pursuant to the provisions of Section 2.1.
(c) With respect to any Eurodollar Rate Loan or Money Market
LIBOR Loan, on the date which is two (2) Eurodollar Banking Days before the
first day of the applicable Interest Period, the Administrative Agent shall
confirm its determination of the applicable Eurodollar Rate (which determination
shall be conclusive in the absence of manifest error) and promptly shall give
notice of the same to the applicable Borrower and the Lenders by telephone or
telecopier (and if by telephone, promptly confirmed by telecopier).
(d) Nothing contained herein shall require any Lender to fund
any Loan in the Designated Eurodollar Market.
2.5 Funding of Loans.
(a) Promptly following receipt of a Notice of Syndicated Loan
or a Notice of Money Market Loan, the Administrative Agent shall notify each
Lender participating in such Loan by telephone or telecopier (and if by
telephone, promptly confirmed by telecopier) of the date and type of the Loan,
the applicable Foreign Currency, the applicable Interest Period or Foreign
Currency Period, and that Lender's share of the Loan.
(b) Not later than 11:00 A.M., California time, on the date
specified for any Loan (which must be a Banking Day), each Lender participating
therein shall make available its share of such Loan, in immediately available
funds (if a Foreign Currency Loan, in the applicable Foreign Currency) available
to the Administrative Agent at the Administrative Agent's Office. Upon
satisfaction or waiver of the applicable conditions set forth in Article 8, the
Administrative Agent shall (i) apply the funds so received from the Lenders to
repay all Swing Line Loans (if any) then outstanding, together with interest
accrued thereon, and (ii) credit the remainder of such funds to the Designated
Deposit Account or disburse such remainder as may be directed by the applicable
Borrower.
(c) Unless the Administrative Agent shall have been notified
by any Lender no later than 11:00 A.M. on the Banking Day of the proposed
funding by the Administrative Agent of any Loan that such Lender does not intend
to make available to the Administrative Agent such Lender's portion of the total
amount of such Loan, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on the date of the Loan
and the Administrative Agent may, in reliance upon such assumption, make
available to the applicable Borrower a corresponding amount. If the
Administrative Agent has made funds available to the applicable Borrower based
on such assumption and such corresponding amount is not in fact made available
to the Administrative Agent by such Lender, the Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent promptly shall
notify the applicable Borrower and the applicable Borrower shall pay such
corresponding amount to the Administrative Agent. The Administrative Agent also
shall be entitled to recover from such Lender interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Administrative Agent to such Borrower to the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to the daily Federal Funds Rate. Nothing herein shall be deemed to
relieve any Lender from its obligation to fulfill its share of the Commitments
or to prejudice any rights which the Administrative Agent or the applicable
Borrower may have against any Lender as a result of any default by such Lender
hereunder.
2.6 Notes.
(a) Each Borrower's obligation to repay the Syndicated Loans
of each Lender shall be evidenced by a single note payable to the order of such
Lender. Each reference in this Agreement to a "Note" or the "Notes" of such
Lender shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(b) Each Lender may, by notice to the applicable Borrower and
the Administrative Agent, request that its Alternate Base Rate Loans, its
Eurodollar Rate Loans or its Money Market Loans be evidenced by a separate Note.
Each such Note shall be substantially in the form of Exhibit M hereto, with
appropriate modifications to reflect the fact that it evidences solely the
relevant kind of Loans. Unless a Lender has received a separate promissory note
evidencing its share of a Foreign Currency Loan pursuant to Section 2.3, the
Loans made by each Lender as part of a Foreign Currency Loan shall be evidenced
by that Lender's Note, with the references therein to "Dollars" being deemed
references to the Foreign Currency which is the subject of such Foreign Currency
Loan. Each reference in this Agreement to a "Note" or the "Notes" of such Lender
shall be deemed to refer to and include any or all of such Notes, as the context
may require.
2.7 Letters of Credit.
(a) Subject to the terms and conditions hereof, at any time
and from time to time from the Closing Date through the Banking Date that is 30
days prior to the Maturity Date, the Issuing Lender shall issue such Letters of
Credit under the Commitment as each Borrower may request by a Request for Letter
of Credit; provided that (i) after giving effect to such Letter of Credit and
any repayments of Loans made, or satisfaction of Obligations in respect of
Letters of Credit made, on the same Banking Day, (x) the sum of (A) the
aggregate principal amount outstanding under the Notes, plus (B) the Aggregate
Effective Amount of all outstanding Letters of Credit, plus (C) the Swing Line
Outstandings do not exceed the then applicable Commitment less the Commitment
Reserve and (y) with respect to any single Borrower, the sum of (A) the
aggregate principal amount of the Loans to such Borrower plus (ii) the Aggregate
Effective Amount of all outstanding Letters of Credit issued for the account of
such Borrower plus (iii) as applicable, the Swing Loan Outstandings to such
Borrower do not exceed such Borrower's Loan Sublimit, (ii) the Aggregate
Effective Amount under all outstanding Letters of Credit shall not exceed
$15,000,000; and (iii) with respect to a Request for Letter of Credit with
respect to a Foreign Currency Letter of Credit, the Issuing Lender shall not be
obligated to issue the Foreign Currency Letter of Credit with respect to a
particular Foreign Currency if and so long as the Issuing Lender determines that
current or reasonably expected market conditions for that Foreign Currency are
unusually unstable or would make it unlawful, impossible or impracticable for
the Issuing Lender to fund or hedge its obligations under the Foreign Currency
Letter of Credit. For purposes of the foregoing, the aggregate principal amount
outstanding under the Notes and the Aggregate Effective Amount of outstanding
Letters of Credit, to the extent consisting of Foreign Currency Loans and
Foreign Currency Letters of Credit, respectively, shall be based on the Foreign
Currency Equivalents thereof as of the Banking Day immediately preceding the
date of the Request for Letter of Credit. Each Letter of Credit shall be in a
form acceptable to the Issuing Lender. Unless all the Lenders otherwise consent
in a writing delivered to the Administrative Agent, the term of any Letter of
Credit shall not exceed one (1) year (subject to extension in accordance with
the terms thereof; provided that all conditions precedent to issuance of a
Letter of Credit are satisfied in connection with any such extension) or extend
beyond the Maturity Date. As of the Closing Date, each Existing Letter of Credit
shall constitute, for all purposes of this Agreement and the other Loan
Documents, a Letter of Credit issued and outstanding hereunder and shall be
deemed to be issued hereunder on the Closing Date.
(b) Each Request for Letter of Credit shall be submitted to
the Issuing Lender, with a copy to the Administrative Agent, at least two (2)
Banking Days prior to the date upon which the related Letter of Credit is
proposed to be issued. The Administrative Agent shall promptly notify the
Issuing Lender whether such Request for Letter of Credit, and the issuance of a
Letter of Credit pursuant thereto, conforms to the requirements of this
Agreement. Upon issuance of a Letter of Credit, the Issuing Lender shall
promptly notify the Administrative Agent, and the Administrative Agent shall
promptly notify the Lenders, of the amount and terms thereof.
(c) Upon the issuance of a Letter of Credit, each Lender shall
be deemed to have purchased a pro rata participation in such Letter of Credit
from the Issuing Lender in an amount equal to that Lender's Pro Rata Share of
the maximum amount available for drawing thereunder. Without limiting the scope
and nature of each Lender's participation in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed by Borrowers for any payment
required to be made by the Issuing Lender under any Letter of Credit, each
Lender shall, pro rata according to its Pro Rata Share, reimburse the Issuing
Lender through the Administrative Agent promptly upon demand for the amount of
such payment. The obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected by the occurrence
of an Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of the applicable Borrower
to reimburse the Issuing Lender for the amount of any payment made by the
Issuing Lender under any Letter of Credit together with interest as hereinafter
provided.
(d) Each Borrower agrees to pay to the Issuing Lender through
the Administrative Agent an amount equal to any payment made by the Issuing
Lender with respect to each Letter of Credit with respect to such Borrower
within one (1) Banking Day after demand made by the Issuing Lender therefor,
together with interest on such amount from the date of any payment made by the
Issuing Lender at the rate applicable to Alternate Base Rate Loans for two (2)
Banking Days after demand and thereafter at the Default Rate. The principal
amount of any such payment shall be used to reimburse the Issuing Lender for the
payment made by it under the Letter of Credit and, to the extent that the
Lenders have not reimbursed the Issuing Lender pursuant to Section 2.7(c), the
interest amount of any such payment shall be for the account of the Issuing
Lender. Each Lender that has reimbursed the Issuing Lender pursuant to Section
2.7(c) for its Pro Rata Share of any payment made by the Issuing Lender under a
Letter of Credit shall thereupon acquire a pro rata participation, to the extent
of such reimbursement, in the claim of the Issuing Lender against the applicable
Borrower for reimbursement of principal and interest under this Section 2.7(d)
and shall share, in accordance with that pro rata participation, in any
principal payment made by the applicable Borrower with respect to such claim and
in any interest payment made by the applicable Borrower (but only with respect
to periods subsequent to the date such Lender reimbursed the Issuing Lender)
with respect to such claim.
(e) Each Borrower may, pursuant to a Notice of Syndicated
Loan, request that Loans be made pursuant to Section 2.1(a) to provide funds for
the payment required by Section 2.7(d) and, for this purpose, the conditions
precedent set forth in Article 8 shall not apply. The proceeds of such Loans
shall be paid directly to the Issuing Lender to reimburse it for the payment
made by it under the Letter of Credit.
(f) If a Borrower fails to make the payment required by
Section 2.7(d) within the time period therein set forth, in lieu of the
reimbursement to the Issuing Lender under Section 2.7(c) the Issuing Lender may
(but is not required to), without notice to or the consent of such Borrower,
instruct the Administrative Agent to cause Loans to be made by the Lenders under
the Commitment in an aggregate amount equal to the amount paid by the Issuing
Lender with respect to that Letter of Credit and, for this purpose, the
conditions precedent set forth in Article 8 shall not apply. The proceeds of
such Loans shall be paid directly to the Issuing Lender to reimburse it for the
payment made by it under the Letter of Credit.
(g) The issuance of any supplement, modification, amendment,
renewal, or extension to or of any Letter of Credit shall be treated in all
respects the same as the issuance of a new Letter of Credit.
(h) The obligation of each Borrower to reimburse to the
Issuing Lender the amount of any payment made by the Issuing Lender under any
Letter of Credit shall be absolute, unconditional, and irrevocable. Without
limiting the foregoing, each Borrower's obligations shall not be affected by any
of the following circumstances:
(i) any lack of validity or enforceability prior to
its stated expiration date of the Letter of Credit, this Agreement, or any other
agreement or instrument relating thereto;
(ii) any amendment or waiver of or any consent to
departure from the Letter of Credit, this Agreement, or any other agreement or
instrument relating thereto, with or without the consent of such Borrower;
(iii) the existence of any claim, setoff, defense, or
other rights which such Borrower may have at any time against the Issuing
Lender, the Administrative Agent or any Lender, any beneficiary of the Letter of
Credit (or any persons or entities for whom any such beneficiary may be acting)
or any other Person, whether in connection with the Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto, or any
unrelated transactions;
(iv) any demand, statement, or any other document
presented under the Letter of Credit proving to be forged, fraudulent, invalid,
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) the existence, character, quality, quantity,
condition, value or delivery of any Property purported to be represented by
documents presented in connection with any Letter of Credit or any difference
between any such Property and the character, quality, quantity, condition, or
value of such Property as described in such documents;
(vi) the time, place, manner, order or contents of
shipments or deliveries of Property as described in documents presented in
connection with any Letter of Credit or the existence, nature and extent of any
insurance relative thereto;
(vii) the solvency or financial responsibility of any
party issuing any documents in connection with a Letter of Credit;
(viii) any failure or delay in notice of shipments or
arrival of any Property;
(ix) any error in the transmission of any message
relating to a Letter of Credit,or any delay or interruption in any such message;
(x) any error, neglect or default of any
correspondent of the Issuing Lender in connection with a Letter of Credit;
(xi) any consequence arising from acts of God, war,
insurrection, civil unrest, disturbances, labor disputes, emergency conditions
or other causes beyond the control of the Issuing Lender;
(xii) the form, accuracy, genuineness or legal effect
of any contract or document referred to in any document submitted to the Issuing
Lender in connection with a Letter of Credit; and
(xiii) where the Issuing Lender has acted in good
faith and observed general banking usage, any other circumstances whatsoever.
(i) The Issuing Lender shall be entitled to the protection
accorded to the Administrative Agent pursuant to Section 10.6.
(j) The Uniform Customs and Practice for Documentary Credits,
as published in its most current version by the International Chamber of
Commerce, shall be deemed a part of this Section and shall apply to all Letters
of Credit to the extent not inconsistent with applicable Law.
(k) No action taken or omitted in good faith by the Issuing
Lender under or in connection with any Letter of Credit, if taken or omitted in
the absence of gross negligence or willful misconduct, shall put such Issuing
Bank under any resulting liability to any Lender, any Borrower, any of the
Borrowers' Subsidiaries or, so long as it is not issued in violation of Section
2.7(a), relieve any Lender of its obligations hereunder to such Issuing Lender.
Solely as between the Issuing Lender and the Lenders, in determining whether to
pay under any Letter of Credit, the Issuing Lender shall have no obligation to
the Lenders other than to confirm that any documents required to be delivered
under a Letter of Credit appear to have been delivered and that they appear on
their face to comply with the requirements of such Letter of Credit.
2.8 Voluntary Reduction of Commitments. Each Borrower shall have the
right, at any time and from time to time, without penalty or charge, upon at
least five (5) Banking Days' prior written notice by a Responsible Official of
such Borrower to the Administrative Agent, voluntarily to reduce, permanently
and irrevocably, in aggregate principal amounts in an integral multiple of
$1,000,000 but not less than $5,000,000, or to terminate, all or a portion of
the then undisbursed portion of the Commitments. The Administrative Agent shall
promptly notify the Lenders of any reduction or termination of the Commitments
under this Section.
2.9 Swing Line Loans. (a) The Swing Line Lender shall from time to time
from the Closing Date through the day prior to the Maturity Date make Swing Line
Loans to Day Runner in such amounts as Day Runner may request, provided that (a)
after giving effect to such Swing Line Loan, the Swing Line Outstandings do not
exceed $10,000,000, (b) without the consent of all of the Lenders, no Swing Line
Loan may be made during the continuation of a Default or an Event of Default.
Day Runner may borrow, repay and reborrow under this Section. Unless notified to
the contrary by the Swing Line Lender, borrowings under the Swing Line may be
made in amounts which are integral multiples of $100,000 upon telephonic request
by a Responsible Official of Day Runner made to the Administrative Agent not
later than 1:00 P.M., California time, on the Banking Day of the requested
borrowing (which telephonic request shall be promptly confirmed in writing by
telecopier by transmission of a Notice of Swingline Loan in the form attached
hereto as Exhibit N). Promptly after receipt of such a request for borrowing,
the Administrative Agent shall provide telephonic verification to the Swing Line
Lender that, after giving effect to such request, availability for Loans will
exist under Section 2.1(a) (and such verification shall be promptly confirmed in
writing by telecopier). Unless notified to the contrary by the Swing Line
Lender, each repayment of a Swing Line Loan shall be in an amount which is an
integral multiple of $100,000. If Day Runner instructs the Swing Line Lender to
debit its demand deposit account at the Swing Line Lender in the amount of any
payment with respect to a Swing Line Loan, or the Swing Line Lender otherwise
receives repayment, after 3:00 P.M., California time, on a Banking Day, such
payment shall be deemed received on the next Banking Day. The Swing Line Lender
shall promptly notify the Administrative Agent of the Swing Loan Outstandings
each time there is a change therein.
(a) Swing Line Loans shall bear interest at a fluctuating rate
per annum equal to the Alternate Base Rate. Interest shall be payable on such
dates, not more frequent than quarterly, as may be specified by the Swing Line
Lender and in any event on the Maturity Date. The Swing Line Lender shall be
responsible for invoicing Day Runner for such interest. The interest payable on
Swing Line Loans is solely for the account of the Swing Line Lender (subject to
clause (d) below).
(b) Each Swing Line Loan shall be repayable on the earlier of
(i) ten (10) Banking Days after such Loan is made, (ii) on demand made by the
Swing Line Lender and (iii) the Maturity Date.
(c) Upon the making of a Swing Line Loan, each Lender shall be
deemed to have purchased from the Swing Line Lender a participation therein in
an amount equal to that Lender's Pro Rata Share of the Commitment times the
amount of the Swing Line Loan. Within one (1) Banking Day after demand made by
the Swing Line Lender, each Lender shall, according to its Pro Rata Share of the
Commitment, promptly provide to the Swing Line Lender its purchase price
therefor in an amount equal to its participation therein. The obligation of each
Lender to so provide its purchase price to the Swing Line Lender shall be
absolute and unconditional and shall not be affected by the occurrence of a
Default or Event of Default; provided that no Lender shall be obligated to
purchase its Pro Rata Share of (i) Swing Line Loans to the extent that Swing
Line Outstandings are in excess of $10,000,000 and (ii) any Swing Line Loan made
(absent the consent of all of the Lenders) during the continuation of an Event
of Default. Each Lender that has provided to the Swing Line Lender the purchase
price due for its participation in Swing Line Loans shall thereupon acquire a
pro rata participation, to the extent of such payment, in the claim of the Swing
Line Lender against Day Runner for principal and interest and shall share, in
accordance with that pro rata participation, in any principal payment made by
Day Runner with respect to such claim and in any interest payment made by Day
Runner (but only with respect to periods subsequent to the date such Lender paid
the Swing Line Lender its purchase price) with respect to such claim.
(d) Upon any demand for payment of the Swing Line Outstandings
by the Swing Line Lender (unless Day Runner has made other arrangements
reasonably acceptable to the Swing Line Lender to reduce the Swing Line
Outstandings to $0), Day Runner shall request a Loan pursuant to Section 2.1(a)
sufficient to repay all Swing Line Outstandings (and, for this purpose, Section
2.1(c) shall not apply). In each case, the Administrative Agent shall
automatically provide the responsive Loans made by each Lender to the Swing Line
Lender (which the Swing Line Lender shall then apply to the Swing Line
Outstandings). In the event that Day Runner fails to request a Loan within the
time specified by Section 2.1 on any such date, the Administrative Agent may,
but is not required to, without notice to or the consent of any Borrower, cause
Loans to be made by the Lenders under the Commitment in amounts which are
sufficient to reduce the Swing Line Outstandings as required above. The
conditions precedent set forth in Article 8 shall not apply to Loans to be made
by the Lenders pursuant to the three preceding sentences. The proceeds of such
Loans shall be paid directly to the Swing Line Lender for application to the
Swing Line Outstandings.
2.10 Guaranty. The Obligations shall be guaranteed pursuant to the
Subsidiary Guaranty and the Borrower Guaranty.
ARTICLE 3
PAYMENTS AND FEES
3.1 Interest.
(a) Interest shall be payable on the outstanding principal
amount of each Loan from the date thereof until payment in full is made and
shall accrue and be payable at the rates set forth or provided for herein before
and after Default, before and after maturity, before and after judgment, and
before and after the commencement of any proceeding under any Debtor Relief Law,
with interest on overdue interest at the Default Rate to the fullest extent
permitted by applicable Laws.
(b) Interest accrued on each Alternate Base Rate Loan shall be
due and payable on each Quarterly Payment Date. Except as otherwise provided in
Section 3.9, the unpaid principal amount of any Alternate Base Rate Loan shall
bear interest at a fluctuating rate per annum equal to the Alternate Base Rate
plus the Applicable Base Rate Margin. Each change in the interest rate under
this Section 3.1(b) due to a change in the Alternate Base Rate shall take effect
simultaneously with the corresponding change in the Alternate Base Rate. Each
change in the interest rate under this Section 3.1(b) due to a change in the
Applicable Base Rate Margin shall take effect simultaneously with the
corresponding change in the Applicable Base Rate Margin.
(c) Interest accrued on each Eurodollar Rate Loan which is for
a term of three months or less shall be due and payable on the last day of the
related Interest Period. Interest accrued on each other Eurodollar Rate Loan
shall be due and payable on the date which is three months after the date such
Eurodollar Rate Loan was made (and, in the event that the applicable Interest
Period is longer than six months, every three months thereafter through the last
day of the Interest Period) and on the last day of the related Interest Period.
Except as otherwise provided in Section 3.9, the unpaid principal amount of any
Eurodollar Rate Loan shall bear interest at a rate per annum equal to the
Adjusted Eurodollar Rate for that Eurodollar Rate Loan plus the Applicable
Eurodollar Rate Margin. Each change in the interest rate under this Section
3.1(c) due to a change in the Eurodollar Reserve Percentage shall take effect
simultaneously with the corresponding change in the Eurodollar Reserve
Percentage. Each change in the interest rate under this Section 3.1(c) due to a
change in the Applicable Eurodollar Rate Margin shall take effect simultaneously
with the corresponding change in the Applicable Eurodollar Rate Margin.
(d) Subject to Section 3.9, each Money Market LIBOR Loan
(except for such Loans that are Foreign Currency Loans) shall bear interest on
the outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Adjusted Eurodollar Rate
for such Interest Period plus (or minus) the Money Market Margin quoted by the
Lender making such Loan in accordance with Section 2.2. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
(e) Subject to Section 3.9, each Money Market Absolute Rate
Loan (except for such Loans that are Foreign Currency Loans) shall bear interest
on the outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by
the Lender making such Loan in accordance with Section 2.2. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months after
the first day thereof.
(f) Interest accrued on each Foreign Currency Loan which is
for a term of three months or less shall be due and payable on the last day of
the related Foreign Currency Period. Interest accrued on each other Foreign
Currency Loan shall be due and payable on the date which is three months after
the date such Foreign Currency Loan was made (and, in the event that the
applicable Foreign Currency Period is longer than six months, every three months
thereafter through the last day of the Foreign Currency Period) and on the last
day of the related Foreign Currency Period. Subject to Section 3.9, each Foreign
Currency Loan shall bear interest at a rate per annum equal to the Foreign
Currency Rate for that Foreign Currency Loan plus the Applicable Eurodollar Rate
Margin.
3.2 Principal.
(a) If not sooner paid, the principal Indebtedness evidenced
by the Notes shall be payable as follows:
(i) the amount, if any, by which the sum of
(A) the principal Indebtedness evidenced by the Notes plus (B) the Aggregate
Effective Amount of all outstanding Letters of Credit plus (C) the Swing Line
Outstandings at any time exceeds the then applicable Commitment (as adjusted
pursuant to the definition thereof) shall be payable immediately (with the
aggregate principal amount outstanding under the Notes and Aggregate Effective
Amount of outstanding Letters of Credit, to the extent consisting of Foreign
Currency Loans and Foreign Currency Letters of Credit, respectively, being based
on the Foreign Currency Equivalents thereof as of the last Banking Day in each
calendar month);
and
(ii) each Money Market Loan shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period applicable thereto; and
(iii) the principal Indebtedness evidenced by the
Notes shall in any event be payable on the Maturity Date.
(b) The principal Indebtedness evidenced by the Notes may, at
any time and from time to time, voluntarily be paid or prepaid in whole or in
part without premium or penalty, except that with respect to any voluntary
prepayment under this subsection, (i) any partial prepayment shall be not less
than $3,000,000, and shall be an integral multiple of $1,000,000, in the case of
any Eurodollar Rate Loan, (ii) any partial prepayment shall be not less than
$500,000, and shall be an integral multiple of $100,000, in the case of any
Alternate Base Rate Loan other than a Swing Line Loan, (iii) any partial
prepayment shall be not less than $100,000 in the case of any Swing Line Loan,
(iv) the Administrative Agent shall have received written notice of any
prepayment by 9:00 A.M. California time on the date that is one (1) Banking Day
before the date of prepayment (which must be a Banking Day) in the case of an
Alternate Base Rate Loan, and, in the case of a Eurodollar Rate Loan, three (3)
Banking Days before the date of prepayment, which notice shall identify the date
and amount of the prepayment and the Loan(s) being prepaid, (v) each prepayment
of principal on any Eurodollar Rate Loan shall be accompanied by payment of
interest accrued to the date of payment on the amount of principal paid and (vi)
any payment or prepayment of all or any part of any Eurodollar Rate Loan or
Money Market LIBOR Loan on a day other than the last day of the applicable
Interest Period shall be subject to Sections 3.7 and 3.8.
3.3 Commitment Fee. From the Closing Date through the Maturity Date,
the Borrowers shall pay to the Administrative Agent, for the ratable accounts of
the Lenders pro rata according to their Pro Rata Share of the Commitments, a
commitment fee equal to the sum of (a) the daily Applicable Commitment Fee Rate
per annum times the average daily amount by which the Commitment exceeds the sum
of (i) the average daily principal Indebtedness constituting Syndicated Loans
evidenced by the Notes plus (ii) the average daily Aggregate Effective Amount of
all outstanding Letters of Credit. The average daily principal indebtedness
evidenced by the Notes, in the case of Foreign Currency Loans, and the average
daily Aggregate Effective Amount of outstanding Letters of Credit, in the case
of Foreign Currency Letters of Credit, shall be determined for this purpose for
each calendar month of each Fiscal Quarter based on the Foreign Currency
Equivalents thereof as of the last Banking Day in each such calendar month. The
commitment fee shall be payable quarterly in arrears on each Quarterly Payment
Date and on the Maturity Date.
3.4 Administrative Agent's Fees. The Borrowers shall pay to the
Administrative Agent an arrangement fee and an agency fee in such amounts and at
such times as heretofore agreed upon by letter agreement dated September 4, 1998
between Day Runner and the Administrative Agent. The arrangement fee and the
agency fee paid to the Administrative Agent are solely for its own account and
are nonrefundable.
3.5 Letter of Credit Fees. With respect to each Letter of Credit,
each Borrower shall pay the following fees:
(a) to the Administrative Agent for the ratable account of the
Lenders in accordance with their Pro Rata Share of the Commitment, a standby
letter of credit fee in an amount equal to the Applicable Standby Letter of
Credit Fee as of the date of the issuance of such Letter of Credit times the
face amount of such Standby Letter of Credit through the termination or
expiration of such Standby Letter of Credit, payable quarterly in advance, which
the Administrative Agent shall promptly pay to the Lenders; and
(b) concurrently with each issuance, negotiation, drawing or
amendment of each Letter of Credit, to the Issuing Lender for the sole account
of the Issuing Lender, issuance, negotiation, drawing and amendment fees in the
amounts set forth from time to time as the Issuing Lender's published scheduled
fees for such services.
All fees with respect to a Foreign Currency Letter of Credit shall be payable in
Dollars based on the Foreign Currency Equivalent as of the Banking Day
immediately preceding the date of the Request for Letter of Credit. Each of the
fees payable with respect to Letters of Credit under this Section is earned when
due and is nonrefundable.
3.6 Increased Commitment Costs. If any Lender shall determine in good
faith that the introduction after the Closing Date of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change therein or any
change in the interpretation or administration thereof by any central bank or
other Governmental Agency charged with the interpretation or administration
thereof, or compliance by such Lender (or its Eurodollar Lending Office) or any
corporation controlling such Lender, with any request, guideline or directive
regarding capital adequacy (whether or not having the force of Law) of any such
central bank or other authority not imposed as a result of such Lender's or such
corporation's failure to comply with any other Laws, affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy and such
Lender's desired return on capital) determines in good faith that the amount of
such capital is increased, or the rate of return on capital is reduced, in an
amount deemed material by such Lender in its sole discretion, as a consequence
of its obligations under this Agreement, then, within five (5) Banking Days
after demand of such Lender, the Borrowers shall pay to such Lender, from time
to time as specified in good faith by such Lender, additional amounts sufficient
to compensate such Lender in light of such circumstances, to the extent
reasonably allocable to such obligations under this Agreement; provided, that,
before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office if the making of such
designation would avoid the need for, or materially reduce the amount of, such
increased cost and would not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender. provided that such Borrower shall not
be obligated to pay any such amount which arose prior to the date which is one
hundred and eighty (180) days preceding the date of such demand or is
attributable to periods prior to the date which is one hundred and eighty (180)
days preceding the date of such demand. Each Lender's determination of such
amounts shall be conclusive in the absence of manifest error.
3.7 Eurodollar Costs and Related Matters.
(a) In the event that any Governmental Agency imposes on any
Lender any reserve or comparable requirement (including any emergency,
supplemental or other reserve) with respect to the Eurodollar Obligations
hereunder of that Lender, the Borrowers shall pay that Lender within five (5)
Banking Days after demand all amounts necessary to compensate such Lender
(determined as though such Lender's Eurodollar Lending Office had funded 100% of
its Eurodollar Rate Loan in the Designated Eurodollar Market) in respect of the
imposition of such reserve requirements. The Lender's determination of such
amount shall be conclusive in the absence of manifest error.
