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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
(X) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 29, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-11112
AMERICAN MEDIA OPERATIONS, INC.
(Exact name of the registrant as specified in its charter)
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Delaware 59-2094424
(State or other jurisdiction of incorporation or organization) (IRS Employee Identification No.)
600 East Coast Avenue, Lantana, Florida 33464-0002
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (561) 540-1000
Securities registered pursuant to Section 12(b) and 12(g) of the Act: None
American Media Operations, Inc. (1) HAS FILED all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) HAS NOT BEEN subject to such filing Requirements
for the past 90 days.
The aggregate market value of the voting stock held by non-affiliates as of June
25, 1999 was $0.
As of June 25, 1999 there were issued and outstanding 7,507.6 shares of the
registrant's common stock, $.20 par value, all of which were held, beneficially
and of record, by American Media, Inc.
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PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, references in this Form 10-K to
the "Company" or "us", "we" or "our" are to American Media Operations, Inc. and
its subsidiaries. All references to a particular fiscal year are to the four
fiscal quarters ended the last Monday in March of the fiscal year specified.
We incorporated under the laws of Delaware in February 1981 and are a
wholly-owned subsidiary of American Media, Inc. ("Media"). We conduct all of
Media's operations and represent substantially all of Media's assets. Our
headquarters and principal executive offices are located at 600 East Coast
Avenue, Lantana, Florida 33464-0002 and the telephone number is (561) 540-1000.
In February 1999, we ceased publication of Soap Opera News and Soap
Opera Magazine and sold certain of the trademarks and other soap opera
publishing assets relating to these magazines (collectively, the "Soap Opera
Assets") to Primedia, Inc. for $10 million in cash. In addition, we may receive
future consideration based upon increased financial performance above certain
levels of Primedia, Inc.'s Soap Opera Digest and Soap Opera Weekly publications.
There can be no assurance however that we will receive any such future
consideration.
On May 7, 1999 all of the common stock of Media was purchased by EMP
Acquisition Corp. ("EMP") a company controlled by Evercore Capital Partners
L.P., a private equity firm ("Evercore"). Proceeds to finance the acquisition
included (a) a cash equity investment of $235 million by Evercore and certain
other investors, (b) borrowings of approximately $350 million under a new $400
million senior bank facility (the "New Credit Agreement") and (c) borrowings of
$250 million in the form of senior subordinated notes (the "New Subordinated
Notes"). These proceeds were used to (d) acquire all of the outstanding common
stock of Media for $299.4 million, (e) repay $267 million then outstanding under
the existing credit agreement (the "Credit Agreement") with our banks, (f)
retire approximately $199 million of our $200 million Senior Subordinated Notes
due 2004 and (g) pay transaction costs (all such transactions in (a) through (g)
are collectively referred to as the "Transactions"). Upon consummation of the
Transactions, EMP was merged with and into Media (the "Merger") resulting in a
change in ownership control of both Media and the Company. As a result of this
change in control, as of the Merger date we will reflect a new basis of
accounting that will include the elimination of historical amounts of certain
assets and liabilities and the revaluation of certain of our tangible and
intangible assets.
INDUSTRY DATA AND CIRCULATION INFORMATION
Unless otherwise specifically indicated, all statements presented in
this Form 10-K regarding (a) circulation rankings in the United States and
Canada of National Enquirer and Star relative to other magazines based on weekly
single copy circulation and of Country Weekly in its category based on weekly
circulation, (b) rankings in the United States and Canada of National Enquirer
and Star relative to other magazines based on total magazine retail dollars
generated, (c) our publications' share of total weekly single copy circulation
in the United States and Canada and (d) the percentage that average weekly
single copy circulation of our publications in the United States, Canada or
outside of North America represents of total average
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weekly single copy circulation of our publications are based upon statistical
data obtained from the report of the Audit Bureau of Circulations for the six
months ended December 31, 1998 (which information has not been independently
verified by us). Unless otherwise indicated, all average weekly circulation
information for our publications is an average of actual weekly circulation for
the six months ended December 28, 1998. All references to "circulation" are to
single copy and subscription circulation, unless otherwise specified. All
information regarding multiple readers per copy of our publications and the core
demographic profile of our readers is based on National Enquirer and Star
magazine audience estimates prepared at our request for fall 1998 by Mediamark
Research Inc. (which information has not been independently verified by us).
THE COMPANY
OVERVIEW
We are a leading publisher in the field of general interest magazines,
publishing National Enquirer, Star, Weekly World News and Country Weekly, with a
current aggregate weekly circulation of approximately 4.7 million copies.
National Enquirer and Star, our premier titles, have the second and fourth
highest weekly single copy circulation, respectively, of any weekly periodical
in the United States. We are the leader in total weekly single copy circulation
of magazines in the United States and Canada with approximately 34% of total
U.S. and Canadian circulation for weekly publications. We derive approximately
85% of our revenues from circulation, predominantly single copy sales in retail
outlets, and the remainder from advertising and other sources. National Enquirer
and Star are distributed in approximately 165,000 retail outlets in the United
States and Canada, representing, in the opinion of management, substantially
complete coverage of periodical outlets in these countries. Distribution
Services, Inc. ("DSI"), our subsidiary, arranges for the placement and
merchandising of our publications and third-party publications at retail outlets
throughout the United States and Canada. In addition, DSI provides marketing,
merchandising and information-gathering services for third parties.
Our publications are among the most well-known and widely distributed
titles in the publishing industry. While our publications have a current
aggregate weekly circulation of approximately 4.7 million copies, they enjoy a
weekly readership of over 20 million people due to multiple readers per copy
sold. As a result, we believe our publications enjoy strong consumer brand
awareness with a large and loyal readership base. Our publications include the
following titles:
- National Enquirer is a weekly general interest periodical with an
editorial content devoted to celebrity features, human interest
stories and articles covering lifestyle topics such as health,
food and household affairs. National Enquirer is the second
highest selling weekly periodical in the United States and Canada
based on single copy circulation, selling on average 1,814,000
copies per week. National Enquirer has a total average weekly
circulation of 2,201,000 copies, including subscriptions, with an
average of approximately 7 readers per copy. National Enquirer
has a core demographic profile of women aged 18-49. National
Enquirer's cover price is $1.49 in the United States.
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- Star is a weekly celebrity news-based periodical with a strong
emphasis on television and movie performers and the lives of the
rich and famous. Star complements this focus with human interest
stories about ordinary people in unusual circumstances. Every
issue also includes a variety of features on topics such as food,
fashion, health, fitness and parenting. Star is the fourth
highest selling weekly periodical in the United States and Canada
based on single copy circulation, selling on average 1,487,000
copies per week. Star has a total average weekly circulation of
1,776,000 copies, including subscriptions, with an average of
approximately 4 readers per copy. Star has a core demographic
profile of women aged 18-49. Star's cover price is $1.49 in the
United States.
- Weekly World News is a tabloid devoted to the publication of
entertaining and unusual stories. The editorial content is
derived principally from rewritten stories and photographs
purchased from agencies and periodicals around the world. Weekly
World News has an average weekly single copy circulation of
355,000 copies, with a total average weekly circulation of
379,000 copies, including subscriptions. Weekly World News' cover
price is $1.39 in the United States.
- Country Weekly is a special interest magazine presenting various
aspects of country music, lifestyles, events and personalities,
and has the highest weekly circulation of any such magazine in
its category. Country Weekly has an average weekly single copy
circulation of 171,000 copies, with a total average weekly
circulation of 363,000 copies, including subscriptions. Country
Weekly's cover price is $1.99 in the United States.
CIRCULATION
Our publications have an aggregate weekly circulation of approximately
4.7 million copies and a weekly readership of over 20 million people due to
multiple readers per copy sold. We derive approximately 85% of our revenues from
circulation and the remainder from advertising and other sources. Approximately
84% of our circulation revenues are generated by single copy circulation at
retail outlets and the remainder by subscriptions. The United States, Canada and
areas outside of North America represented approximately 86%, 10% and 4% of
average weekly single copy circulation, respectively.
SINGLE COPY CIRCULATION. The following table sets forth average weekly
single copy circulation and U.S. cover prices for our publications for the three
fiscal years 1997, 1998 and 1999.
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AVERAGE WEEKLY SINGLE COPY CIRCULATION AND U.S. COVER PRICE
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FOR FISCAL YEAR ENDED
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MARCH 31, MARCH 30, MARCH 29,
1997 1998 1999
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(CIRCULATION DATA IN THOUSANDS)
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National Enquirer
Single Copy Circulation 2,104 1,932 (2) 1,766
Cover Price $1.39 (1) $1.39 $1.49 (1)
Star
Single Copy Circulation 1,858 1,618 (2) 1,445
Cover Price $1.39 (1) $1.39 $1.49 (1)
Weekly World News
Single Copy Circulation 409 356 350
Cover Price $1.09 $1.25 (1) $1.39 (1)
Country Weekly
Single Copy Circulation 219 202 169
Cover Price $1.69 $1.69 $1.99 (1)
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(1) We increased the U.S. cover price on each of National Enquirer and Star on
July 23, 1996 from $1.29 to $1.39 and then to $1.49 on July 7, 1998. We
increased the U.S. cover price on Weekly World News on April 15, 1997 from
$1.09 to $1.25 and then to $1.39 on September 1, 1998. We increased the
U.S. cover price on Country Weekly on April 7, 1998 from $1.69 to $1.79 and
then to $1.99 on March 2, 1999.
(2) We believe that the principal factor in the decline in circulation in
fiscal 1998 from fiscal 1997 was adverse publicity against celebrity
news-based magazines following the death of Princess Diana in August 1997.
Single copy circulation of each of our publications has experienced
declines. We believe that a significant portion of the decline in circulation
since fiscal 1994 is primarily due to two factors. First, the death of Princess
Diana in August 1997 resulted in a significant amount of adverse publicity
against celebrity news-based magazines. While single copy circulation of
National Enquirer and Star have improved from the low levels experienced in the
months immediately after Princess Diana's death, they have not returned to their
prior levels. We believe the second principal factor contributing to lower
circulation since fiscal 1994 has been a significant reduction in advertising
expenditures by us to promote our publications. Total advertising expenditures
for National Enquirer and Star decreased from $16.1 million in fiscal 1994 to
$0.3 in fiscal 1999. We believe that this reduction in advertising was a
significant factor in the decrease in average weekly single copy circulation of
National Enquirer and Star from approximately 2.8 million copies and 2.5 million
copies, respectively, in fiscal 1994 to approximately 1.8 million copies and 1.4
million copies, respectively, in fiscal 1999. In addition, single copy
circulation declines of our publications can be attributed to (a) increased
competition from other publications and forms of media, such as certain
newspapers, television and radio programs concentrating on celebrity news and
(b) a general industry-wide decline in single copy circulation of individual
publications due to an increasing number of publications in the industry.
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Historically, we have offset declines in single copy circulation, in
part, through increases in cover prices. We believe that we will be able to
continue to implement prudent increases in our cover prices over time without
causing a decline in circulation. Since May 1993, we have instituted eight cover
price increases in the United States for National Enquirer and Star, consisting
of four cover price increases for each publication, ranging from $0.04 to $0.26
per copy. The average weekly single copy circulation of National Enquirer and
Star for the three-month periods following seven of these cover price increases
was approximately equal to or greater than the average weekly single copy
circulation for the applicable three-month periods prior to such increases.
After the most recent cover price increase of $0.10 for each of National
Enquirer and Star on July 7, 1998, average weekly single copy circulation
increased approximately 12% and 8%, respectively, for the three-month period
following such increases over the average weekly single copy circulation for
each publication for the three-month period prior to such increases.
SUBSCRIPTION SALES. Our strategy with respect to subscriptions seeks to optimize
subscription revenues and profitability as opposed to subscription circulation.
We accomplish this strategy by focusing on direct sales of our titles by us
through inserts and direct mailings. From time to time, however, we utilize
agents, such as Publishers Clearing House, to maintain and expand our subscriber
base subscription circulation. In fiscal 1999, approximately 14% (or $41.8
million) of our total revenues from circulation were from subscription sales.
Average weekly subscription circulation for fiscal 1999 were 452,000 copies for
National Enquirer, 347,000 copies for Star, 23,000 copies for Weekly World News
and 196,000 copies for Country Weekly.
Subscription renewal rates for our publications (exclusive of
subscriptions sold by direct mail agents) were 82% for National Enquirer, 80%
for Star, 77% for Weekly World News and 71% for Country Weekly for subscriptions
which expired during the 1998 calendar year. In calendar 1998, approximately
two-thirds of our subscribers purchased their subscriptions directly from us. We
believe that our core subscribers are those who do not purchase through direct
mail agents due to the fact that renewals by people who subscribe through direct
mail agents are low.
ADVERTISING REVENUES
We had approximately $22.6 million in advertising revenues in fiscal
1999, excluding advertising generated by the Soap Opera Assets. National
Enquirer, Star, Weekly World News and Country Weekly generated approximately
$12.3 million, $6.9 million, $1.1 million and $2.3 million, respectively, in
advertising revenues during fiscal 1999.
Our advertising revenues are generated by national advertisers,
including consumer product and broadcasting companies, mail order advertisers
and classified advertisers. Excluding advertising revenues for the Soap Opera
Assets, in fiscal 1999 national advertising, mail order advertising and
classified advertising represented 45%, 47% and 8%, respectively of total
advertising revenues.
We employ 20 advertising sales people and maintain advertising sales
offices in New York City, Chicago, Los Angeles, Nashville and Lantana.
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EDITORIAL
The editorial departments of our publications operate independently.
The editorial headquarters for National Enquirer, Weekly World News and Country
Weekly are in Lantana, Florida. National Enquirer also has a Los Angeles,
California bureau and Country Weekly has a bureau in Nashville, Tennessee. Star
has its editorial headquarters in Tarrytown, New York and also has a bureau in
Los Angeles, California.
National Enquirer's editorial operation consists of approximately 80
full-time employees. The editorial news gathering operation of National Enquirer
is directed by the editor in chief and executive editor who supervise 8 article
editors, including the Los Angeles bureau chief. The article editors are
responsible for developing and gathering news stories and story ideas. The
article editors have 21 staff reporters. The article editors work with four
photo editors, under the direction of a head photo editor. Stories brought in
for publication are processed through a skilled team of writers and a design
layout department. Each story is checked during the process by a research
department before actual publication.
Star's total editorial staff consists of approximately 70 full-time
employees and 6 part-time employees. Star's editorial news gathering operation
is similar to National Enquirer's. There is an editor in chief, an executive
editor, 8 story editors and 20 reporters. Their photo department has 7 staff
persons under the direction of a chief photo editor. Star has a library staff
that assists in both story researching and fact checking.
In addition to their editorial staffs, National Enquirer and Star pay
outside news sources for story ideas, for information regarding breaking stories
and for exclusive stories regarding celebrities. They also pay free-lance
photographers and free-lance reporters for their investigative journalism.
National Enquirer and Star have networks of approximately 300 and 150 free-lance
reporters, respectively, to whom they can assign stories. Because a significant
amount of our editorial content is based on investigative reporting, our
publications are "first source" or "breaking story" magazines for our readers.
The editorial staffs of Weekly World News and Country Weekly are
comprised of 14 and 25 people, respectively, and are each managed by an editor.
Due to their high level of investigative reporting, both National
Enquirer and Star employ precautionary measures during the editorial process to
protect themselves from lawsuits. Each publication has a long-standing practice
of having outside legal counsel review the articles, photographs and headlines
under consideration for each issue. Such legal counsel identify and evaluate the
risk exposure presented by each article and photograph and make recommendations
so that the publications can make a business judgment concerning publication of
the articles and photographs. The management and editorial teams at National
Enquirer and Star consistently follow the recommendations of legal counsel. We
believe that this pre-publication "vetting" has been important in mitigating the
risk and occurrence of libel-based suits against the publications. There are
currently no claims pending that we believe would have a material adverse effect
on our operations.
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PRODUCTION AND DISTRIBUTION
An unrelated third-party performs most of the pre-press operations for
our publications and is responsible for transmitting them electronically to
printing plants. We have a long-term printing agreement with an unrelated
domestic printer to print National Enquirer and Star through December 2010 for
sales in the United States, Canada and, to the extent applicable, outside of
North America (except for the United Kingdom). This same printer also prints all
of our other publications. National Enquirer has a special United Kingdom
edition which is printed by another unrelated printer. Once printed, the copies
are distributed primarily by 5 regional wholesalers in the United States and
Canada who deliver the requisite number of copies to approximately 165,000
retail sales locations. We believe our relationships with our printing companies
are favorable and that there are printing facilities available elsewhere, should
the need arise. The principal raw materials utilized by our publications are
paper and ink. Paper is purchased directly by us from several suppliers based
upon pricing and, to a lesser extent, availability. Ink utilized by our
publications is purchased by the printers from at least two different ink
suppliers. Both paper and ink are commodity products with pricing affected by
demand, capacity and economic conditions. We believe that adequate sources of
supply are, and will continue to be, available to fulfill our requirements.
Our operating income may be significantly affected by the price of
paper used in our publications. For example, the price of paper rose
dramatically in 1995 and significantly affected operating income. In mid-1996
paper prices began to fall, then increased moderately in 1997 and 1998. If paper
prices increase in the future and we cannot pass these costs on to our
customers, such increases may have a material adverse effect on us. Currently,
we do not hedge against increases in paper costs.
MARKETING AND MERCHANDISING
We have established, through DSI, our own marketing organization whose
primary function is to coordinate the placement and merchandising of our
publications and third-party publications in retail outlets throughout the
United States and Canada. In addition to the services DSI provides for our
publications, DSI acts as a "quarterback" for approximately 40% (based on our
estimates) of new front-end racking programs initiated annually in the United
States and Canada by supermarkets and other retailers. Recently, DSI has begun
to leverage its network of field representatives, which are regularly in retail
outlets performing its services, by expanding its services to provide
merchandising and other information services to consumer product companies
outside the publishing industry. DSI's field representatives visit approximately
16,000 locations weekly, comprising of the highest volume retailers.
Approximately every three years, supermarkets and other retailers
typically redesign their front-end racks, generally as part of store renovations
or new store openings. As a "quarterback," DSI is selected by retailers to
coordinate the design and installation of the front-end racks and the
positioning of magazines for increased sales. Publishers, including the Company,
which are allocated space on a rack enter into contracts directly with the
retailer for the payment of fees (rack display payments) or other charges with
respect to that space. DSI uses its role as quarterback for approximately 40%
(based on our estimates) of new front-end rack programs initiated annually by
retailers in the United States to achieve better placement of our publications
and of the publications of DSI's third-party publishing clients. DSI is not paid
by the retailers for the services it renders as quarterback.
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DSI provides marketing services for the Company and third-party
publishing clients to achieve favorable placement of their respective
publications at supermarkets and other retail outlets. DSI also provides
merchandising and other information services such as checking retail stock
displays and repositioning and restocking in-store inventories for the Company
and its other clients. DSI's staff consists of approximately 180 full-time
employees and more than 1,500 part-time field representatives, who are equipped
with handheld computers in order to enhance the timeliness and accuracy of its
information-gathering services.
Some of DSI's third-party clients include Hachette, which publishes
Woman's Day, Woman's Day Specials, Elle and Mirabella; Gruner & Jahr
USA/Publishing, which publishes Family Circle, Family Circle Specials, McCall's,
Fitness, Parents and YM; Wenner Media, Inc., which publishes US Magazine,
Rolling Stone Magazine and Men's Journal; Newsweek, Inc., which publishes
Newsweek; and Rodale Press, Inc., which publishes Prevention and Prevention
Guides.
DSI's third-party contracts to provide marketing and merchandising
services to third-party clients in the publishing industry generated
approximately $13.6 million in revenues in fiscal 1999, as compared to $14.5
million and $12.5 million in fiscal 1998 and fiscal 1997, respectively.
OTHER BUSINESSES
Through Frontline, we sell in-store advertising space to various
product manufacturers and other national advertisers. Frontline owns signage
consisting of elevated light displays at checkout counters in about 5,100
supermarkets and considers itself a premier advertising vehicle for new products
and front-end brands. Frontline is responsible for maintaining the signage and
pays retailers commissions on advertising sales. In fiscal 1999, revenues from
Frontline were $6.3 million or approximately 2.1% of total operating revenues.
We also publish pocket-sized books under the name Micro Mags covering
such topics as diets, horoscopes, health and psychic phenomena. Twelve releases
are published annually, each with 4 titles, at a current cover price of $1.49.
In fiscal 1999, revenues from Micro Mags were approximately $3.7 million, which
amount was included in circulation revenues.
We also had ancillary sales (primarily licensing and syndication sales)
of $1.4 million in fiscal 1999.
COMPETITION
National Enquirer, Star, Weekly World News and Country Weekly compete
in varying degrees with other publications sold at retailers' checkout counters,
as well as forms of media concentrating on celebrity news, such as certain
newspapers, magazines and television and radio programs. We believe that
historical declines in single copy circulation of National Enquirer and Star
have resulted in part from increased competition from these publications and
forms of media. Competition for circulation is largely based upon the content of
the publication, its placement in retail outlets and, to a lesser extent, its
price. Competition for advertising revenues is largely based upon circulation
levels, readership, demographics, price and advertising results.
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Many of our competitors have substantially larger operating staffs and greater
capital resources. In this respect, we may be at a competitive disadvantage with
such entities. We believe that currently our most significant direct competitors
in the print media are Time Warner Inc. (which publishes People, In Style and
Entertainment Weekly), Wenner Media, Inc. (which publishes US Magazine), TV
Guide, Inc. (which publishes TV Guide) and Globe Communications Corp. (which
publishes Globe, Sun and National Examiner). As use of the Internet and new
on-line ventures focusing on celebrity news increase, we may face new sources of
competition.
DSI competes with many other companies providing marketing and
distribution services, such as full-service national distributors, wholesalers
and publishers with their own marketing organizations. Certain of DSI's
competitors have substantially larger operating staffs and greater capital
resources. In this respect, DSI may be at a competitive disadvantage with such
entities.
EMPLOYEE RELATIONS
We employ approximately 500 full-time employees and 1,550 part-time
employees. Approximately 1,680 of our employees, including almost all of our
part-time employees, work for DSI. None of our employees is represented by any
union or other labor organization. We have had no strikes or work stoppages
during the last five years. We believe that our relations with our employees are
good.
ITEM 2. PROPERTIES
We own our headquarters buildings which are located in Lantana,
Florida. The premises, which also houses the editorial staffs of National
Enquirer, Weekly World News and Country Weekly, consist of three one-story
buildings with an aggregate of 33,700 square feet located on approximately 7.6
acres.
We also lease 18,800 square feet in Tarrytown, New York for the
editorial staffs of Star, 8,200 square feet in New York, New York for
advertising personnel and 12,500 square feet in West Palm Beach, Florida for
DSI. Various other smaller properties are leased primarily in New York and
California for certain of our other operations. We believe that all of our
properties are in generally good condition and are adequate for current
operations.
ITEM 3. LEGAL PROCEEDINGS
We are involved in a number of litigation matters which have arisen in
the ordinary course of business. Because the focus of our publications often
involves controversial celebrities or subjects, the risk of defamation or
invasion of privacy litigation arises in the ordinary course of our business.
Our experience suggests that the claims for damages made in such lawsuits are
heavily inflated and, in any event, any reasonably foreseeable liability or
settlement would be covered by insurance. During the five fiscal years ended
March 29, 1999, we paid approximately $20 million in the aggregate for legal
fees (including prepublication review and litigation), litigation related
insurance premiums and, to a lesser extent, litigation settlements, including
amounts covered by insurance payments. We have not experienced any difficulty
obtaining such insurance and do not expect to experience any material difficulty
in the future. There are currently no claims pending that we believe would have
a material adverse effect on our operations.
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Multiple sources as well as documentation are sought for all stories
that are potentially controversial or subject to dispute. In addition, because
of their high level of investigative reporting, we retain special libel counsel
for National Enquirer and Star to review, prior to publication, all sensitive
stories and celebrity news and photos. Before publishing book excerpts, we
generally obtain indemnification from the publisher, author and/or agent
concerning publication rights and defamation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during
fiscal 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDERS
All of the Company's common stock is owned by Media. Accordingly, there
is no established public trading market for our common stock.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for each of the five fiscal years in the
period ended March 29, 1999 below have been derived from the consolidated
financial statements of the Company, which have been audited by independent
certified public accountants. The following selected financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations", the Company's Consolidated Financial
Statements and Notes thereto and other financial information appearing elsewhere
in this Form 10-K.
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FISCAL YEARS ENDED
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MARCH 27, MARCH 25, MARCH 31, MARCH 30, MARCH 29,
1995 1996 1997(1) 1998 1999
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(DOLLARS IN THOUSANDS)
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STATEMENT OF INCOME DATA:
Operating Revenues $ 315,299 $ 295,050 $ 315,988 $ 307,684 $ 293,459
Operating Expenses(2) 230,401 228,714 228,817 237,104 228,060
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Operating Income 84,898 66,336 87,171 70,580 65,399
Interest Expense (35,885) (56,715) (56,284) (50,486) (46,897)
Other Income (Expense), Net(3) (1,409) (1,195) (1,705) (1,641) 2,943
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Income before Income Taxes and
Extraordinary Charge 47,604 8,426 29,182 18,453 21,445
Income Taxes 23,755 8,985 16,716 12,437 13,559
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Income (Loss) before Extraordinary Charge 23,849 (559) 12,466 6,016 7,886
Extraordinary Charge(4) (11,635) -- -- -- (2,161)
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Net Income (Loss) $ 12,214 $ (559) $ 12,466 $ 6,016 $ 5,725
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BALANCE SHEET DATA:
Total Assets $ 711,486 $ 687,434 $ 670,850 $ 647,930 $ 616,838
Total Debt 579,844 558,906 528,662 497,535 471,134
Total Stockholder's Equity 36,801 36,242 48,457 54,473 60,198
OTHER DATA:
Depreciation $ 6,546 $ 7,303 $ 8,145 $ 9,252 $ 11,035
Amortization of Intangibles 28,504 23,075 21,075 21,075 21,075
Capital Expenditures 8,307 9,072 8,526 11,018 15,019
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(1) Fiscal 1997 includes 53 weeks as compared to 52 weeks for all other fiscal
years presented.
(2) Fiscal 1999 is net of a gain of $6,499 from the sale of the Soap Opera
Assets.
(3) Other income, net for any period is comprised of the management fee accrued
during such period and miscellaneous nonrecurring items and includes for
the period ended March 29, 1999, a net gain of $4,400 from the favorable
settlement of certain litigation.
(4) Consists primarily of the write-off of deferred debt issuance costs and
charges relating to refinancing of indebtedness.
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of
operations for the three fiscal years ended March 29, 1999. This discussion
should be read in conjunction with our consolidated financial statements and the
related notes thereto.
OVERVIEW
We are a leading publisher in the field of general interest magazines,
publishing National Enquirer, Star, Weekly World News and Country Weekly. We
generate revenues from circulation, predominantly single copy sales in
supermarkets and other retail outlets, and from advertising and other sources.
In fiscal 1999 and 1998, approximately 85% of our total operating
revenues were from circulation. Single copy sales accounted for approximately
84% of such circulation revenues in such periods and the remainder was from
subscription sales. Over the past five years, circulation revenues have been
generally stable as circulation declines have been offset in part by increases
in the cover prices of our publications.
We believe that circulation has been affected by a number of factors
over the last several years. Most recently, we believe the adverse publicity
against celebrity news-based magazines after the death of Princess Diana in
August 1997 was the principal factor for National Enquirer and Star average
weekly single copy circulation declines by 8.6% and 10.7%, respectively. While
single copy circulation has improved for these two publications from the low
levels experienced in the months immediately after Princess Diana's death, they
have not returned to their prior levels.
We also believe that a significant portion of the declines in single
copy circulation of National Enquirer and Star since fiscal 1994 is attributable
to a significant reduction in advertising expenditures for these publications.
Total advertising expenditures for National Enquirer and Star decreased from
$16.1 million in fiscal 1994 to $0.3 in fiscal 1999. We believe that this
reduction in advertising was a significant factor in the decrease in average
weekly single copy circulation of National Enquirer and Star from approximately
2.8 million copies and 2.5 million copies, respectively, in fiscal 1994 to
approximately 1.8 million copies and 1.4 million copies, respectively, in fiscal
1999. In addition, single copy circulation declines of all our publications can
be attributed to (a) increased competition from other publications and forms of
media, such as certain newspapers, television and radio programs concentrating
on celebrity news and (b) a general industry-wide decline in single copy
circulation of individual publications due to an increasing number of
publications in the industry.
Historically, we have offset declines in single copy circulation, in
part, through increases in cover prices. We believe that we will be able to
continue to implement prudent increases in our cover prices over time without
causing a decline in circulation. Since May 1993, we have instituted eight cover
price increases in the United States for National Enquirer and Star, consisting
of four cover price increases for each publication, ranging from $0.04 to $0.26
per copy. The average weekly single copy circulation of National Enquirer and
Star for the three-month periods following seven of these cover price increases
was approximately equal to or
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<PAGE> 14
greater than the average weekly single copy circulation for the applicable
three-month periods prior to such increases. After the most recent cover price
increase of $0.10 for each of National Enquirer and Star on July 7, 1998,
average weekly single copy circulation increased approximately 12% and 8%,
respectively, for the three-month period following such increases over the
average weekly single copy circulation for each publication for the three-month
period prior to such increases.
In addition to circulation, approximately 8% and 7%, respectively, of
our total operating revenues in fiscal 1999 and 1998 were from advertising and
other revenues (consisting primarily of DSI and Frontline revenues),
respectively.
Our primary operating costs and expenses are comprised of editorial,
production, distribution, circulation and other costs of sales and selling,
general and administrative expenses. The largest components of our costs are
related to production, which includes printing and paper expenses, and to
distribution, circulation and other costs of sales. Distribution, circulation
and other costs of sales primarily include the costs associated with operating
DSI, rack display payments made to retailers for our publications and
subscription postage.
In connection with the Transactions and Merger, which will be accounted
for under the purchase method of accounting, as of May 7, 1999 we will reflect a
new basis of accounting that will result in a substantial increase in the amount
of intangible assets. It is estimated that intangible assets will total
approximately $814.2 million with annual amortization expense of $40.7 million
based upon amortizable lives of 20 years. We are currently in the process of
appraising the value of our assets and liabilities, therefore the allocation of
the actual purchase price may differ significantly from this estimate.
In February 1999, we ceased publication of Soap Opera News and Soap
Opera Magazine and sold certain of the trademarks and other soap opera
publishing assets relating to these magazines to Primedia, Inc. for $10 million
in cash. In addition, we may receive future consideration based upon increased
financial performance above certain levels of Primedia, Inc.'s Soap Opera Digest
and Soap Opera Weekly publications. There can be no assurance however that we
will receive any such future consideration.
RESULTS OF OPERATIONS
Comparison of Fiscal Year Ended March 29, 1999 to Fiscal Year Ended
March 30, 1998
Total operating revenues were $293,459,000 for fiscal 1999, a decrease
of $14,225,000 or 4.6% from total operating revenues of $307,684,000 for the
prior fiscal year. This decline in total operating revenues was primarily a
result of a decline in circulation revenues from single copy sales of our
publications and, to a lesser extent, the decrease in total revenues due to the
sale of the Soap Properties.
Circulation revenues (which include all single copy and subscription
sales) of $248,630,000 decreased $13,619,000 or 5.2% for fiscal 1999 compared to
the prior fiscal year. Substantially all of the decrease in circulation revenues
for fiscal 1999 was related to declines in single copy circulation of National
Enquirer and Star, which was partially offset by a $0.10 increase in the cover
prices of these publications on July 7, 1998 in the United States and a
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<PAGE> 15
corresponding increase in Canada. For fiscal 1999 average weekly single copy
circulation for both National Enquirer and Star decreased by 8.6% and 10.7%,
respectively, as compared to the prior fiscal year. We believe that the
principal factor causing such declines was the adverse publicity against
celebrity news-based magazines after the death of Princess Diana in August 1997.
While single copy circulation for these two publications have improved from the
low levels experienced in the months immediately after Princess Diana's death,
they have not returned to their prior levels.
Country Weekly's average weekly circulation decreased 12.3% for fiscal
1999 as compared to the prior fiscal year, reflecting an overall weakness in its
category which has resulted in the recent folding of a competitive publication.
The decline in circulation revenues caused by such decreases in circulation was
partially offset by $.10 and $.20 increases in the cover price of Country Weekly
on April 7, 1998 and March 2, 1999, respectively.
Subscription revenues of $41,802,000 decreased $638,000 or 1.5% for
fiscal 1999 compared to the prior fiscal year. One method of increasing the
subscription bases of our publications has been to offer discounted
subscriptions through an agent. We believe that subscription revenues for the
fiscal year remained relatively flat, at least in part, because of recent
adverse publicity from litigation initiated by several states against certain
agents, which we believe has resulted in weaker responses than we typically
expect from discounted subscription offers. However, because discounted
subscriptions are not profitable until they are renewed at full price, a lower
response rate should have no immediate adverse effect on our results of
operations. It is unknown what the potential long-term impact will be on
subscription levels and profitability should response rates remain weak.
For the fiscal year 1999, advertising revenues of $23,460,000 remained
approximately flat as compared to the advertising revenues of $23,643,000 for
the same prior year period. Declines in mail order and classified advertising
were primarily offset by an increase in national advertising in National
Enquirer and Star.
Other revenues of $21,369,000 for fiscal year 1999 decreased by
$423,000 or 1.9% as compared to the prior fiscal year primarily due to declines
in ancillary sales (primarily licensing and syndication sales) and DSI revenues,
which were not completely offset by increases in Frontline revenues.
Total operating expenses (excluding the gain on the sale of the Soap
Opera Assets) for fiscal 1999 decreased by $2,545,000 when compared to the prior
fiscal year. Editorial costs for fiscal 1999, decreased by $1,591,000 when
compared to the prior fiscal year reflecting cost control efforts of the
editorial departments at National Enquirer and Star. Production costs decreased
by $2,605,000 for fiscal 1999 as compared to fiscal 1998 resulting from reduced
press runs of Soap Opera News and the impact of five fewer issues of both Soap
Opera Magazine and Soap Opera News in the current fiscal year. This decrease
partially offset an increase in distribution, circulation and other cost of
sales of $757,000 related to higher in-store display expenses, of which Soap
Opera News represented a majority of the increase. Depreciation and amortization
expense increased for fiscal 1999 by $1,783,000 compared to the prior fiscal
year reflecting depreciation related to additional Soap Opera News display
pockets and replacement and upgrades of our information systems.
Interest expense decreased for fiscal year 1999 by $3,589,000 to
$46,897,000 compared to the prior fiscal year. This decrease was the result of
reduced average balances of outstanding
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<PAGE> 16
indebtedness and lower amounts of amortization of deferred debt issuance costs
as a result of refinancing of indebtedness.
Other income was $2,943,000 for fiscal 1999 compared to expenses of
$1,641,000 for the prior fiscal year because of a net gain of $4.4 million from
the favorable settlement of certain litigation which was recorded in the first
fiscal quarter.
Our effective income tax rates were 63.2% and 67.4% for fiscal years
1999 and 1998, respectively, as compared to the federal statutory income tax
rate of 35%. The higher effective tax rates when compared to the federal income
tax rate result primarily from goodwill amortization which is not deductible for
income tax reporting purposes. The lower effective tax rate in fiscal 1999 over
fiscal 1998 resulted primarily from changes in the ratio of nondeductible
goodwill as a percentage of income before income taxes.
During the fiscal quarter ended June 29, 1998, we recorded an
extraordinary charge totaling approximately $3.4 million ($2.2 million net of
income taxes) for the write-off of deferred debt issuance costs and other
charges relating to the refinancing of indebtedness.
Comparison of Fiscal Year Ended March 30, 1998 to Fiscal Year Ended
March 31, 1997
Total operating revenues were $307,684,000 for fiscal 1998 (which
includes 52 weeks as compared to 53 weeks in fiscal 1997), a decrease of
$8,304,000 or 2.6% from total operating revenues of $315,988,000 in the prior
fiscal year. On an equivalent number of weeks basis, fiscal 1998 total operating
revenues decreased by approximately $2,342,000 or 0.8% from the prior fiscal
year. This decline in total operating revenues was primarily a result of a
decline in circulation revenues from single copy sales of our publications other
than Soap Opera News (which published only one issue in fiscal 1997) and, to a
lesser extent, a decline in advertising revenues. These declines in single copy
circulation revenues and advertising revenues were partially offset by increases
in subscription revenues and other revenues.
Circulation revenues (which include all single copy and subscription
sales) of $262,249,000 in fiscal 1998 decreased $11,318,000 or 4.1% from the
prior fiscal year. On an equivalent number of weeks basis, fiscal 1998 single
copy circulation revenues fell by approximately $6,156,000 or 2.3% from the
prior fiscal year as revenues generated by Soap Opera News, which published only
one issue in the prior fiscal year, were unable to offset single copy
circulation revenue declines for National Enquirer and Star.
In fiscal 1998, primarily as a result of adverse publicity resulting
from the August 1997 death of Princess Diana, National Enquirer and Star average
weekly single copy circulation declined by 8.2% and 12.9%, respectively, when
compared to the prior fiscal year. We believe that Star, which is more celebrity
focused than National Enquirer, and, to a lesser extent, National Enquirer, also
were impacted by competition from other forms of media covering celebrity news.
Revenues from per copy cover price increases of $0.10 on July 23, 1996 helped to
offset a portion of the circulation declines for these publications. Soap Opera
Magazine's average weekly single copy circulation in fiscal 1998 declined 18.8%,
reflecting the impact of increased competition in the soap opera category. As
compared to fiscal 1997, Country Weekly's average weekly circulation increased
6.9% as higher subscription levels more than offset a decline in average weekly
single copy circulation of 7.5%. A Weekly World News cover price
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<PAGE> 17
increase of $0.16 in April 1997 helped to reduce the impact on circulation
revenues of a 13.0% decline in average weekly single copy circulation.
Subscription revenues of $42,440,000 in fiscal 1998 increased
$2,570,000 or 6.4% over fiscal 1997. Expressed on an equivalent number of weeks
basis, subscription revenues increased by approximately $3,322,000 or 8.5% due
largely to increases in average weekly subscription circulation of 25.8%, 4.7%
and 38.9% for Country Weekly, National Enquirer and Soap Opera Magazine,
respectively, as well as subscriptions generated by the launch of Soap Opera
News.
Advertising revenues of $23,643,000 in fiscal 1998 declined $637,000 or
2.6% compared to fiscal 1997; on an equivalent number of weeks basis,
advertising revenues were approximately flat. During fiscal 1998 lower levels of
national advertising in National Enquirer and Star were offset by higher
national advertising revenues generated by Country Weekly. National advertising,
particularly in National Enquirer and Star, was adversely affected by the loss
of tobacco-related product advertising as the tobacco industry, as a whole, has
curtailed its print media based advertising because of a lack of clear
legislative guidelines that will address the future of tobacco products
advertising in the United States. Advertising revenues in fiscal 1998 were also
negatively impacted by reductions in the average revenues per page generated by
direct mail order and classified advertising.
Other revenues of $21,792,000 in fiscal 1998 increased $3,651,000 or
20.1% over fiscal 1997 reflecting revenues generated by Frontline, acquired in
September 1996, which sells in-store advertising to various product
manufacturers and service providers and, to a lesser extent, DSI, due to
expansion of its marketing, merchandising and information-gathering services for
various third-party clients.
Operating expenses of $237,104,000 in fiscal 1998 increased $8,287,000
or 3.6% over fiscal 1997; on an equivalent number of weeks basis (excluding
depreciation and amortization) increased by $10,946,000 or 5.6% over fiscal 1997
primarily reflecting the editorial, production and distribution expenses
associated with Soap Opera News and expenses related to Frontline, each of which
were included for only a portion of the prior year. Distribution related
expenses were higher due to increased subscription fulfillment and DSI's
expanded marketing, merchandising and information-gathering services as well as
Soap Opera News. Excluding production costs associated with Soap Opera News, on
an equivalent number of issues basis overall production costs declined
reflecting the benefit of lower paper and ink costs.
Interest expense declined $5,798,000 in fiscal 1998 over fiscal 1997 to
$50,486,000 reflecting one less week of interest and decreases in the average
balance of outstanding indebtedness.
Our effective income tax rates were 67.4% and 57.3% for fiscal years
1998 and 1997, respectively, as compared to the statutory federal income tax
rate of 35%. The higher effective tax rates when compared to the federal income
tax rate result primarily from goodwill amortization which is not deductible for
income tax reporting purposes. The higher effective tax rate in fiscal 1998 over
fiscal 1997 resulted primarily from changes in the ratio of nondeductible
goodwill as a percentage of income before taxes.
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LIQUIDITY AND CAPITAL RESOURCES
At March 29, 1999, we had cash and cash equivalents of $3.8 million and
a working capital deficit of $75.1 million compared to cash and cash equivalents
of $7.4 million and a working capital deficit of $52.1 million as of March 30,
1998. Our working capital deficit increased in fiscal 1999 because of the
reclassification of $25.0 million in long-term debt under the Credit Agreement
to current debt. We do not consider our working capital deficit as a true
measure of our liquidity position as our working capital needs typically are met
by cash generated by our business. Our working capital deficits result
principally from:
- our policy of using available cash to reduce borrowings which are
recorded as noncurrent liabilities, thereby reducing current
assets without a corresponding reduction in current liabilities;
- our minimal accounts receivable level relative to revenues, as
most of our sales revenues are received from national
distributors as advances based on estimated single copy
circulation; and
- accounting for deferred revenues as a current liability. Deferred
revenues are comprised of deferred subscriptions, advertising and
single copy revenues and represent payments received in advance
of the period in which the related revenues will be recognized.
Historically, our primary sources of liquidity have been cash generated
from operations and amounts available under the Credit Agreement which have been
used to fund shortfalls in available cash. For the fiscal year ended March 29,
1999 and the fiscal year ended March 30, 1998, we generated net cash from
operating activities totaling $29.8 million and $41.8 million, respectively,
that was used primarily to fund capital expenditures and to make payments of
principal on our outstanding indebtedness.
We made capital expenditures in fiscal 1999 and 1998 totaling $15.0 and
$11.0 million, respectively. We plan to invest $14.0 million in fiscal 2000. Our
capital expenditures are made principally to purchase display pockets for our
publications and computer equipment for our businesses.
At March 29, 1999 and March 30, 1998 our outstanding indebtedness
totaled $471.1 million and $497.5 million, respectively, of which $271.0 million
and $297.4 million, respectively, represented borrowings under the Credit
Agreement. The Credit Agreement charges variable rates of interest which
averaged 7.7% and 7.8%, respectively, for the fiscal year ended March 29, 1999
and March 30, 1998. In order to reduce our exposure to interest rate risk, we
have entered into a $100.0 million interest rate swap agreement expiring in
November 2000 under which we pay a fixed rate of 5.95%.
The New Credit Agreement, which matures in April 2007, provides senior
secured financing of up to $400.0 million, consisting of a $340.0 million term
loan facility and a $60.0 million revolving credit facility. The $250.0 million
in New Subordinated Notes bear interest at 10-1/4% per annum payable
semiannually and mature in May 2009.
We have substantially increased our indebtedness in connection with the
Transactions. If the Transactions had been completed on March 29, 1999, our pro
forma outstanding
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indebtedness would have totaled $600.9 million as compared to our actual
historical outstanding indebtedness at such date of $471.1 million. As a result
of the New Credit Agreement and the New Subordinated Notes, our liquidity
requirements will be significantly increased, primarily due to increased
interest expense obligations and principal payment obligations under the New
Credit Agreement which, other than certain excess cash flow payment obligations,
will commence in 2002. In addition, the business strategy to be implemented upon
consummation of the Transactions will result in increased operating expenses. We
believe that the net cash generated from operating activities and amounts
available under the $60.0 million revolving credit facility will be sufficient
to fund our debt service requirements under the New Credit Agreement and the New
Subordinated Notes, to make capital expenditures, to cover working capital
requirements and to fund the implementation of our business strategy to be
implemented upon consummation of the Transactions. We believe, however, that
based upon our current level of operations and anticipated growth, it will be
necessary to refinance the New Subordinated Notes upon their maturity. To the
extent we make future acquisitions, we may require new sources of funding,
including additional debt, or equity financing or some combination thereof.
There can be no assurances that such additional sources of funding will be
available to us on acceptable terms.
Our ability to make scheduled payments of principal and interest under
the New Credit Agreement and the New Subordinated Notes, as well as our other
obligations and liabilities, is subject to our future operating performance
which is dependent upon general economic, financial, competitive, legislative,
regulatory, business and other factors beyond our control.
YEAR 2000 RISK
The Year 2000 issue is the result of computer programs that were
written using only two digits, rather than four, to represent a year.
Date-sensitive software or hardware may not be able to distinguish between the
years 1900 and 2000 and programs that perform arithmetic operations, comparisons
or sorting of date fields may begin yielding incorrect results. This could
potentially cause a system failure or miscalculations that could disrupt
operations. To address the impact of the Year 2000 issue on our computer
programs, embedded chips and significant third-party suppliers of goods and
services we have formed a task force led by our information services department.
This task force has taken an inventory of the potential Year 2000 issues that
may exist and is in the process of completing its assessment of their impact.
Certain of our key systems (e.g. financial applications) have already been
identified as Year 2000 compliant; in addition, because of the recent
replacement of a majority of our computer hardware, we believe there is little
likelihood that this equipment is not Year 2000 compliant. We believe the
largest areas of internal risk for Year 2000 noncompliance are internally
developed software applications and the handheld communications devices used in
merchandising by DSI. We have purchased specialized software that will allow us
to identify and correct Year 2000 problems within our software applications and
expect to have key applications modified and tested by July 1999. Our
information services department, working with the handheld communication
devices, has determined that remediation of the existing handhelds is the
appropriate cause of action. We expect to complete this remediation work by
August 1999.
At the present time, the Year 2000 project is estimated to cost
approximately $500,000 and will be funded through cash flows from operations.
Approximately $290,000 of the estimated Year 2000 costs will relate to hardware
and software purchases and will be capitalized with the remainder being expensed
as incurred.
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At present, we believe our technology systems will be Year 2000
compliant and that the Year 2000 issue will not present a materially adverse
risk to our future results of operations, financial position or cash flow.
However, there can be no assurance that our systems will be Year 2000 compliant
prior to December 31, 1999 or that the costs incurred will not materially exceed
the amounts budgeted. If there are incidences of noncompliance, we plan to
allocate internal resources and retain dedicated consultants to address such
incidences. In the event that our computers are not Year 2000 compliant by
December 31, 1999, and as a result of that noncompliance business interruptions
occur, we could incur significant losses in revenues due to such business
interruptions, which could have a material adverse effect on our future results
of operations, financial position or cash flow.
In addition, there is a risk that a significant supplier of goods or
services may not be Year 2000 compliant. We are communicating with our
significant suppliers of goods and services to obtain reasonable assurance that
their products and business systems will be Year 2000 compliant. We rely on
certain suppliers to deliver a broad range of goods and services, including
prepress operations, printing services, paper, wholesale distribution, mailings
and banking services. Although we have taken, and will continue to take,
reasonable efforts to gather information to determine and verify the readiness
of products and dependencies, there can be no assurance that reliable
information will be offered or otherwise available. In order to mitigate the
effects of a significant supplier's potential failure to remediate the Year 2000
issue in a timely manner, we would take appropriate actions including arranging
for alternate suppliers, re-running processes if errors occur and using manual
intervention to ensure the continuation of operations where necessary. Should
this happen, it may result in significant delays in business operations
including, but not limited to, delays in delivery of products resulting in loss
of revenues, increased operating costs, loss of customers or suppliers, or other
significant disruptions to our business which could have a material adverse
effect on our future results of operations, financial position or cash flow.
NEW ACCOUNTING PRONOUNCEMENTS
We have adopted the Statement of Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income" effective fiscal 1999. SFAS
No. 130 defines comprehensive income as a measure of all changes in equity of an
enterprise during a period that result from transactions and other economic
events during the period other than transactions with owners. For all periods
presented comprehensive income is the same as net income.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and interim
financial stockholders' reports. The statement requires information to be
reported by operating segment on the same basis which we use to evaluate
performance internally. We have determined that we have only one operating
segment.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
standardizes the accounting for derivatives, requiring recognition as either
assets or liabilities on the balance sheet and measurement at fair value. We
plan to adopt SFAS No. 133 in fiscal 2002. We have not yet
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determined the effect adoption of SFAS No. 133 will have on our consolidated
financial statements.
FORWARD-LOOKING STATEMENTS
Some of the information presented in this Form 10-K constitutes
forward-looking statements, including, in particular, the statements about our
plans, strategies and prospects under the headings "Business Strategy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." We have based these forward-looking statements on our current
assumptions, expectations and projections about future events. We caution you
that a variety of factors could cause business conditions and results to differ
materially from what is contained in the forward-looking statements. These
forward-looking statements are subject to risks, uncertainties and assumptions
about us, including, among other things:
<TABLE>
<S> <C>
- our high degree of leverage and - increasing competition by domestic
significant debt service obligations, and foreign media companies,
- our ability to increase circulation and - changes in the costs of paper used
advertising revenues, by us,
- market conditions for our publications, - any future changes in management,
- our ability to develop new publications - general risks associated with the
and services, publishing industry and
- outcomes of pending and future - the potential effect of year 2000
litigation, computer issues.