(b) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance:
(1) shall subject any Lender or its Eurodollar
Lending Office to any tax, duty or other charge or cost with respect to any
Eurodollar Rate Loan or any Money Market LIBOR Loan, any of its Notes evidencing
Eurodollar Rate Loans or Money Market LIBOR Loans or its obligation to make
Eurodollar Rate Loans or Money Market LIBOR Loans, or shall change the basis of
taxation of payments to any Lender attributable to the principal of or interest
on any Eurodollar Rate Loan or any Money Market LIBOR Loan or any other amounts
due under this Agreement in respect of any Eurodollar Rate Loan or any Money
Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money
Market LIBOR Loans or its obligation to make Eurodollar Rate Loans or Money
Market LIBOR Loans, excluding (i) taxes imposed on or measured in whole or in
part by its overall net income or net worth by any jurisdiction (or political
subdivision thereof) in which it is organized or maintains its principal office
or Eurodollar Lending Office and (ii) any withholding taxes imposed by the
United States of America for any period with respect to which it has failed to
provide the Borrowers with the appropriate form or forms required by Section
11.21, to the extent such forms are then required by applicable Laws;
(2) shall impose, modify or deem applicable any
reserve not applicable or deemed applicable on the date hereof (including any
reserve imposed by the Board of Governors of the Federal Reserve System, special
deposit, capital or similar requirements against assets of, deposits with or for
the account of, or credit extended by, any Lender or its Eurodollar Lending
Office); or
(3) shall impose on any Lender or its Eurodollar
Lending Office or the Designated Eurodollar Market any other condition affecting
any Eurodollar Rate Loan or Money Market LIBOR Loan, any of its Notes evidencing
Eurodollar Rate Loans or Money Market LIBOR Loans, its obligation to make
Eurodollar Rate Loans or this Agreement, or shall otherwise affect any of the
same;
and the result of any of the foregoing, as determined in good faith by such
Lender, increases the cost in a material amount to such Lender or its Eurodollar
Lending Office of making or maintaining any Eurodollar Rate Loan or Money Market
LIBOR Loan or in respect of any Eurodollar Rate Loan or Money Market LIBOR Loan,
any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or
its obligation to make Eurodollar Rate Loans or reduces the amount of any sum
received or receivable by such Lender or its Eurodollar Lending Office with
respect to any Eurodollar Rate Loan or any Money Market LIBOR Loan, any of its
Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or its
obligation to make Eurodollar Rate Loans or Money Market LIBOR Loans (assuming
such Lender's Eurodollar Lending Office had funded 100% of its Eurodollar Rate
Loan or Money Market LIBOR Loan in the Designated Eurodollar Market), then,
within five (5) Banking Days after demand by such Lender (with a copy to the
Administrative Agent), the applicable Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction (determined as though such Lender's Eurodollar Lending Office
had funded 100% of its Eurodollar Rate Loan or Money Market LIBOR Loan in the
Designated Eurodollar Market); provided, that the applicable Borrower shall not
be obligated to pay any such amount which arose prior to the date which is one
hundred and eighty (180) days preceding the date of such demand or is
attributable to periods prior to the date which is one hundred and eighty (180)
days preceding the date of such demand. A statement of any Lender claiming
compensation under this subsection shall be conclusive in the absence of
manifest error.
(c) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance shall, in the good faith opinion of any
Lender, make it unlawful or impossible for such Lender or its Eurodollar Lending
Office to make, maintain or fund its portion of any Eurodollar Rate Loan or
Money Market LIBOR Loan, or materially restrict the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the Designated Eurodollar
Market, or to determine or charge interest rates based upon the Eurodollar Rate,
and such Lender shall so notify the Administrative Agent, then such Lender's
obligation to make Eurodollar Rate Loans shall be suspended for the duration of
such illegality or impossibility and the Administrative Agent forthwith shall
give notice thereof to the other Lenders and the Borrowers. Upon receipt of such
notice, the outstanding principal amount of such Lender's Eurodollar Rate Loans
and Money Market LIBOR Loans, together with accrued interest thereon,
automatically shall be converted to Alternate Base Rate Loans on either (1) the
last day of the Eurodollar Period(s) applicable to such Loans if such Lender may
lawfully continue to maintain and fund such Loans to such day(s) or (2)
immediately if such Lender may not lawfully continue to fund and maintain such
Loans to such day(s), provided that in such event the conversion shall not be
subject to payment of a prepayment fee under Section 3.7(e). Each Lender agrees
to endeavor promptly to notify the applicable Borrower of any event of which it
has actual knowledge, occurring after the Closing Date, which will cause that
Lender to notify the Administrative Agent under this Section, and agrees to
designate a different Eurodollar Lending Office if such designation will avoid
the need for such notice and will not, in the good faith judgment of such
Lender, otherwise be disadvantageous to such Lender. In the event that any
Lender is unable, for the reasons set forth above, to make, maintain or fund its
portion of any Eurodollar Rate Loan, such Lender shall fund such amount as an
Alternate Base Rate Loan for the same period of time, and such amount shall be
treated in all respects as an Alternate Base Rate Loan. Any Lender whose
obligation to make Eurodollar Rate Loans has been suspended under this Section
shall promptly notify the Administrative Agent and the Borrowers of the
cessation of the Special Eurodollar Circumstance which gave rise to such
suspension.
(d) If, with respect to any proposed Eurodollar Rate Loan or
Money Market LIBOR Loan:
(1) the Administrative Agent reasonably determines
that, by reason of circumstances affecting the Designated Eurodollar Market
generally that are beyond the reasonable control of the Lenders, deposits in
Dollars (in the applicable amounts) are not being offered to any Lender in the
Designated Eurodollar Market for the applicable Interest Period; or
(2) the Requisite Lenders advise the Administrative
Agent that the Eurodollar Rate
as determined by the Administrative Agent (i) does not represent the effective
pricing to such Lenders for deposits in Dollars in the Designated Eurodollar
Market in the relevant amount for the applicable Interest Period, or (ii) will
not adequately and fairly reflect the cost to such Lenders of making the
applicable Eurodollar Rate Loans or Money Market LIBOR Loans; then the
Administrative Agent forthwith shall give notice thereof to the Borrowers and
the Lenders, whereupon until the Administrative Agent notifies the Borrowers
that the circumstances giving rise to such suspension no longer exist, the
obligation of the Lenders to make any future Eurodollar Rate Loans shall be
suspended.
(e) Upon payment of any Eurodollar Rate Loan or Money Market
LIBOR Loan (including as the result of a conversion required under Section
3.7(c)) on a day other than the last day in the applicable Interest Period
(whether voluntarily, involuntarily, by reason of acceleration, or otherwise),
or upon the failure of a Borrower to borrow on the date or in the amount
specified for a Eurodollar Rate Loan in any Notice of Syndicated Loan or for a
Money Market LIBOR Loan in any Notice of Money Market Loan, such Borrower shall
pay to the appropriate Lender within five (5) Banking Days after demand a fee
(determined as though 100% of the Eurodollar Rate Loan or Money Market LIBOR
Loan, as the case may be, had been funded in the Designated Eurodollar Market)
equal to the sum of:
(1) the present value of the excess, if any, of
(i) the additional interest that would have accrued on the amount prepaid or not
borrowed at the applicable Eurodollar Rate if that amount had remained or been
outstanding through the last day of the applicable Interest Period over (ii) the
interest that the Lender could recover by placing such amount on deposit in the
Designated Eurodollar Market for a period beginning on the date of the
prepayment or failure to borrow and ending on the last day of the applicable
Interest Period (or, if no deposit rate quotation is available for such period,
for the most comparable period for which a deposit rate quotation may be
obtained), discounted at the Federal Funds Rate; plus
(2) all out-of-pocket expenses incurred by the Lender
reasonably attributable to such payment, prepayment or failure to borrow.
Each Lender's determination of the amount of any
prepayment fee payable under this Section shall be conclusive in the absence of
manifest error.
(f) Each Lender agrees to endeavor promptly to notify the
Borrowers of any event of which it has actual knowledge, occurring after the
Closing Date, which will entitle such Lender to compensation pursuant to clause
(a) or clause (b) of this Section, and agrees to designate a different
Eurodollar Lending Office if such designation will avoid the need for or reduce
the amount of such compensation and will not, in the good faith judgment of such
Lender, otherwise be disadvantageous to such Lender. Any request for
compensation by a Lender under this Section shall set forth the basis upon which
it has been determined that such an amount is due from the applicable Borrower,
a calculation of the amount due, and a certification that the corresponding
costs have been incurred by the Lender.
3.8 Foreign Currency Costs and Related Matters.
(a) In the event that any Governmental Agency imposes on any
Lender any reserve or comparable requirement with respect to the Foreign
Currency Loans hereunder of that Lender, the Borrowers shall pay that Lender
within five (5) Banking Days after demand all amounts necessary to compensate
such Lender in respect of the imposition of such requirements. The Lender's
determination of such amount shall be conclusive in the absence of manifest
error.
(b) If, after the date hereof, the adoption of any Law or any
change in the interpretation of administration of any Law (including, without
limitation, the imposition of any currency exchange control or restriction):
(1) shall subject any Lender or its Applicable
Lending Office to any tax, duty or other charge or cost with respect to any
Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans or its
obligation to make Foreign Currency Loans, or shall change the basis of taxation
of payments to any Lender attributable to the principal of or interest on any
Foreign Currency Loan or any other amounts due under this Agreement in respect
of any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans
or its obligation to make Foreign Currency Loans;
(2) shall impose on any Lender or its Applicable
Lending Office or the Designated Foreign Currency Market any other condition
affecting any Foreign Currency Loan, any of its Notes evidencing Foreign
Currency Loans, or its obligation to make Foreign Currency Loans or this
Agreement, or shall otherwise affect any of the same;
and the result of any of the foregoing, as determined in good faith by such
Lender, increases the cost to such Lender or its Applicable Lending Office, in
an amount deemed by it to be material, of making or maintaining any Foreign
Currency Loan or in respect of any Foreign Currency Loan, any of its Notes
evidencing Foreign Currency Loans or its obligation to make Foreign Currency
Loans or reduces the amount of any sum received or receivable by such Lender or
its Applicable Lending Office with respect to any Foreign Currency Loan, any of
its Notes evidencing Foreign Currency Loans or its obligation to make Foreign
Currency Loans, then, within five (5) Banking Days after demand by such Lender
(with a copy to the Administrative Agent), the applicable Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such increased cost or reduction; provided, that the applicable Borrower shall
not be obligated to pay any such amount which arose prior to the date which is
one hundred and eighty (180) days preceding the date of such demand or is
attributable to periods prior to the date which is one hundred and eighty (180)
days preceding the date of such demand. A statement of any Lender claiming
compensation under this subsection shall be conclusive in the absence of
manifest error.
(c) If, after the date hereof, the adoption of any Law or any
change in the interpretation of administration of any Law (including, without
limitation, the imposition of any currency exchange control or restriction)
shall, in the good faith opinion of any Lender, make it unlawful or
impracticable for such Lender or its Applicable Lending Office to make, maintain
or fund its portion of any Foreign Currency Loan, or materially restrict the
authority of such Lender to purchase or sell, or to take deposits of, the
relevant Foreign Currency in the Designated Foreign Currency Market, or to
determine or charge interest rates based upon the Foreign Currency Rate, and
such Lender shall so notify the Administrative Agent, then such Lender's
obligation to make Foreign Currency Rate Loans shall be suspended for the
duration of such illegality or impracticability and the Administrative Agent
forthwith shall give notice thereof to the other Lenders and the Borrowers. Upon
receipt of such notice, the outstanding principal amount of such Lender's
Foreign Currency Loans shall be repaid, together with accrued interest thereon,
on either (1) the last day of the Foreign Currency Period(s) applicable to such
Loans if such Lender may lawfully continue to maintain and fund such Loans to
such day(s) or (2) immediately if such Lender may not lawfully continue to fund
and maintain such Loans to such day(s), provided that in such event the
conversion shall not be subject to payment of a prepayment fee under Section
3.7(f). Each Lender agrees to endeavor promptly to notify the applicable
Borrower of any event of which it has actual knowledge, occurring after the
Closing Date, which will cause that Lender to notify the Administrative Agent
under this Section, and agrees to designate a different Applicable Lending
Office if such designation will avoid the need for such notice and will not, in
the good faith judgment of such Lender, otherwise be disadvantageous to such
Lender. In the event that any Lender is unable, for the reasons set forth above,
to make, maintain or fund its portion of any Foreign Currency Rate Loan, such
Lender shall fund such amount as an Alternate Base Rate Loan for the same period
of time, and such amount shall be treated in all respects as an Alternate Base
Rate Loan. Any Lender whose obligation to make Foreign Currency Rate Loans has
been suspended under this Section shall promptly notify the Administrative Agent
and the Borrowers of the cessation of the Special Foreign Currency Circumstance
which gave rise to such suspension.
(d) If, with respect to any proposed Foreign Currency Loan:
(1) the Administrative Agent reasonably determines
that, by reason of circumstances affecting the Designated Foreign Currency
Market generally that are beyond the reasonable control of the Lenders, deposits
in the applicable Foreign Currency (in the applicable amounts and for the
applicable periods) are not being offered to any Lender in the Designated
Foreign Currency Market for the applicable Interest Period; or
(2) the Requisite Lenders advise the Administrative
Agent that the Foreign Currency Rate as determined by the Administrative Agent
(i) does not represent the effective pricing to such Lenders for deposits in the
applicable Foreign Currency in the Designated Foreign Currency Market in the
relevant amount for the applicable Interest Period, or (ii) will not adequately
and fairly reflect the cost to such Lenders of making the applicable Foreign
Currency Loans; then the Administrative Agent forthwith shall give notice
thereof to the Borrowers and the Lenders, whereupon until the Administrative
Agent notifies the Borrowers that the circumstances giving rise to such
suspension no longer exist, the obligation of the Lenders to make any future
Foreign Currency Loans shall be suspended.
(e) Upon payment of any Foreign Currency Loan (including as
the result of a conversion required under Section 3.8(c)) on a day other than
the last day in the applicable Interest Period (whether voluntarily,
involuntarily, by reason of acceleration, or otherwise), or upon the failure of
a Borrower to borrow on the date or in the amount specified for a Foreign
Currency Rate Loan in any Notice of Syndicated Loan or Notice of Money Market
Loan, such Borrower shall pay to the appropriate Lender within five (5) Banking
Days after demand a fee equal to the sum of:
(1) the present value of the excess, if any, of (i)
the additional interest that would have accrued on the amount prepaid or not
borrowed at the applicable Foreign Currency Rate if that amount had remained or
been outstanding through the last day of the applicable Interest Period over
(ii) the interest that the Lender could recover by placing such amount on
deposit in the Designated Foreign Currency Market for a period beginning on the
date of the prepayment or failure to borrow and ending on the last day of the
applicable Interest Period (or, if no deposit rate quotation is available for
such period, for the most comparable period for which a deposit rate quotation
may be obtained), discounted at the Federal Funds Rate; plus
(2) all out-of-pocket expenses incurred by the Lender
reasonably attributable to such payment, prepayment or failure to borrow.
Each Lender's determination of the amount of any
prepayment fee payable under this Section shall be conclusive in the absence of
manifest error.
(f) Each Lender agrees to endeavor promptly to notify the
Borrowers of any event of which it has actual knowledge, occurring after the
Closing Date, which will entitle such Lender to compensation pursuant to clause
(a) or clause (b) of this Section, and agrees to designate a different
Applicable Lending Office if such designation will avoid the need for or reduce
the amount of such compensation and will not, in the good faith judgment of such
Lender, otherwise be disadvantageous to such Lender. Any request for
compensation by a Lender under this Section shall set forth the basis upon which
it has been determined that such an amount is due from the applicable Borrower,
a calculation of the amount due, and a certification that the corresponding
costs have been incurred by the Lender.
3.9 Late Payments. If any installment of principal is not paid when
due, or interest is not paid within five (5) days after the date on which it is
due, such amount shall thereafter bear interest at a fluctuating interest rate
per annum at all times equal to the sum of the Alternate Base Rate plus 2%, to
the fullest extent permitted by applicable laws. Accrued and unpaid interest on
past due amounts (including, without limitation, interest on past due interest)
shall be compounded monthly, on the last day of each calendar month, to the
fullest extent permitted by applicable Laws.
3.10 Computation of Interest and Fees. (a) Interest based on the
Alternate Base Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed, unless the Alternate Base Rate is determined by reference to the
Federal Funds Rate, in which case the Alternate Base Rate shall be computed on
the basis of a year of 360 days. All other interest and fees shall be computed
on the basis of a year of 360 days and paid for the actual number of days
elapsed. Interest shall accrue on each Loan for the day on which the Loan is
made; interest shall not accrue on a Loan, or any portion thereof, for the day
on which the Loan or such portion is paid. Any Loan that is repaid on the same
day on which it is made shall bear interest for one day. Notwithstanding
anything in this Agreement to the contrary, interest in excess of the maximum
amount permitted by applicable laws shall not accrue or be payable hereunder or
under the Notes, and any amount paid as interest hereunder or under the Notes
which would otherwise be in excess of such maximum permitted amount shall
instead be treated as a payment of principal.
(b) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder and each Commitment Fee Rate and Applicable
Standby Letter of Credit Fee applicable hereunder. The Administrative Agent
shall give prompt notice to each Borrower and the relevant Lenders of each
interest rate, Commitment Fee Rate and Applicable Standby Letter of Credit Fee
so determined, and its determination thereof shall be conclusive in the absence
of manifest error.
3.11 Non-Banking Days. If any payment to be made by a Borrower or any
other Party under any Loan Document shall come due on a day other than a Banking
Day, payment shall instead be considered due on the next succeeding Banking Day
and the extension of time shall be reflected in computing interest and fees.
3.12 Manner and Treatment of Payments.
(a) Each payment hereunder (except payments pursuant to
Sections 3.6, 3.7, 3.8, 11.3, 11.11 and 11.22) or on the Notes or under any
other Loan Document shall be made to the Administrative Agent at the
Administrative Agent's Office for the account of each of the Lenders or the
Administrative Agent, as the case may be, in immediately available funds not
later than 11:00 A.M. California time, on the day of payment (which must be a
Banking Day). All payments received after such time, on any Banking Day, shall
be deemed received on the next succeeding Banking Day. The amount of all
payments received by the Administrative Agent for the account of each Lender
shall be immediately paid by the Administrative Agent to the applicable Lender
in immediately available funds and, if such payment was received by the
Administrative Agent by 11:00 A.M., California time, on a Banking Day and not so
made available to the account of a Lender on that Banking Day, the
Administrative Agent shall reimburse that Lender for the cost to such Lender of
funding the amount of such payment at the Federal Funds Rate. All payments shall
be made in lawful money of the United States of America, except that payments of
principal and interest on Foreign Currency Loans, and reimbursement payments in
respect of Foreign Currency Letters of Credit, shall be made in the Foreign
Currency of that Foreign Currency Loan or Foreign Currency Letter of Credit.
(b) Each Borrower hereby authorizes the Administrative Agent
to debit such Borrower's Designated Deposit Account as of the date any payment
of principal, interest, commitment fee or other amount payable by such Borrower
under this Agreement is due in an amount equal to such payment. Each Borrower
hereby agrees to take such steps as are necessary to assure that its Designated
Deposit Account will, on each such date, have a credit balance in immediately
available funds at least equal to the amount of such payment.
(c) Each payment or prepayment on account of any Loan shall be
applied pro rata according to the outstanding Loans made by each Lender
comprising such Loan.
(d) Each Lender shall use its best efforts to keep a record
(in writing or by an electronic data entry system) of Loans made by it and
payments received by it with respect to each of its Notes and such record shall,
as against the Borrowers, be presumptive evidence of the amounts owing.
Notwithstanding the foregoing sentence, the failure by any Lender to keep such a
record shall not affect Borrower's obligation to pay the Obligations.
(e) Each payment of any amount payable by any Borrower or any
other Party under this Agreement or any other Loan Document shall be made free
and clear of, and without reduction by reason of, any taxes, assessments or
other charges imposed by any Governmental Agency, central bank or comparable
authority, excluding (i) taxes imposed on or measured in whole or in part by its
overall net income, net worth or the like by any jurisdiction (or political
subdivision thereof) in which it is organized or maintains its principal office
or Eurodollar Lending Office and (ii) any withholding taxes imposed by the
United States of America for any period with respect to which it has failed to
provide the Borrowers with the appropriate form or forms required by Section
11.21, to the extent such forms are then required by applicable Laws (all such
non-excluded taxes, assessments or other charges being hereinafter referred to
as "Taxes"). To the extent that a Borrower is obligated by applicable Laws to
make any deduction or withholding on account of Taxes from any amount payable to
any Lender under this Agreement, such Borrower shall (i) make such deduction or
withholding and pay the same to the relevant Governmental Agency and (ii) pay
such additional amount to that Lender as is necessary to result in that Lender's
receiving a net after-Tax amount equal to the amount to which that Lender would
have been entitled under this Agreement absent such deduction or withholding. If
and when receipt of such payment results in an excess payment or credit to that
Lender on account of such Taxes, that Lender shall promptly refund such excess
to the applicable Borrower.
3.13 Funding Sources. Nothing in this Agreement shall be deemed to
obligate any Lender to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by any Lender that it has obtained or
will obtain the funds for any Loan in any particular place or manner.
3.14 Failure to Charge Not Subsequent Waiver. Any decision by the
Administrative Agent or any Lender not to require payment of any interest
(including interest arising under Section 3.9), fee, cost or other amount
payable under any Loan Document, or to calculate any amount payable by a
particular method, on any occasion shall in no way limit or be deemed a waiver
of the Administrative Agent's or such Lender's right to require full payment of
any interest (including interest arising under Section 3.9), fee, cost or other
amount payable under any Loan Document, or to calculate an amount payable by
another method that is not inconsistent with this Agreement, on any other or
subsequent occasion.
3.15 Administrative Agent's Right to Assume Payments Will be Made.
Unless the Administrative Agent shall have been notified by a Borrower prior to
the date on which any payment to be made by such Borrower hereunder is due that
such Borrower does not intend to remit such payment, the Administrative Agent
may, in its discretion, assume that each Borrower has remitted such payment when
so due and the Administrative Agent may, in its discretion and in reliance upon
such assumption, make available to each Lender on such payment date an amount
equal to such Lender's share of such assumed payment. If a Borrower has not in
fact remitted such payment to the Administrative Agent, each Lender shall
forthwith on demand repay to the Administrative Agent the amount of such assumed
payment made available to such Lender, together with interest thereon in respect
of each day from and including the date such amount was made available by the
Administrative Agent to such Lender to the date such amount is repaid to the
Administrative Agent at the Federal Funds Rate.
3.16 Fee Determination Detail. The Administrative Agent, and any
Lender, shall provide reasonable detail to each Borrower regarding the manner in
which the amount of any payment to the Administrative Agent and the Lenders, or
that Lender, under Article 3 has been determined, concurrently with demand for
such payment.
3.17 Survivability. All of each Borrower's obligations under Sections
3.6, 3.7 and 3.8 shall survive for the ninety (90) day period following the date
on which the Commitments are terminated and all Loans hereunder are fully paid,
and each Borrower shall remain obligated thereunder for all claims under such
Sections made by any Lender to such Borrower prior to the expiration of such
period.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrowers, jointly and severally, represent and warrant to the
Lenders that:
4.1 Existence and Qualification; Power; Compliance With Laws. Each
Borrower is a corporation duly formed and validly existing under the Laws of its
jurisdiction of incorporation. Each Borrower incorporated under the Laws of a
jurisdiction within the United States is in good standing under the Laws of such
jurisdiction of incorporation. Schedule 4.1 hereto correctly sets forth the
names, form of legal entity, number of shares of capital stock (or other
applicable unit of equity interest) issued and outstanding, and the record owner
thereof and jurisdictions of organization of all Borrowers. Each Borrower is
duly qualified or registered to transact business and is in good standing in
each other jurisdiction in which the conduct of its business or the ownership or
leasing of its Properties makes such qualification or registration necessary,
except where the failure so to qualify or register and to be in good standing
would not constitute a Material Adverse Effect. Each Borrower has all requisite
power and authority to conduct its business, to own and lease its Properties and
to execute and deliver each Loan Document to which it is a Party and to perform
its Obligations. All outstanding shares of capital stock of each Borrower are
duly authorized, validly issued, fully paid and non-assessable, and no holder
thereof has any enforceable right of rescission under any applicable state or
federal securities Laws. Each Borrower is in compliance with all Laws and other
legal requirements applicable to its business, has obtained all authorizations,
consents, approvals, orders, licenses and permits from, and has accomplished all
filings, registrations and qualifications with, or obtained exemptions from any
of the foregoing from, any Governmental Agency that are necessary for the
transaction of its business, except where the failure so to comply, obtain
authorizations, etc., file, register, qualify or obtain exemptions does not
constitute a Material Adverse Effect.
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations. The execution, delivery and performance by each Borrower
and the Subsidiary Guarantors of the Loan Documents to which each is a Party
have been duly authorized by all necessary corporate action, and do not and will
not:
(a) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of such Party;
(b) Violate or conflict with any provision of such Party's
charter, articles of incorporation or bylaws, as applicable;
(c) Result in or require the creation or imposition of any
Lien (other than pursuant to the Loan Documents) upon or with respect to any
Property now owned or leased or hereafter acquired by such Party;
(d) Violate any Requirement of Law applicable to such Party;
(e) Result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any indenture or
loan or credit agreement or any other Contractual Obligation to which such Party
is a party or by which such Party or any of its Property is bound or affected;
and such Party is not in violation of, or default under, any Requirement of Law
or Contractual Obligation, including without limitation the provisions of any
indenture, loan or credit agreement described in Section 4.2(e).
4.3 No Governmental Approvals Required. Except as previously obtained
or made, no authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, any Governmental Agency is or will
be required to authorize or permit under applicable Laws the execution, delivery
and performance by each Borrower or any Subsidiary Guarantor of the Loan
Documents to which it is a Party.
4.4 Subsidiaries.
(a) Schedule 4.4 hereto correctly sets forth the names, form
of legal entity, number of shares of capital stock (or other applicable unit of
equity interest) issued and outstanding, and the record owner thereof and
jurisdictions of organization of all Subsidiaries of each Borrower as of the
date hereof. Unless otherwise indicated in Schedule 4.4, all of the outstanding
shares of capital stock, or all of the units of equity interest, as the case may
be, of each such Subsidiary are owned of record and beneficially by a Borrower,
there are no outstanding options, warrants or other rights to purchase capital
stock of any such Subsidiary, and all such shares or equity interests so owned
are duly authorized, validly issued, fully paid and non- assessable, and were
issued in compliance with all applicable state and federal securities and other
Laws, and are free and clear of all Liens and Rights of Others, except for
Permitted Encumbrances.
(b) Each Subsidiary is a corporation duly formed and validly
existing under the Laws of its jurisdiction of organization. Each Subsidiary
incorporated under the Laws of a jurisdiction within the United States is in
good standing under the Laws of such jurisdiction of incorporation. Each
Subsidiary is duly qualified to do business as a foreign organization and is in
good standing as such in each jurisdiction in which the conduct of its business
or the ownership or leasing of its Properties makes such qualification necessary
(except where the failure to be so duly qualified and in good standing does not
constitute a Material Adverse Effect), and has all requisite power and authority
to conduct its business and to own and lease its Properties.
(c) Each Subsidiary is in compliance with all Laws and other
requirements applicable to its business and has obtained all authorizations,
consents, approvals, orders, licenses, and permits from, and each such
Subsidiary has accomplished all filings, registrations, and qualifications with,
or obtained exemptions from any of the foregoing from, any Governmental Agency
that are necessary for the transaction of its business, except where the failure
to be in such compliance, obtain such authorizations, consents, approvals,
orders, licenses, and permits, accomplish such filings, registrations, and
qualifications, or obtain such exemptions, does not constitute a Material
Adverse Effect.
4.5 Financial Statements. Day Runner has furnished to the
Administrative Agent (a) the audited consolidated financial statements of Day
Runner and its Subsidiaries for the Fiscal Year ended June 30, 1998 and (b) the
unaudited consolidated balance sheet and statement of operations of Day Runner
and its Subsidiaries for the Fiscal Quarter ended June 30, 1998. The financial
statements described in clause (a) fairly present in all material respects the
financial condition, statement of cash flows and changes in financial position,
and the balance sheet and statement of operations described in clause (b) fairly
present in all material respects the financial condition and results of
operations of Day Runner and its Subsidiaries as of such dates and for such
periods in conformity with GAAP consistently applied, subject only, in the case
of clause (b), to normal year-end accruals and audit adjustments and footnotes.
4.6 No Other Liabilities; No Material Adverse Changes. Each Borrower
and its Subsidiaries do not have any material liability or material contingent
liability required under GAAP to be reflected or disclosed, and not reflected or
disclosed, in the balance sheet described in Section 4.5(a), other than
liabilities and contingent liabilities arising in the ordinary course of
business since the date of such financial statements. Schedule 4.6 sets forth
all Funded Debt of Day Runner and its Subsidiaries as of the Closing Date. As of
the Closing Date, no circumstance or event has occurred that constitutes a
Material Adverse Effect since June 30, 1998.
4.7 Title to Property. Each Borrower and its Subsidiaries have valid
title to the Property (other than assets which are the subject of a Capital
Lease Obligation) reflected in the balance sheet described in Section 4.5(a),
other than items of Property or exceptions to title which are in each case
immaterial and Property subsequently sold or disposed of in the ordinary course
of business. Such Property is free and clear of all Liens, other than Liens
described in Schedule 4.7 and Permitted Encumbrances.
4.8 Intangible Assets. Each Borrower and its Subsidiaries own, or
possess the right to use to the extent necessary in their respective businesses,
all material trademarks, trade names, copyrights, patents, patent rights,
computer software, licenses and other Intangible Assets that are used in the
conduct of their businesses as now operated, and no such Intangible Asset,
conflicts with the valid trademark, trade name, copyright, patent, patent right
or Intangible Asset of any other Person to the extent that such conflict
constitutes a Material Adverse Effect.