</TABLE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The sensitivity of our financial instruments to changes in the general
level of interest rates represents one of our inherent market risks. In order to
mitigate the potential loss arising from adverse changes in interest rates, we
have a strategy that includes managing a balance of fixed and variable-rate debt
instruments. As part of this strategy, we maintain interest rate swap agreements
that effectively convert a portion of our variable rate indebtedness exposure to
fixed rate indebtedness thereby reducing our exposure to the uncertainty of
floating interest rates. We do not enter into financial instruments for
speculative purposes.
Interest rate changes result in increases or decreases in the market
value of our fixed rate indebtedness because of differences between the current
market interest rate and the rates governing the indebtedness. With respect to
our variable rate indebtedness at March 29, 1999, a 10% increase in interest
rates would result in a $0.9 million annual decrease in our income before income
taxes and cash provided from operating activities.
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In addition, we have risk relative to changes in the market price of
the paper used by our publications. Currently, we do not hedge against increases
in paper costs and historically we have managed this risk through a combination
of cover price increases and paper usage reductions. We can predict neither the
prices of the paper we use nor our ability to manage the risk of higher paper
costs. It is possible that an increase in paper costs could have a material
adverse effect on us.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants.............................. 24
Consolidated Balance Sheets as of March 30, 1998 and March 29, 1999............. 25
Consolidated Statements of Income for the Three Fiscal
Years Ended March 29, 1999.................................................... 26
Consolidated Statements of Stockholder's Equity for the Three Fiscal
Years Ended March 29, 1999.................................................... 27
Consolidated Statements of Cash Flows for the Three Fiscal
Years Ended March 29, 1999.................................................... 28
Notes to Consolidated Financial Statements...................................... 29 - 38
</TABLE>
Schedules have been omitted since the information is not applicable,
not required or because the required information is included in the Consolidated
Financial Statements or Notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of
American Media Operations, Inc.:
We have audited the accompanying consolidated balance sheets of American
Media Operations, Inc. (a Delaware corporation) and subsidiaries as of March 30,
1998 and March 29, 1999, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three fiscal years in the
period ended March 29, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Media
Operations, Inc. and subsidiaries as of March 30, 1998 and March 29, 1999, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended March 29, 1999, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
May 7, 1999.
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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 30, 1998 AND MARCH 29, 1999
(IN 000'S, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
1998 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,405 $ 3,823
Receivables, net 7,852 7,977
Inventories 10,390 9,830
Prepaid income taxes 2,612 --
Prepaid expenses and other 3,939 2,650
--------- ---------
Total current assets 32,198 24,280
--------- ---------
PROPERTY AND EQUIPMENT, at cost:
Land and buildings 4,039 4,039
Machinery, fixtures and equipment 18,447 22,040
Display racks 21,662 19,543
--------- ---------
44,148 45,622
Less - accumulated depreciation (18,149) (18,762)
--------- ---------
25,999 26,860
--------- ---------
DEFERRED DEBT COSTS, net 8,688 5,728
--------- ---------
GOODWILL, net of accumulated amortization
of $126,440 and $141,595 478,811 463,656
--------- ---------
OTHER INTANGIBLES, net of accumulated
amortization of $45,766 and $51,686 102,234 96,314
--------- ---------
$ 647,930 $ 616,838
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of term loan $ -- $ 25,000
Accounts payable 15,587 11,618
Accrued expenses 14,915 13,755
Accrued interest 12,249 11,251
Accrued and current deferred income taxes 9,775 9,795
Deferred revenues 31,749 27,987
--------- ---------
Total current liabilities 84,275 99,406
--------- ---------
PAYABLE TO PARENT COMPANY 3,728 3,404
--------- ---------
TERM LOAN AND REVOLVING CREDIT
COMMITMENT, net of current portion 297,401 246,000
--------- ---------
SUBORDINATED INDEBTEDNESS:
11.63% Senior Subordinated Notes Due 2004 200,000 200,000
10.38% Senior Subordinated Notes Due 2002 134 134
--------- ---------
200,134 200,134
--------- ---------
DEFERRED INCOME TAXES 7,919 7,696
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTES 2 and 9)
STOCKHOLDER'S EQUITY:
Common stock, $.20 par value; 10,000 shares authorized,
7,507.6 shares issued and outstanding
shares issued and outstanding 2 2
Additional paid-in capital 26,039 26,039
Retained earnings 28,432 34,157
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 54,473 60,198
========= =========
$ 647,930 $ 616,838
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
25
<PAGE> 26
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE FISCAL YEARS ENDED MARCH 29, 1999
(IN 000'S)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
MARCH 31, MARCH 30, MARCH 29,
1997 1998 1999
---------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES:
Circulation $ 273,567 $ 262,249 $ 248,630
Advertising 24,280 23,643 23,460
Other 18,141 21,792 21,369
--------- --------- ---------
315,988 307,684 293,459
--------- --------- ---------
OPERATING EXPENSES:
Editorial 28,369 30,497 28,906
Production 80,286 82,296 79,691
Distribution, circulation and other cost of sales 60,514 66,883 67,640
Selling, general and administrative expenses 30,428 27,101 26,212
Gain on sale of Soap Opera Assets -- -- (6,499)
Depreciation and amortization 29,220 30,327 32,110
--------- --------- ---------
228,817 237,104 228,060
--------- --------- ---------
Operating income 87,171 70,580 65,399
INTEREST EXPENSE (56,284) (50,486) (46,897)
OTHER INCOME (EXPENSE), net (1,705) (1,641) 2,943
--------- --------- ---------
Income before provision for income taxes and
extraordinary charge 29,182 18,453 21,445
PROVISION FOR INCOME TAXES 16,716 12,437 13,559
--------- --------- ---------
Income before extraordinary charge 12,466 6,016 7,886
EXTRAORDINARY CHARGE, net of income taxes of $1,269,
related to early extinguishment of debt (Note 8) -- -- (2,161)
--------- --------- ---------
Net income $ 12,466 $ 6,016 $ 5,725
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
26
<PAGE> 27
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE FISCAL YEARS ENDED MARCH 29, 1999
(IN 000'S, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, March 25, 1996 7,507.6 $ 2 $ 26,290 $ 9,950
Other -- -- (251) --
Net income -- -- -- 12,466
------- --- -------- -------
Balance, March 31, 1997 7,507.6 2 26,039 22,416
Net income -- -- -- 6,016
------- --- -------- -------
Balance, March 30, 1998 7,507.6 2 26,039 28,432
Net income -- -- -- 5,725
------- --- -------- -------
Balance, March 29, 1999 7,507.6 $ 2 $ 26,039 $34,157
======= === ======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
27
<PAGE> 28
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED MARCH 29, 1999
(IN 000'S)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
MARCH 31, MARCH 30, MARCH 29,
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 12,466 $ 6,016 $ 5,725
-------- --------- ---------
Adjustments to reconcile net income to net cash
provided from operating activities -
Gain on sale of Soap Opera Assets -- -- (6,499)
Extraordinary charge, net of income taxes -- -- 2,161
Depreciation and amortization 29,220 30,327 32,110
Deferred debt cost amortization 3,144 2,623 1,506
Senior subordinated discount note accretion 1,500 190 --
Deferred income tax provision (credit) 1,180 186 (3,592)
Decrease (increase) in -
Receivables, net (2,540) 339 (125)
Due from Parent Company (431) 1,048 --
Inventories 1,135 3,001 560
Prepaid income taxes 1,184 (2,612) 2,612
Prepaid expenses and other 283 (1,313) 1,289
Increase (decrease) in -
Accounts payable (3,912) 1,420 (5,203)
Accrued expenses 2,894 (3,204) (1,486)
Payable to Parent Company -- 3,728 (324)
Accrued interest (2,141) 2,212 (1,010)
Accrued and current deferred income taxes 864 (1,552) 4,658
Deferred revenues 1,842 (599) (2,580)
-------- --------- ---------
Total adjustments 34,222 35,794 24,077
-------- --------- ---------
Net cash provided from operating activities 46,688 41,810 29,802
-------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures (8,526) (11,018) (15,019)
Acquisition of business (2,236) -- --
Cash proceeds from sale of Soap Opera Assets -- -- 10,000
-------- --------- ---------
Net cash used in investing activities (10,762) (11,018) (5,019)
-------- --------- ---------
Cash Flows from Financing Activities:
Term loan and revolving credit commitment principal repayments (85,744) (133,855) (382,401)
Proceeds from term loan and revolving credit commitment 54,000 118,500 356,000
Repayment of senior subordinated indebtedness -- (15,962) --
Payment of deferred debt costs (344) (300) (1,964)
Other (251) -- --
-------- --------- ---------
Net cash used in financing activities (32,339) (31,617) (28,365)
-------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 3,587 (825) (3,582)
Cash and Cash Equivalents at Beginning of Year 4,643 8,230 7,405
-------- --------- ---------
Cash and Cash Equivalents at End of Year $ 8,230 $ 7,405 $ 3,823
======== ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for -
Income taxes $ 13,203 $ 15,422 $ 9,570
Interest 53,763 45,462 46,389
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
28
<PAGE> 29
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS IN ALL TABLES)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF CONSOLIDATION-
The consolidated financial statements include the accounts of the
Company ("Operations", a wholly-owned subsidiary of American Media, Inc.,
"Media") and its subsidiaries (National Enquirer, Inc., Star Editorial, Inc.,
Weekly World News, Inc., Country Weekly, Inc., DSI and Frontline, among others).
We publish four weekly publications: National Enquirer, Star, Weekly World News
and Country Weekly. All significant intercompany transactions and balances have
been eliminated in consolidation. Our fiscal year, which ends on the last Monday
in March, includes 52 weeks for the fiscal years 1998 and 1999 compared to 53
weeks for the fiscal year 1997.
REVENUE RECOGNITION-
Substantially all publication sales, except subscriptions, are made
through unrelated distributors. Issues, other than special topic issues, are
placed on sale approximately one week prior to the issue date; however,
circulation revenues and related expenses are recognized for financial statement
purposes on an issue date basis (i.e., off sale date). Special topic issue
revenues and related expenses are recognized at the on sale date. On the date
each issue is placed on sale, we receive a percentage of the issue's estimated
sales proceeds for our publications as an advance from the distributors. All of
our publications are sold with full return privileges.
Revenues from copy sales are net of reserves provided for expected sales
returns which are established in accordance with generally accepted accounting
principles after considering such factors as sales history and available market
information. We continually monitor the adequacy of the reserves and make
adjustments when necessary.
Subscriptions received in advance of the issue date are recognized as
income over the term of the subscription on a straight-line basis. Advertising
revenues are recognized in the period in which the related advertising appears
in the publications.
Deferred revenues were comprised of the following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Single Copy $ 6,887 $ 5,367
Subscriptions 24,578 22,334
Advertising 284 286
-------- --------
$ 31,749 $ 27,987
======== ========
</TABLE>
Other revenues, primarily from marketing services performed for third
parties by DSI and Frontline, are recognized when the service is performed.
29
<PAGE> 30
PROPERTY AND EQUIPMENT-
We use straight-line and accelerated depreciation methods for financial
reporting and Federal income tax purposes, respectively. The estimated lives
used in computing depreciation for financial reporting purposes are 22 years for
buildings, 3 years for display racks and 5 to 10 years for all other depreciable
fixed assets.
INVENTORIES-
Inventories are generally stated at the lower of cost or market. We use
the last-in, first-out (LIFO) cost method of valuing our inventories. If the
first-in, first-out (FIFO) cost method of valuation, which approximates market
value, had been used, inventories would have been approximately $170,000 and
$430,000 higher than the amounts reported in the accompanying consolidated
balance sheets for 1998 and 1999, respectively. Inventories are comprised of the
following:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Raw materials - paper $ 6,573 $6,931
Finished product - paper, production
and distribution costs of future issues 3,817 2,899
------- ------
$10,390 $9,830
======= ======
</TABLE>
USE OF ESTIMATES-
The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CONSOLIDATED STATEMENTS OF CASH FLOWS-
For purposes of the accompanying consolidated statements of cash flows,
we consider cash and cash equivalents to be cash on hand or deposited in demand
deposit accounts with financial institutions and highly liquid investments
purchased with an original maturity of three months or less.
NEW ACCOUNTING PRONOUNCEMENTS-
We have adopted the Statement of Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income" effective fiscal 1999. SFAS
No. 130 defines comprehensive income as a measure of all changes in equity of an
enterprise during a period that result from transactions and other economic
events during the period other than transactions with owners. For all periods
presented comprehensive income is the same as net income.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and interim
financial stockholders' reports. The statement requires information to be
reported by operating segment on the same basis which we
30
<PAGE> 31
use to evaluate performance internally. We have determined that we have only one
operating segment.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
standardizes the accounting for derivatives, requiring recognition as either
assets or liabilities on the balance sheet and measurement at fair value. We
plan to adopt SFAS No. 133 in fiscal 2002. We have not yet determined the effect
adoption of SFAS No. 133 will have on our consolidated financial statements.
(2) SALE OF ASSETS, CERTAIN TRANSACTIONS AND MERGER:
In February 1999, we ceased publication of Soap Opera News and Soap
Opera Magazine and sold certain of the trademarks and other soap opera
publishing assets relating to these magazines (collectively, the "Soap Opera
Assets") to Primedia, Inc. for $10 million in cash. In addition, we may receive
future consideration based upon increased financial performance above certain
levels of Primedia, Inc.'s Soap Opera Digest and Soap Opera Weekly publications.
There can be no assurance however that we will receive any such future
consideration.
On May 7, 1999 all of the common stock of Media was purchased by EMP
Acquisition Corp. ("EMP") a company controlled by Evercore Capital Partners
L.P., a private equity firm ("Evercore"). Proceeds to finance the acquisition
included (a) a cash equity investment of $235 million by Evercore and certain
other investors, (b) borrowings of approximately $350 million under a new $400
million senior bank facility (the "New Credit Agreement") and (c) borrowings of
$250 million in the form of senior subordinated notes (the "New Subordinated
Notes"). These proceeds were used to (d) acquire all of the outstanding common
stock of Media for $299.4 million, (e) repay $267 million then outstanding under
the existing credit agreement (the "Credit Agreement") with our banks, (f)
retire approximately $199 million of our $200 million Senior Subordinated Notes
due 2004 and (g) pay transaction costs, including a financial advisory fee of 1%
of the aggregate funds required to finance the acquisition paid to an affiliate
of Evercore, (all such transactions in (a) through (g) are collectively referred
to as the "Transactions"). Upon consummation of the Transactions, EMP was merged
with and into Media (the "Merger") resulting in a change in ownership control of
both Media and the Company. As a result of this change in control, as of the
Merger date we will reflect a new basis of accounting that will include the
elimination of historical amounts of certain assets and liabilities and the
revaluation of certain of our tangible and intangible assets.
The following pro forma financial information reflects the sale of the
Soap Opera Assets, the Transactions and the Merger as if each had occurred as of
the beginning of fiscal 1999 (unaudited):
<TABLE>
<S> <C>
Operating revenues $ 272,184
=========
Operating expenses $ 226,688
=========
Depreciation and
amortization $ (50,307)
=========
Operating income $ 45,496
=========
Interest expense ($58,241)
========
Net loss ($18,332)
========
</TABLE>
31
<PAGE> 32
The above pro forma financial information excludes certain non-recurring
items including bridge loan commitment and ticking fees related to the New
Credit Agreement and the New Subordinated Notes totaling approximately $4.1
million which will be recorded in fiscal 2000. Additional items excluded from
the above pro forma financial information includes the pretax gain recorded in
connection with the sale of the Soap Opera Assets in the amount of $6.5 million
and an extraordinary charge, net of income taxes, totaling approximately $2.2
million, related to the early extinguishment of debt, which were recorded in
fiscal 1999.
(3) INTANGIBLE ASSETS:
Purchase price allocations for acquisitions have been made in accordance
with Accounting Principles Board Opinion No. 16. The excess of the purchase
price, including liabilities assumed, over tangible net assets acquired has been
allocated to either specifically identified intangibles or goodwill.
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. We consider certain events and
circumstances including, among others, the historical and projected operating
results of acquired businesses, industry trends and general economic conditions
to assess whether the remaining estimated useful life of intangible assets may
warrant revision or that the remaining balance of intangible assets may not be
recoverable. When such assessment indicates that an intangible asset should be
evaluated for possible impairment, we use an estimate of undiscounted cash flow
over the remaining life of the intangible asset in measuring the recoverability.
No such event has occurred to our knowledge and we have determined there to be
no impairment.
Goodwill is amortized on a straight-line basis over 40 years. For each
of the fiscal years 1997, 1998 and 1999, amortization of goodwill charged to
depreciation and amortization in the accompanying consolidated statements of
income totaled approximately $15.2 million.
An intangible asset recorded in connection with the acquisition of Star
is amortized on a straight-line basis over its estimated useful life of 25
years. Amortization expense relating to this intangible asset for each of the
fiscal years 1997, 1998 and 1999, totaling approximately $5.9 million, is
included in depreciation and amortization in the accompanying consolidated
statements of income.
In connection with the Transactions and Merger, which will be accounted
for under the purchase method of accounting, as of May 7, 1999 we will reflect a
new basis of accounting that will result in a substantial increase in the amount
of intangible assets. It is estimated that intangible assets will total
approximately $814.2 million with annual amortization expense of $40.7 million
based upon amortizable lives of 20 years. We are currently in the process of
appraising the value of our assets and liabilities, therefore the allocation of
the actual purchase price may differ significantly from this estimate.
32
<PAGE> 33
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of our financial instruments as of year end is
as follows:
<TABLE>
<CAPTION>
1998 1999
----------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Term loan and revolving credit
facility, including current portion $297,401 $297,401 $271,000 $271,000
Subordinated indebtedness 200,134 217,134 200,134 215,152
Interest rate swap agreement liability 122 299 147 1,193
</TABLE>
The fair value of our financial instruments is estimated based on the
quoted market prices for the same or similar issues or on the current rate
offered to us for financial instruments of the same remaining maturities. The
carrying amount for cash equivalents approximates fair value because of the
short maturity of those instruments.
On occasion we enter into interest rate swap agreements to reduce the
interest rate exposure associated with a portion of our variable rate
indebtedness. Interest rate swap agreements modify the interest characteristics
of our variable rate indebtedness by synthetically converting a portion of the
indebtedness to fixed rate. Interest earned (payable) under the interest rate
swap is credited (charged) to interest expense using the accrual method. The
related accrued receivable or payable is included in accounts receivable or
accrued interest payable. The fair market value of the interest rate swap
agreement is not reflected in the accompanying consolidated financial
statements. We do not utilize derivative financial instruments for trading or
other speculative purposes.
Derivative financial instruments terminated at a gain (loss) prior to
maturity are credited (charged) to interest expense over the remaining original
life of the derivative financial instrument.
We have entered into a three-year $100 million notional amount interest
rate swap agreement which effectively converts a portion of our variable-rate
debt to fixed-rate debt. The interest rate swap agreement which expires in
November 2000 has a fixed interest rate of 5.95%. The carrying amounts for the
interest rate swap agreement represents net interest payable as of period end.
Net interest expense related to the interest rate swap agreement and another
swap agreement which expired in May 1998, totaled $793,000, $655,000 and
$584,000 for the fiscal years 1997, 1998 and 1999, respectively.
33
<PAGE> 34
(5) INCOME TAXES:
We file a consolidated Federal income tax return with Media and
calculate our income on a separate return basis. The provision for income taxes
consists of the following:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal $13,824 $11,232 $ 15,693
State 1,712 1,019 1,458
------- ------- --------
Total current 15,536 12,251 17,151
------- ------- --------
Deferred:
Federal 1,050 169 (3,287)
State 130 17 (305)
------- ------- --------
Total deferred 1,180 186 (3,592)
------- ------- --------
$16,716 $12,437 $ 13,559
======= ======= ========
</TABLE>
A reconciliation of the expected income tax provision at the statutory
Federal income tax rate of 35% to the reported income tax provision is as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected income tax provision at
statutory rate $10,214 $ 6,459 $ 7,506
Nondeductible goodwill 5,304 5,304 5,304
State income taxes, net of Federal
benefit 1,198 652 749
Other, net -- 22 --
------- ------- -------
$16,716 $12,437 $13,559
======= ======= =======
</TABLE>
Deferred taxes reflect the impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The net deferred tax liability
is comprised of the following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Gross deferred tax assets $ 444 $ 451
-------- --------
Intangibles amortization (5,674) (5,345)
Expense recognition differences (3,719) (1,425)
Subscription acquisition costs (1,861) (909)
Accelerated depreciation (1,806) (1,912)
Book over tax basis of non-depreciable assets (439) (439)
Inventory capitalization (670) (554)
-------- --------
Gross deferred tax liabilities (14,169) (10,584)
-------- --------
Net deferred tax liabilities $(13,725) $(10,133)
======== ========
</TABLE>
Included in accrued and current deferred income taxes in the
accompanying consolidated balance sheets for fiscal years 1998 and 1999 are net
current deferred taxes payable of $5.8 million and $2.4 million, respectively.
(6) CREDIT AGREEMENTS:
On June 5, 1998, we entered into our Credit Agreement with a bank
syndicate whose agent bank is The Chase Manhattan Corporation ( the "Agent Bank"
and, collectively, the "Banks" ) The Credit Agreement is comprised of a $250
million term loan commitment and a $120 million revolving credit commitment.
34
<PAGE> 35
(a) Term Loan Commitment -- Amounts borrowed under the Credit
Agreement's term loan commitment bear interest at rates based upon
either the Alternate Base Rate (as defined) plus 0% to .75% or the LIBO
Rate (as defined) plus .75% to 1.75%, predicated upon satisfaction of
certain covenants related to our operating cash flow levels. Amounts due
under the term loan commitment are payable in varying quarterly
installments through March 2004. As of March 29, 1999, $250 million was
outstanding under the term loan commitment.
(b) Revolving Credit Commitment - The Credit Agreement also
provides for additional borrowings up to a maximum of $120 million,
bearing interest at the term loan commitment rates described above. This
commitment, which expires in March 2004, allows funds to be borrowed and
repaid from time to time with permanent reductions in the revolving
credit commitment permitted at the Company's option. As of March 29,
1999, borrowings of $21 million were outstanding under the Prior Credit
Agreement's revolving credit commitment.
(c) Commitment Fees -- The Company is required to pay a
commitment fee ranging from .25% to .50% of the unused portion of the
Credit Agreement's revolving credit commitment. Commitment fees under
the Prior Credit Agreement totaled approximately $330,000, $246,000 and
$338,000 for fiscal years 1997, 1998 and 1999, respectively.
(d) Guarantee, Collateral and Financial Covenants -- The
Company's obligations under the Credit Agreement are guaranteed by all
of its subsidiaries and Media. The obligations and such guarantees are
secured by (i) a pledge by the Company of all of the capital stock of
its subsidiaries, (ii) a pledge of all of the capital stock of the
Company and (iii) a security interest in substantially all of the assets
of the Company's subsidiaries.
In addition to the above, the Credit Agreement also contains certain
covenants that, among others, restrict paying cash dividends, incurring
additional indebtedness, entering into certain mergers or consolidations, making
capital expenditures and selling or otherwise disposing of assets. We are also
required to satisfy certain financial tests relating to operating cash flow and
debt coverage ratios. We plan to pay no cash dividends on our common stock in
the foreseeable future, instead using cash generated from operating results
principally to make principal and interest payments on its indebtedness.
As permitted under the covenants of the prior credit agreement,
management fees to affiliates totaling $1.8 million, $1.7 million and $1.2
million are included in other expense, net in the accompanying consolidated
statements of income for the fiscal years 1997, 1998 and 1999, respectively.
The effective interest rates under the Credit Agreement and prior credit
agreements, including amounts borrowed under the term loan commitments and
revolving credit commitment, as of March 29, 1999, and for the fiscal years
1997, 1998 and 1999 were 6.9%, 7.9%, 7.8% and 7.7%, respectively.
In connection with the Transactions and Merger, on May 7, 1999 we repaid
all amounts outstanding under the Credit Agreement and borrowed approximately
$350 million under the
35
<PAGE> 36
New Credit Agreement. Our New Credit Agreement, which consists of $340 million
in term loan commitments and a $60 million revolving credit commitment, includes
the following:
(a) Term Loan Commitments -- The term loans consist of a $100
million (original amount) commitment (the "Tranche A" loans) and a $240
million (original amount) commitment (the "Tranche B" loans). Amounts
borrowed under the Tranche A commitment bear interest at rates based
upon either the Alternate Base Rate plus 3/4% to 2% or the LIBO Rate
plus 1-3/4% to 3%, predicated upon satisfaction of certain Credit
Agreement covenants related to operating results. Tranche B loans bear
interest at either the Alternate Base Rate plus 2-1/2% or the LIBO Rate
plus 3-1/2%.
Borrowings under the term loan commitments are payable in varying
quarterly installments from July 2001 through April 2007. Beginning as
of the fiscal year ending March 2001 and for each fiscal year thereafter
we will be required to make Excess Cash Flow payments (as defined) which
will be applied ratably to the then outstanding term loans.
(b) Revolving Credit Commitment -- The New Credit Agreement also
provides for additional borrowings up to a maximum of $60 million,
bearing interest at the Tranche A rates described above. This
commitment, which expires in April 2006, allows funds to be borrowed and
repaid from time to time with permanent reductions in the revolving
credit commitment permitted at our option.
(c) Commitment Fees - We are required to pay a commitment fee
ranging from 3/8% to 1/2% of the unused portion of the revolving
commitment.
(d) Guarantees, Collateral and Financial Covenants - The New
Credit Agreement contains certain guarantees, collateral pledges and
financial covenant requirements similar to those required under the
Credit Agreement as described above.
As of May 7, 1999 the effective interest rate under the New Credit
Agreement, including amounts borrowed under the term loan commitments and
revolving credit commitment, was 8.5%.
(7) SUBORDINATED INDEBTEDNESS:
Our 11.63% Senior Subordinated Notes due 2004 (the "Senior Subordinated
Notes due 2004"), which mature on November 15, 2004, pay interest semi-annually
on May 15 and November 15 and are redeemable at our option after November 14,
1999 at prices ranging from 104.4% to 100.0% of their face amount.
In connection with the Transactions and Merger, on May 7, 1999 we repaid
approximately $199 million in face amount of the Senior Subordinated Notes due
2004; including the tender premium and consent fee the total amount paid was
approximately $214.2 million. Our New Subordinated Notes, which mature on May 1,
2009, bear interest at 10-1/4% per annum payable in semi-annual installments on
May 1st and November 1st of each year. These notes are redeemable at our option
at prices ranging from 105.1% to 100% of their face amount after April 2004. The
indenture under which the notes were issued includes certain restrictive
covenants that limit, among other things, our ability to incur indebtedness,
give guarantees, pay dividends, make investments, sell assets and merge or
consolidate.
36
<PAGE> 37
Payments of principal due under the New Credit Agreement (excluding any
amounts that may be borrowed under the credit commitment or required to be
prepaid under the excess cash flow provision), the New Subordinated Notes and
other long-term indebtedness follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2002 $ 9,300
2003 16,284
2004 21,150
Thereafter 544,140
--------
$590,874
========
</TABLE>
(8) DEFERRED DEBT COSTS:
Certain costs incurred in connection with the issuance of our long-term
debt have been deferred and are amortized as part of interest expense over
periods from 8 to 10 years. For fiscal years 1997, 1998 and 1999, amortization
of deferred debt costs which is included in interest expense in the accompanying
consolidated statements of income totaled approximately $3.1 million, $2.6
million, and $1.5 million, respectively. In connection with the amendment and
restatement of our senior bank indebtedness (see Note 6) certain unamortized
deferred debt costs related to the prior credit agreement totaling approximately
$3.4 million were charged to extraordinary loss in fiscal 1999. Costs related to
the Credit Agreement are being amortized to interest expense through March 2004.
In connection with the Transactions and Merger, we repaid all amounts
outstanding under the Credit Agreement and approximately $199 million in face
amount of the Senior Subordinated Notes due 2004. Net unamortized deferred debt
costs related to the Credit Agreement and Senior Subordinated Notes Due 2004
totaling approximately $5.6 million will be written off in connection with the
Transactions and Merger.
(9) COMMITMENTS AND CONTINGENCIES:
LITIGATION-
Various suits and claims arising in the ordinary course of business have
been instituted against us. We have insurance policies available to recover
potential legal costs. We periodically evaluate and assess the risks and
uncertainties associated with litigation independent from those associated with
our potential claim for recovery from third party insurance carriers. At
present, in the opinion of management, after consultation with legal counsel,
the liability resulting from litigation, if any, will not have a material effect
on our consolidated financial statements.
37
<PAGE> 38
PRINTING AGREEMENT-
We have entered into a 15 year printing agreement expiring in fiscal
2011 with an unrelated printer to print National Enquirer and Star. Based on
current pricing and production levels this contract, which requires pricing
adjustments based on changes in the Consumer Price Index, is estimated to cost
approximately $172 million over its remaining life as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2000 $ 14,965
2001 14,929
2002 14,929
2003 15,216
2004 14,929
Thereafter 97,024
--------
$171,992
========
</TABLE>
38
<PAGE> 39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Upon consummation of the Transactions, the following individuals became
the directors and executive officers of Media and the Company. All officers
serve at the pleasure of the applicable Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION (S)
- ---- --- ------------
<S> <C> <C>
David J. Pecker............... 47 Chairman, Chief Executive Officer, President
And Director of Media and the Company
Austin M. Beutner............. 39 Director of Media and the Company
Neeraj Mital.................. 32 Director of Media and the Company
Saul D. Goodman............... 31 Director of Media and the Company
Robert V. Seminara............ 27 Director of Media and the Company
Paul G. Yovovich.............. 45 Director of Media and the Company
Helene Belanger............... 44 Director of Media and the Company
Brian J. Richmand............. 45 Director of Media and the Company
J. William Grimes............. 58 Director of Media and the Company
Peter A. Nelson............... 43 Executive Vice President and Chief
Financial Officer of Media and the Company
Michael R. Roscoe............. 52 Chief Executive Officer and President of DSI
</TABLE>
David J. Pecker became Chairman, Chief Executive Officer, President and a
Director of Media and the Company upon consummation of the Transactions on
May 7, 1999. Prior to that time, Mr. Pecker had been the Chief Executive Officer
since 1992, and President since 1991, of Hachette Filipacchi Magazines, Inc.
Prior to 1991, he was Executive Vice President/Publishing and Chief Operating
and Chief Financial Officer of Hachette. Mr. Pecker has over 20 years of
publishing industry experience having worked as the Director of Financial
Reporting at CBS, Inc. Magazine Group and as the Vice President and Controller
of Diamandis Communications Inc.
Austin M. Beutner is a founding partner of Evercore. From 1994 to 1996, Mr.
Beutner was Chief Executive Officer and President of the U.S. Russia Investment
Fund, and in January 1997, Mr. Beutner was named Vice Chairman of its Board of
Directors. Before his affiliation with the U.S. Russia Investment Fund, he was a
General Partner of The Blackstone Group.
39
<PAGE> 40
Neeraj Mital is a Managing Director of Evercore. Prior to joining Evercore,
Mr. Mital was at The Blackstone Group from 1992 to 1998, most recently as a
Managing Director. Prior to joining The Blackstone Group, he was at Salomon
Brothers Inc.
Saul D. Goodman is a Vice President of Evercore. Prior to joining Evercore,
Mr. Goodman was an investment banker at Lehman Brothers, Inc. from 1994 to 1998,
most recently as a Vice President. Prior to that, Mr. Goodman was at Ark Asset
Management.
Robert V. Seminara is an Associate of Evercore. Prior to joining Evercore,
Mr. Seminara was a Financial Analyst at Lazard Freres & Co. LLC from 1994 to
1996.
Paul G. Yovovich is a private investor and an Operating Executive at
Evercore. From 1993 to 1996 he was President of Advance Ross Corporation, whose
business was international transactions services. Prior to 1993, Mr. Yovovich
held a variety of executive positions at Centel Corporation, most recently as
President of its Central Telephone Company unit. Mr. Yovovich is currently a
Director of 3Com Corporation, Comarco, Inc., APAC TeleServices, Inc., the Van
Kampen open end funds and several other private companies.
Helene Belanger is a Vice-President in the Private Investments Group of
Capital Communications CDPQ ("Capital Communications"). Ms. Belanger has been
affiliated with Capital Communications since 1990 holding various positions
including the position of Director. Prior to her affiliation with Capital
Communications, Ms. Belanger was with the Royal Bank of Canada, occupying
various positions in the commercial loans sector, and at the Federal Business
Development Bank. Ms. Belanger is a corporate director sitting on the Board of
Directors of NetStar Communications, CFCF-12 and Groupe Coscient.
Brian J. Richmand is a General Partner at Chase Capital Partners ("Chase
Capital"). Prior to joining Chase Capital, Mr. Richmand was a Partner at the law
firm of Kirkland & Ellis from 1985 to 1993 where he primarily represented
leveraged buyout and venture capital funds. Mr. Richmand currently serves on the
boards of Riverwood International Corp., La Petite Academy, Transtar Metals and
Reiman Publishing.
J. William Grimes is a General Partner at BG Media Investors. Prior to
joining BG Media Investors, Mr. Grimes served from 1994 to 1997 as a media and
communications consultant to several high-tech new media companies and is a
principal of Incontext, Inc., a Washington, D.C.-based information database
company. From 1994 to September 1996, Mr. Grimes was Chief Executive Officer and
President of Zenith Media, USA. Before 1994, Mr. Grimes served in senior
positions at several media companies including Chief Executive Officer and
President of Multimedia, Inc. and Chief Executive Officer and President of
Univision Holdings, Inc. and Chief Executive Officer and President of ESPN.
Peter A. Nelson joined the Company in 1989 and was promoted to his current
position as Executive Vice President and Chief Financial Officer in January
1999. Prior to his promotion, Mr. Nelson held the position of Vice President,
Controller and Chief Accounting Officer.
Michael R. Roscoe joined the Company in 1984 and was promoted to President
of DSI in 1986. In December 1995, Mr. Roscoe was promoted to his current
position as President and Chief Executive Officer of DSI.
40
<PAGE> 41
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us to our chief
executive officer and our four most highly compensated executive officers at
March 29, 1999 for services rendered during the fiscal years 1999, 1998 and
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ ---------------
OTHER ANNUAL SHARES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) COMPENSATION ($)
- --------------------------- ---- --- --- --- ------------ ---
<S> <C> <C> <C> <C> <C> <C>
Peter J. Callahan (1)............ 1999 350,000 (2) -0- (2) -0- -- 690,630 (2)(3)
Chairman, President, Chief 1998 350,000 (2) 198,500 (2) -0- -- 659,271
Executive Officer 1997 350,000 (2) 341,000 (2) -0- -- 657,967
Michael Boylan (1)............... 1999 300,000 (2) -0- (2) -0- -- 279,970 (2)(3)
Vice Chairman, Publishing 1998 300,000 (2) 99,250 (2) -0- -- 283,011
Operations 1997 300,000 (2) 170,500 (2) -0- -- 282,679
Maynard Rabinowitz (1)........... 1999 300,000 (2) -0- (2) -0- -- 312,817 (2)(3)
Vice Chairman, Finance, 1998 300,000 (2) 99,250 (2) -0- -- 283,821
Administration and Legal 1997 300,000 (2) 170,500 (2) -0- -- 290,154
Affairs, and Secretary
Anthony S. Hoyt (1).............. 1999 500,000 -0- -0- -- 40,444 (3)
Senior Vice President and 1998 500,000 -0- -0- -- 29,721
Publisher, National Enmquirer 1997 500,000 -0- -0- 25,000(4) 21,389
and Star
Michael R. Roscoe................ 1999 296,193 37,000 -0- 50,000(4) 18,472 (3)
Chief Executive Officer and 1998 250,000 -0- -0- 25,000(4) 58,095
President of DSI 1997 230,289 46,000 -0- 25,000(4) 10,413
</TABLE>
(1) Upon consummation of the Transactions on May 7, 1999, Messrs. Callahan,
Boylan and Rabinowitz resigned from their respective executive positions
with the Company and Media. Mr. Hoyt resigned from his executive position
as of May 17, 1999.
(2) Includes management fees ("Management Fees") as a component of compensation
for serving as executive officers of the Company and Media. Under the terms
of a former compensation plan Messrs. Callahan, Boylan and Rabinowitz
received a base salary and the Management Fee. The base salaries were
$350,000, $300,000 and $300,000, respectively, for Messrs. Callahan, Boylan
and Rabinowitz. The Management Fees, which were in addition to the base
salary, were divided into two components. The first component consisted of
cash payments of $650,000 to Mr. Callahan and $275,000 to each of Messrs.
Boylan and Rabinowitz. The second component was based upon the Company's
operating results and was distributed 50% to Mr. Callahan and 25% to each
of Messrs. Boylan and Rabinowitz.
(3) Includes for fiscal 1999 the following: profit sharing contributions
allocated under our employee profit sharing plan of $3,530 for each of
Messrs. Callahan, Boylan, Rabinowitz, Hoyt and Roscoe; payments for life
insurance of $2,700 for Mr. Callahan, $1,440 for Mr. Boylan, $2,250 for Mr.
Rabinowitz, $4,915 for Mr. Hoyt and $1,246 for Mr. Roscoe; reimbursements
of country club memberships in the amount of $34,400 and $20,000,
respectively, for Messrs. Callahan and Rabinowitz and proceeds form the
exercise of common stock options totaling $11,937 by Mr. Roscoe.
41
<PAGE> 42
(4) Upon consummation of the Transaction on May 7, 1999, Messrs. Hoyt and Roscoe
received $7 for each underlying share of common stock represented by their
options. After deducting for the exercise price of the underlying stock options,
Messrs. Hoyt and Roscoe received net proceeds of $106,250 and $167,709,
respectively.
Compensation for our executive officers subsequent to the consummation
of the Transactions is not materially different from its historical compensation
levels, other than Mr. Pecker's compensation, which is described below.
All of our common stock is owned by Media and all of Media's common
stock is owned by EMP Group L.L.C. (the "LLC"). Equity interests in the LLC are
owned by Evercore and certain investors, including Mr. Pecker. Other members of
management are expected to acquire equity interests in the LLC. For a discussion
of the distributions Mr. Pecker and other members of management may receive as
the owners of certain units in the LLC as compensation for their employment, see
"Item 13. Certain Relationships and Related Transactions."
Our executive officers are elected by our Board of Directors and serve
at the discretion of our Board of Directors or pursuant to an employment
agreement. Media is party to an employment agreement with Mr. Pecker which has a
five-year term expiring May 6, 2004 and, after the initial term, will be
automatically extended each year for successive one-year periods, unless either
party provides 60 days' prior written notice before the next extension date. The
employment agreement also provided that, upon termination of Mr. Pecker's
employment with Hachette, the LLC was obligated to make payments related to
compensation forfeited upon such termination (the "Make-Whole Payments"). The
Make-Whole Payments, in the aggregate, equal approximately $4.0 million, a
portion of which was paid upon Mr. Pecker's termination of employment with
Hachette on March 31, 1999, and the remaining portion of which shall be payable
on April 15, 2000. During his term of employment, Mr. Pecker shall be entitled
to a base salary equal to $1,500,000 per annum and certain other customary
employee benefits.
Upon termination of employment by Media without cause or by Mr. Pecker
for good reason, Mr. Pecker shall be entitled to the following subject to
certain restrictions: (a) continued payment of base salary and continued health,
life insurance and disability benefits; (b) immediate vesting of plan benefits;
(c) outplacement services for twelve months following such termination; (d) a
golden parachute excise tax gross-up payment, if applicable, in connection with
a "change of control" (as defined in the employment agreement); (e) any unpaid
portion of the Make-Whole Payments; and (f) such employee benefits as to which
Mr. Pecker may be entitled under the employee benefit plans and arrangements of
Media.
During fiscal 1999, the Company's outside directors received an annual
retainer of $25,000, plus $2,500 for each Board meeting and committee meeting
(held other than on the date of a Board meeting) attended. In addition, the
Company reimbursed all directors for travel and out-of-pocket expenses incurred
in connection with Board or committee meetings and otherwise with respect to
their duties as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of our common stock is owned by Media and all of Media's common
stock is owned by the LLC. Equity interests in the LLC are owned by Evercore and
certain investors, including
42
<PAGE> 43
Mr. Pecker. Other members of management are expected to acquire equity interests
in the LLC. Pursuant to the LLC Agreement (as defined herein), Evercore has
control over the LLC, Media and the Company by virtue of its right to appoint a
majority of the Board of Managers of the LLC and a majority of the Board of
Directors of Media, irrespective of the amount of Evercore's equity interests in
the LLC. See "Item 13. Certain Relationships and Related Transactions." Mr.
Austin Beutner, a director of Media and the Company, is a member of the general
partner of Evercore but disclaims the existence of a group and disclaims
beneficial ownership of our common stock. Certain other investors each have the
right to appoint one member of the Board of Managers of the LLC and the Board of
Directors of Media, subject to certain conditions such as ownership of units in
the LLC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of their investment in the LLC, Evercore and the other investors
and Media, have entered into the LLC Agreement (the "LLC Agreement"). Interests
in the LLC are represented by units of various classes. Evercore and the other
investors, including Mr. Pecker, own Class A Units. Class A Units are the only
units with voting power. Other classes of units, one class of which has been
issued to Mr. Pecker and other classes of which may be issued to other members
of management, are eligible to share in the profits of the LLC, pro rata, after
all the holders of the Class A Units have received the return of their aggregate
investment in the Class A Units. Mr. Pecker also has been issued units which
will vest and share in the profits of the LLC, pro rata, only in certain
circumstances.
The units of the LLC are exchangeable for the common stock of Media
under certain circumstances, including pursuant to demand and piggyback
registration rights granted to Evercore and the other investors, including Mr.
Pecker, under the LLC Agreement. The LLC Agreement grants each investor certain
demand registration rights with respect to common stock of Media, the exercise
of which, in general, is controlled by Evercore and grants unlimited piggyback
registration rights.
The LLC Agreement provides that the LLC will be managed by a Board of
Managers, a majority of which will be appointed by Evercore, irrespective of
Evercore's ownership interest. All actions by such Board of Managers are made by
majority vote except for transactions involving the transfer of LLC assets to
Evercore or its affiliates and certain other specified corporate transactions.
In addition, Evercore has the right to appoint a majority of the Board of
Directors of Media.
In general, the investors, including Mr. Pecker, may not transfer their
interests in the LLC without the consent of Evercore. Below a certain ownership
percentage, if Evercore transfers its units, all the other investors are
required to transfer a pro rata number of securities on the same terms as the
Evercore transfer.
Pursuant to a Management Agreement, dated as of May 7, 1999 (the
"Management Agreement"), among Evercore Advisors Inc. ("Evercore Advisors"), an
affiliate of Evercore, and Media, Evercore Advisors will be paid an annual
monitoring fee of $750,000 if the financial performance of Media meets certain
predetermined targets. In addition, pursuant to the Management Agreement,
Evercore Advisors received upon the consummation of the Merger, a financial
advisory fee of 1% of the aggregate funds required to consummate the
Transactions. Pursuant to the LLC Agreement, we have reimbursed Evercore for all
costs and expenses
43
<PAGE> 44
incurred by Evercore and its affiliates in connection with the Transactions,
which costs and expenses totaled $413,000.
44
<PAGE> 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed with, or incorporated by reference in,
and as part of, this Annual Report on Form 10-K.
1. FINANCIAL STATEMENTS
For a complete list of the Financial Statements filed with this Annual
Report on Form 10-K, see the Index to Consolidated Financial Statements on Page
23.
2. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
2.1 -- Agreement and Plan of Merger dated as of February 16, 1999, by and
between EMP Acquisition Corp., a Delaware corporation, and American
Media, Inc., a Delaware corporation.
2.2 -- Certificate of Merger of EMP Acquisition Corp. with and into American
Media, Inc. (Under Section 251 of the General Corporation Law of the
State of Delaware).
2.3 -- Management Agreement dated as of May 7, 1999, between American Media,
Inc., a Delaware Corporation and Evercore Advisors, Inc., a Delaware
limited liability company.
*3.1 -- Certificate of Incorporation of Enquirer/Star, Inc and amendments
thereto (incorporated by reference to Operation's Registration
Statement on Form S-1, Registration No. 33-46676, Part II, Item 16,
Exhibit 3.5, as filed on March 25, 1992). (1)
*3.2 -- Amended By-Laws of Enquirer/Star, Inc. (incorporated by reference to
Operation's Registration Statement on Form S-1, Registration No.
33-46676, Part II, Item 16, Exhibit 3.6, as filed on March 25,
1992).(1)
*3.3 -- Amendment of Certificate of Incorporation of Operations dated November
7, 1994 changing its name to American Media Operations, Inc. from
Enquirer/Star, Inc. (incorporated by reference from Operation's Annual
Report on Form 10-K for the year ended March 27, 1995, filed as
Exhibit 3.3, File No. 1-11112).
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C>
4.1 -- Purchase Agreement, dated as of April 30, 1999, among American
Media Operations, Inc., National Enquirer, Inc., Star Editorial,
Inc., SOM Publishing, Inc., Weekly World News, Inc., Country
Weekly, Inc., Distribution Services, Inc., Fairview Printing,
Inc., NDSI, Inc., Biocide, Inc., American Media Marketing, Inc.
and Marketing Services, Inc.
4.2 -- Indenture dated as of May 7, 1999, among American Media Operations,
Inc., National Enquirer, Inc., Star Editorial, Inc., SOM Publishing,
Inc., Weekly World News, Inc., Country Weekly, Inc., Distribution
Services, Inc., Fairview Printing, Inc., NDSI, Inc., Biocide, Inc.,
American Media Marketing, Inc., and Marketing Services, Inc., and The
Chase Manhattan Bank, a New York banking corporation, as trustee.
4.3 -- Exchange and Registration Rights Agreement, dated as of May 7,
1999, among American Media Operations, Inc., National Enquirer,
Inc., Star Editorial, Inc., SOM Publishing, Inc., Weekly World
News, Inc., Country Weekly, Inc., Distribution Services, Inc.,
Fairview Printing, Inc., NDSI, Inc., Biocide, Inc., American
Media Marketing, Inc., and Marketing Services, Inc.
4.4 -- Credit Agreement dated as of May 7, 1999, among American Media Inc.,
American Media Operations, Inc., the Lenders party hereto, and The
Chase Manhattan Bank, as Administrative Agent.
4.5 -- Guarantee Agreement dated as of May 7, 1999, among American Media,
Inc., each of the subsidiaries listed on Schedule I thereto and The
Chase Manhattan Bank, as collateral agent for the Secured Parties (as
defined in the Security Agreement).
4.6 -- Indemnity, Subrogation and Contribution Agreement dated as of May 7,
1999, among American Media Operations, Inc., each subsidiary of
American Media, Inc. listed on Schedule I thereto and The Chase
Manhattan Bank, as collateral agent for the Secured Parties (as
defined in the Security Agreement).
4.7 -- Pledge Agreement dated as of May 7, 1999, among American Media
Operations, Inc., American Media, Inc., each subsidiary of Holdings
listed on Schedule I thereto and The Chase Manhattan Bank, as
collateral agent for the Secured Parties (as defined in the Security
Agreement).
4.8 -- Security Agreement dated as of May 7, 1999, among American Media
Operations, Inc., American Media, Inc., each subsidiary of Holdings
listed on Schedule I thereto and The Chase Manhattan Bank, as
collateral agent for the Secured Parties (as defined herein).
*10 -- Tax Sharing Agreement dated as of March 31, 1992, among Group and its
subsidiaries (incorporated by reference from Media's Annual Report on
Form 10-K for the year ended March 30, 1992, filed as Exhibit 10.15,
File No. 1-10784).(1)
21 -- Subsidiaries of American Media Operations, Inc.
</TABLE>
46
<PAGE> 47
<TABLE>
<S> <C>
99.1 -- David J. Pecker Employment Agreement, dated as of February 16, 1999.
99.2 -- Side Letter regarding David J. Pecker Employment Agreement to David
Pecker from EMP Group L.L.C., dated as of April 13, 1999.
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
- --------------------
(1) Enquirer/Star, Inc. is now named American Media Operations, Inc.
("Operations"); Enquirer/Star Group, Inc. ("Group") is now named American
Media, Inc. ("Media").
* Incorporated herein by reference as indicated.
47
<PAGE> 48
3. FORM 8-K
On February 17, 1999, we filed Form 8-K reporting the sale of our Soap
Opera Assets as of February 3, 1999. Included in this filing were the following
financial statements: unaudited Pro Forma Consolidated Balance Sheet as of
December 28, 1998 and unaudited Pro Forma Consolidated Statements of Income for
the fiscal year ended March 30, 1998 and the three fiscal quarters ended
December 28, 1998.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15 (d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders in
fiscal year 1999.
48
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
it's behalf by the undersigned, thereto duly authorized on June 25, 1999.
AMERICAN MEDIA OPERATIONS, INC.