4.9 Public Utility Holding Company Act. No Borrower nor any Subsidiary
of any Borrower is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.10 Litigation. There are no actions, suits, proceedings or
investigations pending as to which any Borrower or any of its Subsidiaries have
been served or have received notice or, to the best knowledge of any Borrower,
threatened against or affecting any Borrower or any of its Subsidiaries or any
Property of any of them before any Governmental Agency, which such actions,
suits, proceedings or investigations, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
4.11 Binding Obligations. Each of the Loan Documents to which any
Borrower or any of the Subsidiary Guarantors is a Party will, when executed and
delivered by such Borrower or such Subsidiary Guarantor, constitute the legal,
valid and binding obligation of such Borrower or such Subsidiary Guarantor,
enforceable against such Borrower or such Subsidiary Guarantor in accordance
with its terms, except as enforcement may be limited by Debtor Relief Laws or
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion.
4.12 No Default. No event has occurred and is continuing that is a
Default or Event of Default.
----------
4.13 ERISA.
(a) With respect to each Pension Plan:
(i) Pension Plan complies in all material respects
with ERISA and any other applicable Laws to the extent that noncompliance could
reasonably be expected to have a Material Adverse Effect;
(ii) such Pension Plan has not incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) that
could reasonably be expected to have a Material Adverse Effect;
(iii) no "reportable event" (as defined in Section
4043 of ERISA, but excluding such events as to which the PBGC has by regulation
waived the requirement therein contained that it be notified within thirty days
of the occurrence of such event) has occurred that could reasonably be expected
to have a Material Adverse Effect; and
(iv) none of the Borrowers nor any of their respective
Subsidiaries has engaged in any non-exempt "prohibited transaction" (as defined
in Section 4975 of the Code) that could reasonably be expected to have a
Material Adverse Effect.
(b) None of the Borrowers nor any of their respective
Subsidiaries has incurred or expects to incur any withdrawal liability to any
Multiemployer Plan that could reasonably be expected to have a Material Adverse
Effect.
4.14 Regulations U and X; Investment Company Act. No part of the
proceeds of any Loan hereunder will be used to purchase or carry, or to extend
credit to others for the purpose of purchasing or carrying, any Margin Stock in
violation of Regulations U and X. None of the Borrowers nor any of their
respective Subsidiaries is or is required to be registered as an "investment
company" under the Investment Company Act of 1940.
4.15 Disclosure. No information, exhibit or report furnished by any
Borrower or any Subsidiary Guarantor in connection with the negotiation of the
Loan Documents, pursuant to the terms of the Loan Documents, or in connection
with any Loan as of the date thereof contained any untrue statement of a
material fact or omitted a material fact necessary to make the statement made
not misleading in light of all the circumstances existing at the date the
statement was made. No SEC Document filed by any Borrower since December 1, 1997
contained any untrue statement of a material fact or omitted a material fact
necessary to make the statement made not misleading in light of all the
circumstances existing at the date the statement was made.
4.16 Tax Liability. Each Borrower and its Subsidiaries have filed all
tax returns which are required to be filed, and have paid, or made provision for
the payment of, all taxes with respect to the periods, Property or transactions
covered by said returns, or pursuant to any assessment received by any Borrower
or any of its Subsidiaries, except such taxes, if any, as are being contested in
good faith by appropriate proceedings and as to which adequate reserves have
been established and maintained.
4.17 Projections. The assumptions set forth in the Projections are
reasonable and consistent with each other and with all facts known to the
Borrowers and the Subsidiaries of the Borrowers, and the Projections are
reasonably based on such assumptions. The Projections were prepared in good
faith and represent management's opinion of the projected financial performance
of the Borrowers and their respective Subsidiaries based upon the information
available to the Borrowers at the time so furnished.
4.18 Environmental Matters. (a) Except as described in Schedule 4.18,
to the knowledge of the Borrowers and each Subsidiary of each Borrower, (i) each
Borrower and each Subsidiary of each Borrower is in compliance with all
applicable federal or state environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which govern or
affect any of any Borrower's or any such Subsidiary's operations and/or
properties, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time, (ii) none of the operations
of any Borrower or any of its Subsidiaries is the subject of any federal or
state investigation evaluating whether any remedial action is needed to respond
to a release of any Hazardous Material and (iii) none of the Borrowers and none
of their respective Subsidiaries have any contingent liability in connection
with any release of any Hazardous Materials, in each case, where such lack of
compliance, investigation or contingent liability could reasonably be expected
to have a Material Adverse Effect.
(b) As of the Closing Date (a) neither Borrower nor any of its
Subsidiaries at any time has disposed of, discharged, released or threatened the
release of any Hazardous Materials on, from or under the Real Property in
violation of any Hazardous Materials Law that would individually or in the
aggregate constitute a Material Adverse Effect, (b) to the best knowledge of the
Borrowers, no condition exists that violates any Hazardous Material Law
affecting any Real Property except for such violations that would not
individually or in the aggregate constitute a Material Adverse Effect, (c) no
Real Property or any portion thereof is or has been utilized by any Borrower or
any of its Subsidiaries as a site for the manufacture of any Hazardous Materials
and (d) to the extent that any Hazardous Materials are used, generated or stored
by any Borrower or any of its Subsidiaries on any Real Property, or transported
to or from such Real Property by any Borrower or any of its Subsidiaries, such
use, generation, storage and transportation are in compliance with all Hazardous
Materials Laws except for such non-compliance that would not constitute a
Material Adverse Effect or be materially adverse to the interests of the
Lenders.
4.19 Solvency. Day Runner and its Subsidiaries, taken as a whole, are
Solvent. As of the Closing Date, Day Runner, its Subsidiaries and the Target,
taken as a whole and determined on a pro forma basis on the Closing Date as if
the Target were a Subsidiary of Day Runner on such date, are Solvent (provided,
that, with respect to the Target, at all times prior to the Tender Offer
Termination Date, the representation contained in this sentence is made to the
best knowledge of Day Runner based on publicly available information relating to
Target).
4.20 Year 2000 Matters. Each Borrower will perform all acts reasonably
necessary to ensure that (a) each Borrower and any business in which such
Borrower holds a substantial interest (including without limitation any
Subsidiary of such Borrower), and (b) to the extent reasonably practicable, all
customers, suppliers and vendors that are material to the business of such
Borrower, become Year 2000 Compliant in a timely manner. Such acts shall
include, without limitation, performing a comprehensive review and assessment of
all of such Borrower's systems and adopting a detailed plan, with an itemized
budget, for the remediation, monitoring and testing of such systems. As used
herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
material software, hardware, firmware, equipment, goods or systems utilized by
or material to the business operations or financial condition of such entity
will properly perform date sensitive functions before, during and after the year
2000. Each Borrower shall, immediately upon request, provide to the
Administrative Agent such certifications or other evidence of such Borrower's
compliance with the terms hereof as the Administrative Agent may from time to
time require.
ARTICLE 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
So long as any Loan remains unpaid, or any other Obligation remains
unpaid, or any portion of the Commitments remains in force, each Borrower shall,
and shall cause its Subsidiaries to, unless the Administrative Agent (with the
written approval of the Requisite Lenders) otherwise consents:
5.1 Payment of Taxes and Other Potential Liens. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
any of them, upon their respective Property or any part thereof and upon their
respective income or profits or any part thereof, except that each Borrower and
its Subsidiaries shall not be required to pay or cause to be paid any tax,
assessment, charge or levy that is not yet delinquent, or is being contested in
good faith by appropriate proceedings so long as the relevant entity has
established and maintains adequate reserves for the payment of the same.
5.2 Preservation of Existence. Preserve and maintain their respective
existences in the jurisdiction of their formation and all material
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits, or registrations from any Governmental Agency that are
necessary for the transaction of their respective business and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of their respective business or the ownership
or leasing of their respective Properties except (a) a merger permitted by
Section 6.3 or (b) where the failure to so preserve, maintain, qualify or remain
qualified would not constitute a Material Adverse Effect.
5.3 Maintenance of Properties. Maintain, preserve and protect all of
their respective Properties in good order and condition, subject to wear and
tear in the ordinary course of business, and not permit any waste of their
respective Properties, provided, that the failure to so maintain, preserve or
protect a particular item or items of Property shall not constitute a violation
of this covenant if such failure is not reasonably likely to cause a Material
Adverse Effect.
5.4 Maintenance of Insurance. Maintain liability, casualty and other
insurance (subject to customary deductibles and retentions) with responsible
insurance companies in such amounts and against such risks as is carried by
responsible companies engaged in similar businesses and owning similar assets in
the general areas in which each Borrower and its Subsidiaries operate.
5.5 Compliance With Laws. Comply with all Requirements of Law,
noncompliance with which could constitute a Material Adverse Effect.
5.6 Inspection Rights. Upon reasonable notice, at any time during
regular business hours and as often as reasonably requested (but not so as to
materially interfere with the business of any Borrower or any of its
Subsidiaries) permit the Administrative Agent or any Lender, or any authorized
employee, agent or representative thereof, to examine, audit and make copies and
abstracts from the records and books of account of, and to visit and inspect the
Properties of, any Borrower and its Subsidiaries and to discuss the affairs,
finances and accounts of any Borrower and its Subsidiaries with any of their
officers, key employees or (with prior coordination through such Borrower)
independent accountants.
5.7 Keeping of Records and Books of Account. Keep adequate records and
books of account reflecting all financial transactions in conformity with GAAP,
consistently applied (provided, that the records and books of account of Bidco
and Target shall be kept in accordance with generally accepted accounting
principles as in effect in the United Kingdom), and in material conformity with
all applicable requirements of any Governmental Agency having regulatory
jurisdiction over each Borrower and its Subsidiaries.
5.8 Compliance With Agreements. Promptly and fully comply with all
Contractual Obligations to which any one or more of them is a party, except for
any such Contractual Obligations the non-performance of which would cause either
(a) a Default or (b) a Material Adverse Effect.
5.9 Use of Proceeds. (a) Use the proceeds of all Tender Offer Loans (1)
for the acquisition of Target Shares (i) in the Tender Offer, (ii) outside the
Tender Offer or (iii) pursuant to the provisions of Sections 428-430F of the
Companies Act and (2) for the payment of any Tender Offer Transaction Expenses,
and (b) use the proceeds of all General Purpose Loans for working capital and
general corporate purposes of each Borrower, including (x) repayment of the
Prior Credit Facility, (y) funding of Permitted Acquisitions and (z) the making
of Distributions permitted by Section 6.6 (including without limitation any
Stock Repurchases permitted under Section 6.6).
5.10 Hazardous Materials Laws. Keep and maintain all Real Property and
each portion thereof in compliance in all material respects with all applicable
Hazardous Materials Laws and promptly notify the Administrative Agent in writing
(attaching a copy of any pertinent written material) of (a) any and all material
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened in writing by a Governmental Agency pursuant
to any applicable Hazardous Materials Laws, (b) any and all material claims made
or threatened in writing by any Person against any Borrower relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from any
Hazardous Materials and (c) discovery by any Responsible Official of any
Borrower of any material occurrence or condition on any real Property adjoining
or in the vicinity of such Real Property that could reasonably be expected to
cause such Real Property or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use of such Real Property under
any applicable Hazardous Materials Laws.
5.11 Additional Borrowers and Additional Subsidiaries.
(a) On or before October 30, 1998, Ultima shall deliver to the
Administrative Agent the documentation set forth in Section 8.1(a)(4). After the
delivery of such documentation, if such documentation is in form and substance
satisfactory to the Agent in its sole discretion, the Loan Sublimit for Ultima
shall be increased to Five Million Dollars ($5,000,000), with such increase to
be evidenced by a written notice to such effect from the Administrative Agent to
Day Runner and Ultima. If such documentation is not delivered by October 30,
1998, the Loan Sublimit for Ultima automatically shall be decreased to zero as
of such date.
(b) Each Borrower shall cause each of its Material Subsidiaries
existing on the Closing Date to become a Subsidiary Guarantor as of the Closing
Date. Each such Subsidiary Guarantor, by November 15, 1998, shall provide to the
Administrative Agent and its counsel such legal opinions, certificates and other
documents as shall be reasonably satisfactory to the Administrative Agent and
its counsel.
(c) Day Runner shall be entitled to designate any of its Material
Subsidiaries existing on the Closing Date or any Subsidiary Guarantor as an
additional Borrower pursuant to this Agreement, provided that (i) no Default or
Event of Default shall then exist and be continuing or shall result therefrom,
(ii) such additional Borrower shall be jointly and severally liable, with all
other Borrowers, for all Obligations under this Agreement, (iii) the
Administrative Agent, in its sole discretion, shall agree with such additional
Borrower on an appropriate sublimit for such Borrower with respect to the
Commitments, (iv) such additional Borrower shall provide to the Administrative
Agent such related documentation, including certificates and a legal opinion,
all in form and substance reasonably acceptable to the Administrative Agent, and
(v) such additional Borrower shall execute a joinder agreement with respect to
this Agreement in form and substance reasonably acceptable to the Administrative
Agent.
(d) Subject to any applicable Requirement of Law, including, without
limitation, the requirements of Sections 151-158 of the Companies Act, each
Borrower shall cause each Subsidiary of such Borrower, whether currently
existing or hereafter acquired, that becomes a Material Subsidiary after the
Closing Date to (i) become a Subsidiary Guarantor and (ii) provide to the
Administrative Agent and its counsel in connection therewith such legal
opinions, certificates and other documents as shall be satisfactory to the
Administrative Agent and its counsel, in each case within ninety (90) Banking
Days of the date such Subsidiary becomes a Material Subsidiary; provided,
however, that each of Day Runner and Bidco shall use their respective best
efforts to cause Target to become a Subsidiary Guarantor as soon as practicable
after the Tender Offer Termination Date.
5.12 Syndication Process. After the earlier of (i) the Tender Offer
Commencement Date and (ii) December 31, 1998, cooperate in such respects as may
be reasonably requested by the Arranger in connection with the syndication of
the credit facilities under this Agreement, including the provision of
information for inclusion in written materials furnished to prospective
syndicate members and the participation by Senior Officers in meetings with
prospective syndicate members.
5.13 Tender Offer.
(a) Promptly upon the occurrence of the Tender Offer Termination Date
Day Runner shall give notice to the Administrative Agent (who shall notify the
Lenders) that the same has occurred.
(b) Promptly upon satisfaction of the condition specified in Section
429 of the Companies Act for giving a notice under that sub-section in respect
of any Target Shares and the Tender Offer becoming or being declared wholly
unconditional, Day Runner shall if it is entitled to do so cause Bidco to
implement the procedures set out in Section 429 of the Companies Act and use its
reasonable endeavors to acquire 100 per cent of the Target Shares promptly upon
the expiry of six (6) weeks after its implementation of such procedure.
(c) Each Borrower covenants and agrees that without the prior written
agreement of the Administrative Agent, no Borrower or any Subsidiary of any
Borrower will (i) issue or cause to be issued (or permit any other Affiliate of
Day Runner to issue) any press release or other publicity, the relevant portion
of the text of which has not been previously approved by the Administrative
Agent (which such approval shall not be unreasonably withheld nor delayed),
which makes reference to this Agreement or to some or all of the Lenders unless
the publicity is required by applicable Law, the Takeover Code or any stock
exchange (in which case Day Runner shall notify the Administrative Agent and the
Lenders as soon as practicable upon becoming aware that the publicity is
required) (provided that the Administrative Agent and the Lenders acknowledge
that, pursuant to the Takeover Code, (x) the terms of this Agreement will be
disclosed in the offer document by which the Tender Offer is made, provided that
such disclosure of such terms shall be subject to prior approval by the
Administrative Agent, which approval shall not unreasonably be withheld or
delayed, and (y) this Agreement will be available for public inspection while
the Tender Offer remains open for acceptance) or (ii) take or permit to be taken
any step as a result of which the offer price stated in the offer document by
which the Tender Offer is made is, or may be required to be, increased beyond
the level agreed between Day Runner and the Administrative Agent from time to
time; or
(d) Each of Day Runner and Bidco covenants and agrees that, in respect
of the Tender Offer, it will comply with the Takeover Code (subject to any
applicable waivers by the Panel), the Financial Services Act 1986, the Companies
Act 1985 and all other applicable Laws, if the failure to comply therewith,
individually or in the aggregate, could have a Material Adverse Effect;
(e) Each of Day Runner and Bidco covenants and agrees that if it shall
become aware of a circumstance or occurrence or information which constitutes or
reflects a material breach of any of the conditions of the Tender Offer which
could reasonably be expected to entitle Bidco to cause the Tender Offer to lapse
(a "Relevant Event"), it will promptly inform the Administrative Agent and (i)
if the Administrative Agent shall so request, it will make all reasonable
efforts to lapse the Tender Offer (including seeking the approval of the Panel,
if so required, to permit the condition in respect of such Relevant Event to be
invoked) (provided, that the failure to satisfy the condition of the Tender
Offer requiring valid acceptances to be received in respect of 90 percent in
nominal value of the Target Shares to which the Tender Offer relates on any date
shall not constitute a Relevant Event provided that Bidco and/or its Wholly
Owned Subsidiaries shall, on such date, have acquired or agreed to acquire,
whether pursuant to the Tender Offer or otherwise, Target Shares carrying in
aggregate more than 50 percent of the voting rights then exercisable at a
general meeting of Target) and (ii) it will obtain the written consent of the
Administrative Agent prior to declaring the Tender Offer unconditional, which
such consent shall not unreasonably be withheld or delayed, unless the Panel
would not allow the condition in respect of such Relevant Event to be invoked to
lapse the Tender Offer, in which case no such consent shall be required.
(f) Day Runner covenants and agrees that it will keep the
Administrative Agent informed as to the status and progress of the Tender Offer
and, in particular, will from time to time and promptly on request give to the
Administrative Agent reasonable details as to the current level of acceptances
of the Tender Offer (including a copy of every certificate delivered by the
receiving agent to Bidco, Day Runner or their respective advisers pursuant to
the Takeover Code) and such other matters relevant to the Tender Offer as the
Administrative Agent may reasonably request.
5.14 Funded Debt. Within 30 days after the Closing Date, all Funded
Debt of Day Runner and its Subsidiaries under the heading "Designated Funded
Debt" on Schedule 4.6 ("Designated Funded Debt") shall have been paid in full
and the commitments, if any, agreements and instruments relating to such Funded
Debt shall have been terminated. Within a commercially reasonable time
thereafter, all Liens of Day Runner and any of its Subsidiaries relating to the
Designated Funded Debt of Ultima shall be terminated. Without limiting the
foregoing, within 30 days after the Closing Date, all Indebtedness outstanding
under the Prior Credit Agreement shall have been paid and the same shall have
been terminated.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Loan remains unpaid, or any other Obligation remains
unpaid, or any portion of the Commitments remains in force, each Borrower shall
not, and shall not permit any of its Subsidiaries to, unless the Administrative
Agent (with the written approval of the Requisite Lenders or, if required by
Section 11.2, of all of the Lenders) otherwise consents:
6.1 Payment of Subordinated Obligations. Pay any principal (including
sinking fund payments) with respect to any Subordinated Obligation, or purchase
or redeem (or offer to purchase or redeem) any Subordinated Obligation, or
deposit any monies, securities or other Property with any trustee or other
Person to provide assurance that the principal or any portion thereof of any
Subordinated Obligation will be paid when due or otherwise to provide for the
defeasance of any Subordinated Obligation.
6.2 Disposition of Property. Make any Disposition of its Property,
whether now owned or hereafter acquired, except (a) a Disposition by a Borrower
to another Borrower that is not a Foreign Subsidiary, (b) a Disposition by a
Subsidiary of a Borrower to such Borrower, or (c) a Disposition of Property
other than any Intangible Asset that is material to the business of Day Runner
or any of its Subsidiaries for reasonably equivalent value, provided that, with
respect to any such Disposition pursuant to this clause (c), the aggregate value
of all such Dispositions in any Fiscal Year shall not exceed the greater of (i)
$10,000,000 or (ii) five percent (5%) of the value of the total assets of Day
Runner and its Subsidiaries as of the last day of the immediately preceding
Fiscal Year.
6.3 Mergers. Merge or consolidate with or into any Person, except (a) a
merger or consolidation of a Subsidiary of a Borrower into any Borrower or any
Subsidiary Guarantor, (b) (c) a merger or consolidation of a Borrower into any
other Borrower; or (d) a merger or consolidation constituting a Permitted
Acquisition; provided, that (i) in the case of any merger or consolidation to
which Day Runner is a party, Day Runner is the surviving Person, (ii) a Borrower
or a Subsidiary Guarantor is the surviving entity, (iii) no Default or Event of
Default then exists or would result therefrom and (iv) each Borrower and each of
its Subsidiaries execute such amendments to the Loan Documents as the
Administrative Agent may reasonably determine are appropriate as a result of
such merger; provided, further, for the avoidance of doubt that nothing in this
Section 6.3 shall be deemed to prevent or in any way restrict the acquisition of
Target Shares by Bidco (a) in the Tender Offer, (b) outside the Tender Offer or
(c) pursuant to the provisions of Sections 428-430F of the Companies Act.
6.4 Hostile Acquisitions. Directly or indirectly use the proceeds of
any Loan in connection with the acquisition of a voting interest of five percent
(5%) or more in any corporation or other business entity (other than the Target)
if such acquisition is opposed by the board of directors or comparable governing
body of such corporation or business entity.
6.5 Acquisitions. Make any Acquisition, except a Permitted Acquisition.
6.6 Distributions. Make any Distribution, whether from capital, income
or otherwise, and whether in Cash or other Property, except:
(a) Distributions by any Subsidiary of a Borrower to such
Borrower;
(b) Stock Repurchases by Day Runner of an aggregate of up to
the number of shares authorized by the Board of Directors of Day Runner prior to
September 1, 1998 and not so repurchased prior to the date hereof, as certified
to the Administrative Agent by a Senior Officer of Day Runner on or prior to the
Closing Date, of Day Runner Common Stock; provided that no Default or Event of
Default then exists or would result therefrom; and
(c) After the Tender Offer Termination Date, Stock Repurchases
by Day Runner of an aggregate amount during any Fiscal Year of (i) thirty
percent (30%) of the Net Income of Day Runner for the prior Fiscal Year minus
(ii) the consideration paid during such Fiscal Year with respect to Stock
Repurchases, if any, under Section 6.6(b); provided, that (i) no Default or
Event of Default then exists or would result therefrom; (ii) Net Income of Day
Runner shall have been positive during the immediately preceding Fiscal Quarter
prior to each such Stock Repurchase.
6.7 ERISA. At any time, permit any Pension Plan to: (i) engage in any
non-exempt "prohibited transaction" (as defined in Section 4975 of the Code);
(ii) fail to comply with ERISA or any other applicable Laws; (iii) incur any
material "accumulated funding deficiency" (as defined in Section 302 of ERISA);
or (iv) terminate in any manner, which, with respect to each event listed above,
could reasonably be expected to result in a Material Adverse Effect or (b)
withdraw, completely or partially, from any Multiemployer Plan if to do so could
reasonably be expected to result in a Material Adverse Effect.
6.8 Change in Nature of Business. Make any material change in the
nature of the business of Day Runner and its Subsidiaries, taken as a whole;
provided, for the avoidance of doubt that nothing in this Section 6.8 shall be
deemed to prevent or in any way restrict the acquisition of Target Shares by
Bidco (a) in the Tender Offer, (b) outside the Tender Offer or (c) pursuant to
the provisions of Sections 428-430F of the Companies Act.
6.9 Liens and Sale Leasebacks. Create, incur, assume or suffer to exist
any Lien of any nature upon or with respect to any of their respective
Properties, or sell or factor any accounts receivable or engage in any sale and
leaseback transaction with respect to any of their respective Properties,
whether now owned or hereafter acquired, except:
(a) Liens existing on the Closing Date and disclosed in
Schedule 4.7 and any renewals/extensions or amendments thereof, provided that
the obligations secured or benefited thereby are not increased;
(b) Liens under the Loan Documents;
(c) Permitted Encumbrances;
(d) Liens on Property acquired by any Borrower or any of its
Subsidiaries, provided that such Liens were in existence at the time of the
acquisition of such Property and were not created in contemplation of such
acquisition, and Liens on Property that secure Indebtedness permitted pursuant
to Section 6.10(d); provided that the aggregate Indebtedness secured by Liens
pursuant to this Section is not in excess of $5,000,000 in principal amount; and
(e) Dispositions of real Property permitted by Section 6.2 and
the leaseback of the real Property which is the subject thereof.
6.10 Indebtedness and Guaranty Obligations. Create, incur or assume
any Indebtedness or Guaranty Obligation except:
(a) Indebtedness and Guaranty Obligations existing on the
Closing Date and disclosed in Schedule 6.10, and refinancings, renewals,
extensions or amendments that do not increase the amount thereof;
(b) Indebtedness and Guaranty Obligations under the Loan
Documents;
(c) Indebtedness and Guaranty Obligations owed to any Borrower
or any of the Subsidiary Guarantors; provided, that any such Indebtedness owing
by Day Runner to any Subsidiary of Day Runner constitutes Subordinated
Obligations;
(d) Indebtedness consisting of Capital Lease Obligations, or
otherwise incurred to finance the purchase or construction of capital assets
(which shall be deemed to exist if the Indebtedness is incurred at or within 180
days before or after the purchase or construction of the capital asset), or to
refinance any such Indebtedness, provided that the aggregate principal amount of
such Indebtedness outstanding at any time does not exceed $5,000,000;
(e) Indebtedness consisting of Interest Rate Protection
Agreements entered into in order to manage existing or anticipated interest rate
risks and not for speculative purposes and subordinated to the rights of the
Lenders hereunder in a manner that is acceptable to the Requisite Lenders;
(f) Indebtedness constituting Subordinated Obligations;
provided that the aggregate principal amount thereof does not exceed $25,000,000
at any time outstanding;
(g) the Tender Offer Notes; and
(h) other Indebtedness that is not secured by a Lien on any
Property of any Borrower or any of the Subsidiaries of any Borrower; provided
that the aggregate principal amount thereof does not exceed $2,000,000 at any
time.
6.11 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of any Borrower or any Affiliate of any Subsidiary of
any Borrower other than (a) salary, bonus, employee stock option and other
compensation arrangements with directors or officers in the ordinary course of
business; and (b) transactions on overall terms at least as favorable to the
applicable Borrower or its Subsidiary as would be the case in an arm's-length
transaction between unrelated parties of equal bargaining power.
6.12 Funded Debt Ratio. Permit the Funded Debt Ratio, as of the last
day of any Fiscal Quarter, to be greater than the ratio set forth below opposite
the period during which such Fiscal Quarter ends:
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------- -------------------------
Period Ratio
--------------------------------------------- -------------------------
--------------------------------------------- -------------------------
Closing Date through June 30, 1999 3.75 to 1.00
--------------------------------------------- -------------------------
--------------------------------------------- -------------------------
July 1, 1999 through June 30, 2000 3.25 to 1:00
--------------------------------------------- -------------------------
--------------------------------------------- -------------------------
July 1, 2000 through June 30, 2001 2.75 to 1.00
--------------------------------------------- -------------------------
--------------------------------------------- -------------------------
July 1, 2001 and thereafter 2.50 to 1.00
--------------------------------------------- -------------------------
</TABLE>
6.13 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage
Ratio, as of the last day of any Fiscal Quarter, to be less than 2.00 to 1.00.
6.14 Stockholders' Equity. Permit Stockholders' Equity, as of the last
day of any Fiscal Quarter, to be less than the sum of (a) the greater of (i)
$67,000,000 and (ii) 80% of Stockholders' Equity as of March 31, 1999, in either
case plus (b) 50% of Net Income in the Fiscal Quarter ending September 30, 1998
and each Fiscal Quarter thereafter (with no deduction for a net loss in any such
Fiscal Quarter), plus (c) 75% of Net Cash Issuance Proceeds subsequent to the
Closing Date.
6.15 Investments. Make or suffer to exist any Investment, other than:
(a) Investments in existence on the Closing Date and
disclosed on Schedule 6.15;
(b) Investments consisting of Cash Equivalents;
(c) Investments in a Person that is the subject of a
Permitted Acquisition;
(d) Investments consisting of advances to officers, directors
and employees of Borrowers and their Subsidiaries in the ordinary course of
business not to exceed $1,000,000 at any time outstanding;
(e) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of disputes with
customers and suppliers arising in the ordinary course of business;
(f)Investments of any Borrower in any Borrower or any
Subsidiary Guarantor;
(g) Investments of a Borrower in any Subsidiary of such
Borrower that is not a Subsidiary Guarantor; provided that the aggregate amount
of all such Investments shall not exceed $1,500,000; and
(h) Investments of Bidco in Target Shares, including, for the
avoidance of doubt, purchases of Target Shares pursuant to the Tender Offer,
purchases of Target Shares outside the Tender Offer and the acquisition of
Target Shares pursuant to the provisions of Sections 428-430F of the Companies
Act.