By: /s/ DAVID J. PECKER
----------------------------------------
David J. Pecker
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacities
indicated on June 25, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DAVID J. PECKER Chairman of the Board, President,
- -------------------------------------- Chief Executive Officer and Director
David J. Pecker (Principal Executive Officer)
/s/ PETER A. NELSON Executive Vice President and Chief
- -------------------------------------- Financial Officer (Principal Financial
Peter A. Nelson and Accounting Officer)
/s/ AUSTIN M. BEUTNER Director
- --------------------------------------
Austin M. Beutner
/s/ NEERAJ MITAL Director
- --------------------------------------
Neeraj Mital
/s/ SAUL D. GOODMAN Director
- --------------------------------------
Saul D. Goodman
/s/ ROBERT V. SEMINARA Director
- --------------------------------------
Robert V. Seminara
</TABLE>
49
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
EMP ACQUISITION CORP.
AND
AMERICAN MEDIA, INC.
DATED
February 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. THE MERGER 2
SECTION 1.1. The Merger 2
SECTION 1.2. Closing 2
SECTION 1.3. Effective Time 2
SECTION 1.4. Effects of the Merger 3
SECTION 1.5. Certificate of Incorporation and By-Laws of
the Surviving Corporation 3
SECTION 1.6. Directors 3
SECTION 1.7. Officers 3
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS 3
SECTION 2.1. Effect On Capital Stock 3
SECTION 2.2. Company Option Plan 4
SECTION 2.3. Consent Statement; Action by Written Consent 5
SECTION 2.4. Releases 6
ARTICLE III. DISSENTING SHARES; PAYMENT FOR SHARES 7
SECTION 3.1. Dissenting Shares 7
SECTION 3.2. Payment for Shares 7
SECTION 3.3. The Debt Offer 10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
SECTION 4.1. Organization and Qualification; Subsidiaries 11
SECTION 4.2. Certificate of Incorporation and By-laws 12
SECTION 4.3. Capitalization 12
SECTION 4.4. Authority Relative to this Agreement 13
SECTION 4.5. No Conflict; Required Filings and Consents 14
SECTION 4.6. SEC Reports and Financial Statements 15
SECTION 4.7. Information 16
SECTION 4.8. Litigation 17
SECTION 4.9. Compliance with Applicable Laws 17
SECTION 4.10. Employee Benefit Plans 17
SECTION 4.11. Intellectual Property 19
SECTION 4.12. Environmental Matters 20
SECTION 4.13. Material Adverse Change 22
SECTION 4.14. Certain Approvals 22
SECTION 4.15. Opinion of Financial Advisor 23
SECTION 4.15.1. Brokers 23
SECTION 4.16. Contracts, Etc. 23
SECTION 4.17. Labor Matters 25
SECTION 4.18. Tax Matters 25
SECTION 4.19. Make Goods; Advertising Credits 26
SECTION 4.20. Insurance 26
SECTION 4.21. Year 2000 26
SECTION 4.22. Soap Opera Sale 26
</TABLE>
(2)
<PAGE> 3
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF NEWCO 27
SECTION 5.1. Organization and Qualification 27
SECTION 5.2. Authority Relative to this Agreement 27
SECTION 5.3. No Conflict; Required Filings and Consents 28
SECTION 5.4. Information 28
SECTION 5.5. Financing 29
SECTION 5.6. Newco Not an Interested Stockholder or an Acquiring Person 29
SECTION 5.7. Newco 29
SECTION 5.8. Brokers 30
ARTICLE VI. COVENANTS 30
SECTION 6.1. Conduct of Business of the Company 30
SECTION 6.2. Access to Information; Interim Financials 34
SECTION 6.3. Reasonable Best Efforts 35
SECTION 6.4. Consents 36
SECTION 6.5. Public Announcements 36
SECTION 6.6. Employee Benefits Matters 36
SECTION 6.7. Indemnification 37
SECTION 6.8. No Solicitation 38
SECTION 6.9. Notification of Certain Matters 39
SECTION 6.10. State Takeover Laws 39
SECTION 6.11. Disposition of Litigation 39
SECTION 6.12. Stop Transfer Order 39
SECTION 6.13. Financing 39
SECTION 6.14. Newco Action 40
ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE MERGER 40
SECTION 7.1. Conditions of Each Party's Obligation to Consummate
the Merger 40
SECTION 7.2. Conditions to Obligation of Newco 41
SECTION 7.3. Conditions to Obligation of the Company 42
ARTICLE VIII. TERMINATION; AMENDMENT; WAIVER 43
SECTION 8.1. Termination 43
SECTION 8.2. Effect of Termination 44
SECTION 8.3. Expenses 44
SECTION 8.4. Amendment 45
SECTION 8.5. Extension; Waiver 45
ARTICLE IX. MISCELLANEOUS 46
SECTION 9.1. Non-Survival of Representations and Warranties 46
SECTION 9.2. Entire Agreement; Assignment 46
SECTION 9.3. Validity 46
SECTION 9.4. Notices 46
SECTION 9.5. Governing Law; Jurisdiction 47
SECTION 9.6. Waiver of Jury Trial 48
SECTION 9.7. Descriptive Headings 48
SECTION 9.8. Counterparts 48
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SECTION 9.9. Parties in Interest 48
SECTION 9.10. Certain Definitions 48
SECTION 9.11. Specific Performance 52
DISCLOSURE SCHEDULE
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EXHIBITS
EXHIBIT A Form of Certificate of Incorporation of Company immediately
after the Effective Time.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 16, 1999, by
and between EMP ACQUISITION CORP., a Delaware corporation ("NEWCO"), and
AMERICAN MEDIA, INC., a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of Newco and the
Company have declared this Agreement to be advisable and determined that the
merger of Newco with and into the Company (the "MERGER"), in accordance with the
General Corporation Law of the State of Delaware (the "GCL") and upon the terms
and subject to the conditions set forth in this Agreement, would be fair to and
in the best interests of their respective stockholders, and such Boards of
Directors have approved such Merger, pursuant to which each share of Class A
Common Stock, par value $.01 per share (the "CLASS A SHARES"), and each share of
Class C Common Stock, par value $.01 per share (the "CLASS C SHARES" and,
collectively with the Class A Shares, the "SHARES"), in each case which is
issued and outstanding immediately prior to the Effective Time (as defined in
Section 1.3) and not owned directly or indirectly by Newco or the Company will
be converted into the right to receive $7.00 in cash;
WHEREAS, all of the issued and outstanding Common Stock, par
value $.01 per share (the "NEWCO SHARES"), of Newco is owned by EMP Group LLC
or an affiliate thereof;
WHEREAS, the adoption of this Agreement requires the approval
of a majority of the voting power of the outstanding Shares, voting as a single
class (with each Class A Share having one vote per share and each Class C Share
having three votes per share) (the "COMPANY STOCKHOLDER APPROVAL");
WHEREAS, as a condition to their willingness to enter into
this Agreement and consummate the transactions contemplated hereby, Newco has
required that Boston Ventures Limited Partnership III, Boston Ventures Limited
Partnership IIIA, Boston Ventures Company Limited Partnership III, Pemima,
L.P. and Michael J. Boylan (each, a "PRINCIPAL STOCKHOLDER") agree, among
other things, to execute a written consent in favor of adoption of this
Agreement on the date hereof in accordance with the provisions of Section 228
of the GCL, vote the Shares beneficially owned by each of them in accordance
with the Voting Agreement and comply with the other provisions of such Voting
Agreement; and in order to induce Newco to enter into this Agreement, each
Principal Stockholder has executed and delivered the Voting Agreement, dated
as of the date hereof, with Newco (the "Voting Agreement");
WHEREAS, Newco and the Company desire to make certain
<PAGE> 7
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, certain capitalized terms used herein are defined or
cross-referenced in Section 9.10.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Newco and the Company agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the GCL, at the Effective Time (as
defined in Section 1.3) Newco shall be merged with and into the Company.
Following the Merger, the separate corporate existence of Newco shall cease and
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION").
SECTION 1.2. CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1 and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing of the Merger (the "CLOSING")
will take place at 10:00 am. on the second business day after satisfaction or
waiver of the conditions set forth in Article VII (the "CLOSING DATE"), at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017, unless another date, time or place is agreed to in writing by the parties
hereto; PROVIDED that Newco may, upon written notice given to the Company no
later than one business day before the date on which the Closing would otherwise
occur, as contemplated by this Section 1.2 cause the Closing to be postponed to
a date specified in such notice so long as such date is not more than 85 days
after the date hereof, Newco states in such notice that such delay is necessary
to permit completion of the offering of Senior Subordinated Notes (as defined in
and contemplated by the Commitment Letters) and such notice is accompanied by a
letter from the initial purchaser in respect of such offering and addressed to
the Company to the effect that such initial purchaser agrees with the aforesaid
statement.
SECTION 1.3. EFFECTIVE TIME . As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the Company
shall execute in the manner required by the GCL and deliver to the Secretary of
State of the State of Delaware
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a duly executed certificate of merger, and the parties shall take such other and
further actions as may be required by law to make the Merger effective. The time
the Merger becomes effective in accordance with applicable law is referred to as
the "EFFECTIVE TIME."
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the GCL.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION.
(a) The certificate of incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be amended in the
Merger so as to read in its entirety in the form set forth as Exhibit A hereto
and, as so amended, shall be the certificate of incorporation of the Surviving
Corporation, until thereafter amended in accordance with the provisions thereof
and applicable law.
(b) Subject to the provisions of Section 6.7, the
by-laws of Newco in effect at the Effective Time shall be the by-laws of the
Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and applicable law.
SECTION 1.6. DIRECTORS. Subject to applicable law, the
directors of Newco immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 1.7. OFFICERS. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the Company,
Newco or the holders of Shares or Newco Shares:
(a) CONVERSION OF SHARES. Each Share issued and
outstanding immediately prior to the Effective Time (other than any Shares held
by Newco or any wholly-owned subsidiary of Newco, in the treasury of the Company
or by any wholly-owned subsidiary of the Company), which Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
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<PAGE> 9
canceled and retired and shall cease to exist with no payment being made with
respect thereto, and other than Dissenting Shares (as defined in Section 3.1)
shall be converted into the right to receive following the Merger an amount in
cash equal to $7.00 (the "MERGER PRICE").
(b) CANCELLATION AND RETIREMENT OF SHARES. As of the
Effective Time, all Shares (other than Shares referred to in Section 2.1(a)
which shall be canceled and retired in connection therewith and Dissenting
Shares) issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive the Merger Price, without interest thereon,
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such Shares so converted (a "CERTIFICATE") shall
cease to have any rights with respect thereto, except the right to receive the
Merger Price, without interest thereon.
(c) CONVERSION OF NEWCO SHARES. As of the Effective
Time, each Newco Share that was issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
SECTION 2.2. COMPANY OPTION PLAN. (a) Newco and the Company
shall take all actions necessary so that, immediately prior to the Effective
Time, (i) each outstanding option to purchase Shares (an "OPTION") granted under
the Company's Amended and Restated Stock Option Plan (the "OPTION PLAN"),
whether or not then exercisable or vested, shall become fully exercisable and
vested, (ii) each Option which is then outstanding shall be canceled and (iii)
in consideration of such cancellation, and except to the extent that Newco and
the holder of any such Option otherwise agree, as soon as practicable following
the Effective Time, the Company shall pay to such holders of Options an amount
in respect thereof equal to the product of (A) the excess of the Merger Price
over the exercise price thereof and (B) the number of Shares subject thereto
(such payment to be net of taxes required by law to be withheld with respect
thereto).
(b) Effective as of the Effective Time, the Company
shall use its reasonable best efforts to take all such action as is necessary
prior to the Effective Time to terminate the Option Plan so that on and after
the Effective Time no current or former employee or director shall have any
Option to purchase shares of common stock or any other equity interest in the
Company under the Option Plan. The Company shall use its reasonable best efforts
to obtain any consents necessary to release the Company from any liability in
respect of any Options.
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<PAGE> 10
SECTION 2.3. CONSENT STATEMENT; ACTION BY WRITTEN CONSENT.
(a) As soon as practicable following the date of
this Agreement, the Company and Newco shall prepare and file with the SEC a
consent statement (the "CONSENT STATEMENT") in connection with the solicitation
of written consents in favor of the adoption of this Agreement (the "Consent
Solicitation"). The Company and Newco shall use their reasonable best efforts to
have the Consent Statement approved by the SEC as promptly as practicable after
such filing and the Company shall use its reasonable best efforts to cause the
Consent Statement to be mailed to its stockholders as promptly as practicable
after receipt of such approval. The Company will notify Newco of the receipt of
any comments from the SEC or its staff or of any request by the SEC or its staff
for amendments or supplements to the Consent Statement or for additional
information and will supply Newco with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Consent Statement prior to its
being filed with the SEC and shall give Newco and its counsel the reasonable
opportunity to review the Consent Statement and all amendments and supplements
thereto and all responses to requests for additional information and replies to
comments prior to their being filed with or sent to the SEC. The Company agrees
to use its reasonable best efforts, after consultation with Newco, to respond
promptly to all such comments of and requests by the SEC. The Company will cause
the Consent Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act. If at any time prior to the Effective
Time any information relating to Newco or the Company, or any of their
respective affiliates, officers or directors, should be discovered by Newco or
the Company that should be set forth in an amendment or supplement to the
Consent Statement so that such document would not include a misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other party hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of the Company. The Company
shall include in the Consent Statement the recommendation of the Company's Board
of Directors that the shareholders consent to the adoption of this Agreement.
(b) Upon approval of the Consent Statement by the
SEC, the Company shall solicit written consents for the adoption of this
Agreement in compliance with the applicable rules of the New York Stock Exchange
and the SEC. Notwithstanding the foregoing, the parties understand that,
pursuant to the Voting Agreement, immediately following the execution of this
Merger Agreement, the Principal Shareholders will effect the adoption of this
Agreement by the stockholders of the Company by taking
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<PAGE> 11
action by written consent of the stockholders of the Company in lieu of calling
a meeting of stockholders pursuant to, and in accordance with, the requirements
set forth in Section 228 of the GCL. The Company shall use its best efforts in
the making of the Consent Solicitation and in causing the approval of this
Agreement and the Merger to become effective as soon as practicable after the
date of this Agreement, including but not limited to, fixing a record date for
the purpose of determining the holders of Shares entitled to consent to the
adoption of this Agreement and distributing the consents to the holders of
Shares. The Company shall deliver to Newco, promptly after receipt, but in no
case, more than two business days after receipt, notice of receipt of all
consents received pursuant to the Consent Solicitation and filing of such
consents with the Secretary of the Company. The Company shall promptly file with
the Secretary of the Company after receipt, but in no case, more than one (1)
business day after receipt, all consents received pursuant to the Consent
Solicitation. The Company shall ensure that the Consent Solicitation is
conducted in accordance with applicable laws.
SECTION 2.4. RELEASES.
(a) Effective upon the Effective Time, the Company
hereby releases and forever discharges each person who is now, or has been at
any time prior to the date hereof, an officer, director or stockholder (and any
direct or indirect partner of any stockholder that is a partnership), trustee or
agent of the Company or any of its subsidiaries and each person controlling any
of the foregoing persons (individually, a "RELEASED PARTY" and collectively, the
"RELEASED PARTIES"), from any and all claims, rights, obligations, debts,
liabilities, actions or causes of action of every kind and nature, whether
foreseen or unforeseen, contingent or actual, and whether now known or hereafter
discovered, which the Company or any of its subsidiaries had, now has or may in
the future have, in law or in equity, against any Released Party in any way
arising out of, pertaining to or incurred in connection with acts or omissions
or alleged acts or omissions by any of them in their capacity as an officer,
director or stockholder which acts or omissions existed or occurred at or prior
to the Effective Time other than acts or omissions or alleged acts or omissions
involving criminal activity, willful misconduct or fraudulent activity by such
Released Party (a "RELEASED CLAIM"). This Section 2.4 shall not apply to loans
from the Company to any Released Party.
(b) The Company shall pay all expenses, including
attorneys' fees, that may be incurred by any Released Party in enforcing the
obligations provided for in this Section 2.4 and all expenses, including
attorneys' fees, that may be incurred by any Released Party in defending any
Released Claim; provided, that the Company shall not be obligated to pay any
such expenses incurred by an officer, director or stockholder in the event that
the Company is purchasing a claim against such officer, director
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<PAGE> 12
or stockholder for acts or omissions or alleged acts or omissions involving
criminal activity, willful misconduct or fraudulent activity unless such person
is determined not to have committed such acts or omissions.
(c) The rights of each Released Party hereunder shall
be in addition to any other rights such Released Party may have under the
charter or by-laws of the Company, under applicable law or otherwise, the
provisions of this Section 2.4 shall survive the Merger and each Released Party
shall, for all purposes, be a third-party beneficiary of the covenants and
agreements of the Company under this Section 2.4 and, accordingly, shall be
treated as a party to this Agreement for purposes of the rights and remedies
relating to enforcement of such covenants and agreements and shall be entitled
to enforce any such rights and exercise any such remedies directly.
ARTICLE III.
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who demands in writing appraisal for such
Shares in accordance with Section 262 of the GCL, if such Section 262 provides
for appraisal rights for such Shares in the Merger ("DISSENTING SHARES"), shall
not be converted into the right to receive the Merger Price as provided in
Section 2.1(a), but shall be entitled to receive the consideration as shall be
determined pursuant to Section 262 of the GCL unless and until such holder fails
to perfect or withdraws or otherwise loses his right to appraisal and payment
under the GCL. If any such holder fails to perfect or withdraws or loses his
right to appraisal, such Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the Merger
Price, if any, to which such holder is entitled, without interest or dividends
thereon. The Company shall give Newco prompt notice of any demands received by
the Company for appraisal of Shares, withdrawals of such demands and any other
instruments served pursuant to the GCL and received by the Company and, prior to
the Effective Time, Newco shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Newco, make any payment with respect to, or settle or offer to settle, any such
demands.
SECTION 3.2. PAYMENT FOR SHARES.
(a) From and after the Effective Time, a bank or
trust company mutually acceptable to Newco and the Company shall
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act as paying agent (the "PAYING AGENT") in effecting the payment of the Merger
Price. Immediately prior to the Effective Time, Newco shall deposit, or cause to
be deposited, in trust with the Paying Agent the aggregate Merger Price to which
holders of Shares shall be entitled at the Effective Time pursuant to Section
2.1(a).
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder of
Certificates (other than Certificates representing Dissenting Shares and
Certificates representing Shares held by Newco, any wholly-owned subsidiary of
Newco, in the treasury of the Company or by any wholly-owned subsidiary of the
Company) (i) a form of letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent and which
shall be in such form and have such other provisions as Newco may reasonably
specify and to which the Company consents (such consent not to be unreasonably
withheld or delayed) and (ii) instructions for use in surrendering such
Certificates and receiving the aggregate Merger Price in respect thereof. Upon
the surrender of each such Certificate, duly completed and validly executed in
accordance with the instructions thereto, the Paying Agent shall pay the holder
of such Certificate the Merger Price multiplied by the number of Shares formerly
represented by such Certificate in consideration therefor, and such Certificate
shall forthwith be canceled. Until so surrendered, each such Certificate (other
than Certificates representing Dissenting Shares and Certificates representing
Shares held by Newco, any wholly-owned subsidiary of Newco, in the treasury of
the Company or by any wholly-owned subsidiary of the Company) shall represent
solely the right to receive the aggregate Merger Price relating thereto. No
interest or dividends shall be paid or accrued on the Merger Price. If the
Merger Price (or any portion thereof) is to be delivered to any person other
than the person in whose name the Certificate formerly representing Shares
surrendered therefor is registered, it shall be a condition to such right to
receive such Merger Price, that the Certificate so surrendered shall be properly
endorsed, with signature guaranteed, or otherwise be in proper form for transfer
and that the person surrendering such Certificates shall pay to the Paying Agent
any transfer or other taxes required by reason of the payment of the Merger
Price to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days
after the Effective Time, the Paying Agent shall deliver to the Surviving
Corporation all cash, Certificates and other documents in its possession
relating to the transactions described in this Agreement, and the Paying Agent's
duties shall terminate. Thereafter, each holder of a Certificate formerly
representing
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<PAGE> 14
Shares who has not theretofore complied with Article II and this Article III
shall look only to the Surviving Corporation (as a general creditor thereof) for
payment of its claim for the Merger Price (without any interest or dividends
thereon).
(d) NO LIABILITY. None of Newco, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law to the extent any such law so provides.
(e) INVESTMENT IN EXCHANGE FUND. The Paying Agent
shall invest the Merger Price as directed by the Surviving Corporation (within
guidelines approved by the Company prior to the Closing Date, which approval
shall not be unreasonably withheld or delayed). Any interest resulting from such
investment shall be paid to the Surviving Corporation.
(f) STOCK TRANSFER BOOKS. After the Effective Time,
there shall be no registrations of transfers on the stock transfer books of the
Surviving Corporation of any Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates formerly
representing Shares are presented to the Surviving Corporation or the Paying
Agent, they shall be surrendered and canceled in return for the payment of the
aggregate Merger Price relating thereto, as provided in this Article III.
(g) NO FURTHER OWNERSHIP RIGHTS IN SHARES EXCHANGED
FOR CASH. All cash paid upon the surrender for exchange of Certificates formerly
representing Shares in accordance with the terms of this Article III shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
Shares formerly represented by such Certificates.
(h) LOST CERTIFICATES. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable and customary amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to the
Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Price with respect thereto.
(i) WITHHOLDING RIGHTS. The Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable to any holder of Shares pursuant to this Agreement such amounts as may
be required to be deducted and withheld with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "CODE"), or
under any provision of state, local or foreign Tax law.
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SECTION 3.3. THE DEBT OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.1, the Company shall, as soon as
practicable following execution of this Agreement (but in no event later than 15
calendar days after the public announcement of the execution of this Agreement),
commence an offer to purchase all of the outstanding aggregate principal amount
of the Company's 11.63% Senior Subordinated Notes due 2004 (the "SUBORDINATED
NOTES") on the terms set forth in Section 3.3 of the Company Disclosure Schedule
(as defined in Article IV) and such other customary terms and conditions as are
reasonably acceptable to Newco (the "DEBT OFFER"). The Company shall waive any
of the conditions (other than that the Merger shall have been consummated) to
the Debt Offer and make any other changes in the terms and conditions of the
Debt Offer as reasonably requested by Newco, and the Company shall not, without
Newco's prior consent, waive any condition to the Debt Offer or make any changes
to the terms and conditions of the Debt Offer. Notwithstanding anything in this
Agreement, including the immediately preceding sentence, to the contrary, Newco
shall not request that the Company make any change to the terms and conditions
of the Debt Offer that, in the Company's reasonable judgment, is adverse to the
holders of the Subordinated Notes or the Shares or that reasonably could be
expected to delay or impair consummation of the Merger or the transactions
contemplated hereby unless such change was previously approved by the Company in
writing. The Company covenants and agrees that, subject to the terms and
conditions of this Agreement, including but not limited to the conditions to the
Debt Offer, it will accept for payment and pay for the Subordinated Notes as
soon as the condition set forth in Section 7.2(f) is satisfied or waived and
immediately prior to the Effective Time so long as it is permitted to do so
under applicable law.
(b) Promptly following the date of this Agreement,
Newco and the Company shall prepare an offer to purchase the Subordinated Notes
(or portions thereof) and forms of the related letter of transmittal (the
"LETTER OF TRANSMITTAL") (collectively, the "OFFER TO PURCHASE") and summary
advertisement, as well as all other information and exhibits (collectively, the
"OFFER DOCUMENTS"). Newco and the Company will cooperate with each other in the
preparation of the Offer Documents. All mailings to the holders of Subordinated
Notes in connection with the Debt Offer shall be subject to the prior review,
comment and reasonable approval of Newco. The Company will use its reasonable
best efforts to cause the Offer Documents to be mailed to the holders of the
Subordinated Notes as promptly as practicable following commencement of the Debt
Offer in accordance with Section 3.3(a). The Company agrees promptly to correct
any information in the Offer Documents that shall be or have become false or
misleading in any material respect.
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(c) In connection with the Debt Offer, if requested
by Newco, the Company shall promptly furnish Newco with security position
listings, any non-objecting beneficial owner lists and any available listings or
computer files containing the names and addresses of the beneficial owners
and/or record holders of Subordinated Notes, each as of a recent date, and shall
promptly furnish Newco with such additional information (including but not
limited to updated lists of holders of the Subordinated Notes, mailing labels,
security position listings and non-objecting beneficial owner lists) and such
other assistance as Newco or its agents may reasonably require in communicating
the Debt Offer to the record and beneficial holders of Subordinated Notes.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco that (i) except
as set forth in the Company Disclosure Schedule delivered to Newco prior to the
execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), but, with
respect to any representation or warranty, only to the extent that it would be
reasonably apparent that a reference on the Company Disclosure Schedule relates
to such representation or warranty, and (ii) except as fairly reflected in the
notes to the financial statements described in Section 4.6(b) hereof.
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of its
subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, reasonably could not,
individually or in the aggregate, be expected to have a Material Adverse Effect
on the Company. The term "MATERIAL ADVERSE EFFECT ON THE COMPANY", as used in
this Agreement, means any change, effect, event, occurrence or development that
is (i) materially adverse to the business, operations, assets, liabilities,
condition (financial or otherwise), results of operations or prospects of the
Company and its subsidiaries taken as a whole except for any change or effect
resulting from (a) general economic, financial or market conditions, (b) any
change or effect resulting from conditions or
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circumstances generally affecting the newspaper or magazine publishing industry
so long as such change or effect does not have a materially disproportionate
effect on the Company, or (c) changes in laws of general applicability or
applicable generally to the newspaper or magazine publishing industry so long as
such change or effect does not have a materially disproportionate effect on the
Company or (ii) materially adversely affects the ability of the Company to
perform its obligations under this Agreement.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Company has heretofore delivered to Newco a complete and correct copy of the
certificate of incorporation and the by-laws, each as amended to the date
hereof, of the Company and of each of its subsidiaries. Such certificates of
incorporation and by-laws are in full force and effect and no other
organizational documents are applicable to or binding upon the Company or its
subsidiaries, as applicable. Neither the Company nor any of its subsidiaries is
in violation of any of the provisions of its certificate of incorporation or
by-laws.
SECTION 4.3. CAPITALIZATION. The authorized capital stock of
the Company consists of 155,000,000 Shares divided into 100,000,000 Class A
Shares, 20,000,000 shares of Class B Common Stock, par value $.01 per share (the
"CLASS B SHARES"), 25,000,000 Class C Shares and 10,000,000 shares of Serial
Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"), none of which
preferred shares are outstanding. As of the close of business on February 8,
1999, there were 21,793,184 Class A Shares issued and outstanding. As of the
date of this Agreement, there were no Class B Shares and 20,702,005 Class C
Shares issued and outstanding. The Company has no shares of capital stock
reserved for issuance, except that (i), as of the close of business on February
8, 1999, there were 1,672,912 Class A Shares issuable upon exercise of
outstanding Options (with an average exercise price of $6.02) and (ii) as of the
date of this Agreement, there are 20,702,005 Class A Shares issuable upon
conversion of Class C Shares. Except as set forth above, as of the close of
business on February 8, 1999, or the date of this Agreement, as the case may be,
no shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding. All the outstanding Shares are, and all
Shares which may be issued pursuant to the exercise of outstanding Options or
the conversion of Class C Shares will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive (or similar) rights. There are no bonds,
debentures, notes or other indebtedness or securities having general voting
rights (or convertible into securities having such rights) ("VOTING DEBT") of
the Company or any of its subsidiaries issued and outstanding. Except as set
forth above, there are no existing options, warrants, calls, subscriptions or
other rights, agreements, arrangements or commitments of any character,
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relating to the issued or unissued capital stock of the Company or any of its
subsidiaries, obligating the Company or any of its subsidiaries to issue,
deliver, transfer or sell or cause to be issued, delivered, transferred or sold
any shares of capital stock or Voting Debt of, or other equity or voting
interest in, the Company or any of its subsidiaries or securities convertible
into or exchangeable or exercisable for such shares or equity or voting
interests or obligations of the Company or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment. All Options were granted under the
Option Plan. Since the close of business on February 8, 1999 and prior to the
execution of this Agreement, there have been no Options, Shares or any other
voting securities or capital stock issuances by the Company or any subsidiary
except for issuances of Shares pursuant to the exercise of Options. Except for
the Company's obligations to accept surrendered Class C Shares upon conversion
thereof into Class A Shares, there are no outstanding obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire, or make
any payment in respect of, any Shares or the capital stock of the Company or any
of its subsidiaries, or to provide funds or make any investment (in the form of
a loan, capital contribution or otherwise) in, any other person (other than cash
equivalents, trade receivables and investments in wholly-owned subsidiaries). To
the knowledge of the Company, there are no irrevocable proxies with respect to
Shares of the Company or any shares of capital stock of any subsidiary of the
Company. Section 4.3 of the Company Disclosure Schedule constitutes a true and
complete list of the subsidiaries and associated entities of the Company and
evidences the amount of capital stock or other equity interests owned by the
Company, either directly or indirectly, in such subsidiaries or associated
entities. Each of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and such shares of the Company's subsidiaries are 100% owned by
the Company or by a subsidiary of the Company (other than the shares of
Frontline Marketing, Inc. and Biocide, Inc. (collectively, the "SPECIAL SUBS"),
the shares of which are each 80% owned by the Company), in each case free and
clear of any lien, claim, option, charge, security interest, limitation,
encumbrance, agreement, limitation on voting rights and restriction of any kind
(any of the foregoing being a "LIEN"). For the purposes of this Agreement, the
Special Subs are considered to be wholly-owned subsidiaries of the Company. No
entity in which the Company owns, directly or indirectly, less than a 50% equity
interest is, individually or when taken together with all such other entities,
material to the business of the Company and its subsidiaries taken as a whole.
SECTION 4.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations under this Agreement and to consummate the
transactions
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contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
adoption of this Agreement by holders of the Shares to the extent required by
the Company's certificate of incorporation and by applicable law). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery of this
Agreement by Newco, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and (ii) is subject
to general principles of equity (whether considered in a proceeding in equity or
in law).
SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution, delivery and performance
of this Agreement by the Company, the consummation by the Company of the
transactions contemplated hereby or compliance by the Company with any of the
provisions hereof (in each case other than in respect of the financing to be
obtained contemplated by the Commitment Letters or any other financing obtained
in connection with the transactions contemplated hereby) will (i) conflict with
or violate any provision of the certificate of incorporation or by-laws of the
Company or the comparable organizational documents of any of its subsidiaries,
(ii) subject to the governmental filings and of matters referred to in Section
4.5(b), conflict with or violate any statute, ordinance, rule, regulation,
order, judgment or decree applicable to the Company or its subsidiaries, or by
which any of them or any of their respective properties or assets may be bound
or affected, or (iii) result in a violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any Lien on any of the property or assets of the Company or any of its
subsidiaries (any of the foregoing referred to in clause (ii) or this clause
(iii) being a "VIOLATION") pursuant to, any loan or credit agreement, note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any of their respective properties may be bound or affected, except in the case
of the foregoing clauses (ii) or (iii) for any such Violations which,
individually or in the
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aggregate, reasonably could not be expected to have a Material Adverse Effect on
the Company.
(b) None of the execution, delivery and performance
of this Agreement by the Company, the consummation by the Company of the
transactions contemplated hereby or compliance by the Company with any of the
provisions hereof (in each case other than in respect of the financing
contemplated by the Commitment Letters or any other financing obtained in
connection with the transactions contemplated hereby) will require any consent,
waiver, approval, authorization or permit of, or registration or filing with or
notification to (any of the foregoing being a "CONSENT"), any administrative,
government or regulatory authority, agency, court, commission, tribunal or body,
domestic, foreign or supranational (a "GOVERNMENTAL ENTITY"), except for (i)
compliance with any applicable requirements of the Exchange Act, (ii) the filing
of a certificate of merger, pursuant to the GCL, (iii) applicable state takeover
statutes, (iv) compliance with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), and any requirements of any foreign or
supranational Antitrust Laws (as hereinafter defined) and (v) Consents, the
failure of which to obtain or make, individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect on the Company.
SECTION 4.6. SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy statements
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC REPORTS") required to be
filed by the Company with the SEC since December 31, 1995. Other than American
Media Operations, Inc. ("OPERATIONS"), no subsidiary of the Company is required
to file any form, report, schedule, registration statement or proxy statement
with the SEC. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act or the Securities
Act of 1933, as amended, and the rules and regulations of the SEC promulgated
thereunder applicable, as the case may be, to such SEC Reports, and none of the
SEC Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) Each of the audited and unaudited consolidated
financial statements of the Company (including any related notes and schedules,
if any, thereto) included in the SEC Reports complies as to form in all material
respects with all applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, represents
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fairly, in all material respects, the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated subsidiaries as of the dates or for the periods presented therein
and has been prepared in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved except as otherwise noted therein, including in the notes thereto.
Except as set forth in the consolidated balance sheet of the Company at
September 28, 1998, included in the SEC Reports, as of such date, neither the
Company nor any of its subsidiaries has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) that (i) is required
by GAAP to be reflected on a consolidated balance sheet of the Company as of
such date, and (ii) individually or in the aggregate, reasonably could be
expected to have a Material Adverse Effect on the Company. Except as set forth
in the consolidated balance sheet of the Company at September 30, 1998, included
in the SEC Reports, neither the Company nor any of its subsidiaries had any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required by GAAP to be reflected on a consolidated
balance sheet of the Company, except for liabilities or obligations (i) incurred
in the ordinary course of business since September 28, 1998, or (ii) which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As of January 31, 1999, the aggregate Funded Debt of the Company
and its subsidiaries was less than $483 million.
SECTION 4.7. INFORMATION. None of the information supplied by
the Company for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Consent Statement or (iii) any other document to be filed
with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement (the "OTHER FILINGS") will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Consent Statement, at the date it or any amendment
or supplement is mailed to stockholders, and at the Effective Time, and, in the
case of the Offer Documents, at the time the Offer Documents or any amendments
or supplements are first published or sent or given to Holders of the
Subordinated Notes, as the case may be, or at the time the Debt Offer is
consummated, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading except, in each case, as the same may be amended or
supplemented prior to the Effective Time. The Consent Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, except that no representation is made by the
Company with respect to statements made therein based on information supplied by
Newco in writing specifically for inclusion in the Consent Statement. For
purposes of this Agreement, the parties
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agree that statements made and information in the Consent Statement relating to
the Federal income tax consequences of the transactions herein contemplated to
holders of Shares shall be deemed to be supplied by the Company and not by
Newco.
SECTION 4.8. LITIGATION. As of the date hereof: there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
subsidiaries that, individually or in the aggregate, reasonably could be
expected to (x) have a Material Adverse Effect on the Company or (y) prevent or
delay in any material respect the consummation of the transactions contemplated
by this Agreement, nor is there any judgment, decree, injunction or order of any
Governmental Entity, administrative or regulatory authority or body, or
arbitrator outstanding against the Company or any of its subsidiaries that
reasonably could be expected to (x) have, individually or in the aggregate, a
Material Adverse Effect on the Company or (y) prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement.
Neither the Company nor any of its subsidiaries nor any of their respective
properties is or are subject to any order, writ, judgment, injunction, decree,
determination or award which reasonably could be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company or would enjoin or
prohibit the consummation of the transactions contemplated hereby.
SECTION 4.9. COMPLIANCE WITH APPLICABLE LAWS. Each of the
Company and its subsidiaries has been and is in compliance with all permits,
licenses and franchises from Governmental Entities required to conduct its
business as now being conducted, except to the extent that the failure to have
been or comply with such permits, licenses and franchises reasonably could not,
individually or in the aggregate, be expected to have a Material Adverse Effect
on the Company. The Company and its subsidiaries are, and are conducting their
respective business operations, in compliance with all laws, regulations and
orders of any Governmental Entity applicable to any of them, except for such
failures so to comply which, individually or in the aggregate, reasonably could
not be expected to have a Material Adverse Effect on the Company.
SECTION 4.10. EMPLOYEE BENEFIT PLANS.
(a) Section 4.10 of the Company Disclosure Schedule
includes a complete list of each material "employee benefit plan" (within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (including, without limitation, multiemployer plans within
the meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs,
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policies or other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future as a result
of the transaction contemplated by this Agreement or otherwise), whether formal
or informal, oral or written, legally binding or not under which any employee or
former employee of the Company or any of its subsidiaries has any present or
future right to benefits or under which the Company or any of its subsidiaries
has any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "PLANS."
(b) With respect to each Plan, the Company has made
available to Parent a true, correct and complete copy of: (i) all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan description,
if any, and other written communications; (iv) the three most recent annual
financial reports, if any; (v) the three most recent actuarial reports, if any;
and (vi) the most recent determination letter from the Internal Revenue Service
(the "IRS"), if any.
(c) Each Plan has been established and administered
in accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations except for
such violations or non-compliances, which, individually or in the aggregate,
reasonably could not be expected to have a Material Adverse Effect on the
Company. With respect to each Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code ("QUALIFIED PLANS"), the IRS
has issued a favorable determination letter and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
(d) All contributions required to be made to any
Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Plan, for any period through the Effective Time
have been timely made or paid in full or, to the extent not required to be made
or paid on or before the date hereof, have been fully reflected in the financial
statements of the Company to the extent required under GAAP.
(e) No Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. There does not now exist, nor do any
circumstances exist that could reasonably be expected to result in, any material
liability under (i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections
412 and 4971 of the Code or (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the Code.
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(f) (i) With respect to any Plan, no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or threatened and no facts or circumstances exist which could give rise
to any such actions, suits or claims; (ii) neither the Company nor any other
party has engaged in a prohibited transaction, as such term is defined under
Code section 4975 or ERISA section 406, which would subject the Company, any of
its subsidiaries or the Buyer to any taxes, penalties or other liabilities under
Code section 4975 or ERISA sections 409 or 502(i); (iii) no event has occurred
and no condition exists that would subject the Company or any of its
subsidiaries, either directly or by reason of its affiliation with any member of
its Controlled Group (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code sections 414(b),
(c), (m) or (o)), to any tax, fine or penalty imposed by ERISA, the Code or
other applicable laws, rules and regulations; (iv) no Plan provides for an
increase in benefits on or after the Closing Date; and (v) each Plan, excluding
individual employment agreements or individual contracts with employees, may be
amended or terminated without obligation or liability (other than those
obligations and liabilities for which specific assets have been set aside in a
trust or other funding vehicle or reserved for on the Company's balance sheet).
(g) Except as set forth in Section 4.10 of the
Company Disclosure Schedule, no Plan exists which could result in the payment to
any employee of the Company or any of its subsidiaries of any money or other
property or rights or accelerate or provide any other rights or benefits to any
employee of the Company or any of its subsidiaries as a result of the
transaction contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G, and
whether or not some other subsequent action or event would be required to cause
such payment, acceleration or provision to be triggered.
SECTION 4.11. INTELLECTUAL PROPERTY.
(a) Schedule 4.11(a) sets forth (i) all patents,
registrations and applications for Intellectual Property owned, held or used by
the Company or any of its subsidiaries, (ii) all material unregistered
Intellectual Property owned, held or used by the Company or any of its
subsidiaries, and (iii) all material licenses, sublicenses, consent-to-use
agreements and other agreements concerning Intellectual Property to which the
Company or any of its subsidiaries is a party ("IP LICENSES"). The Company or
any of its subsidiaries owns or has the right to use all the Intellectual
Property listed on Schedule 4.11(a), and all the Intellectual Property necessary
or desirable for the operation of the Company or any of its subsidiaries as each
is currently operated and consistent with past practice.
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(b) Except as set forth on Schedule 4.11(b), and
except for such matters that, individually or in the aggregate, reasonably could
not be expected to have a Material Adverse Effect on the Company, (i) all of the
Intellectual Property owned or used by the Company or any of its subsidiaries is
valid, enforceable and unexpired, is free of all Liens, has not been abandoned,
does not infringe or impair the Intellectual Property of any third party and is
not being infringed or impaired by any third party; (ii) no judgment, decree,
injunction, rule or order has been rendered or, to the Company's knowledge, is
threatened by any Governmental Entity which would limit, cancel or question the
validity of (or the Company's or any of its subsidiaries' rights regarding
ownership or use of) any Intellectual Property owned, held or used by the
Company or any of its subsidiaries; (iii) no action, suit or proceeding is
pending, or to the Company's knowledge, threatened that seeks to limit, cancel
or question the validity of (or the Company's or any of its subsidiaries' rights
regarding ownership or use of) any Intellectual Property owned, held or used by
the Company or any of its subsidiaries; and (iv) the Company and its
subsidiaries are not in breach of or default under any IP License, nor to the
Company's knowledge, does a valid basis exist for any other party to any IP
License to claim same.
(c) For purposes of this Section 4.11, "INTELLECTUAL
PROPERTY" shall mean all U.S., state and foreign intellectual property,
including without limitation all (i) (A) patentable inventions, discoveries,
processes, designs, techniques, developments, technology, and related
improvements and know-how; (B) copyrights in works of authorship in any language
or media, including computer software, databases and related items, textual
works, graphics, artwork, photography, advertising and promotional materials,
designs, web site content, and all authors' rights and waivers; (C) trademarks,
service marks, trade names, brand names, corporate names, domain names, logos,
trade dress and all elements thereof, the goodwill of any business symbolized
thereby, and all common-law rights relating thereto; and (D) trade secrets,
subscriber and advertiser lists and other confidential information; (ii) all
registrations, applications, recordings, licenses and other agreements related
thereto; and (iii) all rights to obtain renewals, extensions, continuations,
continuations-in-part, reissues, divisions or similar legal protections related
thereto.
SECTION 4.12. ENVIRONMENTAL MATTERS. Except for items referred
to below which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, (a) each of the
Company and each of its subsidiaries complies and has complied with all
Environmental Laws applicable to the properties, assets or businesses of the
Company and its subsidiaries, and possesses and complies with and has possessed
and complied with all Environmental Permits required under such laws; (b) no
modification, revocation,
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reissuance, alteration, transfer, or amendment of any of the Environmental
Permits, or any review by, or approval of, any third party of any of the
Environmental Permits is required in connection with the execution or delivery
of this Agreement or the consummation of the transactions contemplated hereby or
the continuation of the business of the Company and its subsidiaries following
such consummation; (c) no judicial or administrative proceeding is pending or to
the knowledge of the Company threatened relating to liability for any off-site
disposal or contamination; (d) none of the Company or any of its subsidiaries
has received any Environmental Claim, and none of the Company or any of its
subsidiaries is aware after reasonable inquiry of any threatened Environmental
Claim; (e) none of the Company or any of its subsidiaries has assumed,
contractually or by operation of law, any liabilities or obligations under any
Environmental Laws; (f) there are and have been no Hazardous Materials at any
property owned, operated or otherwise used by the Company or any subsidiary now
or in the past that reasonably could be expected to give rise to liability that
could reasonably be expected to have a Material Adverse Effect on the Company or
any subsidiary under any Environmental Law; (g) there are no past or present
events, conditions, circumstances, practices, plans or legal requirements that
could reasonably be expected to result in liability to the Company or any of its
subsidiaries under Environmental Laws or prevent or increase either the
Company's or any of its subsidiaries' burden of complying with Environmental
Laws, in either case, such that, individually or in the aggregate, such matters
could reasonably be expected to have a Material Adverse Effect; and (h) none of
the Company or any of its subsidiaries has entered into or agreed to any
consent, decree, order or agreement under any Environmental Law, and none of the
Company or any of its subsidiaries is subject to any judgment, decree or order
relating to compliance with any Environmental Law or to investigation, cleanup,
remediation or removal of Hazardous Materials. For purposes of this Agreement,
the following terms shall have the following meanings:
"ENVIRONMENTAL CLAIM" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by
any person alleging liability or potential liability arising out of,
relating to, based on or resulting from (i) the presence, discharge,
emission, release or threatened release of any Hazardous Materials at
any location, whether or not owned, leased or operated by the Company
or any of its subsidiaries or (ii) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or
Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws.
"ENVIRONMENTAL LAWS" means all applicable federal, state and
local statutes, rules, regulations, ordinances,
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orders, decrees and common law, as they exist at the date hereof,
relating in any manner to contamination, pollution or protection of
human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act,
the Solid Waste Disposal Act, the Resource Conservation and Recovery
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the Emergency
Planning and Community-Right-to-Know Act, the Safe Drinking Water Act,
all as amended, and similar state laws.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
registrations and other governmental authorizations required for the
Company and the operations of the Company's and its subsidiaries'
facilities and otherwise to conduct its business under Environmental
Laws.
"HAZARDOUS MATERIALS" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials and substances regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
SECTION 4.13. MATERIAL ADVERSE CHANGE. Since September 28,
1998, the Company and its subsidiaries have conducted their businesses only in
the ordinary course of business consistent with past practice (except with
respect to the Soap Opera Sale) in all material respects, and, since such date,
there has not been (a) any change, effect, event, occurrence or development in
the business, operations, assets, liabilities, condition (financial or
otherwise), results of operations or prospects of the Company or any of its
subsidiaries that reasonably could be expected to be materially adverse to the
Company and its subsidiaries taken as a whole except for any change resulting
from (i) general economic, financial or market conditions, (ii) conditions or
circumstances generally affecting the newspaper or magazine publishing industry
so long as such change does not have a materially disproportionate effect on the
Company, or (iii) changes in laws of general applicability or applicable
generally to the newspaper or magazine publishing industry so long as such
change does not have a materially disproportionate effect on the Company, (b)
any action by the Company or any of its subsidiaries which, if taken after the
date of this Agreement, would constitute a breach of any provision of Section
6.1 (other than Section 6.1(i) and (n)) or (c) any change, effect, event,
occurrence of development which reasonably could be expected to prevent or delay
in any material respect the consummation of the transactions contemplated by
this Agreement.
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SECTION 4.14. CERTAIN APPROVALS.
(a) The Board of Directors of the Company, at a
meeting duly called and held, has by unanimous vote of the directors present and
with the written consent of the one director not present (who together
constituted 100% of the directors then in office) (a) declared this Agreement
advisable and determined that the transactions contemplated hereby, including
the Merger and the Debt Offer, are fair to and in the best interests of the
stockholders of the Company, (b) duly approved this Agreement and the
transactions contemplated hereby, including the Merger and the Debt Offer, and
the Voting Agreement and (c) resolved to recommend that the holders of Shares
adopt this Agreement. The Board of Directors of the Company has taken
appropriate action such that, assuming the accuracy of Newco's representation in
Section 5.6 of this Agreement, the provisions of Section 203 of the GCL will not
apply to Newco, any "affiliate" or "associate" (each as defined in Section 203)
of Newco or any of the transactions contemplated by this Agreement or the Voting
Agreement.
(b) The Company Stockholder Vote is the only vote of
the holders of any class or series of the Company's voting securities necessary
to approve this Agreement and the transactions contemplated hereby. There is no
vote of the holders of any class or series of the Company's securities necessary
to approve the Voting Agreement.
SECTION 4.15. OPINION OF FINANCIAL ADVISOR. The Company has
received the written opinion of Lazard Freres & Co., LLC ("LAZARD FRERES") to
the effect that the Merger Price is fair to the holders of the Shares from a
financial point of view.
SECTION 4.15.1. BROKERS. Except for the engagement of Lazard
Freres, none of the Company, any of its subsidiaries, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement. The Company is obligated
to pay to Lazard Freres at the Effective Time an aggregate fee of $3.45 million
plus its costs and expenses.
SECTION 4.16. CONTRACTS, ETC. Section 4.16 of the Company
Disclosure Schedule contains a complete and accurate list of all material
contracts (written or oral), plans, undertakings, commitments or agreements to
which the Company or any of its subsidiaries is a party or by which any of them
is bound as of the date of this Agreement ("Contracts") (other than Contracts
between or solely among the Company and any of its wholly owned subsidiaries),
including those agreements included in the following categories.
(a) To the extent not already listed in the Company
Disclosure Schedule, employment contracts, including, without limitation,
contracts to employ executive officers and other
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contracts with officers or directors of the Company or the Principal
Stockholders (or their affiliates), and all severance, change in control or
similar arrangements with any officers, employees or agents of the Company that
will result in any obligation (absolute or contingent) of the Company or any of
its subsidiaries to make any payment to any officers, employees or agents of the
Company following either the consummation of the transactions contemplated
hereby, termination of employment or both;
(b)(i) Contracts for the purchase of
inventory/supplies which are not cancelable (without penalty, cost or other
liability in excess of $100,000) within one (1) year and (ii) other contracts
made in the ordinary course of business involving future annual expenditures or
liabilities of the Company and its subsidiaries in excess of $100,000 which are
not cancelable (without penalty, cost or other liability in excess of $100,000)
within ninety (90) days;
(c) Promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments providing for the lending of
money in excess of $1,000,000, whether as borrower, lender or guarantor;
(d) Contracts containing covenants limiting the
freedom of the Company or any of its subsidiaries to engage in any line of
business or compete with any person or operate at any location;
(e) Joint venture or partnership agreements or joint
development or similar agreements pursuant to which any third party is entitled
to develop any products on behalf of the Company or its subsidiaries;
(f) Any Contract pending or the acquisition or
disposition, directly or indirectly (by merger or otherwise) of assets with fair
market value or book value in excess of $100,000 (other than inventory) or
capital stock of another person;
(g) Any Contract with an affiliate of the Company or
any of its subsidiaries;
(h) Any other Contract containing "change of control"
provisions which would be triggered upon the Merger, sale of the Company or any
of its subsidiaries or similar transaction; and
(i) all Contracts governing the material distribution
of the publications, subscription servicing and any other material Contract
governing the operations of the Company or any subsidiary.