6.16 Capital Expenditures. The Borrowers shall not, and shall not
permit any of their respective Subsidiaries to, make any Capital Expenditures in
any Fiscal Year, if, after giving effect thereto, the aggregate amount of all
Capital Expenditures made by the Borrowers and their Subsidiaries in such Fiscal
Year would exceed the amount set forth below for such Fiscal Year:
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------- ------------------------------------------------------
Fiscal Year Ending Maximum Aggregate Capital Expenditures
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 1999 $11,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2000 $12,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2001 $13,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2002 $14,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2003 $15,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2004 $16,000,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
June 30, 2005 $17,000,000
------------------------- ------------------------------------------------------
</TABLE>
6.17 Payment Restrictions Affecting Subsidiaries. Enter into, or permit
any of its Subsidiaries to enter into, any agreement, instrument or other
document which directly or indirectly prohibits or restricts in any manner, or
would have the effect of prohibiting or restricting in any material manner, the
ability of any of the Borrower's Subsidiaries to (i) pay dividends or make any
other distributions in respect of its capital stock or any other equity interest
or participation in its profits owned by the Borrower or any of its
Subsidiaries, or pay or repay any Indebtedness owed to the Borrower or any of
its Subsidiaries, (ii) make loans or advances to any of the Borrowers or any of
their Subsidiaries, or (iii) transfer any of its properties or assets to the
Borrowers or any of their Subsidiaries
6.18 Lease Obligations. The Borrowers shall not, and shall not permit
any of their respective Subsidiaries to, incur any obligations with respect to
any lease that is not a Capital Lease in any Fiscal Year, if, after giving
effect thereto, the aggregate amount of all obligations of the Borrowers and
their Subsidiaries with respect to leases that are not Capital Leases would
exceed $10,000,000 in any Fiscal Year.
ARTICLE 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 Financial and Business Information. So long as any Loan remains
unpaid, or any other Obligation remains unpaid, or any portion of the
Commitments remains in force, Day Runner shall, unless the Administrative Agent
(with the written approval of the Requisite Lenders) otherwise consents, at Day
Runner's sole expense, deliver to each Lender:
(a) As soon as practicable, and in any event within 55 days
after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in
any Fiscal Year), the consolidated balance sheet of Day Runner and its
Subsidiaries as at the end of such Fiscal Quarter and the consolidated
statements of operations and cash flows for such Fiscal Quarter, and the portion
of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail.
Such financial statements shall be certified by the chief financial officer of
Day Runner as fairly presenting in all material respects the financial
condition, results of operations and cash flows of Day Runner and its
Subsidiaries in accordance with GAAP (other than footnote disclosures),
consistently applied, as at such date and for such periods, subject only to
normal year-end accruals and audit adjustments;
(b) As soon as practicable, and in any event within 55 days
after the end of each Fiscal Quarter (i) a Pricing Certificate setting forth a
calculation of the Funded Debt Ratio as of the last day of such Fiscal Quarter,
and providing reasonable detail as to the calculation thereof, which
calculations in the case of the fourth Fiscal Quarter in any Fiscal Year shall
be based on the preliminary unaudited financial statements of such Borrower and
its Subsidiaries for such Fiscal Quarter, and as soon as practicable thereafter,
in the event of any material variance in the actual calculation of the Funded
Debt Ratio from such preliminary calculation, a revised Pricing Certificate
setting forth the actual calculation thereof and (ii) a certificate of a Senior
Officer of Day Runner stating that the representations and warranties in Article
4 hereof are true and correct in all material respects as of the date of such
certificate and that no Event of Default has occurred and is continuing or, if
an Event of Default has occurred and is continuing, a statement as to the nature
thereof and the action that Day Runner has taken and proposes to take with
respect thereto;
(c) As soon as practicable, and in any event within 100 days
after the end of each Fiscal Year, the consolidated balance sheet of Day Runner
and its Subsidiaries as at the end of such Fiscal Year and the consolidated
statements of operations, stockholders' equity and cash flows, in each case of
Day Runner and its Subsidiaries for such Fiscal Year, with all related
consolidating financial statements prepared by Day Runner, all in reasonable
detail. Such consolidated financial statements shall be prepared in accordance
with GAAP, consistently applied, and shall be accompanied by a report of
Deloitte & Touche LLP or other independent public accountants of recognized
standing selected by Day Runner and reasonably satisfactory to the Requisite
Lenders, which report shall be prepared in accordance with generally accepted
auditing standards as at such date, and shall not be subject to any
qualifications or exceptions. Such accountants' report shall be accompanied by a
certificate stating that, in making the examination pursuant to generally
accepted auditing standards necessary for the certification of such financial
statements and such report, such accountants have obtained no knowledge of any
Event of Default then existing relating to the breach by any Borrower of any of
Sections 6.1, 6.2, 6.6, 6.9, 6.10, 6.12, 6.13, 6.14 and 6.16 of this Agreement
or, if, in the opinion of such accountants, any such Event of Default shall
exist, stating the nature and status of such Event of Default;
(d) As soon as practicable, and in any event within one
hundred (100) days after the commencement of each Fiscal Year, a budget and
projection by Fiscal Quarter for that Fiscal Year and by Fiscal Year for the
next four succeeding Fiscal Years, including for the first such Fiscal Year,
projected consolidated balance sheets, statements of operations and statements
of cash flow and, for succeeding Fiscal Years, projected consolidated condensed
balance sheets and statements of operations and cash flows of each Borrower and
its Subsidiaries, all in reasonable detail (it being understood that any
projections provided hereunder shall be were prepared in good faith and will
represent management's opinion of the projected financial performance of the
Borrowers and their respective Subsidiaries based upon the information available
to the Borrowers at the time so furnished);
(e) Promptly after request by the Administrative Agent or the
Requisite Lenders, copies of any detailed audit reports, management letters or
recommendations submitted to the board of directors (or the audit committee of
the board of directors) of any Borrower by independent accountants in connection
with the accounts or books of such Borrower or any of its Subsidiaries, or any
audit of any of them;
(f) (i) As soon as practicable, and in any event within 55
days after the end of each Fiscal Quarter, a copy of the Form 10-Q for such
Fiscal Quarter filed with the Securities and Exchange Commission by any
Borrower; (ii) as soon as practicable, and in any event within 100 days after
the end of each Fiscal Quarter a copy of the Form 10-K for such Fiscal Quarter
filed with the Securities and Exchange Commission by any Borrower; and (iii)
promptly after the same are available, and in any event within two (2) Banking
Days after filing with the Securities and Exchange Commission, copies of each
annual report, proxy or financial statement or other report or communication
sent to the stockholders of any Borrower, and copies of all annual, regular,
periodic and special reports and registration statements which any Borrower may
file or be required to file with the Securities and Exchange Commission under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not
otherwise required to be delivered to the Lenders pursuant to the other
provisions of this Section 7.1;
(g) Promptly after request by the Administrative Agent or any
Lender, copies of any other report or other document that was filed by any
Borrower with any Governmental Agency;
(h) Promptly upon a Senior Officer of any Borrower becoming
aware, and in any event within five (5) Banking Days after becoming aware, of
the occurrence of any (i) "reportable event" (as such term is defined in Section
4043 of ERISA, but excluding such events as to which the PBGC has by regulation
waived the requirement therein contained that it be notified within thirty days
of the occurrence of such event) or (ii) non-exempt "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Pension Plan or any trust created thereunder, telephonic notice
specifying the nature thereof, and, no more than two (2) Banking Days after such
telephonic notice, written notice again specifying the nature thereof and
specifying what action the applicable Borrower is taking or proposes to take
with respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto;
(i) As soon as practicable, and in any event within two (2)
Banking Days after a Senior Officer becomes aware of the existence of any
condition or event which constitutes a Default or Event of Default, telephonic
notice specifying the nature and period of existence thereof, and, no more than
two (2) Banking Days after such telephonic notice, written notice again
specifying the nature and period of existence thereof and specifying what action
the Borrowers are taking or propose to take with respect thereto;
(j) Promptly upon a Senior Officer of any Borrower becoming
aware that (i) any Person has commenced a legal proceeding with respect to a
claim against any Borrower that such Borrower reasonably believes is $5,000,000
or more in excess of the amount thereof that is fully covered by insurance or
indemnification agreement of a financially responsible Person, (ii) any creditor
under a credit agreement involving Indebtedness of $1,000,000 or more or any
lessor under a material lease involving aggregate rent of $2,000,000 per year or
more has asserted a material default thereunder on the part of any Borrower or,
(iii) any Person has commenced a legal proceeding with respect to a claim
against any Borrower under a contract that is not a credit agreement or material
lease with respect to a claim of in excess of $2,000,000 or which otherwise may
reasonably be expected to result in a Material Adverse Effect, a written notice
describing the pertinent facts relating thereto and what action the applicable
Borrower is taking or proposes to take with respect thereto; and
(k) Such other data and information as from time to time may
be reasonably requested by the Administrative Agent, any Lender (through the
Administrative Agent) or the Requisite Lenders.
7.2 Compliance Certificates. So long as any Loan remains unpaid, or any
other Obligation remains unpaid or unperformed, or any portion of the
Commitments remains outstanding, Day Runner shall, at Day Runner's sole expense,
deliver to each Lender concurrently with the financial statements required
pursuant to Sections 7.1(a) and 7.1(c), a Compliance Certificate signed by a
Senior Officer of Day Runner.
ARTICLE 8
CONDITIONS
8.1 Closing Date and Effectiveness of Commitments. The occurrence of
the Closing Date, and the obligations of each Lender pursuant to the Commitment,
are subject to the following conditions precedent, each of which shall be
satisfied on or prior to the Closing Date:
(a) The Administrative Agent shall have received all of the
following, each of which shall be originals unless otherwise specified, each
properly executed by a Responsible Official of each party thereto, each dated as
of the Closing Date and each in form and substance reasonably satisfactory to
the Administrative Agent and its legal counsel (unless otherwise specified or,
in the case of the date of any of the following, unless the Administrative Agent
otherwise agrees or directs):
(1) at least one (1) executed counterpart
of this Agreement, together with arrangements satisfactory to the Administrative
Agent for additional executed counterparts, sufficient in number for
distribution to the Lenders and Borrowers;
(2) Notes executed by each Borrower in favor of each
Lender, each in a principal amount equal to that Lender's Pro Rata Share of the
Commitment;
(3) the Subsidiary Guaranty executed by each
Subsidiary Guarantor and the Borrower Guaranty executed by each Borrower;
(4) with respect to each Borrower (subject, in the
case of Ultima, to Section 5.11(a)), such documentation as the Administrative
Agent may reasonably require to establish the due organization, valid existence
and good standing of such Borrower, qualification to engage in business in each
material jurisdiction in which each such Borrower is engaged in business or
required to be so qualified, such Borrower's authority to execute, deliver and
perform the Loan Documents to which it is a Party, the identity, authority and
capacity of each Responsible Official thereof authorized to act on such
Borrower's behalf, including certified copies of articles of incorporation and
amendments thereto, bylaws and amendments thereto, certificates of good standing
and/or qualification to engage in business, tax clearance certificates,
certificates of corporate resolutions, incumbency certificates, Certificates of
Responsible Officials, and the like, in each case to the extent applicable in
the relevant jurisdiction;
(5) the Opinions of Counsel;
(6) a Certificate of the chief financial officer of
Day Runner certifying that the representations contained in Article 4 are true
and correct in all material respects; and
(7) such other assurances, certificates, documents,
consents or opinions as the Administrative Agent or the Requisite Lenders
reasonably may require.
(b) The Administrative Agent's fees payable pursuant to
Section 3.4 shall have been paid.
(c) No material action, suit, proceeding or investigation
shall be pending against any Borrower; no law, regulation, judgment or court
order shall be applicable that restrains, prevents or imposes materially adverse
conditions upon the Tender Offer or the making of the Loans; and each Borrower
and Subsidiary Guarantor shall have received all governmental and material third
party approvals necessary for such Party's execution of the Loan Documents to
which it is a party;
(d) No circumstance or event shall have occurred that
constitutes a Material Adverse Effect since June 30, 1998.
(e) The reasonable costs and expenses of the Administrative
Agent in connection with the preparation of the Loan Documents payable pursuant
to Section 11.3, and invoiced with supporting detail to the Borrowers prior to
the Closing Date, shall have been paid.
(f) The representations and warranties of each Borrower
contained in Article 4 shall be true and correct in all material respects.
(g) Borrowers and any other Parties shall be in compliance
with all the terms and provisions of the Loan Documents, and after giving effect
to the initial Loan, no Default or Event of Default shall have occurred and be
continuing.
(h) All legal matters relating to the Loan Documents shall be
reasonably satisfactory to Gibson, Dunn & Crutcher LLP, special counsel to the
Administrative Agent.
8.2 Tender Offer Loans.
The obligation of each Lender to make any Tender Offer Loan is subject
to the Closing Date having occurred, and to the following conditions precedent,
each of which shall be satisfied prior to the making of any Tender Offer Loan
(unless all of the Lenders, in their sole and absolute discretion, shall agree
otherwise):
(a) Prior to or contemporaneously with such Tender Offer Loan,
Day Runner shall have acquired and/or agreed to acquire, whether pursuant to the
Tender Offer or otherwise, Target Shares carrying in aggregate more than fifty
percent (50%) of the voting rights then exercisable at a general meeting of
Target;
(b) No Default or Event of Default pursuant to Section
9.1(j) shall have occurred and be continuing;
(c) (i) No Event of Default shall exist with respect to
Section 5.13(b), 5.13(d) or 5.13(e), and (ii) if required pursuant to Section
5.13(e), the Administrative Agent's written consent to Day Runner's declaration
of the Tender Offer as wholly unconditional shall have been granted (such
consent not to be unreasonably withheld or delayed);
(d) No Borrower shall have engaged in any Distribution after
the Closing, except that Day Runner may have repurchased not more than 375,000
shares of its common stock after September 4, 1998 and a Borrower may have made
Distributions to Day Runner;
(e) The price payable per share of Target common stock
pursuant to the Tender Offer shall not have been increased above a price per
share agreed to in writing by the Administrative Agent; and
(f) The Tender Offer Commencement Date shall have occurred
prior to December 31, 1998.
8.3 General Purpose Loans. The obligation of each Lender to make any
General Purpose Loan, and the obligation of the Issuing Lender to issue any
Letter of Credit, is subject to the Closing Date having occurred, and to the
following conditions precedent (unless the Requisite Lenders or, in any case
where the approval of all of the Lenders is required pursuant to Section 11.2,
all of the Lenders, in their sole and absolute discretion, shall agree
otherwise):
(a) Except for representations and warranties which expressly
speak as of a particular date, the representations and warranties contained in
Article 4 shall be true and correct in all material respects on and as of the
date of the Loan as though made on that date;
(b) No Default or Event of Default shall have occurred and be
continuing;
(c) No circumstance or event shall have occurred that
constitutes a Material Adverse Effect since the Closing Date.
ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 Events of Default. The existence or occurrence and continuation of
any one or more of the following events, whatever the reason therefor and under
any circumstances whatsoever, shall constitute an Event of Default:
(a) A Borrower fails to pay any principal on any of the Notes,
or any portion thereof, on the date when due; or
(b) A Borrower fails to pay any interest on any of the Notes,
or any fees under Sections 3.3, 3.4 or 3.5, or any portion thereof, within three
(3) Banking Days after the date when due; or fails to pay any other fee or
amount payable to the Lenders under any Loan Document, or any portion thereof,
within ten (10) Banking Days after demand therefor; or
(c) A Borrower fails to comply with any of the covenants
contained in Article 6 or with Sections 5.2, 5.5, 5.13 or 7.1; or
(d) A Borrower or any other Party fails to perform or observe
any other covenant or agreement (not specified in clause (a), (b), (c) or (d)
above) contained in any Loan Document on its part to be performed or observed
within sixty days after the occurrence thereof; or
(e) Any representation or warranty of any Borrower or any
Subsidiary Guarantor made in any Loan Document, or in any certificate or other
writing delivered by any Borrower or any Subsidiary Guarantor pursuant to any
Loan Document, proves to have been incorrect when made or reaffirmed in any
material respect; or
(f) A Borrower (i) fails to pay the principal, or any
principal installment, of any present or future Indebtedness of $5,000,000 or
more, or any guaranty of present or future Indebtedness of $5,000,000 or more,
on its part to be paid, when due (or within any stated grace period), whether at
the stated maturity, upon acceleration, by reason of required prepayment or
otherwise or (ii) fails to perform or observe any other term, covenant or
agreement on its part to be performed or observed, or suffers any event of
default to occur, in connection with any present or future Indebtedness of
$5,000,000 or more, or of any guaranty of present or future Indebtedness of
$5,000,000 or more, if as a result of such failure or sufferance any holder or
holders thereof (or an agent or trustee on its or their behalf) has the right to
declare such Indebtedness due before the date on which it otherwise would become
due or the right to require a Borrower to redeem or purchase, or offer to redeem
or purchase, all or any portion of such Indebtedness; or
(g) Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement or action (or omission to
act) of the Administrative Agent or the Lenders or satisfaction in full of all
the Obligations, ceases to be in full force and effect or is declared by a court
of competent jurisdiction to be null and void, invalid or unenforceable in any
respect which is materially adverse to the interests of the Lenders; or any
Party thereto denies in writing that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or rescind
same; or
(h) Any Change in Control occurs; or
(i) A final judgment against any Borrower or any Subsidiary
Guarantor is entered for the payment of money in excess of $5,000,000 (not
covered by insurance or for which an insurer has reserved its rights) and,
absent procurement of a stay of execution, such judgment remains unsatisfied for
thirty (30) calendar days after the date of entry of judgment, or in any event
later than five (5) days prior to the date of any proposed sale thereunder; or
any writ or warrant of attachment or execution or similar process is issued or
levied against the Property of any such Person and is not released, vacated or
fully bonded within thirty (30) calendar days after its issue or levy; or
(j) A Borrower or any Subsidiary Guarantor institutes or
consents to the institution of any proceeding under a Debtor Relief Law relating
to it or to all or any material part of its Property, or is unable or admits in
writing its inability to pay its debts as they mature, or makes an assignment
for the benefit of creditors; or applies for or consents to the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer for it or for all or any material part of its Property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of that Person and the
appointment continues undischarged or unstayed for sixty (60) calendar days; or
any proceeding under a Debtor Relief Law relating to any such Person or to all
or any part of its Property is instituted without the consent of that Person and
continues undismissed or unstayed for sixty (60) calendar days; or
(k) The occurrence of an Event of Default (as such term is or
may hereafter be specifically defined in any other Loan Document) under any
other Loan Document; or
(l) Any Pension Plan maintained by any Borrower is finally
determined by the PBGC to have a material "accumulated funding deficiency" as
that term is defined in Section 302 of ERISA in excess of an amount equal to 5%
of the consolidated total assets of such Borrower as of the most-recently ended
Fiscal Quarter.
9.2 Remedies Upon Event of Default. Without limiting any other rights
or remedies of the Administrative Agent or the Lenders provided for elsewhere in
this Agreement, or the other Loan Documents, or by applicable Law, or in equity,
or otherwise:
(a) Subject to Section 9.3, upon the occurrence, and during
the continuance, of any Event of Default other than an Event of Default
described in Section 9.1(j):
(1) the Administrative Agent shall at the request,
or may with the consent, of the Requisite Lenders, by written notice to the
Borrowers, declare that all or any portion of the Commitments to make Loans and
all other obligations of the Administrative Agent and the Lenders under the
Commitments and all rights of the Borrowers and any other Parties under the Loan
Documents are terminated;
(2) the Issuing Lender shall at the request, or
may with the consent, of the Requisite Lenders, demand immediate payment by each
Borrower of an amount equal to the aggregate amount of all outstanding Letters
of Credit to be held by the Issuing Lender in an interest-bearing cash
collateral account as collateral hereunder; and
(3) the Requisite Lenders may request the
Administrative Agent to, and the Administrative Agent thereupon shall, declare
all or any part of the unpaid principal of all Notes, all interest accrued and
unpaid thereon and all other amounts payable under the Loan Documents to be
forthwith due and payable, and shall notify each Borrower thereof, whereupon the
same shall become and be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or further notice of any kind, all of
which are expressly waived by each Borrower.
(b) Upon the occurrence of any Event of Default described in
Section 9.1(j):
(1) the Commitments to make Loans and all other
obligations of the Administrative Agent or the Lenders and all rights of the
Borrowers and any other Parties under the Loan Documents shall terminate without
notice to or demand upon any Borrower, which are expressly waived by each
Borrower, except that all of the Lenders may waive the Event of Default or,
without waiving, determine, upon terms and conditions satisfactory to all the
Lenders, to reinstate the Commitments and such other obligations and rights and
make further Loans, which determination shall apply equally to, and shall be
binding upon, all the Lenders;
(2) an amount equal to the aggregate amount of all
outstanding Letters of Credit shall be immediately due and payable to the
Issuing Lender without notice to or demand upon any Borrower, which are
expressly waived by each Borrower, to be held by the Issuing Lender in an
interest-bearing cash collateral account as collateral hereunder; and
(3) the unpaid principal of all Notes, all interest
accrued and unpaid thereon and all other amounts payable under the Loan
Documents shall be forthwith due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of which are
expressly waived by each Borrower.
(c) Subject to Section 9.3, upon the occurrence and during the
continuation of any Event of Default, the Lenders and the Administrative Agent,
or any of them, without notice to (except as expressly provided for in any Loan
Document) or demand upon any Borrower, which are expressly waived by each
Borrower, may proceed (but only with the consent of the Requisite Lenders) to
protect, exercise and enforce their rights and remedies under the Loan Documents
against each Borrower and any other Party and such other rights and remedies as
are provided by Law or equity.
(d) Subject to Section 9.3, the order and manner in which the
Lenders' rights and remedies are to be exercised shall be determined by the
Requisite Lenders in their sole discretion, and all payments received by the
Administrative Agent and the Lenders, or any of them, during the continuation of
an Event of Default, shall be applied first to the costs and expenses (including
reasonable attorneys' fees and disbursements and the reasonably allocated costs
of attorneys employed by the Administrative Agent or by any Lender) of the
Administrative Agent and of the Lenders, and thereafter paid pro rata to the
Lenders in the same proportions that the aggregate Obligations owed to each
Lender under the Loan Documents bear to the aggregate Obligations owed under the
Loan Documents to all the Lenders, without priority or preference among the
Lenders. Regardless of how each Lender may treat payments for the purpose of its
own accounting, for the purpose of computing Borrower's Obligations hereunder
and under the Notes, payments during the continuation of an Event of Default
shall be applied first, to the costs and expenses of the Administrative Agent
and the Lenders, as set forth above, second, to the payment of accrued and
unpaid interest due under any Loan Documents to and including the date of such
application (ratably, and without duplication, according to the accrued and
unpaid interest due under each of the Loan Documents), and third, to the payment
of all other amounts (including principal and fees) then owing to the
Administrative Agent or the Lenders under the Loan Documents. No application of
payments will cure any Event of Default, or prevent acceleration, or continued
acceleration, of amounts payable under the Loan Documents, or prevent the
exercise, or continued exercise, of rights or remedies of the Lenders hereunder
or thereunder or at Law or in equity.
9.3 Certain Funds Period. To assist Bidco in meeting its obligations to
ensure it has sufficient funds available to fulfill its obligations under the
Tender Offer, the Administrative Agent and the Lenders agree that the provisions
of Section 9.2(a), 9.2(c) and 9.2(d) shall be suspended during the Certain Funds
Period with respect to Tender Offer Loans, except to the extent that, at any
time during such period, an Event of Default based upon a violation of Section
5.13(b), 5.13(d) or 5.13(e) has occurred and is continuing.
ARTICLE 10
THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization. Subject to Section 10.8, each
Lender hereby irrevocably appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Administrative Agent by the terms thereof
or are reasonably incidental, as determined by the Administrative Agent,
thereto. This appointment and authorization is intended solely for the purpose
of facilitating the servicing of the Loans and does not constitute appointment
of the Administrative Agent as trustee for any Lender or as representative of
any Lender for any other purpose and, except as specifically set forth in the
Loan Documents to the contrary, the Administrative Agent shall take such action
and exercise such powers only in an administrative and ministerial capacity.
10.2 Administrative Agent and Affiliates. Wells Fargo Bank, National
Association (and each successor Administrative Agent) has the same rights and
powers under the Loan Documents as any other Lender and may exercise the same as
though it were not the Administrative Agent, and the term "Lender" or "Lenders"
includes Wells Fargo Bank, National Association in its individual capacity.
Wells Fargo Bank, National Association (and each successor Administrative Agent)
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with any Borrower, any
Subsidiary thereof, or any Affiliate of any Borrower or any Subsidiary thereof,
as if it were not the Administrative Agent and without any duty to account
therefor to the Lenders. Wells Fargo Bank, National Association (and each
successor Administrative Agent) need not account to any other Lender for any
monies received by it for reimbursement of its costs and expenses as
Administrative Agent hereunder, or (subject to Section 11.10) for any monies
received by it in its capacity as a Lender hereunder. The Administrative Agent
shall not be deemed to hold a 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.
10.3 Lenders' Credit Decisions. Each Lender agrees that it has,
independently and without reliance upon the Administrative Agent, any other
Lender or the directors, officers, agents, employees or attorneys of the
Administrative Agent or of any other Lender, and instead in reliance upon
information supplied to it by or on behalf of the Borrowers and upon such other
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement. Each Lender also agrees that
it shall, independently and without reliance upon the Administrative Agent, any
other Lender or the directors, officers, agents, employees or attorneys of the
Administrative Agent or of any other Lender, continue to make its own
independent credit analyses and decisions in acting or not acting under the Loan
Documents.
10.4 Action by Administrative Agent.
(a) Absent actual knowledge of the Administrative Agent of the
existence of a Default, the Administrative Agent may assume that no Default has
occurred and is continuing, unless the Administrative Agent (or the Lender that
is then the Administrative Agent) has received notice from a Borrower stating
the nature of the Default or has received notice from a Lender stating the
nature of the Default and that such Lender considers the Default to have
occurred and to be continuing.
(b) The Administrative Agent has only those obligations under
the Loan Documents as are expressly set forth therein.
(c) Except for any obligation expressly set forth in the Loan
Documents and as long as the Administrative Agent may assume that no Event of
Default has occurred and is continuing, the Administrative Agent may, but shall
not be required to, exercise its discretion to act or not act, except that the
Administrative Agent shall be required to act or not act upon the instructions
of the Requisite Lenders (or of all the Lenders, to the extent required by
Section 11.2) and those instructions shall be binding upon the Administrative
Agent and all the Lenders, provided that the Administrative Agent shall not be
required to act or not act if to do so would be contrary to any Loan Document or
to applicable Law or would result, in the reasonable judgment of the
Administrative Agent, in substantial risk of liability to the Administrative
Agent.
(d) If the Administrative Agent has received a notice
specified in clause (a), the Administrative Agent shall immediately give notice
thereof to the Lenders and shall act or not act upon the instructions of the
Requisite Lenders (or of all the Lenders, to the extent required by Section
11.2), provided that the Administrative Agent shall not be required to act or
not act if to do so would be contrary to any Loan Document or to applicable Law
or would result, in the reasonable judgment of the Administrative Agent, in
substantial risk of liability to the Administrative Agent, and except that if
the Requisite Lenders (or all the Lenders, if required under Section 11.2) fail,
for five (5) Banking Days after the receipt of notice from the Administrative
Agent, to instruct the Administrative Agent, then the Administrative Agent, in
its sole discretion, may act or not act as it deems advisable for the protection
of the interests of the Lenders.
(e) The Administrative Agent shall have no liability to any
Lender for acting, or not acting, as instructed by the Requisite Lenders (or all
the Lenders, if required under Section 11.2), notwithstanding any other
provision hereof.
10.5 Liability of Administrative Agent. Neither the Administrative
Agent nor any of its directors, officers, agents, employees or attorneys shall
be liable for any action taken or not taken by them under or in connection with
the Loan Documents, except for their own gross negligence or willful misconduct.
Without limitation on the foregoing, the Administrative Agent and its directors,
officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof
until the Administrative Agent receives notice of the assignment or transfer
thereof, in form satisfactory to the Administrative Agent, signed by the payee,
and may treat each Lender as the owner of that Lender's interest in the
Obligations for all purposes of this Agreement until the Administrative Agent
receives notice of the assignment or transfer thereof, in form satisfactory to
the Administrative Agent, signed by that Lender;
(b) May consult with legal counsel (including in-house legal
counsel), accountants (including in-house accountants) and other professionals
or experts selected by it, or with legal counsel, accountants or other
professionals or experts for Borrowers and/or their Subsidiaries or the Lenders,
and shall not be liable for any action taken or not taken by it in good faith in
accordance with any advice of such legal counsel, accountants or other
professionals or experts;
(c) Shall not be responsible to any Lender for any statement,
warranty or representation made in any of the Loan Documents or in any notice,
certificate, report, request or other statement (written or oral) given or made
in connection with any of the Loan Documents;
(d) Except to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance or
observance by the Borrowers or their respective Subsidiaries of any of the
terms, conditions or covenants of any of the Loan Documents or to inspect any
collateral or any Property, books or records of the Borrowers or their
Subsidiaries;
(e) Will not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, effectiveness,
sufficiency or value of any Loan Document, any other instrument or writing
furnished pursuant thereto or in connection therewith, or any collateral;
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement,
request or other instrument or writing believed in good faith by it to be
genuine and signed or sent by the proper party or parties; and
(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by any Borrower or any Subsidiary or
Affiliate thereof or paid or payable to or received or receivable from any
Lender under any Loan Document, including, without limitation, principal,
interest, commitment fees, Loans and other amounts; provided that, promptly upon
discovery of such an error in computation, the Administrative Agent, the Lenders
and (to the extent applicable) any Borrower and/or its Subsidiaries or
Affiliates shall make such adjustments as are necessary to correct such error
and to restore the parties to the position that they would have occupied had the
error not occurred.
10.6 Indemnification. Each Lender shall, ratably in accordance with its
Pro Rata Share of the Commitments (if the Commitments are then in effect) or in
accordance with its proportion of the aggregate Indebtedness then evidenced by
the Notes (if the Commitments have then been terminated), indemnify and hold the
Administrative Agent and its directors, officers, agents, employees and
attorneys harmless against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including reasonable attorneys' fees and
disbursements and allocated costs of attorneys employed by the Administrative
Agent) that may be imposed on, incurred by or asserted against it or them in any
way relating to or arising out of the Loan Documents (other than losses incurred
by reason of the failure of any Borrower to pay the Indebtedness represented by
the Notes) or any action taken or not taken by it as Administrative Agent
thereunder, except such as result from its own gross negligence or willful
misconduct. Without limitation on the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for that Lender's Pro Rata Share of any
out-of-pocket cost or expense incurred by the Administrative Agent in connection
with the negotiation, preparation, execution, delivery, amendment, waiver,
restructuring, reorganization (including a bankruptcy reorganization),
enforcement or attempted enforcement of the Loan Documents, to the extent that
any Borrower or any other Party is required by Section 11.3 to pay that cost or
expense but fails to do so upon demand. Nothing in this Section 10.6 shall
entitle the Administrative Agent or any indemnitee referred to above to recover
any amount from the Lenders if and to the extent that such amount has
theretofore been recovered from a Borrower or any of its Subsidiaries. To the
extent that the Administrative Agent or any indemnitee referred to above is
later reimbursed such amount by a Borrower or any of its Subsidiaries, it shall
return the amounts paid to it by the Lenders in respect of such amount.
10.7 Successor Administrative Agent. The Administrative Agent may, and
at the request of the Requisite Lenders shall, resign as Administrative Agent
upon reasonable notice to the Lenders and each Borrower effective upon
acceptance of appointment by a successor Administrative Agent. If the
Administrative Agent shall resign as Administrative Agent under this Agreement,
the Requisite Lenders shall appoint from among the Lenders a successor
Administrative Agent for the Lenders, which successor Administrative Agent shall
be approved by each Borrower (and such approval shall not be unreasonably
withheld or delayed). If no successor Administrative Agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and each
Borrower, a successor Administrative Agent from among the Lenders. Upon the
acceptance of its appointment as successor Administrative Agent hereunder, such
successor Administrative Agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor Administrative Agent and the retiring Administrative
Agent's appointment, powers and duties as Administrative Agent shall be
terminated. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article 10, and Sections 11.3,
11.11 and 11.22, 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.
Notwithstanding the foregoing, if (a) the Administrative Agent has not been paid
its agency fees under Section 3.5 or has not been reimbursed for any expense
reimbursable to it under Section 11.3, in either case for a period of at least
one (1) year and (b) no successor Administrative Agent has accepted appointment
as Administrative Agent by the date which is thirty (30) days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Requisite Lenders appoint a successor
Administrative Agent as provided for above.
10.8 No Obligations of Borrowers. Nothing contained in this Article 10
shall be deemed to impose upon any Borrower any obligation in respect of the due
and punctual performance by the Administrative Agent of its obligations to the
Lenders under any provision of this Agreement, and no Borrower shall have
liability to the Administrative Agent or any of the Lenders in respect of any
failure by the Administrative Agent or any Lender to perform any of its
obligations to the Administrative Agent or the Lenders under this Agreement.
Without limiting the generality of the foregoing, where any provision of this
Agreement relating to the payment of any amounts due and owing under the Loan
Documents provides that such payments shall be made by a Borrower to the
Administrative Agent for the account of the Lenders, such Borrower's obligations
to the Lenders in respect of such payments shall be deemed to be satisfied upon
the making of such payments to the Administrative Agent in the manner provided
by this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and
remedies of the Administrative Agent and the Lenders provided herein or in any
Note or other Loan Document are cumulative and not exclusive of any right,
power, privilege or remedy provided by Law or equity. No failure or delay on the
part of the Administrative Agent or any Lender in exercising any right, power,
privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may
any single or partial exercise of any right, power, privilege or remedy preclude
any other or further exercise of the same or any other right, power, privilege
or remedy. The terms and conditions of Article 10 (other than Section 10.8)
hereof are inserted for the sole benefit of the Administrative Agent and the
Lenders; the same may be waived in whole or in part, with or without terms or
conditions, in respect of any Loan without prejudicing the Administrative
Agent's or the Lenders' rights to assert them in whole or in part in respect of
any other Loan.
11.2 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder (other than a consent relating
to a matter expressly stated by this Agreement to require only the
Administrative Agent's consent), and no consent to any departure by any Borrower
or any other Party therefrom, may in any event be effective unless in writing
signed by the Administrative Agent with the written approval of the Requisite
Lenders (and, in the case of any amendment, modification or supplement of or to
any Loan Document to which a Borrower is a Party, signed by such Borrower, and,
in the case of any amendment, modification or supplement to Article 10, signed
by the Administrative Agent), and then only in the specific instance and for the
specific purpose given; and, without the approval in writing of all the Lenders,
no amendment, modification, supplement, termination, waiver or consent (other
than a consent relating to a matter expressly stated by this Agreement to
require only the Administrative Agent's consent) may be effective.
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on, any Note,
or the amount of the Commitments or the Pro Rata Share of any Lender or the
amount of any commitment fee payable to any Lender, or any other fee or amount
payable to any Lender under the Loan Documents or to waive an Event of Default
consisting of the failure of any Borrower to pay when due principal, interest or
any fee due to the Lenders or the Issuing Bank;
(b) To postpone any date fixed for any payment of principal
of, prepayment of principal of or any installment of interest on, any Note or
any installment of any fee due to the Lenders or the Issuing Bank, or to extend
the term of the Commitments;
(c) To amend the provisions of the definition of "Requisite
Lenders" or "Maturity Date"; or
(d) To release any Subsidiary Guarantor from its obligations
under the Subsidiary Guaranty; or
(e) To amend or waive Article 8 or this Section 11.2; or
(f) To amend any provision of this Agreement that expressly
requires the consent or approval of all the Lenders.
Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section 11.2 shall apply equally to, and shall be binding upon, all the
Lenders and the Administrative Agent.
11.3 Costs, Expenses and Taxes. Borrowers, jointly and severally, shall
pay within ten (10) Banking Days after demand, accompanied by an invoice
therefor, the reasonable costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, syndication, execution and
delivery of the Loan Documents and any amendment thereto or waiver thereof.
Borrowers, jointly and severally, shall also pay on demand, accompanied by an
invoice therefor, the reasonable costs and expenses of the Administrative Agent
and the Lenders in connection with the restructuring, reorganization (including
a bankruptcy reorganization of any Borrower or any of their respective
Subsidiaries) and enforcement or attempted enforcement of the Loan Documents,
and any matter related thereto. The foregoing costs and expenses shall include
any applicable filing fees, recording fees, search fees, and other out-of-pocket
expenses and the reasonable fees and out-of-pocket expenses of any legal counsel
(including reasonably allocated costs of legal counsel employed by the
Administrative Agent or any Lender), independent public accountants and other
outside experts retained by the Administrative Agent or any Lender, whether or
not such costs and expenses are incurred or suffered by the Administrative Agent
or any Lender in connection with or during the course of any bankruptcy or
insolvency proceedings of any Borrower or any Subsidiary thereof. Borrowers,
jointly and severally, shall pay any and all documentary and other taxes,
excluding (i) taxes imposed on or measured in whole or in part by a Lender's
overall net income or net worth imposed on it by (A) any jurisdiction (or
political subdivision thereof) in which it is organized or maintains its
principal office or Eurodollar Lending Office or (B) any jurisdiction (or
political subdivision thereof) in which it is "doing business" or (ii) any
withholding taxes or other taxes based on gross income imposed by the United
States of America for any period with respect to which it has failed to provide
Borrowers with the appropriate form or forms required by Section 11.21, to the
extent such forms are then required by applicable Laws, and all costs, expenses,
fees and charges payable or determined to be payable in connection with the
filing or recording of this Agreement, any other Loan Document or any other
instrument or writing to be delivered hereunder or thereunder, or in connection
with any transaction pursuant hereto or thereto, and shall reimburse, hold
harmless and indemnify on the terms set forth in 11.11 the Administrative Agent
and the Lenders from and against any and all loss, liability or legal or other
expense with respect to or resulting from any delay in paying or failure to pay
any such tax, cost, expense, fee or charge or that any of them may suffer or
incur by reason of the failure of any Party to perform any of its Obligations.
11.4 Nature of Lenders' Obligations. The obligations of the Lenders
hereunder are several and not joint or joint and several. Nothing contained in
this Agreement or any other Loan Document and no action taken by the
Administrative Agent or the Lenders or any of them pursuant hereto or thereto
may, or may be deemed to, make the Lenders a partnership, an association, a
joint venture or other entity, either among themselves or with the Borrowers or
any Affiliate of any of the Borrowers. A default by any Lender will not increase
the Pro Rata Share of the Commitments attributable to any other Lender. Any
Lender not in default may, if it desires, assume in such proportion as the
nondefaulting Lenders agree the obligations of any Lender in default, but is not
obligated to do so. The Administrative Agent agrees that it will use its best
efforts either to induce promptly the other Lenders to assume the obligations of
a Lender in default or to obtain promptly another Lender, reasonably
satisfactory to the Borrowers, to replace such a Lender in default.
11.5 Survival of Representations and Warranties. All representations
and warranties contained herein or in any other Loan Document, or in any
certificate or other writing delivered by or on behalf of any one or more of the
Parties to any Loan Document, will survive the making of the Loans hereunder and
the execution and delivery of the Notes, and have been or will be relied upon by
the Administrative Agent and each Lender, notwithstanding any investigation made
by the Administrative Agent or any Lender or on their behalf.
11.6 Notices. Except as otherwise expressly provided in the Loan
Documents, all notices, requests, demands, directions and other communications
provided for hereunder or under any other Loan Document must be in writing and
must be mailed, telegraphed, telecopied, dispatched by commercial courier or
delivered to the appropriate party at the address set forth on the signature
pages of this Agreement or other applicable Loan Document or, as to any party to
any Loan Document, at any other address as may be designated by it in a written
notice sent to all other parties to such Loan Document in accordance with this
Section. Except as otherwise expressly provided in any Loan Document, if any
notice, request, demand, direction or other communication required or permitted
by any Loan Document is given by mail it will be effective on the earlier of
receipt or the fourth Banking Day after deposit in the United States mail with
first class or airmail postage prepaid; if given by telegraph or cable, when
delivered to the telegraph company with charges prepaid; if given by telecopier,
when sent; if dispatched by commercial courier, on the scheduled delivery date;
or if given by personal delivery, when delivered.
11.7 Execution of Loan Documents. Unless the Administrative Agent
otherwise specifies with respect to any Loan Document, (a) this Agreement and
any other Loan Document may be executed in any number of counterparts and any
party hereto or thereto may execute any counterpart, each of which when executed
and delivered will be deemed to be an original and all of which counterparts of
this Agreement or any other Loan Document, as the case may be, when taken
together will be deemed to be but one and the same instrument and (b) execution
of any such counterpart may be evidenced by a telecopier transmission of the
signature of such party. The execution of this Agreement or any other Loan
Document by any party hereto or thereto will not become effective until
counterparts hereof or thereof, as the case may be, have been executed by all
the parties hereto or thereto.
11.8 Binding Effect; Assignment.
(a) This Agreement and the other Loan Documents to which each
Borrower is a Party will be binding upon and inure to the benefit of Borrowers,
the Administrative Agent, each of the Lenders, and their respective successors
and assigns, except that no Borrower may assign its rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of all the Lenders. Any Lender may at any time pledge any of its Notes or any
other instrument evidencing its rights as a Lender under this Agreement to a
Federal Reserve Bank, but no such pledge shall release that Lender from its
obligations hereunder or grant to such Federal Reserve Bank the rights of a
Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Lender
may assign to one or more Persons all or any portion of its Pro Rata Share of
the Commitments; provided that (i) such Person, if not then a Lender or an
Affiliate of the assigning Lender, shall be approved by the Administrative Agent
and (if no Event of Default then exists) the Borrowers (neither of which
approvals shall be unreasonably withheld or delayed), (ii) such assignment shall
be evidenced by a Commitments Assignment and Acceptance, a copy of which shall
be furnished to the Administrative Agent as hereinbelow provided, (iii) except
in the case of an assignment to an Affiliate of the assigning Lender, to another
Lender or of the entire remaining Commitments of the assigning Lender, the
assignment shall not assign a Pro Rata Share of the Commitments that is
equivalent to less than $5,000,000 and (iv) the effective date of any such
assignment shall be as specified in the Commitments Assignment and Acceptance,
but not earlier than the date which is five (5) Banking Days after the date the
Administrative Agent has received the Commitments Assignment and Acceptance.
Upon the effective date of such Commitments Assignment and Acceptance, the
Person named therein shall be a Lender for all purposes of this Agreement, with
the Pro Rata Share of the Commitments therein set forth and, to the extent of
such Pro Rata Share, the assigning Lender shall be released from its further
obligations under this Agreement. Each Borrower agrees that it shall execute and
deliver (against delivery by the assigning Lender to each Borrower of its Note)
to such assignee Lender, Notes evidencing that assignee Lender's Pro Rata Share
of the Commitments, and to the assigning Lender, Notes evidencing the remaining
balance Pro Rata Share retained by the assigning Lender.
(c) By executing and delivering a Commitments Assignment and
Acceptance, the Person constituting the assignee thereunder acknowledges and
agrees that: (i) other than the representation and warranty that it is the legal
and beneficial owner of the Pro Rata Share of the Commitments being assigned
thereby free and clear of any adverse claim, the assigning Lender has made no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness or
sufficiency of this Agreement or any other Loan Document; (ii) the assigning
Lender has made no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or the performance by the
Borrowers of the Obligations; (iii) it has received a copy of this Agreement,
together with copies of the most recent financial statements delivered pursuant
to Section 7.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Commitments Assignment and Acceptance; (iv) it will, independently and without
reliance upon the Administrative Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (v) it
appoints and authorizes the Administrative Agent to take such action and to
exercise such powers under this Agreement as are delegated to the Administrative
Agent by this Agreement; and (vi) it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent shall maintain at the
Administrative Agent's Office a copy of each Commitments Assignment and
Acceptance delivered to it and a register (the "Register") of the name and
address of each of the Lenders and the Pro Rata Share of the Commitments held by
each Lender, giving effect to each Commitments Assignment and Acceptance. The
Register shall be available during normal business hours for inspection by any
Borrower or any Lender upon reasonable prior notice to the Administrative Agent.
After receipt of a completed Commitments Assignment and Acceptance executed by
any Lender and an assignee, and receipt of an assignment fee of $3,500 from such
Lender or assignee, the Administrative Agent shall, promptly following the
effective date thereof, provide to the Borrowers and the Lenders a revised
Schedule 1.1 giving effect thereto. Each Borrower, the Administrative Agent and
the Lenders shall deem and treat the Persons listed as Lenders in the Register
as the holders and owners of the Pro Rata Share of the Commitments listed
therein for all purposes hereof, and no assignment or transfer of any such Pro
Rata Share of the Commitments shall be effective, in each case unless and until
a Commitments Assignment and Acceptance effecting the assignment or transfer
thereof shall have been accepted by the Administrative Agent and recorded in the
Register as provided above. Prior to such recordation, all amounts owed with
respect to the applicable Pro Rata Share of the Commitments shall be owed to the
Lender listed in the Register as the owner thereof, and any request, authority
or consent of any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be conclusive
and binding on any subsequent holder, assignee or transferee of the
corresponding Pro Rata Share of the Commitments.
(e) Each Lender may from time to time grant participations to
one or more banks or other financial institutions in a portion of its Pro Rata
Share of the Commitments; provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participating banks or other financial institutions shall
not be a Lender hereunder for any purpose except, if the participation agreement
so provides, for the purposes of Sections 3.6, 3.7, 3.8, 11.11 and 11.22 but
only to the extent that the cost to the Borrowers does not exceed the cost which
the Borrowers would have incurred in respect of such Lender absent the
participation, (iv) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (v)
the participation interest shall be expressed as a percentage of the granting
Lender's Pro Rata Share of the Commitments as it then exists and shall not
restrict an increase in the Commitments, or in the granting Lender's Pro Rata
Share of the Commitments, so long as the amount of the participation interest is
not affected thereby and (vi) the consent of the holder of such participation
interest shall not be required for amendments or waivers of provisions of the
Loan Documents other than those which (A) extend the Maturity Date or any other
date upon which any payment of money is due to the Lenders, (B) reduce the rate
of interest on the Notes, any fee or any other monetary amount payable to the
Lenders, (C) reduce the amount of any installment of principal due under the
Notes or (D) release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty.
11.9 Right of Setoff. If an Event of Default has occurred and is
continuing, the Administrative Agent or any Lender (but in each case only with
the consent of the Requisite Lenders) may exercise its rights under applicable
Laws and, to the extent permitted by applicable Laws, apply any funds in any
deposit account maintained with it by any Borrower and/or any Property of any
Borrower in its possession against the Obligations.
11.10 Sharing of Setoffs. Each Lender severally agrees that if it,
through the exercise of any right of setoff, banker's lien or counterclaim
against any Borrower, or otherwise, receives payment of the Obligations held by
it that is ratably more than any other Lender, through any means, receives in
payment of the Obligations held by that Lender, then, subject to applicable
Laws: (a) the Lender exercising the right of setoff, banker's lien or
counterclaim or otherwise receiving such payment shall purchase, and shall be
deemed to have simultaneously purchased, from each of the other Lenders a
participation in the Obligations held by the other Lenders and shall pay to the
other Lenders a purchase price in an amount so that the share of the Obligations
held by each Lender after the exercise of the right of setoff, banker's lien or
counterclaim or receipt of payment shall be in the same proportion that existed
prior to the exercise of the right of setoff, banker's lien or counterclaim or
receipt of payment; and (b) such other adjustments and purchases of
participations shall be made from time to time as shall be equitable to ensure
that all of the Lenders share any payment obtained in respect of the Obligations
ratably in accordance with each Lender's share of the Obligations immediately
prior to, and without taking into account, the payment; provided that, if all or
any portion of a disproportionate payment obtained as a result of the exercise
of the right of setoff, banker's lien, counterclaim or otherwise is thereafter
recovered from the purchasing Lender by any Borrower or any Person claiming
through or succeeding to the rights of such Borrower, the purchase of a
participation shall be rescinded and the purchase price thereof shall be
restored to the extent of the recovery, but without interest. Each Lender that
purchases a participation in the Obligations pursuant to this Section 11.10
shall from and after the purchase have the right to give all notices, requests,
demands, directions and other communications under this Agreement with respect
to the portion of the Obligations purchased to the same extent as though the
purchasing Lender were the original owner of the Obligations purchased. Each
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in an Obligation so purchased pursuant to this
Section 11.10 may exercise any and all rights of setoff, banker's lien or
counterclaim with respect to the participation as fully as if the Lender were
the original owner of the Obligation purchased.
11.11 Indemnity by Borrowers. Borrowers jointly and severally agree to
indemnify, save and hold harmless the Administrative Agent and each Lender and
their respective directors, officers, agents, attorneys and employees
(collectively the "Indemnitees") from and against: (a) any and all claims,
demands, actions or causes of action if the claim, demand, action or cause of
action arises out of or relates to any act or omission (or alleged act or
omission) of any Borrower, its Affiliates or any of its officers, directors or
stockholders relating to the Commitments, the use or contemplated use of
proceeds of any Loan, or the relationship of the Borrowers and the Lenders under
this Agreement; (b) any administrative or investigative proceeding by any
Governmental Agency arising out of or related to a claim, demand, action or
cause of action described in clause (a) above; and (c) any and all liabilities,
losses, costs or expenses (including reasonable attorneys' fees and the
reasonably allocated costs of attorneys employed by any Indemnitee and
disbursements of such attorneys and other professional services) that any
Indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action or cause of action; provided that no Indemnitee shall be
entitled to indemnification for any loss caused by its own gross negligence or
willful misconduct. If any claim, demand, action or cause of action is asserted
against any Indemnitee, such Indemnitee shall promptly notify the Borrowers, but
the failure to so promptly notify the Borrowers shall not affect the Borrowers'
obligations under this Section unless such failure materially prejudices the
Borrowers' right to participate in the contest of such claim, demand, action or
cause of action, as hereinafter provided. Such Indemnitee may (and shall, if
requested by the Borrowers in writing) contest the validity, applicability and
amount of such claim, demand, action or cause of action and shall permit the
Borrowers to participate in such contest. Any Indemnitee that proposes to settle
or compromise any claim or proceeding for which the Borrowers may be liable for
payment of indemnity hereunder shall give the Borrowers written notice of the
terms of such proposed settlement or compromise reasonably in advance of
settling or compromising such claim or proceeding and shall obtain the
Borrowers' prior written consent (which shall not be unreasonably withheld or
delayed). In connection with any claim, demand, action or cause of action
covered by this Section 11.11 against more than one Indemnitee, all such
Indemnitees shall be represented by the same legal counsel (which may be a law
firm engaged by the Indemnitees or attorneys employed by an Indemnitee or a
combination of the foregoing) selected by the Indemnitees and reasonably
acceptable to the Borrowers; provided, that if such legal counsel determines in
good faith that representing all such Indemnitees would or is reasonably likely
to result in a conflict of interest under Laws or ethical principles applicable
to such legal counsel, then to the extent reasonably necessary to avoid such a
conflict of interest or to permit unqualified assertion of such a defense or
counterclaim, each affected Indemnitee shall be entitled to separate
representation by legal counsel selected by that Indemnitee and reasonably
acceptable to the Borrowers, with all such legal counsel using reasonable
efforts to avoid unnecessary duplication of effort by counsel for all
Indemnitees; and further provided that the Administrative Agent (as an
Indemnitee) shall at all times be entitled to representation by separate legal
counsel (which may be a law firm or attorneys employed by the Administrative
Agent or a combination of the foregoing). Any obligation or liability of the
Borrowers to any Indemnitee under this Section 11.11 shall survive the
expiration or termination of this Agreement and the repayment of all Loans and
the payment and performance of all other Obligations owed to the Lenders.
11.12 Nonliability of the Lenders. Each Borrower acknowledges and
agrees that:
(a) Any inspections of any Property of any Borrower made by or
through the Administrative Agent or the Lenders are for purposes of
administration of the Loan only and such Borrower is not entitled to rely upon
the same (whether or not such inspections are at the expense of such Borrower);
(b) By accepting or approving anything required to be
observed, performed, fulfilled or given to the Administrative Agent or the
Lenders pursuant to the Loan Documents, neither the Administrative Agent nor the
Lenders shall be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term, provision
or condition thereof, and such acceptance or approval thereof shall not
constitute a warranty or representation to anyone with respect thereto by the
Administrative Agent or the Lenders;
(c) The relationship between the Borrowers and the
Administrative Agent and the Lenders is, and shall at all times remain, solely
that of borrowers and lenders; neither the Administrative Agent nor the Lenders
shall under any circumstance be construed to be partners or joint venturers of
the Borrowers or their Affiliates; neither the Administrative Agent nor the
Lenders shall under any circumstance be deemed to be in a relationship of
confidence or trust or a fiduciary relationship with the Borrowers or their
Affiliates, or to owe any fiduciary duty to the Borrowers or their Affiliates;
neither the Administrative Agent nor the Lenders undertake or assume any
responsibility or duty to the Borrowers or their Affiliates to select, review,
inspect, supervise, pass judgment upon or inform the Borrowers or their
Affiliates of any matter in connection with their Property or the operations of
the Borrowers or their Affiliates; the Borrowers and their Affiliates shall rely
entirely upon their own judgment with respect to such matters; and any review,
inspection, supervision, exercise of judgment or supply of information
undertaken or assumed by the Administrative Agent or the Lenders in connection
with such matters is solely for the protection of the Administrative Agent and
the Lenders and neither the Borrowers nor any other Person is entitled to rely
thereon; and
(d) The Administrative Agent and the Lenders shall not be
responsible or liable to any Person for any loss, damage, liability or claim of
any kind relating to injury or death to Persons or damage to Property caused by
the actions, inaction or negligence of any Borrower and/or its Affiliates and
each Borrower hereby indemnifies and holds the Administrative Agent and the
Lenders harmless on the terms set forth in Section 11.11 from any such loss,
damage, liability or claim.
11.13 No Third Parties Benefited. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties of
the Borrowers, the Administrative Agent and the Lenders in connection with the
Loans, and is made for the sole benefit of the Borrowers, the Administrative
Agent and the Lenders, and the Administrative Agent's and the Lenders'
successors and assigns. Except as provided in Sections 11.8 and 11.11, no other
Person shall have any rights of any nature hereunder or by reason hereof.
11.14 Confidentiality. Each Lender agrees to hold any confidential
information that it may receive from the Borrowers pursuant to this Agreement in
confidence, except for disclosure: (a) to other Lenders or Affiliates of a
Lender; (b) to legal counsel and accountants for the Borrowers or any Lender;
(c) to other professional advisors to the Borrowers or any Lender, provided that
the recipient has accepted such information subject to a confidentiality
agreement substantially similar to this Section 11.14; (d) to regulatory
officials having jurisdiction over that Lender; (e) as required by Law or legal
process, provided that each Lender agrees to notify the Borrowers of any such
disclosures unless prohibited by applicable Laws, or in connection with any
legal proceeding to which that Lender and the Borrowers are adverse parties; and
(f) to another financial institution in connection with a disposition or
proposed disposition to that financial institution of all or part of that
Lender's interests hereunder or a participation interest in its Notes. For
purposes of the foregoing, "confidential information" shall mean all
Projections, information relating to acquisitions, information relating to the
Borrowers' businesses and any other information respecting the Borrowers or
their Subsidiaries reasonably considered by the Borrowers to be confidential,
other than (i) information previously filed with any Governmental Agency and
available to the public, (ii) information previously published in any public
medium from a source other than, directly or indirectly, that Lender, and (iii)
information previously disclosed by the Borrowers to any Person not associated
with the Borrowers which does not owe a professional duty of confidentiality to
the Borrowers or which has not executed an appropriate confidentiality agreement
with the Borrowers. Nothing in this Section shall be construed to create or give
rise to any fiduciary duty on the part of the Administrative Agent or the
Lenders to the Borrowers.
11.15 Further Assurances. The Borrowers shall, at their expense and
without expense to the Lenders or the Administrative Agent, do, execute and
deliver such further acts and documents as the Requisite Lenders or the
Administrative Agent from time to time reasonably require for the assuring and
confirming unto the Lenders or the Administrative Agent of the rights hereby
created or intended now or hereafter so to be, or for carrying out the intention
or facilitating the performance of the terms of any Loan Document.
11.16 Integration. This Agreement, together with the other Loan
Documents and the letter agreement referred to in Sections 3.2, 3.4 and 3.5,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof. In the event of any conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control and govern; provided that the inclusion of supplemental
rights or remedies in favor of the Administrative Agent or the Lenders in any
other Loan Document shall not be deemed a conflict with this Agreement. Each
Loan Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.
11.17 Governing Law. Except to the extent otherwise provided therein,
each Loan Document shall be governed by, and construed and enforced in
accordance with, the Laws of California applicable to contracts made and
performed in California.
11.18 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable or invalid as to any party or in
any jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
11.19 Headings. Article and Section headings in this Agreement and the
other Loan Documents are included for convenience of reference only and are not
part of this Agreement or the other Loan Documents for any other purpose.
11.20 Time of the Essence. Time is of the essence of the Loan
Documents.
11.21 Foreign Lenders and Participants. Each Lender that is
incorporated or otherwise organized under the Laws of a jurisdiction other than
the United States of America or any State thereof or the District of Columbia
shall deliver to the Borrowers (with a copy to the Administrative Agent), on or
before the Closing Date (or on or before accepting an assignment or receiving a
participation interest herein pursuant to Section 11.8, if applicable) two duly
completed copies, signed by a Responsible Official, of either Form 1001
(relating to such Lender and entitling it to a complete exemption from
withholding on all payments to be made to such Lender by the Borrowers pursuant
to this Agreement) or Form 4224 (relating to all payments to be made to such
Lender by the Borrowers pursuant to this Agreement) of the United States
Internal Revenue Service or such other evidence (including, if reasonably
necessary, Form W-9) satisfactory to the Borrowers and the Administrative Agent
that no withholding under the federal income tax laws is required with respect
to such Lender. Thereafter and from time to time, each such Lender shall (a)
promptly submit to the Borrowers (with a copy to the Administrative Agent), such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to the
Borrowers and the Administrative Agent of any available exemption from, United
States withholding taxes in respect of all payments to be made to such Lender by
the Borrowers pursuant to this Agreement and (b) take such steps as shall not be
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its Eurodollar Lending
Office, if any) to avoid any requirement of applicable Laws that any Borrower
make any deduction or withholding for taxes from amounts payable to such Lender.
11.22 Joint and Several Liability.
(a) Each Borrower, whether a party to this Agreement on the Closing
Date or thereafter becoming a Borrower pursuant to the provisions of Section
5.11, shall be jointly and severally liable for all of the Obligations.