True and complete copies of the written Contracts
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identified on Section 4.16 of the Company Disclosure Schedule have been filed
with the SEC as exhibits to the Company SEC Reports or delivered to Newco,
including, without limitation, all schedules, exhibits and annexes to such
contracts. Except as set forth in Section 4.16 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries nor any other party to
any Contract is in default under, or in breach or violation of, any Contract
and, to the knowledge of the Company, no event has occurred which, with the
giving of notice or passage of time or both would constitute a default under any
Contract, except for such defaults, breaches and violations which, individually
or in the aggregate, reasonably could not be expected to have a Material Adverse
Effect on the Company. Other than contracts which have terminated or expired in
accordance with their terms, each of the Contracts is valid, binding and
enforceable in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered on a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing) and is in full force and
effect. No event (except for the execution, delivery and performance of this
Agreement) has occurred which either entitles, or would, on notice or lapse of
time or both, entitle, the holder of any indebtedness for borrowed money of the
Company or any of its subsidiaries to accelerate, or which does accelerate, the
maturity of any indebtedness affecting the Company or any of its subsidiaries.
SECTION 4.17. LABOR MATTERS. The Company is not a party to any
agreement pursuant to which a labor organization is certified under applicable
labor law as a bargaining agent for any of the Company's or any of its
subsidiaries' employees, nor is such an agreement being negotiated. There are no
representation or certification proceedings, or petitions seeking a
representation proceeding pending or, to the knowledge of the Company,
threatened to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority; and there are not any organizing
activities or strikes involving the Company or any of its subsidiaries with
respect to any group of employees of the Company or its subsidiaries.
SECTION 4.18. TAX MATTERS. Except as set forth on Section 4.18
of the Company Disclosure Schedule: the Company and each of its subsidiaries and
any consolidated, combined, unitary or aggregate group for Tax purposes of which
the Company or any of its subsidiaries is a member has timely filed all material
Tax Returns required to be filed by it in the manner provided by law, has timely
paid all material Taxes and has provided adequate reserves as required by GAAP
in its financial statements with respect to any liability for Taxes not yet due
and payable. Except as set forth in Section 4.18 of the Company Disclosure
Schedule: (i) no deficiencies for any United States federal
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income Taxes have been proposed, asserted or assessed in writing against the
Company or any of its subsidiaries that are not adequately reserved for as
required by GAAP; (ii) no audit of any United States Tax Return of the Company
or any of subsidiaries is being conducted by a Tax authority; (iii) no extension
of the statute of limitations on the assessment of any Taxes has been granted by
the Company or any of its subsidiaries and is currently in effect; (iv) neither
the Company nor any of its subsidiaries (x) has been a member of an affiliated
group filing a consolidated Federal Income Tax Return (other than a group the
common parent of which was the Company) or (y) has any liability for the Taxes
of any person (other than the Company and its subsidiaries) arising from the
application of Treasury Regulations Section 1.1502-6 or any analogous provision
of state, local or foreign law; (v) no consent under Section 341(f) of the Code
has been filed with respect to the Company or any of its subsidiaries; (vi)
neither the Company nor any of its subsidiaries has issued or assumed any
obligations described in Section 279(a) of the Code that remains outstanding;
(vii) no claim for unpaid Taxes has become a Lien against the property of the
Company or any of its subsidiaries or is being asserted against the Company or
any of its subsidiaries; and (viii) neither the Company nor any of its
subsidiaries has made any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments, that will not be
deductible under Sections 162(m) or 2180G of the Code. As used herein, "TAXES"
shall mean any taxes of any kind including but not limited to those on or
measured by or referred to as income, gross receipts, capital, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "TAX RETURN" shall mean any return, report or statement required
to be filed with any governmental authority with respect to Taxes.
SECTION 4.19. MAKE GOOD; ADVERTISING CREDITS. Set forth in
Section 4.19 of the Company Disclosure Schedule is a description of the policies
of the Company and its subsidiaries regarding "make good" and advertising credit
requests for each publication.
SECTION 4.20. INSURANCE. Section 4.20 of the Company
Disclosure Schedule contains a correct and complete description of all
performance bonds, policies or binders of insurance held by or on behalf of the
Company or its subsidiaries exclusively, or providing coverage for any of their
respective properties or assets (in each case specifying the insurer, the amount
of coverage, the type of insurance, the risks insured, the expiration date, and
the policy number). Except as set forth in Section 4.20 of the Company
Disclosure Schedule, to the best of the
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Company's knowledge, no state or fact exists and no event has occurred which
reasonably might form the basis of any claim against or relating to the Company
and its subsidiaries which might substantially increase the insurance premiums
payable under or result in the cancellation or nonrenewal of any of the policies
or binders listed on such schedule.
SECTION 4.21. YEAR 2000. The statement set forth in Section
4.21 of the Company Disclosure Schedule is, as of the date hereof, materially
true and correct.
SECTION 4.22. SOAP OPERA SALE. On February 3, 1999, the Soap
Opera Sale was consummated.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco represents and warrants to the Company that, except as
set forth in the Newco Disclosure Schedule delivered to the Company prior to the
execution of this Agreement (the "NEWCO DISCLOSURE SCHEDULE"), but, with respect
to any representation or warranty, only to the extent that it would be
reasonably apparent that a reference on the Newco Disclosure Schedule relates to
such representation or warranty:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the requisite corporate power and authority to
own, operate or lease its properties and to carry on its business as it is now
being conducted, and is duly qualified or licensed to do business, and is in
good standing, in, each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary, except where the failure to have such power or
authority, or the failure to be so qualified, licensed or in good standing,
would not have a Material Adverse Effect on Newco. The term "MATERIAL ADVERSE
EFFECT ON NEWCO", as used in this Agreement, means any change in or effect on
the business, operations or financial condition of Newco or any of its
subsidiaries that (a) materially and adversely affects the ability of Newco to
perform its obligations under this Agreement or (b) prevents or delays in any
material respect consummation of the transactions contemplated by this Agreement
(including, in each case and without limitation, the financing contemplated by
the Commitment Letters or any other financing obtained in connection with the
transactions contemplated hereby).
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Newco has
all necessary corporate power and authority to execute and
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deliver this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby (including the financing
contemplated by the Commitment Letters or any other financing obtained in
connection with the transactions contemplated hereby). The execution, delivery
and performance of this Agreement by Newco and the consummation by Newco of the
transactions contemplated hereby have been duly and validly authorized and
approved by all necessary corporate actions on the part of Newco and no other
corporate proceedings on the part of Newco are necessary to authorize or approve
this Agreement or to consummate the transactions contemplated hereby (including
the financing contemplated by the Commitment Letters or any other financing
obtained in connection with the transactions contemplated hereby). This
Agreement has been duly executed and delivered by Newco and, assuming the due
and valid authorization, execution and delivery by the Company, constitutes a
valid and binding obligation of Newco enforceable against it in accordance with
its terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to the enforcement of creditors' rights (whether
considered in a proceeding in equity or in law) generally and (ii) is subject to
general principles of equity.
SECTION 5.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution, delivery and performance
of this Agreement by Newco, the consummation by Newco of the transactions
contemplated hereby or compliance by Newco with any of the provisions hereof
will (i) conflict with or violate any provision of the organizational documents
of Newco, (ii) subject to the governmental filings and other matters referred to
in Section 5.3(b) below, conflict with or violate any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Newco, or any of its
subsidiaries, or by which any of them or any of their respective properties or
assets may be bound or affected, or (iii) result in a Violation pursuant to any
loan or credit agreement, note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Newco or any its subsidiaries is a party or by which any of their respective
properties or assets may be bound or affected, except in the case of the
foregoing clauses (ii) and (iii) for any such Violations which reasonably could
not be expected to have a Material Adverse Effect on Newco.
(b) None of the execution, delivery and performance
of this Agreement by Newco, the consummation by Newco of the transactions
contemplated hereby (including the financing contemplated by the Commitment
Letters or any other financing obtained in connection with the transactions
contemplated hereby) or compliance by Newco with any of the provisions hereof
will require any Consent of any Governmental Entity, except for
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(i) compliance with any applicable requirements of the Exchange Act, (ii) the
filing of a certificate of merger, pursuant to the GCL, (iii) applicable state
takeover and environmental statutes, (iv) compliance with the HSR Act and any
requirements of any foreign or supranational Antitrust Laws, and (v) Consents,
the failure of which to obtain or make reasonably could not be expected to have
a Material Adverse Effect on Newco.
SECTION 5.4. INFORMATION. None of the information supplied or
to be supplied by Newco in writing specifically for inclusion in (i) the Offer
Documents, (ii) the Consent Statement or (iii) the Other Filings will, at the
respective times filed with the SEC or such other Governmental Entity and, in
addition, in the case of the Consent Statement, at the date it or any amendment
or supplement is mailed to stockholders, and at the Effective Time, and, in the
case of the Offer Documents, at the time the Offer Documents or any amendments
or supplements are first published or sent or given to holders of the
Subordinated Notes, as the case may be, or at the time the Debt Offer is
consummated, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading, except, in each case, as the same may be amended or
supplemented prior to the Effective Time. Notwithstanding the foregoing, Newco
makes no representation or warranty with respect to any information supplied by
the Company or its subsidiaries or any of their respective representatives which
is contained in or incorporated by reference in the Consent Statement.
SECTION 5.5. FINANCING. Attached as Annex A-1 to A-2 of the
Newco Disclosure Schedule are true and complete copies of the letters addressed
to the Company, dated the date hereof, issued in connection with the financing
of the transactions contemplated by this Agreement (collectively, the
"Commitment Letters"). The terms and conditions of the letters attached as Annex
A-1 to A-2 of the Newco Disclosure Schedule are satisfactory to Newco.
SECTION 5.6. NEWCO NOT AN INTERESTED STOCKHOLDER OR AN
ACQUIRING PERSON. Except as a result of the execution of this Agreement or the
Voting Agreement, as of the date of this Agreement Newco is not an "INTERESTED
STOCKHOLDER" of the Company as such term is defined in Section 203 of the GCL.
SECTION 5.7. NEWCO.
(a) Except as contemplated by this Agreement, none of
Newco, Evercore Capital Partners L.P., any of their affiliates controlled by any
of them, Evercore Partners LLC or any of its affiliates are engaged in the
magazine or newspaper publishing business, and there is no intention as of the
date hereof, on the part of Newco, Evercore Capital Partners L.P., any of their
affiliates controlled by any of them, Evercore Partners
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LLC or any of its affiliates, to cause Newco to become affiliated with any
person engaged in the magazine or newspaper publishing business.
(b) Newco has not engaged in any business, and has
(and prior to the Effective Time will have) no liabilities except for costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including costs and expenses of providers of the financing
contemplated by the Commitment Letters) in connection with the transactions
contemplated hereby), liabilities under this Agreement and liabilities to the
providers of finance pursuant to the Commitment Letters as described in the
Commitment Letters.
(c) None of the Commitment Letters requires that
Newco or its affiliates make any payments (other than reimbursement of costs and
expenses as therein provided) before the Effective Time.
SECTION 5.8. BROKERS. Neither Newco nor any of its
subsidiaries, officers, directors or employees, has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated by this Agreement for or
with respect to which the Company is or might be liable.
ARTICLE VI.
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as
expressly contemplated by this Agreement (and, for purposes of Section 4.13, the
Soap Opera Sale) or with the prior written consent of Newco, during the period
from the date of this Agreement to the Effective Time, the Company will, and
will cause each of its subsidiaries to, conduct its operations only in the
ordinary course of business consistent with past practice and in compliance with
applicable laws and will use its reasonable efforts, and will cause each of its
subsidiaries to use its reasonable efforts, to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available the
services of its and their present officers and employees, and to preserve the
good will of those having business relationships with it. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, the Company Disclosure Schedule (or for purposes of Section
4.13, the Soap Opera Sale), the Company will not, and will not permit any of its
subsidiaries to, prior to the Effective Time, without the prior written consent
of Newco:
(a) adopt any amendment to its certificate of
incorporation or by-laws or comparable organizational documents;
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(b) except for issuances of capital stock of the
Company's subsidiaries to the Company or a wholly-owned subsidiary of the
Company, issue, reissue, deliver, sell, pledge or otherwise encumber, agree or
commit to issue, reissue, deliver, sell, pledge or otherwise encumber, or
authorize the issuance, reissuance, delivery, sale, pledge or encumbrance of
shares of capital stock of any class, any other voting securities or equity
equivalents (including, without limitation, stock appreciation rights) or
securities convertible into, or exchangeable for capital stock or equity
equivalents, or any rights, warrants or options to acquire any convertible
securities, capital stock, voting securities or equity equivalents other than
the issuance of Class A Shares pursuant to the exercise of the Options
outstanding on September 30, 1998, and in accordance with their terms as of the
date of this Agreement or pursuant to the conversion of Class C Shares;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock or rights,
warrants or options to acquire any such securities, except for the Debt Offer
and the purchase of the Subordinated Notes and transactions between or among the
Company and any of its wholly-owned subsidiaries;
(d) split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem, purchase or otherwise
acquire, any shares of its capital stock, or any of its other securities or
rights, warrants or options to acquire any such shares or securities, except for
the Debt Offer and the purchase of the Subordinated Notes and transactions
between or among the Company and any of its wholly owned subsidiaries;
(e) (i) except for increases in salary or wages,
benefits of officers or of employees of the Company or its subsidiaries (who are
not officers of the Company or Operations) in the ordinary course of business
and in accordance with past practice, (ii) increases in salary, wages and
benefits granted to officers and employees of the Company or its subsidiaries
(who are not officers of the Company or Operations) in conjunction with new
hires, promotions or other changes in job status or (iii) increases in salary,
wages and benefits to employees of the Company pursuant to collective bargaining
agreements entered into in the ordinary course of business or pursuant to
agreements disclosed in Sections 4.10 or 4.16 of the Company Disclosure
Schedule, increase the compensation or fringe benefits payable or to become
payable to its directors, officers or key employees (whether from the Company or
any of its subsidiaries), or pay any benefit not required by any existing plan
or arrangement (including, without limitation, the granting of stock options,
stock appreciation rights, shares of restricted stock or performance units) or
grant any severance or termination pay to (except pursuant to existing
agreements, plans or policies), or
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enter into any employment, consulting or severance agreement with, any director,
officer or other key employee of the Company or any of its subsidiaries or
establish, adopt, enter into, or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, welfare, deferred compensation, employment termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees (any of the foregoing being an "EMPLOYEE BENEFIT ARRANGEMENT"),
except in each case to the extent required by applicable law or regulation;
(f) acquire, sell, lease, license, mortgage, encumber
or dispose of any assets (other than inventory) or securities (including capital
stock of the Company's subsidiaries), or enter into any commitment to do any of
the foregoing, in each case outside the ordinary course of business, other than
transactions between or among the Company and any of its wholly owned
subsidiaries;
(g) merge or consolidate with, or purchase an equity
interest in or a substantial portion of the assets of, any corporation,
partnership, association or other business organization or any division or
business thereof other than transactions between or among the Company or any of
its fully owned subsidiaries;
(h) (i) incur, assume or pre-pay any long-term debt,
incur or assume any short-term debt, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its subsidiaries (other than transactions between or among the Company and any
of its wholly-owned subsidiaries or (except for incurring Funded Debt in the
ordinary course of business consistent with past practice so long as the
aggregate amount of Funded Debt does not exceed $474 million at any one time
outstanding) except that the Company and its subsidiaries may incur, assume or
pre-pay debt to the extent necessary to effect the Debt Offer and except that
the $474 million limitation shall not apply to periods prior to the date hereof;
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person (other than checks in collection and transactions between or among the
Company and any of its wholly owned subsidiaries) or (iii) make any loans,
advances or capital contributions to, or investments in, any other person except
for loans, advances, capital contributions or investments between or among the
Company and any of its wholly owned subsidiaries and investments in cash
equivalents or trade receivables; or
(i) take any other action that reasonably could be
expected to result in any of the representations and warranties of the Company
set forth in this Agreement becoming
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untrue or any of the conditions to the Merger set forth in Section 7.1 or 7.2
hereof not being satisfied;
(j) adopt a plan of complete or partial liquidation
or resolutions provided for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization of
Company or any of its subsidiaries;
(k) change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, or change any other
material accounting principles or practices used by it (except changes that may
be necessary or appropriate in order to comply with a change in GAAP that takes
effect after the date of this Agreement);
(l)(i) pay, discharge or satisfy any claims
(including claims of stockholders or repayment of debt otherwise permitted),
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or satisfaction of
(A) liabilities in the ordinary course consistent with past practices, and (B)
costs relating to this Agreement and the transactions contemplated hereby, (ii)
other than in connection with a settlement otherwise permitted under clause
(iii) below, waive, release, grant or transfer any rights of material value or
terminate, modify or change in any material respect any existing material
license, lease, contract or other document or (iii) settle or compromise any
litigation (whether or not commenced prior to the date of this Agreement) other
than settlements or compromises of litigation in the ordinary course of business
consistent with past practice if the amount paid (after giving effect to
insurance proceeds actually received or to be received) in settlement or
compromise does not exceed $75,000; PROVIDED that the aggregate amount paid
(after giving effect to insurance proceeds actually received or to be received)
in connection with the settlement or compromise of all such litigation matters
shall not exceed $1 million (exclusive, in the case of Section 4.13 hereof, of
amounts paid in settlement or compromise of litigation after September 28, 1998,
but before December 28, 1998);
(m) enter into any collective bargaining agreement or
any successor collective bargaining agreement to any collective bargaining
agreement;
(n) make or agree (other than pursuant to contracts
or arrangements that are terminable by the Company after nor more than 90 days
notice and without penalty or cost in excess of $100,000) to make any new
capital expenditure or expenditures which exceed, in the aggregate, $5 million
if such expenditures are made in the ordinary course of business consistent with
past practice
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(o) engage in any transaction with, or enter into any
agreement, arrangement or understanding with, directly or indirectly, any of the
Company's affiliates (other than wholly-owned subsidiaries of the Company);
(p) make or change any material Tax election, file
any material amended Tax Return, settle or compromise any material federal,
state, local or foreign Tax liability, change any annual Tax accounting period,
change any method of Tax accounting, enter into any material closing agreement
relating to any Tax, surrender any right to claim a material Tax refund, or
consent to any extension or waiver of the limitations period applicable to any
material Tax claim or assessment;
(q)(i) grant any material bonus, free or make good
space to any advertiser or change the discount structure for any of the
Company's advertising customers other than in the ordinary course of business
consistent with past practice, (ii) (x) change the 52-week subscription pricing
of any of the publications, (y) change the other subscription pricing in any of
the publications other than, in the case of this clause (y), in the ordinary
course of business consistent with past practice or (z) enter into, amend or
terminate any material arrangements with any subscription agents, (iii) change
any cover prices, wholesaler discounts or any other changes to the Company's
incentive sales programs (wholesale or retail), (iv) enter into any material
licensing agreement, arrangement or understanding with respect to television,
radio, Internet or other media or enter into any material licensing agreement,
arrangement or understanding with respect to any "branded" merchandise bearing
any of the trademarks or tradenames owned or licensed by the Company or any
subsidiary; (v) enter into, amend or terminate any agreements or arrangements
with the national distributor of the publications; or (vi) take any action with
respect to the publications in contravention of the advice of the Company's
litigation counsel; or
(r) authorize any of, or commit, contract, arrange or
agree in writing or otherwise to take any of the foregoing actions.
SECTION 6.2. ACCESS TO INFORMATION; INTERIM FINANCIALS.
(a) From the date hereof until the Effective Time,
the Company will, and will cause its subsidiaries, and each of their respective
officers, directors, employees, counsel, advisors and representatives
(collectively, the "COMPANY REPRESENTATIVES") to, provide Newco and its
respective officers, employees, counsel, advisors and representatives
(collectively, the "NEWCO REPRESENTATIVES") reasonable access (subject, however,
to existing confidentiality and similar non-disclosure obligations), during
normal business hours and upon reasonable notice, to the offices and other
facilities and to the books and
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records and personnel of the Company and its subsidiaries, as will permit Newco
to make inspections of such as it may reasonably require, and will cause the
Company Representatives and the Company's subsidiaries to furnish Newco and the
Newco Representatives to the extent available with such other information with
respect to the business and operations of the Company and its subsidiaries as
Newco may from time to time reasonably request. Unless otherwise required by
law, Newco will, and will cause the Newco Representatives to, hold any such
information in confidence to the extent required by, and in accordance with, the
Confidentiality Agreement (as hereinafter defined).
(b) No investigation pursuant to this Section 6.2
shall affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
(c) As promptly as practicable after their
completion, the Company shall deliver to Newco copies of monthly consolidated
balance sheets, statements of operations and cash flows to the extent
customarily prepared by the Company in the ordinary course of business and in a
manner consistent with past practice.
SECTION 6.3. REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions herein
provided, each of the parties hereto agrees to, and shall cause each of its
subsidiaries to, use its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, and to assist and cooperate with the
other parties hereto in doing, as promptly as practicable, all things necessary,
proper or advisable to ensure that the conditions set forth in Article VII are
satisfied and to consummate and make effective, in the most expeditious manner
practicable, the Merger, the Debt Offer and the other transactions contemplated
by this Agreement and the Voting Agreement.
(b) The Company agrees to provide, and will cause its
subsidiaries and its and their respective officers, employees and advisers to
provide, all necessary cooperation in connection with the arrangement of any
financing to be consummated contemporaneous with or at or after the Closing in
respect of the transactions contemplated by this Agreement, including without
limitation, participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, the execution and delivery of any commitment letters,
underwriting or placement agreements, pledge documents, or other definitive
financing documents including a certificate of the chief financial officer
(without personal liability thereto) of the Company with respect to solvency
matters, comfort letters of accountants and legal opinions as may be requested
by Newco. In
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addition, in conjunction with the obtaining of any such financing, the Company
agrees, at the request of Newco, to call for prepayment or redemption, or to
prepay, redeem and/or renegotiate, as the case may be, any then existing
indebtedness of the Company. Anything in this Agreement to the contrary
notwithstanding, none of the actions, agreements or documents described in this
Section 6.3(b) shall impose any liability on the Company or its subsidiaries
until after the Effective Time and Newco shall reimburse the Company for all
Expenses incurred thereby (or by its subsidiaries) in respect of the foregoing
to the extent provided in Section 8.3 hereof (and all costs of litigation in
respect of the Debt Offer as described in Section 6.11 hereof).
(c) If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
(d) The Company shall not take any action with
respect to any transaction or proposed transaction with a third party with the
intention of impeding, interfering with, preventing or materially delaying the
Debt Offer or the Merger or diluting the benefits to Newco of the transactions
contemplated by this Agreement. The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which the company is a party. The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
conducted heretofore by or on behalf of the Company with respect to any of the
foregoing.
(e) Each of the parties agrees to cooperate with each
other in taking, or causing to be taken, all actions necessary to delist the
Shares from the New York Stock Exchange; provided, that such delisting shall not
be effective until after the Effective Time. The parties also acknowledge that
it is Newco's intent that the Shares following the Merger will not be listed on
any national securities exchange or quoted on NASDAQ/NMS.
SECTION 6.4. CONSENTS. Each of the parties will use its
reasonable best efforts to obtain as promptly as practicable all Consents of any
Governmental Entity or any other person required in connection with, and waivers
of any Violations that may be caused by, the consummation of the Merger, the
Debt Offer and the other transactions contemplated by this Agreement and the
Voting Agreement (provided that the Company shall not pay or agree to pay any
material amount to obtain a Consent without the prior approval of Newco).
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SECTION 6.5. PUBLIC ANNOUNCEMENTS. So long as this Agreement
is in effect, Newco and the Company agree to use reasonable efforts to consult
with each other before issuing, and provide each other with a reasonable
opportunity to review and comment upon, any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Agreement and the Voting Agreement. The parties agree that the initial press
release or releases to be issued with respect to the transactions contemplated
by this Agreement and the Voting Agreement shall be mutually agreed upon prior
to the issuance thereof.
SECTION 6.6. EMPLOYEE BENEFITS MATTERS.
(a) Except as contemplated herein, the Surviving
Corporation, for a period of at least six months from the Effective Time, shall
provide employee benefits under plans, programs and arrangements (other than
equity-based plans) which, in the aggregate, will provide benefits to all
employees of the Surviving Corporation or its subsidiaries which are no less
favorable, in the aggregate, than those provided pursuant to the plans, programs
and arrangements of the Company and its subsidiaries in effect and disclosed to
Newco as of the date hereof; PROVIDED, HOWEVER, that nothing herein shall (i)
require that the Surviving Corporation provide or permit investment in the
securities of the Surviving Corporations or (ii) interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law or (iii) prevent the amendment or termination of any
such plan, program or arrangement, so long as in each such case the aggregate of
benefits provided to all employees of the Surviving Corporation or its
subsidiaries for such six month period are no less favorable than those provided
pursuant to the plans, programs and arrangements of the Company and its
subsidiaries in effect and as disclosed to Newco as of the date hereof.