(b) Each Borrower hereby agrees that its Obligations hereunder shall
not be discharged or otherwise affected as a result of (a) the invalidity or
unenforceability of any of the other Borrowers' obligations under this Agreement
or any other Loan Document or any other agreement or instrument relating
thereto, or any guaranty of the Obligations, (b) the absence of any attempt to
collect the Obligations from any of the other Borrowers or other action to
enforce the same; (c) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against any of the other Borrowers (other than such Borrower), including without
limitation, any discharge of, or bar or stay against collecting, all or any of
the Obligations (or any interest thereon) in or as a result of any such
proceeding; (d) failure by the Administrative Agent, any Lender, or the Issuing
Lender to file or enforce a claim against any other Borrower or its estate in
any bankruptcy or insolvency case or proceeding; (e) any action taken by the
Administrative Agent, any Lender, or the Issuing Lender that is authorized
hereby; or (f) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a surety or guarantor or any other third
party obligor on any Obligations, other than the payment in full of the
Obligations. Each Borrower hereby waives (a) diligence, presentment, demand of
payment (except as expressly required hereunder), filing of claims with a court
in the event of receivership or bankruptcy of the other Borrowers, protest or
notice with respect to the Obligations, and all presentments, demands for
performance, notices of nonperformance (except to the extent expressly required
hereunder), protests, notices of protest, notices of dishonor and notices of
acceptance of this Agreement and the Obligations, the benefits of all statutes
of limitation, and all other demands (except as expressly required hereunder)
whatsoever (and shall not require that the same be made on the other Borrowers
as a condition precedent to its Obligations hereunder), (b) all notices of the
existence, creation or incurring of new or additional indebtedness, arising
either from additional loans extended to the other Borrowers or otherwise, (c)
all notices that the principal amount, or any portion thereof, and/or any
interest on any instrument or document evidencing all or any part of the
Obligations is due (except as expressly required hereunder), (d) notices of any
and all proceedings to collect from the maker, any endorser or any other
guarantor of all or any part of the Obligations, or from any other Person, (e)
any requirement of marshalling or any other principle of election of remedies
and all rights and defenses arising out of an election of remedies by any
Lender, (f) any defense based upon any Requirement of Law which provides that
the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal and (g) without limiting the
generality of the foregoing or any other provision hereof, all rights and
benefits under California Civil Code Sections 2808, 2809, 810, 2811, 2819, 2839,
2845, 2849, 2850 and 3433.
11.23 Removal of a Lender. Borrowers shall have the right to remove a
Lender as a party to this Agreement if such Lender is paid a material amount by
Borrowers pursuant to Section 3.6 or Section 3.7. Upon notice from Borrowers,
such Lender shall execute and deliver a Commitments Assignment and Acceptance
covering that Lender's Pro Rata Share of the Commitments in favor of such Person
as Borrowers may designate, subject to payment in full by such Person of all
principal, interest and fees owing to such Lender through the date of assignment
and the agreement of such Person to indemnify such Lender with respect to all
then outstanding Letters of Credit. The Administrative Agent shall, if requested
by the Borrowers, use reasonable efforts to identify Persons willing to accept
such an assignment from such Lender.
11.24 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
11.25 Purported Oral Amendments. EACH BORROWER EXPRESSLY ACKNOWLEDGES
THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR
MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN
INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. EACH BORROWER AGREES THAT
IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR
WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE ADMINISTRATIVE AGENT OR ANY
LENDER THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT,
MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DAY RUNNER, INC.
By: /s/ DENNIS K. MARQUARDT
-----------------------------------
Dennis K. Marquardt
Address:
15295 Alton Parkway
Irvine, California 92618
Facsimile: 714-441-4848
ULTIMA DISTRIBUTION INC.
By: /s/ STAN LITTLEY
-------------------------------------
Stan Littley
Address:
2690 Plymouth Drive
Oakville, Ontario
Canada L6H 5R6
DAY RUNNER UK plc
By:/s/ DENNIS K. MARQUARDT
---------------------------------
Dennis K. Marquardt
Address:
Day Runner UK plc
30-32 Gildredge Road
Eastbourne East Sussex
BN21 45H
<PAGE>
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent and a Lender
By: /s/ FRANK PIZZO
-----------------------------------
Frank Pizzo
Address:
WELLS FARGO BANK, N.A., as Agent
Commercial Bank Loan Center
Agency Dept., 2840
201 3rd Street, 8th Floor
San Francisco, CA 94103
Attn: Manager
Telephone: 415-477-5319
Facsimile: 415-512-9408
and
WELLS FARGO BANK, N.A., as Agent
Regional Commercial Banking Office
333 South Grand Avenue, 3rd Floor
Los Angeles, CA 90071
Attn: Regional Vice President
Telephone: 213-253-6126
Facsimile: 213-628-9694
Payment Instructions:
WELLS FARGO, N.A.
San Francisco, CA
ABA # 1210-00248
For Acct.: 4081656654
Acct. Name: SYNDIC/WFBCORP/DAY RUNNER
Ref.: Day Runner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the report on Form 8-K and is qualified in its entirety by reference to
such report on Form 8-K.
</LEGEND>
<CIK> 0000853102
<NAME> Day Runner, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Jun-30-1997
<PERIOD-END> Jun-30-1998
<CASH> 2,923
<SECURITIES> 0
<RECEIVABLES> 42,484
<ALLOWANCES> 9,942
<INVENTORY> 37,610
<CURRENT-ASSETS> 84,569
<PP&E> 26,972
<DEPRECIATION> 15,084
<TOTAL-ASSETS> 101,179
<CURRENT-LIABILITIES> 26,594
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 74,518
<TOTAL-LIABILITY-AND-EQUITY> 101,179
<SALES> 167,841
<TOTAL-REVENUES> 167,841
<CGS> 80,663
<TOTAL-COSTS> 80,663
<OTHER-EXPENSES> 61,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (172)
<INCOME-PRETAX> 25,741
<INCOME-TAX> 9,833
<INCOME-CONTINUING> 15,908
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,908
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.27
</TABLE>
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
Day Runner, Inc.:
We have audited the accompanying consolidated balance sheets of Day Runner, Inc.
and subsidiaries (the "Company") as of June 30, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended June 30, 1998. 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 audits 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Day Runner, Inc. and subsidiaries
as of June 30, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
August 17, 1998
(September 24, 1998 as to Note 20)
<PAGE>
<TABLE>
<CAPTION>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
June 30,
1998 1997
<S> <C> <C>
--------- ------
Current assets:
Cash and cash equivalents...................................................... $ 2,923 $15,550
Accounts receivable (less allowance for doubtful accounts and
sales returns and other allowances of $9,942 and $8,664 at
June 30, 1998 and 1997, respectively)....................................... 32,542 22,303
Inventories.................................................................... 37,610 23,406
Prepaid expenses and other current assets...................................... 1,670 2,409
Income taxes receivable........................................................ 2,606
Deferred income taxes.......................................................... 7,218 6,386
--------- -------
Total current assets........................................................ 84,569 70,054
Property and equipment, net ....................................................... 11,888 8,688
Other assets (net of accumulated amortization of $196,000 at June 30, 1998)........ 4,722 138
--------- -------
Total assets....................................................................... $101,179 $78,880
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit................................................................ $ 2,716 $ 452
Accounts payable............................................................... 9,969 8,320
Accrued expenses............................................................... 13,876 9,500
Income taxes payable........................................................... 1,049
Current portion of capital lease obligations................................... 33 23
--------- -------
Total current liabilities................................................... 26,594 19,344
--------- -------
Long-term liabilities:
Capital lease obligations...................................................... 53 52
--------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock (1,000,000 shares authorized; $0.001 par value, no shares
issued or outstanding)
Common stock (29,000,000 shares authorized; $0.001 par value; 13,677,386
shares issued and 11,955,598 outstanding at June 30, 1998;
12,728,858 shares issued and 11,702,658 outstanding at June 30, 1997)........ 14 13
Additional paid-in capital..................................................... 34,445 23,752
Retained earnings.............................................................. 65,076 49,168
Cumulative translation adjustment.............................................. 102 92
Treasury stock - At cost (1,721,788 and 1,026,200 shares, at June 30, 1998 and
1997, respectively).......................................................... (25,105) (13,541)
--------- --------
Total stockholders' equity.................................................. 74,532 59,484
--------- -------
Total liabilities and stockholders' equity......................................... $101,179 $78,880
========= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years Ended June 30,
1998 1997 1996
--------- ---------- --------
<S> <C> <C> <C>
Net sales................................................... $ 167,841 $ 127,376 $125,126
Cost of goods sold.......................................... 80,663 60,452 59,920
--------- --------- ---------
Gross profit................................................ 87,178 66,924 65,206
--------- --------- ---------
Operating expenses:
Selling, marketing and distribution..................... 43,193 31,673 29,878
General and administrative.............................. 18,416 14,451 16,376
Costs incurred in pursuing acquisitions................. 1,451
--------- ---------
Total operating expenses............................. 61,609 47,575 46,254
--------- --------- ---------
Income from operations...................................... 25,569 19,349 18,952
--------- --------- ---------
Interest (income) expense:
Interest income......................................... (390) (1,431) (823)
Interest expense........................................ 218 130 117
--------- --------- ---------
Net interest income.................................. (172) (1,301) (706)
--------- --------- ---------
Income before provision for income taxes.................... 25,741 20,650 19,658
Provision for income taxes.................................. 9,833 8,102 7,840
--------- --------- ---------
Net income.................................................. $ 15,908 $ 12,548 $ 11,818
========= ========= =========
Earnings per common share:
Basic................................................ $ 1.38 $ 1.01 $ 0.95
========= ========= =========
Diluted.............................................. $ 1.27 $ 0.95 $ 0.89
========= ========= =========
Weighted average number of common shares outstanding:
Basic................................................ 11,533 12,432 12,468
========= ========= =========
Diluted.............................................. 12,523 13,182 13,252
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
Number Additional Cumulative
of Shares Common Paid-In Retained Translation Treasury
Outstanding Stock Capital Earnings Adjustment Stock Total
----------- --------------- ---------------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1995..................... 12,251,594 $ 12 $ 19,936 $ 24,802 $ 37 $44,787
Exercise of options......................... 357,948 1,475 1,475
Tax benefit of options...................... 1,452 1,452
Cumulative translation adjustment .......... (34) (34)
Net income.................................. 11,818 11,818
---------- ------ -------- ------ ------ -------- -------
Balance, June 30, 1996...................... 12,609,542 12 22,863 36,620 3 59,498
Exercise of warrants........................ 11,000 22 22
Exercise of options......................... 108,316 1 660 661
Tax benefit of options...................... 157 157
Compensation cost associated with
warrant grant........................... 50 50
Cumulative translation adjustment........... 89 89
Treasury stock.............................. (1,026,200) $(13,541) (13,541)
Net income.................................. 12,548 12,548
---------- ------- ----------- -------- ----- --------- --------
Balance, June 30, 1997...................... 11,702,658 13 23,752 49,168 92 ( 13,541) 59,484
Exercise of warrants........................ 278,000 673 673
Exercise of options......................... 670,528 1 4,579 4,580
Tax benefit of options...................... 5,208 5,208
Compensation cost associated with
warrant grant........................... 233 233
Cumulative translation adjustment........... 10 10
Treasury stock.............................. (695,588) (11,564) (11,564)
Net income.................................. 15,908 15,908
---------- ------- --------- --------- ------ -------- --------
Balance, June 30, 1998...................... 11,955,598 $ 14 $ 34,445 $ 65,076 $ 102 $(25,105) $74,532
========== ===== ========= ========= ===== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended June 30,
1998 1997 1996
--------- ---------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 15,908 $ 12,548 $11,818
Adjustments to reconcile net income to net cash provided
by(used in) operating activities:
Depreciation and amortization......................... 5,517 3,869 2,548
Provision for losses on accounts receivable........... 381 810
Write-off of barter credits........................... 200 520
Utilization of barter credits......................... 100
Compensation expense related to issuance of warrants.. 233 50
Deferred income tax benefit........................... (832) (1,186) (26)
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts receivable................................ (8,100) (1,220) (2,884)
Inventories ...................................... (11,050) (3,294) 6,543
Prepaid expenses and other current assets.......... 595 (689) (87)
Income taxes receivable............................ 2,087 1,930 (1,930)
Accounts payable................................... (725) 225 (1,028)
Accrued expenses................................... 3,755 (872) 3,606
Income taxes payable............................... (453) 1,206 (1,247)
-------- -------- -------
Net cash provided by operating activities........... 7,035 13,148 18,643
-------- -------- -------
Cash flows from investing activities:
Acquisition of property and equipment................... (7,175) (4,972) (4,393)
Purchase of businesses...................................... (4,626)
Other assets............................................ (110) 5 (8)
--------- ---------- ----------
Net cash used in investing activities................... (11,911) (4,967) (4,401)
--------- ---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit..................... (338) 452
Payment of long-term debt............................... (990) (141)
Payment of capital lease obligations.................... (58) (13) (23)
Exercise of warrants.................................... 673 22
Exercise of options......................................... 4,580 661 1,475
Repurchase of common stock.............................. (11,564) (13,541)
-------- --------
Net cash (used in) provided by financing activities..... (7,697) (12,419) 1,311
-------- -------- -------
Effect of exchange rate changes on cash and cash equivalents (54) 23 (57)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents........ (12,627) (4,215) 15,496
Cash and cash equivalents, beginning of year................ 15,550 19,765 4,269
--------- -------- ---------
Cash and cash equivalents, end of year...................... $ 2,923 $ 15,550 $19,765
======== ======== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DAY RUNNER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Day Runner, Inc. and subsidiaries (the "Company") is a developer,
manufacturer and marketer of paper-based organizers for the retail market. The
Company also develops, manufactures and markets a number of related organizing
products, including telephone/address books, spiral dated goods, executive
accessories, products for children and students, organizing and other wall
boards and planners. A substantial portion of the Company's sales is to office
products superstores, wholesalers and dealers and to mass market retailers
throughout the United States and abroad. The Company grants credit to
substantially all of its customers.
Consolidation. The consolidated financial statements include the accounts
of Day Runner, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements. 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 for the reporting period. Actual
results could differ from those estimates.
Foreign Currency Translation. Assets and liabilities of the Company's
foreign subsidiaries are translated into U.S. dollars at the exchange rate
prevailing at the balance sheet date and, where appropriate, at historical rates
of exchange. Income and expense accounts are translated at the weighted average
rate in effect during the year. The aggregate effect of translating the
financial statements of the foreign subsidiaries is included as a separate
component of stockholders' equity. Foreign exchange gains (losses) were not
significant during the years ended June 30, 1998, 1997 and 1996.
Cash Equivalents. The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments. The Company's financial instruments
consist primarily of cash, accounts receivable and payable, and debt
instruments. The book values of financial instruments, other than the debt
instruments, are representative of their fair values due to their short-term
maturity. The book value of the Company's debt instruments is considered to
approximate its fair value because the interest rate of these instruments is
based on current rates offered to the Company.
Property and Depreciation. Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided for over the estimated useful
lives of the respective assets, using the straight-line method. Estimated useful
lives range from three to seven years. Vehicles and equipment under capital
leases and leasehold improvements are amortized using the straight-line method
over the lesser of the estimated useful life of the asset or the life of the
lease.
Other Assets. Other assets consist primarily of goodwill and
non-competition agreements that arose as a result of the Company's acquisitions
during fiscal 1998. Goodwill is being amortized using the straight-line method
over a period of 20 years, and the non-competition agreements are being
amortized using the straight-line method over a period of five years.
Impairment of Long-Lived Assets. Long-lived assets are reviewed for
impairment, based on cash flows undiscounted without interest charges, whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. Impairment losses would be recognized if the
carrying amount of the asset exceeds the fair value of the assets.
Income Taxes. Deferred taxes are determined based on temporary differences
between the financial reporting and income tax bases of assets and liabilities
at the balance sheet date multiplied by the applicable tax rates.
Net Sales. Revenue is recognized upon shipment of product to the customer,
with appropriate allowances for estimated returns, rebates and other allowances.
Significant Customers. In 1998, sales to four customers accounted for 28%,
16%, 15% and 14% of the Company's sales. In 1997, sales to four customers
accounted for 25%, 15%, 14% and 11% of the Company's sales. In 1996, sales to
three customers accounted for 17%, 15% and 12% of the Company's sales.
New Accounting Standards. In June 1997, the Financial Accounting Standards
Board (the "Board") issued Statement of Financial Accounting Standards ("SFAS")
No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. These statements are
effective for financial statements issued for periods beginning after December
15, 1997. In June 1998, the Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement is effective for financial
statements issued for periods beginning after June 15, 1999. The Company is
evaluating what, if any, additional disclosures may be required upon
implementation of SFAS Nos. 130, 131 and 133.
Reclassifications. Certain reclassifications were made to the prior year
financial statements to conform to the current presentation.
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out basis. Inventories consist of the following (in
thousands):
June 30,
1998 1997
---------- -------
Raw materials................. $ 14,087 $ 10,204
Work in process............... 831 426
Finished goods................ 22,692 12,776
--------- --------
Total................ $ 37,610 $ 23,406
========= ========
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
June 30,
1998 1997
-------- -------
Displays................................. $ 9,003 $ 6,094
Data processing equipment and software... 8,785 5,863
Machinery and equipment.................. 6,705 4,222
Leasehold improvements................... 2,229 1,838
Vehicles................................. 250 214
-------- ---------
Total................................ 26,972 18,231
Accumulated depreciation and
amortization...................... (15,084) (9,543)
--------- ---------
Property and equipment - net.. ..... $ 11,888 $ 8,688
======== =========
4. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
June 30,
1998 1997
-------- -------
Accrued sales and promotion costs........ $ 7,473 $ 5,223
Accrued payroll and related costs........ 2,955 2,128
Other.................................... 3,448 2,149
-------- ---------
Total............................ $ 13,876 $ 9,500
======== =========
5. LINES OF CREDIT
Effective February 1, 1998, the Company entered into a new credit agreement
with a bank to allow the Company to borrow up to $15,000,000 under a line of
credit through February 1, 2000 and open commercial or standby letters of credit
up to $10,000,000, with the aggregate of borrowings and letters of credit not to
exceed $15,000,000. Commercial letters of credit shall be issued for a term not
to exceed 180 days, provided, however, that no letters of credit shall have an
expiration date subsequent to May 1, 2000. At June 30, 1998, the Company had
$1,253,000 outstanding under this line of credit and had outstanding letters of
credit totaling approximately $1,050,000. (See Note 20).
Under this new credit agreement, borrowings bear interest at the Company's
election either at the bank's prime rate (8.50% at June 30, 1998) less certain
margins, which range from .50% to 1.00%, or at LIBOR (5.66% at June 30, 1998)
plus certain margins, which range from .75% to 1.25%, with the margins dependent
upon the Company's meeting certain funded debt-to-EBITDA ratios. The credit
agreement requires the Company to: maintain a current ratio of not less than
1.50 to 1.00, maintain tangible net worth of not less than $45,000,000, and
maintain a funded debt-to-EBITDA ratio of less than 1.50 to 1.00. The Company
also is required to obtain the bank's approval to declare or pay dividends in
excess of $200,000.
Each of the Company's two Canadian subsidiaries has a credit agreement with
a Canadian bank. The aggregate borrowings under these lines of credit, which are
guaranteed by the Company and are used for working capital by these
subsidiaries, may not exceed Canadian $3,000,000 (approximately US $2,039,000),
bear interest at the bank's prime rate (6.50% at June 30, 1998) and are due and
payable on demand. At June 30, 1998, approximately Canadian $2,155,000
(approximately US $1,463,000) was outstanding under these lines of credit. These
borrowings were collateralized by substantially all of the two Canadian
subsidiaries' assets.
Total borrowings under the new credit agreement and the two Canadian credit
agreements bore interest at an average interest rate of 7.00% and 8.50% for the
years ended June 30, 1998 and 1997, respectively. The Company had no borrowings
outstanding under its lines of credit during the year ended June 30, 1996.
6. LEASES
The Company has four noncancelable operating leases for its principal
operating facilities and its corporate headquarters. The leases expire through
2005. The leases include renewal options that, if exercised, would extend the
lease terms through 2011, and the leases provide for increases in future minimum
annual rental payments based on defined increases in the Consumer Price Index,
subject to certain minimum increases. The Company also has entered into leases
for certain production, warehouse, computer and office equipment under
noncancelable operating leases that expire through August 2002.
<TABLE>
<CAPTION>
The Company also leases certain vehicles and equipment under agreements
that meet the criteria for classification as capital leases. Future minimum
lease payments under these capital leases, and the future minimum lease payments
under the operating leases at June 30, 1998, are summarized as follows (in
thousands):
<S> <C> <C>
Capital Operating
Years Ending June 30, Leases Leases
--------------------- --------- ---------
1999.................................................... $ 33 $ 4,525
2000.................................................... 24 3,626
2001.................................................... 12 3,014
2002.................................................... 13 1,478
2003.................................................... 4 1,137
Thereafter.............................................. 836
--------- --------
Total minimum lease payments............................ 86 $ 14,616
========
Less current portion of capital lease obligations....... 33
---------
Long-term portion of capital lease obligations.......... $ 53
=========
</TABLE>
Included in property and equipment at June 30, 1998 and 1997 are
vehicles and equipment under capital leases with a cost of $157,000 and $88,000
and accumulated depreciation of $47,000 and $43,000, respectively.
Rent expense was $4,025,000, $3,841,000 and $3,927,000 for the years
ended June 30, 1998, 1997 and 1996, respectively.
7. INCOME TAXES
<TABLE>
<CAPTION>
The components of income before provision for income taxes were (in
thousands):
Years Ended June 30,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
United States......................... $ 22,856 $ 18,765 $ 18,029
Other................................. 2,885 1,885 1,629
--------- --------- ---------
Total.............................. $ 25,741 $ 20,650 $ 19,658
========= ========= =========
The provision for income taxes consists of the following (in
thousands):
Years Ended June 30,
1998 1997 1996
---------- --------- ---------
Current:
Federal............................... $ 8,565 $ 7,076 $ 6,051
State................................. 1,477 1,825 1,473
Foreign............................... 623 387 342
--------- --------- ---------
Total current........................... 10,665 9,288 7,866
--------- --------- ---------
Deferred:
Federal............................... (920) (961) (37)
State................................. 88 (225) 11
--------- --------- ---------
Total deferred.......................... (832) (1,186) (26)
--------- --------- ---------
Total provision for income taxes........ $ 9,833 $ 8,102 $ 7,840
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Differences between the total income tax provision and the amount
computed by applying the statutory federal income tax rate to income before
provision for income taxes are as follows (in thousands):
Years Ended June 30,
1998 1997 1996
---------- ----------- -------
<S> <C> <C> <C>
Computed tax expense using the
statutory federal income tax rate..... $ 9,009 $ 7,228 $ 6,880
Increase (decrease) in taxes arising from:
State taxes, net of federal benefit... 769 1,000 980
Foreign earnings taxed at other
than federal statutory rate......... (387) (273) (229)
Other................................. 442 147 209
--------- --------- ---------
Total................................. $ 9,833 $ 8,102 $ 7,840
========= ========= =========
Effective income tax rate............... 38% 39% 40%
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Total deferred tax assets and deferred tax liabilities consist of the
following (in thousands):
June 30,
1998 1997
------------ ------------
<S> <C> <C>
Allowance for sales returns............................ $ 2,918 $ 2,490
Inventory obsolescence reserve......................... 1,220 1,394
Allowance for doubtful accounts........................ 1,074 1,147
State taxes............................................ 615 615
Sales programs......................................... 608 374
Other deferred tax assets.............................. 1,368 1,117
------ --------
Total deferred tax assets.............................. 7,803 7,137
Deferred tax liabilities............................... (585) (751)
------- --------
Total.................................................. $7,218 $ 6,386
======= ========
</TABLE>
Cumulative undistributed earnings of foreign subsidiaries for which no
deferred taxes have been provided approximated $4,153,000 at June 30, 1998. The
additional taxes payable on the earnings of foreign subsidiaries, if remitted,
would be offset by U.S. tax credits for foreign taxes paid.
<PAGE>
8. EARNINGS PER SHARE
The Company adopted SFAS No. 128, Earnings Per Share, which requires
the Company to present basic and diluted earnings per share on the face of the
income statement. Basic earnings per share is computed by dividing net income by
the weighted-average number of common shares outstanding for the period. Diluted
earnings per share is computed by dividing net income by the sum of the weighted
average number of common shares outstanding for the period plus the assumed
exercise of all dilutive securities. The following reconciles the numerator and
denominator of the basic and diluted per share computations for net income (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Years Ended June 30,
1998 1997 1996
------------ ----------- ----------
<S> <C> <C> <C>
Net Income $ 15,908 $ 12,548 $ 11,818
========== =========== ==========
Basic Weighted Average Shares
Weighted average number of
common shares outstanding 11,533 12,432 12,468
Effect of Dilutive Securities
Additional shares from the assumed
exercise of options and warrants 3,093 2,757 2,295
Shares assumed to be repurchased
under the treasury stock method (2,103) (2,007) (1,511)
---------- ----------- ----------
Diluted Weighted Average Shares
Weighted average number of
common shares outstanding and
common share equivalents 12,523 13,182 13,252
========== =========== ==========
Basic $ 1.38 $ 1.01 $ 0.95
========== =========== ==========
Diluted $ 1.27 $ 0.95 $ 0.89
========== ============ ==========
</TABLE>
9. STOCK OPTION PLANS
Under the Company's 1995 Stock Option Plan (the "Plan"), an aggregate
of 1,550,000 shares of common stock is reserved for issuance to key employees,
including officers and directors, and consultants of the Company. Both incentive
stock options and nonstatutory stock options are authorized for issuance under
the Plan. The terms of the options are determined at the time of grant. Pursuant
to the Plan, the per share option price of incentive stock options may not be
less than the fair market value of a share of common stock at the date of grant,
and no options may be granted after December 2005. The outstanding options
typically become exercisable over a period of five years from the date of
issuance and have terms of up to ten years.
The Company also authorized the issuance of up to 3,450,000 shares of
the Company's common stock under its Amended and Restated 1986 Stock Option
Plan. Such options typically become exercisable ratably over a period of five
years from the date of issuance and have terms of six to ten years. As of June
30, 1998, options covering 2,406,564 shares have been exercised and options
covering 1,027,186 shares remain outstanding. No additional options will be
granted under this plan.
During the years ended June 30, 1998, 1997 and 1996, certain officers
and employees exercised options to purchase an additional 651,414, 74,300 and
328,050 shares, respectively, of the Company's common stock for an aggregate of
$4,278,000, $381,000 and $1,214,000, respectively (see Note 10).
In connection with the exercise of nonstatutory stock options and the
sale of shares purchased pursuant to incentive stock options, the Company
realized a reduction in its current tax liability during the years ended June
30, 1998, 1997 and 1996. This reduction totaled $5,208,000, $157,000 and
$1,452,000, respectively, and was credited to additional paid-in capital.
<PAGE>
<TABLE>
<CAPTION>
A summary of option activity is as follows:
Weighted Weighted
Average Average
Number of Exercise Options Exercise
Options Price Exercisable Price
------- ----- ----------- -----
<S> <C> <C> <C> <C>
Outstanding, July 1, 1995............... 1,733,450 $ 5.96
Granted.......................... 336,750 8.38
Exercised........................ (328,050) 3.69
Cancelled........................ (10,000) 7.65
------------
Outstanding, June 30, 1996.......... 1,732,150 6.85 753,774 $ 6.22
Granted.......................... 465,000 13.00
Exercised........................ (74,300) 5.13
Cancelled........................ (31,250) 11.96
------------
Outstanding, June 30, 1997.......... 2,091,600 8.20 1,102,314 6.90
Granted.......................... 565,000 17.10
Exercised........................ (651,414) 6.57
------------
Outstanding, June 30, 1998.......... 2,005,186 11.24 933,648 8.61
</TABLE>
============
<TABLE>
<CAPTION>
At June 30, 1998, the range of option prices for shares under options
and the weighted average remaining contractual life is as follows:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Number of Exercise Contractual Number Exercise
Range of Option Exercise Price Options Price Life Exercisable Price
------------------------------ ------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.13 - $8.38 818,636 $ 6.69 5.80 601,098 $ 6.32
9.75 - 13.00 623,550 11.91 7.42 253,050 11.41
16.88 - 20.63 563,000 17.10 9.16 79,500 17.00
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock option plans. Accordingly,
no compensation cost has been recognized for stock option awards. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant dates for awards under those plans as required by
SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income
and earnings per common and common equivalent shares would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years Ended June 30,
1998 1997 1996
<S> <C> <C>
---------- ---------- --------
Net income:
As reported $ 15,908 $ 12,548 $ 11,818
Pro forma $ 12,617 $ 11,094 $ 11,294
Earnings per common and common equivalent shares:
As reported:
Basic $ 1.38 $ 1.01 $ 0.95
Diluted $ 1.27 $ 0.95 $ 0.89
Pro forma:
Basic $ 1.09 $ 0.89 $ 0.91
Diluted $ 1.01 $ 0.84 $ 0.85
</TABLE>
The fair values of the options granted under the plans during 1998,
1997 and 1996 were estimated on the date of grant using the Black-Scholes
option-pricing model. The weighted-average fair value of the options at the date
of grant were $9.03, $14.53 and $10.10, during fiscal 1998, 1997 and 1996,
respectively. The following weighted average assumptions for 1998, 1997 and
1996, respectively, were used: no dividend yield; volatility of 57.21%, 53.28%
and 56.26%; risk-free interest rates of 5.24% to 6.21%, 5.41% to 6.95% and 5.69%
to 6.40%; and expected option lives of one to four years for all periods. Pro
forma compensation cost of options granted under the Employee Stock Purchase
Plan is measured based on the discount from market value (see Note 10).
On August 17, 1998, the Company issued options to key employees to
purchase 375,000 shares of the Company's common stock at $18.75 per share. The
options vest over a period of five years and expire in 2008.
10. EMPLOYEE STOCK PURCHASE PLAN
During 1992, the Company adopted an Employee Stock Purchase Plan under
which 350,000 shares of common stock were authorized for issuance to employees.
Under the plan, eligible employees may purchase, through payroll deductions
withheld during an offering period, an amount of common stock not to exceed
approximately 5% of the employee's annual compensation. The purchase price per
share is the lower of 85% of the fair market value of a share of common stock on
the first day of the offering period or on the last day of the offering period.
There are two offering periods during each year. During the years ended June 30,
1998, 1997 and 1996, employees purchased an aggregate of 19,114, 34,016 and
29,898 shares of common stock for $302,000, $280,000 and $261,000, respectively,
under this plan. These amounts are included in the amounts shown for exercise of
options on the consolidated statements of stockholders' equity (see Note 9).
11. WARRANTS
During the years ended June 30, 1998, 1997 and 1996, the Board of
Directors approved the issuance of warrants to purchase an aggregate of 565,000
shares of the Company's common stock. Such warrants are exercisable at prices
ranging from $9.50 to $20.625 per share, vest over periods up to 48 months and
expire at various times through April 2008.
During fiscal 1998 and 1997, certain directors exercised warrants to
purchase 278,000 and 11,000 shares, respectively, of the Company's common stock
for an aggregate of $673,000 and $22,000, respectively. No warrants were
exercised during the year ended June 30, 1996.
Included in the issuance of warrants to purchase 565,000 aggregate
shares of the Company's common stock is a warrant to purchase 50,000 shares that
was issued to a director under the terms of a consulting agreement during fiscal
1997. Such issuance was accounted for under SFAS No. 123 using the Black-Scholes
option pricing model, which resulted in the recording of $233,000 and $50,000 in
compensation cost during the years ended June 30, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
A summary of warrant activity is as follows:
Weighted Weighted
Average Average
Number of Exercise Options Exercise
Warrants Price Exercisable Price
-------- ----- ----------- -----
<S> <C> <C> <C> <C>
Outstanding, July 1, 1995........... 427,000 $ 3.84
Granted.......................... 50,000 9.50
------------
Outstanding, June 30, 1996.......... 477,000 4.44 449,916 $4.13
Granted.......................... 300,000 11.95
Exercised........................ (11,000) 2.00
------------
Outstanding, June 30, 1997.......... 766,000 7.42 493,082 4.91
Granted.......................... 215,000 17.31
Exercised........................ (278,000) 2.42
------------
Outstanding, June 30, 1998.......... 703,000 12.42 482,166 12.20
============
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1998, the range of warrant prices for shares under warrants
and the weighted average remaining contractual life is as follows:
Warrants Outstanding Warrants Exercisable
-------------------- --------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Number of Exercise Contractual Number Exercise
Range of Warrant Exercise Price Warrants Price Life Exercisable Price
------------------------------- ---------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 6.00 - 9.50 200,000 $ 7.81 5.83 200,000 $ 7.81
11.78 - 12.81 288,000 11.96 6.01 92,166 12.11
16.88 - 20.63 215,000 17.31 9.22 190,000 16.88
</TABLE>
12. STOCK SPLIT
At a Special Meeting of the Company's stockholders held on March 17,
1998, the Company's stockholders approved an amendment to the Company's
Certificate of Incorporation to (i) effect a two-for-one split of each of the
outstanding shares of common stock of the Company and (ii) increase the number
of authorized shares of all classes of stock of the Company from 15,000,000 to
30,000,000, consisting of 29,000,000 shares of common stock, $0.001 par value
per share, and 1,000,000 shares of preferred stock, $0.001 par value per share.
Both actions were effective March 18, 1998. All share and per share data has
been retroactively restated to reflect the two-for-one stock split.
13. TREASURY STOCK
In fiscal 1997, the Board of Directors authorized the purchase of up to
1,200,000 shares of the Company's common stock, which may be used to meet the
Company's common stock requirements for its stock benefit plans. In fiscal 1998,
the Board of Directors increased the number of shares of common stock that the
Company is authorized to repurchase under this plan by 200,000 shares and
authorized the purchase of up to 720,000 shares of the Company's common stock
from officers and directors. During fiscal 1998 and 1997, the Company
repurchased 695,588 and 1,026,200 shares, respectively, at an average per share
cost of $16.625 and $13.195, respectively. All the shares repurchased in fiscal
1998 were from officers and directors at a per share cost equal to the closing
price of the stock on the day of the repurchase.
14. ACQUISITIONS
On July 29, 1997, the Company purchased the stock of Ultima
Distribution Inc. ("Ultima"), which was the distributor of the Company's
products in Canada, for approximately $130,000. The Company also entered into
non-competition agreements with certain of Ultima's former stockholders. In
addition, contingent payments may be paid over the two years following the
acquisition based on Ultima's operating performance during that period.
On October 1, 1997, the Company purchased substantially all the
operating assets of Ram Manufacturing, Inc. ("Ram"), an Arkansas based
developer, manufacturer and marketer of wall boards. The purchase price was
approximately $2,400,000, of which approximately $1,950,000 had been paid as of
June 30, 1998. The Company also assumed certain liabilities totaling
approximately $3,000,000. In addition, contingent payments may be paid over the
three years following the acquisition based upon Ram's operating performance
during that period. The owner of Ram, who now works for the Company, entered
into a non-competition agreement with the Company.
On February 1, 1998, the Company purchased the stock of Timeposters
Inc. ("Timeposters"), a Canadian developer, manufacturer and marketer of
planning and presentation products, including flexible planners, planning
boards, other wall boards and easels, and entered into certain non-competition
agreements with the founders, who continue to work for Timeposters. The purchase
price was approximately $2,546,000. In addition, contingent payments may be paid
over the two years following the acquisition based on Timeposters' operating
performance during that period.
The following table presents summarized unaudited pro forma operating
results assuming that the Company had acquired these three companies on July 1,
1996 (in thousands, except per share amounts):
Years Ended June 30,
1998 1997
------------- -----------
Net Sales $ 172,168 $ 138,475
Income from operations $ 25,667 $ 19,616
Net income $ 15,959 $ 12,574
Earnings per share:
Basic $ 1.38 $ 1.01
Diluted $ 1.27 $ 0.95
Weighted average shares outstanding:
Basic 11,533 12,432
Diluted 12,523 13,182
15. OTHER TRANSACTIONS
During 1995 and 1993, the Company entered into barter agreements
whereby it delivered $132,000 and $1,098,000, respectively, of its inventory in
exchange for future advertising credits and other items. The credits, which
expire in October 1999, are valued at the lower of the Company's cost or market
value of the inventory transferred. The Company has recorded barter credits of
$15,000 and $36,000 in prepaid expenses and other current assets at June 30,
1998 and 1997, respectively. At June 30, 1997, other assets include $79,000 of
such credits. No amounts were included in other assets at June 30, 1998. Under
the terms of the agreement, the Company is required to pay cash equal to a
negotiated amount of the bartered advertising, or other items, and use the
barter credits to pay the balance. These credits are charged to expense as they
are used. During the year ended June 30, 1998, approximately $100,000 was
charged to expense for barter credits used. No amounts were charged to expense
for barter credits used during the years ended June 30, 1997 and 1996.
The Company assesses the recoverability of barter credits periodically.
Factors considered in evaluating the recoverability include management's plans
with respect to advertising and other expenditures for which barter credits can
be used. Any impairment losses are charged to operations as they are
determinable. During the years ended June 30, 1997 and 1996, the Company charged
$200,000 and $520,000, respectively, to operations for such impairment losses.
No such impairment losses were charged to operations during the year ended June
30, 1998.
16. PROFIT-SHARING AND BONUS PLANS
In January 1991, the Company established a 401(k) profit-sharing plan
in which eligible employees may contribute up to 15% of their eligible earnings.
The Company may contribute to the plan at the discretion of the Board of
Directors, subject to applicable regulations. In the years ended June 30, 1998,
1997 and 1996, the Board elected to contribute an amount equal to 25% of the
first 6% of eligible earnings. Participants vest in the Company's contributions
at a rate of 20% after two years of plan participation and 20% each year
thereafter until fully vested.
During the years ended June 30, 1998, 1997 and 1996, the Company's
matching contributions were $156,000, $133,000 and $128,000, respectively.
The Company has an executive bonus plan and incentive compensation
arrangements for key employees based on an earnings formula. Compensation
expense recorded under these plans was $628,000 and $1,120,000 during the years
ended June 30, 1998 and 1996, respectively. No amounts were recorded under these
plans during the year ended June 30, 1997.
17. OPERATIONS IN FOREIGN COUNTRIES
<TABLE>
<CAPTION>
The following is a summary of the financial activity of the Company by
geographical area (in thousands):
Year Ended June 30, 1998
United States Other Eliminations Total
------------- ----- ------------ -----
<S> <C> <C> <C> <C>
Net sales to unaffiliated entities $ 152,938 $ 14,903 $ 167,841
Transfers between geographic areas 2,348 2,125 $ (4,473)
------------- --------- ----------- ----------
Net sales $ 155,286 $ 17,028 $ (4,473) $ 167,841
============= ========= =========== ==========
Income from operations $ 31,883 $ 2,671 $ (8,985) $ 25,569
============= ========= =========== ==========
Identifiable assets $ 88,818 $ 13,096 $ (735) $ 101,179
============= ========= =========== ==========
Year Ended June 30, 1997
United States Other Eliminations Total
------------- ----- ------------ -----
Net sales to unaffiliated entities $ 122,618 $ 4,758 $ 127,376
Transfers between geographic areas 490 1,621 $ (2,111)
------------- --------- ---------- ----------
Net sales $ 123,108 $ 6,379 $ (2,111) $ 127,376
============= ========= ========== ==========
Income from operations $ 23,927 $ 1,834 $ (6,412) $ 19,349
============= ========= ========== ==========
Identifiable assets $ 74,050 $ 4,968 $ (138) $ 78,880
============= ========= ========== ==========
Year Ended June 30, 1996
United States Other Eliminations Total
------------- ----- ------------ -----
Net sales to unaffiliated entities $ 120,519 $ 4,607 $ 125,126
Transfers between geographic areas 443 1,302 $ (1,745)
------------- --------- ---------- ---------
Net sales $ 120,962 $ 5,909 $ (1,745) $ 125,126
============= ========= ========== ==========
Income from operations $ 22,022 $ 1,675 $ (4,745) $ 18,952
============= ========= =========== ==========
Identifiable assets $ 73,940 $ 4,061 $ (70) $ 77,931
============= ========= ========== ==========
</TABLE>
18. CONTINGENCIES
In the normal course of business, the Company and certain of its
subsidiaries are defendants in various lawsuits. After consultation with
counsel, management is of the opinion that these various lawsuits, individually
or in the aggregate, will not have a materially adverse effect on the
consolidated financial statements.
<PAGE>
19. SUPPLEMENTAL CASH FLOW INFORMATION
Disclosure of cash flow information (in thousands):
Years Ended June 30,
1998 1997 1996
-------- -------- --------
Cash paid during the period for:
Interest....................... $ 91 $ 130 $ 24
Income taxes........................ $ 8,862 $6,026 $ 9,988
In fiscal 1998, the Company purchased all of the capital stock of
Ultima Distribution Inc. and Timeposters Inc. The Company also purchased certain
of the assets of Ram Manufacturing, Inc. In conjunction with these acquisitions,
net cash expended was as follows (in thousands) (see Note 14):
Fair value of assets acquired $ (11,809)
Liabilities assumed 7,183
---------
Cash paid $ (4,626)
==========
Disclosure of noncash investing and financing activities:
Capital lease obligations totaling $88,000 were incurred in 1997 when
the Company entered into leases to acquire certain vehicles.
The Company realized a reduction in its current tax liability during
1998, 1997 and 1996 in the amount of $5,208,000, $157,000 and $1,452,000,
respectively. Such amounts were credited to additional paid-in capital (see Note
9).
20. SUBSEQUENT EVENTS
On September 15, 1998, the Board of Directors of the Company approved
the Non-Employee Director Stock Option Plan. Under this plan, an aggregate of
150,000 shares of common stock is reserved for issuance to members of the Board
of Directors who are not employees of the Company. In accordance with the plan,
the per share option price must equal the fair market value of a share of common
stock at the date of grant. The outstanding options become exercisable over a
period of one year from the date of issuance and have terms of 10 years. The
plan is subject to final approval by the stockholders of the Company.
On September 23, 1998, Day Runner, Inc., a Delaware corporation (the
"Registrant"), and Day Runner UK, plc, a corporation organized under the laws of
the United Kingdom and a wholly-owned subsidairy of the Registrant (the
"Purchaser"), entered into a Revolving Loan Agreement (the "Loan Agreement")
with a bank. The Loan Agreement provides for borrowings through September 30,
2005 (the "Maturity Date"). Borrowings will bear interest either at fixed rates
based on the higher of the bank's prime rate and the Federal Funds Rate
published by the Federal Reserve Bank of New York or at floating rates
calculated by reference to the interest rates at which the bank offers deposits
in US dollars in amounts approximately equal to the amount of the relevant Loan
and for a period of time comparable to the number of days the relevant Loan will
remain outstanding, together with a margin. The maximum amount that may be
outstanding under the Loan Agreement is $160,000,000 through December 31, 2000.
Thereafter, the maximum amount of borrowings that may be outstanding under the
Loan Agreement is reduced by $10,000,000 in each of the following calendar years
up to the Maturity Date.
On September 24, 1998, Registrant announced a cash offer (the "Offer")
for Filofax Group plc ("Filofax"), a UK-based company traded on the London Stock
Exchange. The offer is for (pound)2.00 (approximately US $3.36) per share for a
total of approximately US$80,500,000. The acquisition is being made pursuant
to a tender offer by Purchaser to purchase all of the outstanding ordinary
shares of stock of Filofax.
The Offer has not been recommended by Filofax's Board of Directors. The
proposed acquisition will be funded by bank debt pursuant to the Loan
Agreement.
Consummation of the Company's Offer is subject to, among other things,
the acceptance of Filofax's stockholders, regulatory approvals and the
satisfaction or waiver of various other conditions. There can be no assurance
that the acquisition will be consummated, or as to the terms on which it may be
consummated.
FOR IMMEDIATE RELEASE EXHIBIT 99.2
CONTACT: Day Runner, Inc.
Judy Tucker
Vice President, Business Development
714/680-3500, Ext. 3171
Jenifer Kirtland
Director, Investor Relations
714/680-3500, Ext. 3697
DAY RUNNER ANNOUNCES CASH TENDER OFFER FOR FILOFAX
IRVINE, CA, September 24, 1998. Day Runner, Inc. (Nasdaq/DAYR), a marketer
of broad-based personal organizing products to broad consumer audiences through
retail distribution and the leading producer of paper-based organizers for the
U.S. retail market, today announced a cash tender offer for Filofax, a UK-based
company traded on the London Stock Exchange. The offer is for (pound)2.00
(approximately US$3.36) per share for a total of approximately US$80.5 million.
The offer represents a trailing p/e of 13.3 on earnings from continuing
operations and a premium of 42.9% over the September 23rd closing mid-market
price, which represented a trailing p/e of 9.3. The offer has not been
recommended by Filofax's Board of Directors. The proposed acquisition will be
funded by bank debt.
Filofax is a manufacturer and supplier of stationery products, including
Filofax, Lefax and Microfile brand personal organizers. In addition to its core
personal organizer business, Filofax markets business forms and high-end pens.
Filofax has wholly owned sales subsidiaries in France, Germany, Hong Kong,
Scandinavia, the UK and the U.S. and sells primarily through retail distribution
channels in each market. Filofax's sales from continuing operations for fiscal
1998 were (pound)37.7 million (approximately US$63.3 million), with 86%, or
approximately US$54.6 million, to markets outside the U.S.
In commenting on the offer, Day Runner chairman Mark Vidovich stated,
"We're confident that our solid financial position, management depth and the
healthy state of our existing business make this offer a sound and timely move
for Day Runner. We believe that the acquisition of an established presence in a
number of overseas markets combined with our ability to develop brands and build
sales of organizers and other personal organizing products can provide excellent
long-term value to our stockholders."
In discussing the effect of the proposed acquisition on Day Runner's
profitability, Mr. Vidovich said, "Filofax's sales are seasonal, with the six
months from January through June accounting for only approximately 31% of its
fiscal 1998 sales. We do not expect the acquisition to be completed in time to
enjoy the benefit of more than a small part of Filofax's current calendar
year-end busy season. Therefore, we expect the acquisition to be dilutive for
our current fiscal year ending June 30, 1999, but to enhance our earnings for
fiscal 2000."
Commenting on why Day Runner moved forward in the absence of a
recommendation from Filofax's Board, Mr. Vidovich stated, "We believe this offer
provides Filofax's stockholders with an attractive exit. Filofax's sales have
stagnated, growing at a compound annual rate of less than 1% per year since
1996. We believe that the Filofax brand name is gradually becoming devalued and
that reinvigorating this brand will take the kind of marketing and product
development leadership that Day Runner has shown it is able to provide."
Filofax's sales from continuing operations for fiscal 1998 declined 0.7%
to (pound)37.7 million (approximately US$63.3 million), compared with
(pound)37.9 million (approximately US$63.7 million) for fiscal 1997. Excluding a
loss on disposal of a discontinued operation, operating income was (pound)6.1
million (approximately US$10.3 million), up 8% from (pound)5.7 million
(approximately US$9.6 million) for the prior year, and net income before
dividends was (pound)4.3 million (approximately US$7.2 million) for fiscal 1998,
up 9% compared with (pound)4.0 million (approximately US$6.6 million) for fiscal
1997.
Day Runner's sales for the fiscal year ended June 30, 1998 were $167.8
million, up 31.8% from $127.4 million for fiscal 1997. Day Runner reported
fiscal 1998 operating income of $25.6 million, up 32.1% from $19.3 million for
fiscal 1997 and net income of $15.9 million, up 26.8%. A total of $12.2 million,
or 7.3%, of Day Runner's fiscal 1998 sales were to markets outside the U.S.
As is usual under UK takeover practice, the Offer is subject to an
'acceptance condition' to the effect that Day Runner must acquire not less than
90% of the Filofax shares (or such lesser percentage down to 50% as Day Runner
may decide) either through acceptances of the Offer or by purchases outside the
Offer. The Offer will be open for acceptance for a minimum of 20 business days,
although this period may be extended by Day Runner for up to 60 days in total.
The Offer is also subject to anti-trust and other usual conditions that must be
satisfied (unless waived by Day Runner) no later than 21 days after the
acceptance condition is satisfied. Accordingly, the outcome of the Offer is
likely to be determined in Day Runner's fiscal 1999 second quarter ending
December 31, 1998.
With the exception of actual reported financial results and statements of
historical fact, the statements made in this news release or other statements
that may be made about the transaction, including, without limitation the effect
of the acquisition of Filofax on Day Runner's earnings, are forward looking,
reflect Day Runner's current expectations and involve certain risks and
uncertainties. There can be no assurance that the Company's actual future
performance will meet its expectations. As discussed in the Company's fiscal
1997 Annual Report on Form 10-K, the Company's future operating results are
difficult to predict and subject to significant fluctuations. Factors that may
cause future results to differ materially from the Company's current
expectations include, among others: the timing and size of orders from large
customers, timing and size of orders for new products, large customers'
inventory management, competition, general economic conditions, the health of
the retail environment, supply constraints and supplier performance. In
addition, unanticipated events and circumstances may render the acquisition of
Filofax by Day Runner less beneficial than expected, and the differences may be
significant.
Day Runner is a marketer of personal organizing products to broad-based
consumer audiences through retail distribution. The Company is the leading
developer, manufacturer and marketer of paper-based organizers for the U.S.
retail market and also develops, manufactures and markets a number of related
organizing products, including telephone/address books, appointment books,
executive accessories, products for children and students, organizing and other
wall boards and flexible, laminated wall planners, among others. Day Runner's
products are carried by more than 20,000 retail stores across the U.S. and are
available in a number of countries in North America, Europe and the Asia-Pacific
region.
This announcement does not constitute an offer or an invitation to
purchase any securities, directly or indirectly, in Canada, Australia or Japan.
Further, this release is not for distribution in Canada, Australia or Japan.
# # # #
Day Runner is a registered trademark of Day Runner, Inc. All other
trademarks remain the property of their respective companies.
EXHIBIT 99.3
PRESS RELEASE 24 September 1998
FOR IMMEDIATE RELEASE
Not for release, publication or distribution in or into Canada,
Australia or Japan
Day Runner UK plc
(a wholly owned subsidiary of Day Runner, Inc.)
Cash offer
for
Filofax Group plc
Summary
The Board of Day Runner announces a cash offer to acquire the entire issued and
to be issued ordinary share capital of Filofax. The Offer is being made by
Wasserstein Perella on behalf of Day Runner UK, a wholly owned subsidiary of Day
Runner. Cazenove is broker to the Offer.
The Offer:
is 200 pence in cash for each Filofax Share
values the entire issued ordinary share capital of Filofax at approximately
(pound)47.9 million
represents a premium of approximately 42.9 per cent. over yesterday's
closing middle market price of 140 pence per Filofax Share
is higher than any daily closing price since Filofax's profit warning in
July 1996
represents a multiple of 13.3x Filofax's 1998 earnings per share, before
the loss attributable to Henry Ling
<PAGE>
Day Runner markets personal organising products to broad-based consumer
audiences through retail distribution channels. It is the leading producer of
paper-based personal organisers for the US retail market and also supplies a
number of related organising products. Through a careful strategy of building
its brand, Day Runner has seen sales increase at a compound annual growth rate
of over 18 per cent. over the last five years to US$167.8 million for the year
ended 30 June 1998. In the same period Day Runner's net income increased at a
compound annual growth rate of over 27 per cent. This performance is
attributable almost entirely to organic growth.
Day Runner has closely followed Filofax and observed how in recent years Filofax
has struggled to find a way forward, failed to develop the Filofax brand and
failed to deliver value:
it has been ex-growth since 1996
its share price has underperformed the FTSE All-Share Index by over
59 per cent since 1 January 1996
its diversification strategy has failed
it has had reorganisations and reviews but has not delivered results
its talks with third parties earlier this year did not deliver value
it has itself recently pointed towards reduced growth expectations
Commenting on the Offer, Mark Vidovich, Chairman of Day Runner, said today:
"We are offering a serious price for an underperforming company that lacks
direction. Filofax needs Day Runner's skills to develop the brand further and
take the business forward."
Press Enquiries:
Day Runner Mark Vidovich Tel: 0171 404 5959
Judy Tucker Tel: 0171 404 5959
Wasserstein Perella Howard Covington Tel: 0171 446 8000
Karen Dodd Tel: 0171 446 8000
Cazenove Julian Cazalet Tel: 0171 825 9350
Ed Byers Tel: 0171 825 9113
Brunswick James Bradley Tel: 0171 404 5959
Lucas van Praag Tel: 0171 404 5959
The Offer is not being made, directly or indirectly, in or into, or by use of
the mails of, or by any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facilities of a national securities exchange of, Canada, Australia or Japan and
the Offer will not be capable of acceptance by any such use, means,
instrumentality or facilities or from within Canada, Australia or Japan, except
pursuant to any applicable exemption.
The Loan Notes which may be issued pursuant to the Offer have not been, and will
not be, registered under the Securities Act or under any of the relevant
securities laws of any State of the United States, Canada, Australia or Japan.
Accordingly, unless an exemption under the Securities Act or such relevant
securities laws is applicable, the Loan Notes may not be offered, sold, resold,
delivered or distributed, directly or indirectly, in or into the United States,
Canada, Australia or Japan and will not be available to US Persons.
Wasserstein Perella, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for Day Runner and Day Runner UK and no one else in
connection with the Offer and will not be responsible to anyone other than Day
Runner and Day Runner UK for providing the protections afforded to customers of
Wasserstein Perella nor for giving advice in relation to the Offer.
This summary should be read in conjunction with the attached announcement.
<PAGE>
PRESS RELEASE 24 September 1998
FOR IMMEDIATE RELEASE
Not for release, publication or distribution in or into Canada, Australia
or Japan
Day Runner UK plc
(a wholly owned subsidiary of Day Runner, Inc.)
Cash offer
for
Filofax Group plc
Introduction
The Board of Day Runner announces the terms of a cash offer for Filofax. The
Offer is being made by Wasserstein Perella on behalf of Day Runner UK, a wholly
owned subsidiary of Day Runner, for the entire issued and to be issued ordinary
share capital of Filofax. Cazenove is broker to the Offer.
The Offer
The Offer is being made on the following basis:
For each Filofax Share 200 pence in cash
The Offer values Filofax's issued share capital at approximately (pound)47.9
million.
The Offer represents a premium of approximately 42.9 per cent. to yesterday's
closing middle market price of 140 pence per Filofax Share and a multiple of
13.3x Filofax's 1998 earnings per share, before the loss attributable to Henry
Ling. It is also a higher price than any daily closing price since Filofax's
profit warning in July 1996
The Offer will be subject to the conditions and on the terms set out in Appendix
I and on the further terms to be set out in the Offer Document.
Filofax Shares will be acquired pursuant to the Offer fully paid and free from
all liens, equities, charges, encumbrances and other interests and together with
all rights now or hereafter attaching thereto, including, without limitation,
the right to receive and retain all dividends and other distributions announced,
declared, made or paid after 31 March 1998, save for the final ordinary dividend
of 2.42 pence per Filofax Share payable on 30 October 1998.
<PAGE>
The Offer will extend to all existing issued Filofax Shares and any Filofax
Shares which are unconditionally allotted or issued prior to the date on which
the Offer closes (or such earlier date not (without the consent of the Panel)
being earlier than the date on which the Offer becomes or is declared
unconditional as to acceptances or, if later, the first closing date of the
Offer, as Day Runner UK may decide) as a result of the exercise of options under
the Filofax Share Schemes or otherwise.
Background to and reasons for the Offer
Day Runner has closely followed Filofax and observed how in recent years Filofax
has struggled to find a way forward, failed to develop the Filofax brand and
failed to deliver value:
it has been ex-growth since 1996
its share price has underperformed the FTSE All-Share Index by over
59 per cent. since 1 January 1996
its diversification strategy has failed
it has had reorganisations and reviews but has not delivered results
its talks with third parties earlier this year did not deliver value
it has itself recently pointed towards reduced growth expectations
Day Runner has believed for some time that a combination of Day Runner and
Filofax would create a much stronger platform to develop the Filofax brand and
so create value for both sets of shareholders. In many ways Day Runner is the
logical international partner for Filofax. Day Runner and Filofax are
complementary both in geographical coverage and in distribution channels.
In November 1997, Filofax announced that it had initiated a review of the
strategic opportunities open to it. This led to talks with a number of parties
regarding strategic alliances, joint ventures and the sale of the group. Day
Runner was astounded that despite this apparently far reaching review, Filofax
made no attempt during this period to develop a dialogue with Day Runner.
Filofax's talks came to nothing and failed to deliver value for Filofax's
Shareholders.
Against this background, Day Runner believes it is in the interests of the
business and its shareholders for Day Runner to make a public case for a
combination. Day Runner is prepared to offer a full cash price for Filofax
despite the current uncertainties in financial markets and the world economy and
is confident in its ability to develop the Filofax brand in a way that current
management has been unable to do.
<PAGE>
Information on Day Runner UK
Day Runner UK is an indirect wholly owned subsidiary of Day Runner, and has been
established in order to implement the Offer. To date, Day Runner UK has engaged
in no activities other than those incidental to its incorporation and the making
of the Offer.
Information on Day Runner
Day Runner markets personal organising products to broad-based consumer
audiences through retail distribution channels. It is the leading producer of
paper-based personal organisers for the US retail market and also supplies a
number of related organising products. Day Runner is headquartered in Irvine,
California. Its shares are quoted on The Nasdaq Stock Market in the US (ticker
symbol "DAYR"), and it has a market capitalisation of approximately US$ 229
million ((pound)136 million).
Through a careful strategy of building its brand, Day Runner has seen sales
increase at a compound annual growth rate of over 18 per cent. over the last
five years. In the same period Day Runner's net income increased at a compound
annual growth rate of over 27 per cent. This performance is attributable almost
entirely to organic growth.
In the year ended 30 June 1998, Day Runner reported audited consolidated
operating profit of US$25.6 million ((pound) 15.2 million) on sales of US$167.8
million ((pound) 99.9 million). This represented sales growth of 31.8 per cent.
over the prior year. At 30 June 1998, Day Runner had shareholders' funds of
US$74.5 million ((pound) 44.4 million).
Day Runner has established a strong retail distribution network in the US, where
its products are carried by more than 20,000 retail stores. During its fiscal
year ended 30 June 1998, Day Runner sold more than 6 million organisers and
approximately 20 million refills, which include calendars, other pages and
accessories.
A key element of Day Runner's strategy has been to identify and cultivate new
sources of demand for organisers by creating organisers and planners designed to
appeal to distinct consumer segments, from business and professional people to
students and housewives. All of these products have been internally developed.
Suggested retail prices for Day Runner's organisers range from US$4 to $150
(approximately (pound) 2.38 to (pound) 89.29). Organiser lines include:
Day Runner(R) System, the original Day Runner time management system
PRO Business System(R), designed for business and professional people
FactCentre(TM), aimed at budget-conscious consumers
4-1-1(TM) Student Planners
Perennials(TM), designed to appeal to young women
Licensed products featuring DILBERT(TM), The Mickey Unlimited Brand of
the Walt Disney Co., THE FAR SIDE(R) and Warner Bros. Looney Tunes(TM)
classic cartoon characters
To leverage its brand name and strong retail distribution, Day Runner also
develops, manufactures and markets a number of related organising products.
Sales of related organising products grew by 221 per cent. in the year ended 30
June 1998 and represented 19.6 per cent. of Day Runner's total turnover.
Internally developed related organising products, virtually all of which have
been introduced since March 1995, include telephone/address books, appointment
books, business accessories, pocket calendars, desk calendars and several lines
of organising wallboards, among others.
Day Runner's student planners have established Day Runner as a supplier of
back-to-school products. Day Runner's success at building its back-to-school
business since 1994 has been the primary factor in reducing the seasonality of
Day Runner's sales by lessening its dependence on calendar year-end purchasing
and establishing a second strong selling season. Day Runner's sales in the
quarter ended 30 June, the primary quarter for back-to-school shipments, have
grown from US$14.0 million in 1993, the year before Day Runner introduced 4-1-1
Student Planners, to US$50.9 million in 1998.
Information on Filofax
Filofax is a manufacturer and supplier of stationery products. Filofax's core
business is the supply of ring binder organisers under the Filofax, Microfile
and Lefax brands. Other products include time management systems, business forms
and telephone message pads and up-market writing instruments.
In the year ended 31 March 1998, Filofax's consolidated turnover was (pound)42.2
million ((pound)37.7 million for continuing operations) and operating profit was
(pound)4.3 million ((pound)6.1 million for continuing operations). Net assets at
31 March 1998 were (pound)10.5 million.
The Loan Note Alternative
Instead of some or all of the cash consideration which would otherwise be
receivable by them under the Offer, Filofax Shareholders (other than persons who
are citizens or residents of the United States and certain other overseas
persons) accepting the Offer will be entitled to elect to receive Loan Notes on
the following basis:
for each (pound)1 of cash consideration under the Offer
(pound)1 nominal of Loan Notes
The Loan Notes will be unsecured obligations of Day Runner UK and will be
issued, credited as fully paid, in amounts and integral multiples of (pound)1
nominal value; all fractional entitlements will be disregarded and not paid. The
Loan Notes will bear interest (from the date of issue to the relevant holder of
Loan Notes) at a rate of 1.0 per cent. per annum below LIBOR. Interest on the
Loan Notes will be payable annually in arrears on 30 September (or, if not a
business day in any year, on the first business day thereafter), commencing 30
September 1999. The Loan Notes will be redeemable at the option of the holders
on each interest payment date from and including 30 September 1999 (or, if not a
business day, on the first business day thereafter ). Unless previously redeemed
or purchased, the Loan Notes will be redeemed on 30 September 2003 or, if not a
business day, on the first business day thereafter. The Loan Notes will, subject
to certain conditions, be transferable but no application is intended to be made
for the Loan Notes to be listed, or dealt in, on any stock exchange. Payment of
principal of and interest on the Loan Notes will be guaranteed by Day Runner.
The Loan Notes have not been, and will not be, registered under the Securities
Act or under any other securities laws and should not be offered, sold, resold,
delivered or distributed, directly or indirectly, in or into the United States,
Canada, Australia or Japan and will not be available to US Persons (except in
transactions exempt from or not subject to the registration requirements of the
Securities Act or the relevant securities laws of any State of the United
States, Canada, Japan or Australia).
The Loan Note Alternative will be conditional on the Offer becoming or being
declared unconditional in all respects and will remain open for so long as the
Offer remains open for acceptance. No Loan Notes will be issued unless, by the
time the Offer becomes or is declared wholly unconditional, valid elections from
accepting Filofax Shareholders have been received for at least (pound)5 million
nominal value of Loan Notes (or such lesser value as Day Runner UK may decide).
If insufficient elections are received, Filofax Shareholders who validly elect
for the Loan Note Alternative will instead receive cash in accordance with the
terms of the Offer. Details of the principal terms of the Loan Notes will be
contained in the Offer Document.
Financing for the Offer
Day Runner will finance the Offer out of medium term credit facilities which it
has put in place both for this purpose and to provide working capital for the
Day Runner Group in future.
Employees
The Board of Day Runner has confirmed that the existing employment rights,
including pension rights, of the employees of Filofax will be fully safeguarded.
Filofax Share Schemes
The Offer extends to any Filofax Shares unconditionally allotted or issued prior
to the date on which the Offer closes (or such earlier date as Day Runner UK may
determine) as a result of the exercise of options granted under the Filofax
Share Schemes. To the extent that such options are not or cannot be exercised in
full, it is intended that appropriate proposals will be made to option holders
under the Filofax Shares Schemes in due course, once the Offer has become
unconditional in all respects.
General
Neither Day Runner nor Day Runner UK, nor any of their respective directors nor,
so far as Day Runner UK is aware, any person acting in concert with Day Runner
or Day Runner UK, owns or controls any Filofax Shares or has any option to
acquire any Filofax Shares, or has entered into any derivative referenced to
securities of Filofax which remains outstanding.
The Offer Document, setting out details of the Offer (including the Loan Note
Alternative) and the Form of Acceptance will be posted to Filofax Shareholders
as soon as practicable. The Offer will be open for at least twenty business days
from the date of the Offer Document.
The availability of the Offer and any election thereunder to persons outside the
UK may be affected by the laws of the relevant jurisdiction. Such persons should
inform themselves about and observe any applicable requirements.
This announcement does not constitute an offer or an invitation to purchase any
securities.
Certain terms used in this announcement are defined in Appendix II.
Day Runner and PRO Business System are registered trademarks, and FactCentre,
4-1-1 and Perennials are trademarks of Day Runner, Inc. (C)Disney. DILBERT is a
trademark of United Feature Syndicate, Inc. THE FAR SIDE is a registered
trademark of FarWorks, Inc. LOONEY TUNES, characters, names and all related
indicia are trademarks of Warner Bros. All other trademarks remain the property
of their respective companies.
Press Enquiries:
Day Runner Mark Vidovich Tel: 0171 404 5959
Judy Tucker Tel: 0171 404 5959
Wasserstein Perella Howard Covington Tel: 0171 446 8000
Karen Dodd Tel: 0171 446 8000
Cazenove Julian Cazalet Tel: 0171 825 9350
Ed Byers Tel: 0171 825 9113
Brunswick James Bradley Tel: 0171 404 5959
Lucas van Praag Tel: 0171 404 5959
Wasserstein Perella, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for Day Runner and Day Runner UK and no one else in
connection with the Offer and will not be responsible to anyone other than Day
Runner and Day Runner UK for providing the protections afforded to customers of
Wasserstein Perella nor for giving advice in relation to the Offer.
The Offer is not being made, directly or indirectly, in or into, or by use of
the mails of, or by any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facilities of a national securities exchange of, Canada, Australia or Japan and
the Offer will not be capable of acceptance by any such use, means,
instrumentality or facilities or from within Canada, Australia or Japan except
pursuant to any applicable exemption.
The Loan Notes which may be issued pursuant to the Offer have not been, and will
not be, registered under the Securities Act or under any of the relevant
securities laws of any State of the United States, Canada, Australia or Japan.
Accordingly, unless an exemption under the Securities Act or such relevant
securities laws is applicable, the Loan Notes may not be offered, sold, resold,
delivered or distributed, directly or indirectly, in or into the United States,
Canada, Australia or Japan and will not be available to US Persons.
<PAGE>
Appendix I
Conditions and certain further terms of the Offer
The Offer, which is being made by Wasserstein Perella on behalf of Day Runner
UK, will comply with the applicable rules of the London Stock Exchange and the
Code and with US federal securities laws (except to the extent that exemptive
relief has been granted by the SEC). In addition, the Offer (which includes the
Loan Note Alternative) will be subject to the following conditions:
(i) valid acceptances being received (and not, where permitted,
withdrawn) by not later than 3.00 pm (London time) on the first
closing date of the Offer (or such later time(s) and/or date(s) as Day
Runner UK may, subject to the rules of the Code, decide) in respect of
not less than 90 per cent. (or such lesser percentage as Day Runner UK
may decide) in nominal value of the Filofax Shares to which the Offer
relates, provided that this condition shall not be satisfied unless
Day Runner UK and/or its wholly owned subsidiaries shall have acquired
or agreed to acquire, whether pursuant to the Offer or otherwise,
Filofax Shares carrying in aggregate more than 50 per cent. of the
voting rights then exercisable at a general meeting of Filofax. For
the purposes of this condition:
(a) to the extent, if any, required by the Panel, Filofax
Shares that are unconditionally allotted but not issued
before the Offer becomes or is declared unconditional as
to acceptances, whether pursuant to the exercise of any
outstanding subscription or conversion rights or
otherwise, shall be deemed to carry the voting rights
they will carry upon issue; and
(b) the expression "Filofax Shares to which the Offer
relates" shall be construed in accordance with Sections
428 to 430F of the Companies Act;
(ii) an announcement being made indicating in terms satisfactory
to Day Runner UK that it is not the intention of the Secretary of
State for Trade and Industry to refer the proposed acquisition of
Filofax by Day Runner UK, or any matters arising therefrom, to the
Monopolies and Mergers Commission;
(iii) the expiry or early termination of all applicable waiting
periods under the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the regulations made thereunder;
(iv) no relevant authority having intervened in a way that would or might
reasonably be expected to:
(a) make the Offer or its implementation or the acquisition
or proposed acquisition by any member of the Wider Day
Runner Group of any Filofax Shares, or the acquisition
of control of any member of the Wider Filofax Group by
any member of the Wider Day Runner Group, void,
unenforceable and/or illegal or directly or indirectly
restrain, restrict, prohibit, delay or otherwise
interfere with the implementation thereof, or impose
additional conditions or obligations with respect
thereto, or otherwise challenge or hinder the Offer
or its implementation or the acquisition or proposed
acquisition of any Filofax Shares, or the acquisition
of control of any member of the Wider Filofax Group by
any member of the Wider Day Runner Group;
(b) require, prevent or delay the divestiture or alter the
terms of any proposed divestiture by any member of the
Wider Day Runner Group or the Wider Filofax Group of all
or any part of their respective businesses, assets or
properties or impose any limitation on the ability of
any of them to conduct any of their respective
businesses or to own any of their respective assets or
properties or any part thereof;
(c) impose any limitation on, or result in a delay in, the
ability of any member of the Wider Day Runner Group or
of any member of the Wider Filofax Group, directly or
indirectly, to acquire or hold or exercise effectively
any rights of ownership of shares or loans or securities
convertible into shares or any other securities (or the
equivalent) in any member of the Wider Filofax Group or
to exercise management control over any such member of
the Wider Filofax Group;
(d) require any member of the Wider Day Runner Group or the
Wider Filofax Group to acquire or to offer to acquire
any shares or other securities (or the equivalent) or
interest in any member of the Wider Day Runner Group or
the Wider Filofax Group or any asset owned by any third
party or to sell, or to offer to sell, any shares or
other securities (or the equivalent) or interest in or
any asset owned by any member of the Wider Day Runner
Group or the Wider Filofax Group;
(e) result in a delay in the ability of any member of the
Wider Day Runner Group, or render any member of the
Wider Day Runner Group unable, to acquire some or all of
the shares or other securities (or the equivalent) or
interest in, or control of, any member of the Wider
Filofax Group or require or prevent or delay divestiture
by any member of the Wider Day Runner Group or the Wider
Filofax Group of the same;
(f) impose any limitation on the ability of any member of
the Wider Day Runner Group or the Wider Filofax Group to
co-ordinate all or any part of its business with all or
any part of the business of any other member of the
Wider Day Runner Group or the Wider Filofax Group; or
(g) otherwise adversely affect the business, assets, profits
or prospects of any member of the Wider Day Runner Group
or Wider Filofax Group,
and all applicable waiting and other time periods during which any
relevant authority could have intervened, in respect of the Offer or
the acquisition or proposed acquisition of any shares or other
securities (or the equivalent) or interest in, or control of, any
member of the Wider Filofax Group by any member of the Wider Day
Runner Group, having expired, lapsed or terminated;
(v) all necessary notifications and filings having been made, all
regulatory and statutory obligations having been complied with, all
appropriate waiting or other time periods under any applicable
legislation or regulations in any jurisdiction having expired, lapsed
or terminated in each case in respect of the Offer or the acquisition
or proposed acquisition of any shares or other securities (or the
equivalent) or interest in, or control of, any member of the Wider
Filofax Group by any member of the Wider Day Runner Group and all
authorisations and determinations necessary or appropriate in any
jurisdiction for or in respect of the Offer or the acquisition or
proposed acquisition of any shares or other securities (or the
equivalent) or interest in, or control of, any member of the Wider
Filofax Group by any member of the Wider Day Runner Group or in
relation to the affairs of any member of the Wider Filofax Group
having been obtained in terms and in a form satisfactory to Day Runner
UK from all relevant authorities or (without prejudice to the
generality of the foregoing) from any persons or bodies with whom any
member of the Wider Filofax Group or the Wider Day Runner Group has
entered into contractual arrangements and such authorisations and
determinations together with all authorisations and determinations
necessary or appropriate for any member of the Wider Filofax Group to
carry on its business remaining in full force and effect at the time
at which the Offer becomes otherwise unconditional in all respects and
all filings necessary for such purpose having been made and there
being no notice of any intention to revoke, suspend, restrict, modify
or not renew any of the same having been received;
(vi) there being no provision of any agreement, arrangement, licence,
permit or other instrument to which any member of the Wider Filofax
Group is a party or by or to which any such member or any of its
assets may be bound, entitled or subject which would, could or might
reasonably be expected to, as a result of (i) the Offer, (ii) the
proposed acquisition by any member of the Wider Day Runner Group of
the shares or other securities (or the equivalent) or interest in any
member of the Wider Filofax Group or any of them, or (iii) a change in
the control or management of any member of the Wider Filofax Group,
result in:
(a) any moneys borrowed by, or any other indebtedness,
actual or contingent, of or any grant available to any
such member being or becoming repayable or capable of
being declared repayable immediately or prior to its
stated maturity, or the ability of any such member to
borrow moneys or incur any indebtedness being withdrawn
or inhibited;
(b) any such agreement, arrangement, licence, permit or
other instrument being terminated or modified or any
obligation or liability arising or any action being
taken or arising thereunder;
(c) the rights, liabilities, obligations or interests of any
such member under any such agreement, arrangement,
licence, permit or instrument or the interests or
business of any such member in or with any other person,
firm, company or body (or any arrangements relating to
any such interests or business) being terminated or
modified or affected;
(d) any such member ceasing to be able to carry on its
business under any name under which it at present does
so or ceasing to be able to use in its business any
names, trademarks or other intellectual property rights
which it at present uses, in each case on the same basis
and terms as at present apply;
(e) any assets or interests of any such member being or
falling to be disposed of or charged or any right
arising under which any such asset or interest could be
required to be disposed of or charged;
(f) the creation of any mortgage, charge or other security
interest over the whole or any part of the business,
property or assets of any such member or any such
security interest (whenever and wherever arising or
having arisen) becoming enforceable;
(g) the value of, or financial or trading position or
prospects of, any such member being prejudiced or
adversely affected; or
(h) the creation of any liability, actual or contingent, by
any such member;
and no event having occurred which, under any provision of any
agreement, arrangement, licence, permit or other instrument to which
any member of the Wider Filofax Group is a party or by or to which
any such member or any of its assets may be bound, entitled or
subject, could or might reasonably be expected to result in any of
the events or circumstances as are referred to in subparagraphs (a)
to (h) of this condition (vi);
(vii) no member of the Wider Filofax Group having since 31 March 1998
(save as disclosed in the annual report and accounts of Filofax for
the year ended 31 March 1998 or otherwise announced on or before 23
September 1998 by Filofax on the London Stock Exchange (information
which has been disclosed or announced in such manner and on or
before such date being "publicly announced")):
(a) (save as between Filofax and members of the Wholly owned
Filofax Group or upon the exercise of rights to
subscribe for Filofax Shares pursuant to the exercise of
options granted under any of the Filofax Share Schemes
on or prior to 31 March 1998) issued or allotted or
agreed to issue or allot or authorised or proposed the
issue or allotment of additional shares of any class, or
of securities convertible into, or rights, warrants or
options to subscribe for or acquire, any such shares or
convertible securities;
(b) recommended, declared, paid or made or proposed to
recommend, declare, pay or make any bonus, dividend or
other distribution other than to a member of the Wholly
owned Filofax Group, save for the final ordinary
dividend of 2.42 pence per Filofax Share payable on 30
October 1998;
(c) acquired or disposed of or transferred, mortgaged or
charged or created any security interest over any assets
or any rights, title or interest in any asset (including
shares and trade investments) or merged with or demerged
any body corporate or authorised or proposed or
announced any intention to propose any such merger,
demerger, acquisition, disposal, transfer, mortgage,
charge or security interest;
(d) made or authorised or proposed or announced an intention
to propose any change in its share or loan capital (save
for any Filofax Shares allotted upon exercise of options
granted on or before 31 March 1998 under the Filofax
Share Schemes);
(e) issued, authorised or proposed the issue of any
debentures or incurred or increased any indebtedness or
contingent liability;
(f) purchased, redeemed or repaid or proposed the redemption
or repayment of any of its own shares or other
securities (or the equivalent) or reduced or proposed
the reduction of any of its share or loan capital;
(g) entered into any contract, reconstruction, amalgamation,
commitment or other transaction or arrangement otherwise
than in the ordinary course of business or entered into
or varied, or announced its intention to enter into or
vary, any contract with or in relation to any of the
directors or senior executives or consultants of the
Wider Filofax Group;
(h) entered into or varied or authorised or proposed any
contract, transaction or commitment (whether in respect
of capital expenditure or otherwise) which is of a
long-term, onerous or unusual nature or magnitude or
which involves or could involve an obligation of such a
nature or magnitude;
(i) entered into any contract, transaction or arrangement
which consents to or may result in the restriction of
the scope of the business of any member of the Wider
Filofax Group or of the Wider Day Runner Group and no
member of the Wider Filofax Group being a party to or
otherwise affected by any such contract, transaction or
arrangement whether the same was entered into before or
after 31 March 1998;
(j) waived or compromised any claim;
(k) taken any corporate action or had any legal proceedings
started or threatened against it for its winding-up,
dissolution or reorganisation or for the appointment of
a receiver, administrator, administrative receiver,
trustee or similar officer of all or any of its assets
or revenues or any analogous proceedings or appointment
in any jurisdiction or had any such person appointed;
(l) made or agreed or consented to any significant change to the terms of
the trust deeds constituting the pension schemes established for its
directors, employees or their dependents or the benefits which accrue,
or to the pensions which are payable, thereunder, or to the basis on
which qualifications for, or accrual or entitlement to, such benefits
or pensions are calculated or determined or to the basis upon which
the liabilities (including pensions) of such pension schemes are
funded or made, or agreed or consented to any change to the trustees
involving the appointment of a trust corporation or allowed any
deficit (actual or contingent) to arise or persist in relation to the
funding of any such scheme;
(m) been unable or admitted in writing that it is unable, to
pay its debts or having stopped or suspended (or
threatened to stop or suspend) payment of its debts
generally or ceased or threatened to cease carrying on
all or substantial part of any business;
(n) made any alteration to its memorandum or articles of
association, or other incorporation documents; or
(o) entered into an agreement, contract, arrangement or
commitment or passed any resolution or made any offer
(which remains open for acceptance) or proposal with
respect to any of the circumstances or events, referred
to in this condition (vii);
(viii) since 31 March 1998, and save as publicly announced:
(a) no adverse change or deterioration having occurred in the business,
assets, financial or trading position or profits or prospects of
Filofax or any other member of the Wider Filofax Group;
(b) no litigation or arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider Filofax Group is or may
become a party (whether as plaintiff or defendant or otherwise) or
which may otherwise affect any such member having been announced,
instituted or threatened by or against or remaining outstanding by or
against any member of the Wider Filofax Group or which may otherwise
affect any such member and no investigation by any relevant authority
against or in respect of or affecting any member of the Wider Filofax
Group having been threatened, announced or instituted or remaining
outstanding and which in any such case might adversely affect any
member of the Wider Filofax Group;
(c) there having been no receiver, administrator,
administrative receiver, trustee or similar officer
appointed over any of the assets or revenues of any
member of the Wider Filofax Group or any analogous
proceedings or steps having taken place under the laws
of any jurisdiction and there having been no petition
presented for the administration of any member of the
Wider Filofax Group or any analogous proceedings or any
steps having taken place under the laws of any other
jurisdictions; and
(d) no contingent or other liability having arisen or become
apparent or increased that might be likely to have an
adverse effect on any member of the Wider Filofax Group;
(ix) Day Runner UK not having discovered that:
(a) any financial, business or other information concerning
Filofax or the Wider Filofax Group that has been
publicly disclosed at any time by or on behalf of any
member of the Wider Filofax Group is misleading,
contains a misrepresentation of fact or omits to state a
fact necessary to make the information contained therein
not misleading and which was not corrected by subsequent
public announcement made on the London Stock Exchange on
or before 23 September 1998; or
(b) any member of the Wider Filofax Group or any partnership
in which any member of the Wider Filofax Group has a
significant economic interest having any liability
(contingent or otherwise) that is not publicly
announced;
(x) Day Runner UK not having discovered that:
(a) any past or present member of the Wider Filofax Group
has not complied with all applicable legislation or
regulations of any jurisdiction with regard to the
storage, carriage, disposal, discharge, spillage, leak
or emission of any waste or hazardous substance or any
substance likely to impair the environment or harm human
health, which non-compliance or any other disposal,
discharge, spillage, leak or emission which has occurred
would be likely to give rise to any liability (whether
actual or contingent) on the part of any member of the
Wider Filofax Group; or
(b) there has been a disposal, discharge, spillage,
emission or leak of waste or any hazardous substance or
any substance likely to impair the environment or harm
human health on or about, or there has been an emission
or discharge of any waste or any hazardous substance
or any substance likely to impair the environment or
harm human health from, any land or other asset owned,
occupied or made use of by any member of the Wider
Filofax Group, or in which any such member may have an
interest, which would be likely to give rise to any
liability or cost (whether actual or contingent) on the
part of any member of the Wider Filofax Group; or
(c) there is or is likely to be any liability (whether
contingent or otherwise) to make good, repair, reinstate
or clean up any property now or previously owned,
occupied or made use of by any past or present member of
the Wider Filofax Group, or in which any such member may
now or previously have had or be deemed to have or have
had an interest, under any environmental legislation,
regulation, notice, circular or order of any relevant
authority, or to contribute to the cost thereof or
associated therewith or indemnify any person in relation
thereto; or
(d) circumstances exist whereby a person or class of persons
would be likely to have any claim or claims in respect
of any product, by-product or process of manufacture or
service or materials used therein now or previously
manufactured, supplied, sold or carried out or in any
way dealt with or handled by any past or present member
of the Wider Filofax Group which claim or claims would
be likely adversely to affect any member of the Wider
Filofax Group.
For the purposes of these conditions:
(a) "relevant authority" means any government, government department or
governmental, quasi-governmental, supranational, statutory or
regulatory body, court, trade agency, professional association or
institution or environmental body or any other body or person in any
jurisdiction;
(b) a relevant authority shall be regarded as having "intervened" if it
has instituted, implemented, threatened or communicated its intention
to take any action, proceedings, suit, investigation, inquiry or
reference, or made, enacted or proposed any statute, regulation,
decision or order, or taken any measures or other steps or otherwise
having indicated that it may do any of the foregoing and "intervene"
shall be construed accordingly;
(c) "authorisations" means authorisations, orders, grants, recognitions,
determinations, confirmations, consents, licences, clearances,
permissions, exemptions and approvals;
(d) "the Wider Filofax Group" means Filofax and its subsidiary
undertakings, associated undertakings and any other undertakings in
which Filofax and such undertakings (aggregating their interests) have
a substantial interest and "the Wider Day Runner Group" means Day
Runner, any holding company and any subsidiary undertaking, associated
undertakings and any other undertaking in which Day Runner and such
undertakings (aggregating their interests) have a substantial interest
and, for these purposes, "holding company", "subsidiary undertaking",
"associated undertaking" and "undertaking" have the meanings given by
the Companies Act (but for this purpose ignoring paragraph 20(1)(b) of
Schedule 4A to the Companies Act) and "substantial interest" means a
direct or indirect interest in 15 per cent. or more of the equity or
voting capital of an undertaking; and
(e) "the Wholly owned Filofax Group" means Filofax and those of its
subsidiaries in which it has a direct or indirect interest in 100 per
cent. of the equity and voting capital.
Day Runner UK reserves the right to waive all or any of the above conditions, in
whole or in part, except condition (i). The Offer will lapse unless all the
above conditions have been satisfied or (if capable of waiver) waived, or, where
appropriate, have been determined by Day Runner UK in its reasonable opinion to
be or remain satisfied, by midnight on the day which is 21 days after the later
of the first closing date of the Offer and the date on which the Offer becomes
or is declared unconditional as to acceptances, or such later date as Day Runner
UK may, with the consent of the Panel, decide, provided that Day Runner UK shall
be under no obligation to waive or treat as satisfied any of conditions (ii) to
(x) inclusive by a date earlier than the latest date specified or referred to
above for the satisfaction thereof notwithstanding that any such condition or
the other conditions of the Offer may at such earlier date have been waived or
satisfied and that there are at such earlier date no circumstances indicating
that any of such conditions may not be capable of being satisfied.
The Offer will lapse if the acquisition of Filofax is referred to the Monopolies
and Mergers Commission before the later of 3.00 pm (London time) on the first
closing date of the Offer and the date on which the Offer becomes or is declared
unconditional as to acceptances. In such circumstances, the Offer will cease to
be capable of further acceptance and Day Runner UK and accepting Filofax
Shareholders shall thereupon cease to be bound by forms of acceptance submitted
at or before the time when the Offer so lapses.
If Day Runner UK is required by the Panel to make an offer for Filofax Shares
under the provisions of Rule 9 of the Code, Day Runner UK may make such
alterations to the terms and conditions of the Offer as are necessary to comply
with the provisions of that Rule.
<PAGE>
Appendix II
Definitions
The following definitions apply throughout this document, unless the context
requires otherwise:
"business day" any day, other than a Saturday or Sunday
or a US federal holiday or UK Bank Holiday
and consisting of the time period from 12.01
am until and including 12.00 (midnight) (New
York City time);
"Cazenove" Cazenove & Co.;
"Code" The City Code on Takeovers and Mergers;
"Companies Act" the Companies Act 1985, as amended;
"Daily Official List" the Daily Official List of the London Stock
Exchange;
"Day Runner" Day Runner, Inc.;
"Day Runner Group" the group of companies of which Day Runner is
the ultimate holding company;
"Day Runner UK" or the Day Runner UK plc, a wholly owned subsidiary
of Day Runner;
"Offeror"
"Filofax" Filofax Group plc;
"Filofax Group" the group of companies of which Filofax is
the ultimate holding company;
"Filofax Share Schemes" the Filofax Employee Sharesave Scheme, the
Filofax approved Executive Share Option
Scheme and the Filofax unapproved Executive
Share Option Scheme;
"Filofax Shareholders" holders of Filofax Shares;
"Filofax Shares" the existing unconditionally allotted
or issued and fully paid ordinary shares of 5
pence each in the capital of Filofax and any
further such shares that are unconditionally
allotted or issued at or prior to the time at
which the Offer ceases to be open for
acceptance (or, subject to the provisions of
the Code, such earlier time and/or date as
Day Runner UK may decide);
"Form of Acceptance" the Form of Acceptance, Authority and
Election for use by Filofax Shareholders
in connection with the Offer;
"Henry Ling" the company formerly named Henry Ling &
Son (London) Limited and renamed Elijo
(London) Limited on 9 April 1998;
"LIBOR" London Interbank Offered Rate for one year
sterling deposits;
"Loan Note Alternative" the alternative whereby
Filofax Shareholders (other than certain
overseas persons) validly accepting the Offer
may elect to receive Loan Notes instead of
all or part of the cash consideration to
which they would otherwise be entitled under
the Offer;
"Loan Note Instrument" the loan note instrument constituting the
Loan Notes;
"Loan Notes" the floating rate, guaranteed, unsecured
loan notes to be issued by Day Runner
UK pursuant to the Loan Note Alternative;
"London Stock Exchange" the London Stock Exchange Limited;
"Offer" the offer by Wasserstein Perella on behalf of
Day Runner UK to acquire the Filofax Shares
other than those already owned by Day Runner
UK on the terms and subject to the conditions
to be set out in the Offer Document and the
Form of Acceptance including, where the
context so requires, any subsequent revision,
variation, extension or renewal of such
offer;
"Offer Document" the document by means of which the Offer is
made;
"Panel" The Panel on Takeovers and Mergers;
"SEC" the US Securities and Exchange Commission;
"Securities Act" the US Securities Act of 1933, as amended,
and the rules and regulations promulgated
thereunder;
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland;
"United States, US or USA" the United States of
America, its territories and possessions, any
State of the United States of America and the
District of Columbia, and all other areas
subject to its jurisdiction;
"US$" or "US dollar" the lawful currency of the US;
"US Person" as defined in Regulation S under the
Securities Act;
"Wasserstein Perella" Wasserstein Perella & Co. Limited.
Bases of calculation in this document
FX rate (pound)1 = $1.68
The loss of value of over 59 per cent. against the FTSE All-Share Index is
calculated as [1 - (a/b)] where: a = Filofax's closing share price of 140 pence
on 23 September 1998; b = the value of the FTSE All-Share Index on 23 September
1998, having rebased the index to Filofax's share price on 1 January 1996.