(b) Newco and the Company agree that, for purposes
of the Employee Severance Policy as reflected in Section 6.6 of the Company
Disclosure Schedule the resignations contemplated by Section 7.2(h) hereof from
persons who are also employees of the Company or any of its subsidiaries shall
not affect the rights of such resigning directors under such severance policy.
SECTION 6.7. INDEMNIFICATION.
(a) Newco agrees that all rights to indemnification
now existing in favor of any current or former employee, agent, director or
officer of the Company and its subsidiaries (the "INDEMNIFIED PARTIES") as
provided in their respective certificates of incorporation or by-laws, in an
agreement between an Indemnified Party and the Company or one of its
subsidiaries, in effect on the date hereof and disclosed in Section 6.7 of the
Company Disclosure Schedule shall survive the
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Merger and shall continue in full force and effect for a period of six years
from the Effective Time; PROVIDED that in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until final disposition of
any and all such claims.
(b) Subject to the terms hereof, Newco agrees that
the Company and, from and after the Effective Time, the Surviving Corporation
shall cause to be maintained in effect for six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company; PROVIDED that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time. Prior to the Effective Time, the Company shall endeavor to, and
shall be permitted to, satisfy its obligations under the preceding sentence by
extending coverage under such insurance policies pursuant to a six-year "tail"
policy if the terms of such "tail" policy are agreed to in writing by Newco. If
such a "tail" policy cannot be purchased on such terms prior to the Effective
Time, then the Company shall endeavor to obtain coverage contemplated by the
first sentence of this Section 6.7(b) at the lowest premium cost available;
PROVIDED, that the Surviving Corporation shall not be required to pay an annual
premium in excess of 200% of the last annual premium paid by the Company prior
to the date hereof and if the Surviving Corporation is unable to obtain the
insurance required by this Section 6.7(b) within such limitation it shall obtain
as much comparable insurance as possible for an annual premium equal to such
maximum amount; and PROVIDED, FURTHER, that during such six-year period the
Surviving Corporation shall review, not less than annually, the feasibility of
purchasing tail coverage for the balance of such six-year period and shall
endeavor to purchase such coverage if it is available at a cost not exceeding
the maximum amount that the Surviving Corporation would otherwise be obligated
to pay for such remaining period under the first proviso to this sentence. The
Company represents and warrants that the current annual premium for such
insurance coverage is $182,200.
(c) The provisions of this Section 6.7 shall survive
the Merger, and each Indemnified Party shall, for all purposes, be a third-party
beneficiary of the covenants and agreements of Newco and the Company under this
Section 6.7 and, accordingly, shall be treated as a party to this Agreement for
purposes of the rights and remedies relating to enforcement of such covenants
and agreements and shall be entitled to enforce any such rights and exercise any
such remedies directly.
SECTION 6.8. NO SOLICITATION. The Company agrees that, prior
to the Effective Time, it and each of its subsidiaries
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shall not, and shall not authorize or permit any of its or its subsidiaries'
directors, officers, employees, agents, advisors or representatives, directly or
indirectly, to (a) solicit, initiate or encourage or knowingly facilitate the
submission of any inquiries or the making of any proposal (a "TAKEOVER
PROPOSAL") with respect to any acquisition or purchase of a significant amount
of assets of the Company and its subsidiaries, taken as a whole (other than
inventory), or of over 15% of any class of equity securities of the Company or
any of its subsidiaries or any tender offer (including a self tender offer) or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of the Company or any of
its subsidiaries, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, reclassification, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries other than the transactions contemplated by this Agreement and the
Voting Agreement (an "ACQUISITION TRANSACTION"), (b) negotiate, explore or
otherwise participate in discussions with any person (other than Newco or its
directors, officers, employees, agents and representatives) with respect to any
Acquisition Transaction, or furnish to any person (other than Newco or its
directors, officers, employees, agents and representatives) any information with
respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person (other than Newco or its
directors, officers, employees, agents and representatives) to do or seek any of
the foregoing, in each case, in respect of an Acquisition Transaction or (c)
enter into any agreement, arrangement or understanding with respect to, or
endorse, any Takeover Proposal.
SECTION 6.9. NOTIFICATION OF CERTAIN MATTERS. Newco and the
Company shall promptly notify each other of (a) the occurrence or non-occurrence
of any fact or event which would be reasonably likely (i) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (ii) to cause any covenant, condition or agreement hereunder
not to be complied with or satisfied in all material respects and (b) any
failure of the Company or Newco, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; PROVIDED, HOWEVER, that no such notification
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder or shall limit or otherwise affect the
remedies available hereunder to the parties receiving such notice.
SECTION 6.10. STATE TAKEOVER LAWS. The Company shall, upon the
request of Newco, take all reasonable steps to assist in any challenge by Newco
to the validity or applicability to the
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transactions contemplated by this Agreement, including the Merger and the Voting
Agreement, of any state takeover law.
SECTION 6.11. DISPOSITION OF LITIGATION. The Company will not
voluntarily cooperate with any third party which has sought or may hereafter
seek to restrain or prohibit or otherwise oppose the Debt Offer or the Merger
and will cooperate with Newco to resist any such effort to restrain or prohibit
or otherwise oppose the Debt Offer or the Merger.
SECTION 6.12. STOP TRANSFER ORDER. The Company shall notify
the Company's transfer agent that there is a stop transfer order with respect to
all of the Subject Shares (as defined in the Voting Agreement) and that the
Voting Agreement places limits on the voting of the Subject Shares.
SECTION 6.13. FINANCING.
(a) Newco shall use its reasonable best efforts
(including complying with the provisions of the Commitment Letters) to obtain
the debt and equity financing necessary to consummate the Merger.
(b) Newco shall (i) fully enforce its rights under
the Commitment Letters and the documents contemplated thereby and (ii) not
amend, modify or terminate any of the Commitment Letters in a manner which
reasonably could be expected to result in a Material Adverse Effect on Newco.
(c) Newco shall not include any information
concerning the Company or its subsidiaries in any offering document to be used
in connection with a sale of securities contemplated by the Commitment Letters
to which the Company reasonably objects and Newco shall provide the Company with
copies of all such material to enable the Company to comment thereon.
(d) At the Effective Time, Newco shall provide the
Company with a copy of each solvency opinion (if any) delivered to any source of
financing in respect of the transactions contemplated hereby. Such opinion shall
state that it may be relied upon by the Board of Directors of the Company.
(e) None of Newco, Evercore Capital Partners L.P.,
any of their affiliates controlled by any of them, Evercore Partners LLC or any
of its affiliates shall announce, or announce any intention to pursue, any
transaction that, if announced on the date hereof, could reasonably be expected
to have a Material Adverse Effect on Newco.
SECTION 6.14. NEWCO ACTION. Newco shall not take any action
that reasonably could be expected to result in any of the representations and
warranties of Newco set forth in this
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Agreement becoming untrue or any of the conditions to the Merger set forth in
Section 7.1 or 7.3 not being satisfied.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS OF EACH PARTY'S OBLIGATION TO
CONSUMMATE THE MERGER. The respective obligations of Newco and the Company to
consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions:
(a) STOCKHOLDER APPROVAL. The stockholders
of the Company shall have duly approved the transactions contemplated by this
Agreement, pursuant to the requirements of the Company's certificate of
incorporation and applicable law.
(b) HSR ACT. The waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired.
(c) INJUNCTIONS; ILLEGALITY. The
consummation of the Merger, shall not be restrained, enjoined or prohibited by
any order, judgment, decree, injunction or ruling of a court of competent
jurisdiction or any Governmental Entity and there shall not have been any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any Governmental Entity which prevents the consummation of the Merger;
provided, however, that each of the parties shall have used their reasonable
best efforts to prevent the entry of such order, judgment, decree, injunction or
ruling and to appeal as promptly as practicable any such order, judgment,
decree, injunction or ruling.
SECTION 7.2. CONDITIONS TO OBLIGATION OF NEWCO. The
obligations of Newco to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement that
are qualified as to materiality shall be true and correct and any such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date. Newco
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company (with no
personal liability thereto) to the effect set forth in this paragraph.
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(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The
Company shall have performed, in all material respects, the obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) CONSENTS, ETC. Newco shall have received
evidence, in form and substance reasonably satisfactory to it, that such
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities, the failure of which to obtain reasonably could
be expected to have a Material Adverse Effect on the Company, have been
obtained.
(d) NO MATERIAL LITIGATION. There shall not be
pending by any Governmental Entity or any other third party any suit, action or
proceeding which has a reasonable likelihood of success (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement or the Voting Agreement or
seeking to obtain from Newco or any of its affiliates any damages that are
material (assuming that the Merger had been consummated) to any party, (ii)
seeking to prohibit or limit the ownership or operation by the Company or any of
its subsidiaries of any material portion of the business or assets of the
Company or any of its subsidiaries or (iii) seeking to impose limitations on the
ability of Newco (or any designee of Newco pursuant to the Voting Agreement) or
any stockholder of Newco or the Company to acquire or hold, or exercise full
rights of ownership of, any Shares, including, without limitation, the right to
vote the Company's shares on all matters properly presented to the stockholders
of the Company.
(e) FINANCING. Newco shall have received the
proceeds of financing on the terms and conditions set forth in Annexes A-1
through A-2 of the Newco Disclosure Schedule or upon terms and conditions which
are substantially equivalent thereto and to the extent that any terms and
conditions are not set forth in Annexes A-1 through A-2 of the Newco Disclosure
Schedule, on terms and conditions reasonably satisfactory to Newco.
(f) SUBORDINATED NOTES. Newco shall have received
evidence that the terms of the Subordinated Notes shall have been amended as
contemplated by the terms of the Debt Offer. The Company shall have purchased at
least that principal amount of Subordinated Notes as equals the minimum
condition of the Debt Offer.
(g) APPRAISAL RIGHTS. Stockholders comprising no more
than 20% of the outstanding Shares shall have demanded appraisal rights under
Section 262 of the GCL.
(h) RESIGNATIONS OF COMPANY DIRECTORS. Each director
of the Company shall have resigned as a director of the Company pursuant to a
letter of resignation signed thereby and
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delivered to Newco and the Company.
(i) NO MATERIAL ADVERSE CHANGE. Since March 31, 1998,
there shall not have occurred any change, effect, event, occurrence or
development that is materially adverse to the business, operations, assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole except for any
change or effect resulting from (i) general economic, financial or market
conditions, (ii) any change or effect resulting from conditions or circumstances
generally affecting the newspaper or magazine publishing industry so long as
such change or effect does not have a materially disproportionate effect on the
Company or (iii) changes in laws of general applicability or applicable
generally to the newspaper or magazine publishing industry so long as such
change or effect does not have a materially disproportionate effect on the
Company.
SECTION 7.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligations of the Company to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions.
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Newco set forth in this Agreement that are
qualified as to materiality shall be true and correct and any such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date. The Company shall have received a certificate signed
on behalf of Newco by an authorized officer of Newco (with no personal liability
thereto) to the effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF NEWCO. Newco shall
have performed, in all material respects, the obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated
and the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company or of Newco:
(a) by the mutual written consent of Newco and the
Company;
(b) by Newco or the Company if any court or other
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Governmental Entity shall have issued, enacted, entered, promulgated or enforced
any order, judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, the Debt Offer or
any of the transactions contemplated by the Merger Agreement, or otherwise
altering the terms of any of the forgoing in any material respect and such
order, judgment, decree, injunction, ruling or other action shall have become
final and nonappealable;
(c) by the Company if there shall have occurred, on
the part of Newco, a breach of any representation, warranty, covenant or
agreement contained in this Agreement which would give rise to the failure of a
condition set forth in Section 7.3(a) or 7.3(b) and which is not curable or, if
curable, is not cured within 30 calendar days after written notice of such
breach is given by the Company to Newco or cannot be cured by the termination
date set forth in Section 8.1(e) (provided that the Company is not then in
breach of any representation, warranty covenant or agreement contained in this
Agreement which would give rise to a failure of a condition set forth in Section
7.2(a) or 7.2(b));
(d) by Newco if there shall have occurred, on the
part of the Company, a breach of any representation, warranty, covenant or
agreement contained in this Agreement which would give rise to the failure of a
condition set forth in Section 7.2(a) or 7.2(b) and which is not curable or, if
curable, is not cured within 30 calendar days after written notice of such
breach is given by Newco to the Company or cannot be cured by the termination
date set forth in Section 8.1(e) (provided that Newco is not then in breach of
any representation, warranty, covenant or agreement contained in this Agreement
which would give rise to a failure of a condition set forth in Section 7.3(a) or
7.3(b));
(e) by Newco or the Company, if the Merger shall not
have been consummated on or before the earlier of (i) the later of 120 days
after the date hereof or 25 business days after the first date on which the
Company is permitted to disseminate the Consent Statement to its stockholders
pursuant to the rules and regulations under the Exchange Act and the NYSE or
(ii) 140 days after the date hereof; PROVIDED, that the right to terminate this
Agreement under this Section 8.1(e) shall not be available to the party whose
action or failure to act has been the cause of or resulted in the failure of the
Merger to occur on or before such date and such action or failure to act
constitutes a material breach of any representation, warranty or covenant in
this Agreement;
(f) by Newco, if the Company Stockholder Approval
shall not have been obtained.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 8.1, this
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Agreement shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders, other than
the provisions of this Section 8.2, Section 8.3, the last sentence of Section
6.2 and Article IX, which shall survive any such termination. Nothing contained
in this Section 8.2 or Section 8.3 shall relieve any party from liability for
any willful breach of any agreement or covenant of such party prior to
termination of this Agreement or for any breach of the Confidentiality
Agreement.
SECTION 8.3. EXPENSES.
(a) Whether or not the Merger is consummated (unless
otherwise provided in Section 8.2 or this Section 8.3), all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses; PROVIDED,
HOWEVER, if the Merger as contemplated by this Agreement is consummated, then
the fees and expenses incurred by Newco and its affiliates in connection with
this transaction shall be paid by the Company.
(b) If this Agreement is terminated pursuant to
Section 8.1(e), then Newco shall pay to the Company all Expenses incurred by the
Company in respect of the performance of the Company's obligations in Sections
3.3, 6.3 and 6.11 hereof in respect of the Debt Offer and the financing
contemplated by the Commitment Letters.
(c) If this Agreement is terminated by Newco pursuant
to Section 8.1(d) or 8.1(f), then the Company shall pay to Newco all Expenses
incurred by Newco and its affiliates. Any payment pursuant to this Section
8.3(c) shall reduce damages otherwise obtainable by Newco in respect of a
willful breach by the Company of this Agreement.
(d) If this Agreement is terminated by the Company
pursuant to Section 8.1(c), then Newco shall pay to the Company all Expenses
incurred by the Company thereby. Any payment pursuant to this Section 8.3(d)
shall reduce damages otherwise obtainable by the Company in respect of a willful
breach by Newco of this Agreement.
"EXPENSES" means all out-of-pocket fees and expenses actually
incurred by any party hereto or on its behalf, whether before or after the
execution and delivery of this Agreement, in connection with the transactions
contemplated by this Agreement, including the Merger and the Debt Offer, and the
Voting Agreement, including without limitation the costs and expenses payable by
such party or its affiliates to all banks, investment banking firms and other
financial institutions, and the fees and expenses of their respective agents and
counsel, all fees and expenses of counsel, accountants, experts and consultants
to such party or its affiliates, and, in the case of Newco and its
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affiliates, all salary and bonus payments, expense reimbursements and other
payments (not to exceed an amount disclosed to the Company in a letter dated the
date hereof from Newco to the Company) made by Newco or its affiliates to David
Pecker and, further, including without limitation fees and expenses of the party
attempting to collect such Expenses that are incurred in connection with, any
litigation or other proceedings to collect the Expenses if such party prevails
in such litigation or proceeding. Expenses shall not include fees to any person
(or its affiliates) providing, directly or indirectly, equity finance or costs
of employee compensation or overhead thereof.
SECTION 8.4. AMENDMENT. This Agreement may be amended by the
Company and Newco at any time before or after any approval of this Agreement by
the stockholders of Newco or of the Company but, after any such approval, no
amendment shall be made which under applicable law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of all the parties.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto may (i) extend the time for the performance
of any of the obligations or other acts of any other party hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein by any
other party or in any document, certificate or writing delivered pursuant
thereto by any other party or (iii) subject to applicable law, waive compliance
with any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made in this Agreement shall not survive
beyond the Effective Time. Notwithstanding the foregoing, the agreements set
forth in Sections 2.4 and 3.2, Section 6.3(c) and Sections 6.6 and 6.7 shall
survive the Effective Time indefinitely (except to the extent a shorter period
of time is explicitly specified therein).
SECTION 9.2. ENTIRE AGREEMENT; ASSIGNMENT.
(a) This Agreement (including the documents and
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the instruments referred to herein) and the letter agreement, by and between
Purchaser and the Company (the "CONFIDENTIALITY AGREEMENT"), constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof.
(b) Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party; PROVIDED, that Newco may assign its rights hereunder to any of
its affiliates, but no such assignment shall relieve Newco of its obligations
hereunder or cause any representation or warranty of the Company or Newco herein
to be materially incorrect or, in the Company's reasonable judgment, materially
delay the Closing or the consummation of the transactions contemplated hereby.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
SECTION 9.3. VALIDITY. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, each of which shall remain in full
force and effect.
SECTION 9.4. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by overnight courier or facsimile
to the respective parties as follows:
If to Newco:
EMP Acquisition Corp.
65 East 55th Street
New York, New York 10022
Attention: Austin Beutner
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
If to the Company:
American Media, Inc.
600 South East Coast Avenue
Lantana, Florida 33464
Attention: Peter J. Callahan
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with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Jack H. Nusbaum, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.5. GOVERNING LAW; JURISDICTION. (a) This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
(a)(b) In addition, each of the parties hereto
(i) consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a federal or
state court sitting in the State of Delaware.
SECTION 9.6. WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH
SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.6.
SECTION 9.7. DESCRIPTIVE HEADINGS. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
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<PAGE> 54
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 9.9. PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and, except
with respect to Sections [2.4 and] 6.6(b), 6.7, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.10. CERTAIN DEFINITIONS. As used in this Agreement:
"ACQUISITION TRANSACTION" shall have the meaning set forth in
Section 6.8.
"AFFILIATE", as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
"CERTIFICATE" shall have the meaning set forth in Section
2.1(b).
"CLASS A SHARES" shall have the meaning set forth in the
Recitals hereto.
"CLASS B SHARES" shall have the meaning set forth in Section
4.3.
"CLASS C SHARES" shall have the meaning set forth in the
Recitals hereto.
"CODE" shall have the meaning set forth in Section 3.2(i).
"COMMITMENT LETTERS" shall have the meaning set forth in
Section 5.5.
"COMPANY" shall have the meaning set forth in the first
paragraph of this Agreement.
"COMPANY DISCLOSURE SCHEDULE" shall have the meaning set forth
in Article 4.
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<PAGE> 55
"COMPANY REPRESENTATIVES" shall have the meaning set forth in
Section 6.2.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth
in Section 9.2(a).
"CONSENT" shall have the meaning set forth in Section 4.5(b).
"CONSENT STATEMENT" shall have the meaning set forth in
Section 2.3(a).
"CONTROL" shall have the meaning set forth in the definition
of affiliate.
"DISSENTING SHARES" shall have the meaning set forth in
Section 3.1.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.2.
"EMPLOYEE BENEFIT ARRANGEMENT" shall have the meaning set
forth in Section 6.1(e).
"ENVIRONMENTAL LAW" shall have the meaning set forth in
Section 4.12.
"ERISA" shall have the meaning set forth in Section 4.10(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FUNDED DEBT" means, in respect of the Company and its
subsidiaries as of any date, all indebtedness of such person which by its terms
or by the terms of any instrument or agreement relating thereto matures one year
or more from, or is directly or indirectly renewable or extendible at the option
of the obligor in respect thereof to a date one year or more (including without
limitation an option of such obligor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of one
year or more) from, the date of the creation thereof, and shall also include the
current maturities of any such indebtedness as of such date.
"GAAP" shall have the meaning set forth in Section 4.6(b).
"GCL" shall have the meaning set forth in the Granting
Clauses.
"GOVERNMENTAL ENTITY" shall have the meaning set forth in
Section 4.5(b).
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<PAGE> 56
"HSR ACT" shall have the meaning set forth in Section 4.5(b).
"HAZARDOUS SUBSTANCE" shall have the meaning set forth in
Section 4.12.
"IRS" shall have the meaning set forth in Section 4.10(c).
"INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 6.7(a).
"INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 4.11(c).
"INTERESTED STOCKHOLDER" shall have the meaning set forth in
Section 5.6.
"LAZARD FRERES" shall have the meaning set forth in Section
4.15.
"LIEN" shall have the meaning set forth in Section 4.3.
"MATERIAL ADVERSE EFFECT ON THE COMPANY" shall have the
meaning set forth in Section 4.1.
"MATERIAL ADVERSE EFFECT ON PARENT" shall have the meaning set
forth in Section 5.1.
"MERGER" shall have the meaning set forth in the Granting
Clauses.
"MERGER PRICE" shall have the meaning set forth in Section
2.1.
"OPERATIONS" shall have the meaning set forth in Section
4.6(a).
"OPTION" shall have the meaning set forth in Section 2.2.
"OPTION PLAN" shall have the meaning set forth in Section 2.2.
"OTHER FILINGS" shall have the meaning set forth in Section
4.7.
"PAYING AGENT" shall have the meaning set forth in Section
3.2(a).
"PERSON" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of
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<PAGE> 57
the Exchange Act).
"PLANS" shall have the meaning set forth in Section 4.10(a).
"PREFERRED STOCK" shall have the meaning set forth in Section
4.3.
"RELEASED CLAIM" shall have the meaning set forth in Section
2.4.(a).
"RELEASED PARTY" shall have the meaning set forth in Section
2.4(a).
"SEC" means the Securities and Exchange Commission.
"SEC REPORTS" shall have the meaning set forth in Section
4.6(a).
"SHARES" shall have the meaning set forth in the Granting
Clauses.
"SOAP OPERA SALE" means the sale of the assets of the Company
and its subsidiaries pursuant to the agreements and documents included in
Section 4.22 of the Company Disclosure Schedule.
"SPECIAL SUBS" shall have the meaning set forth in Section
4.3.
"SUBSIDIARY" or "SUBSIDIARIES" means, with respect to Newco,
the Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Newco, the Company or such other person, as the case
may be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 2.1.
"TAX RETURN" shall have the meaning set forth in Section 4.19.
"TAXES" shall have the meaning set forth in Section 4.19.
"VIOLATION" shall have the meaning set forth in Section
4.5(a).
"VOTING DEBT" shall have the meaning set forth in
Section 4.3.
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<PAGE> 58
SECTION 9.11. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any federal court
located in the State of Delaware or any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
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<PAGE> 59
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its respective officer thereunto duly
authorized, all as of the day and year first above written.
EMP ACQUISITION CORP.
By: /s/ Austin Beutner
---------------------------------
Name: Austin Beutner
Title: President
AMERICAN MEDIA, INC.
By: /s/ Michael J. Boylan
---------------------------------
Name: Michael J. Boylan
Title: Vice Chairman,
Publishing Operations
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<PAGE> 1
Exhibit 2.2
CERTIFICATE OF MERGER
OF
EMP ACQUISITION CORP.
WITH AND INTO
AMERICAN MEDIA, INC.
(Under Section 251 of the General
Corporation Law of the State of Delaware)
American Media, Inc., a Delaware corporation, hereby
certifies that:
1. The name and state of incorporation of each of the constituent
corporations is as follows:
(a) EMP Acquisition Corp., a Delaware corporation ("EMP
Acquisition");
(b) American Media, Inc., a Delaware corporation ("American
Media").
2. The Agreement and Plan of Merger (the "Agreement and Plan of
Merger"), dated as of February 16, 1999, by and between EMP Acquisition and
American Media has been approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with Section 251 (and by
the written consent of the stockholders of the constituent corporations in
accordance with Section 228) of the General Corporation Law of the State of
Delaware.
3. The name of the surviving corporation is American Media, Inc. (the
"Surviving Corporation").
4. The Restated Certificate of Incorporation of American Media as in
effect immediately prior to the merger shall be amended in its entirety to read
as set forth in Exhibit A hereto and, as so amended, shall be the Restated
Certificate of Incorporation of the Surviving Corporation.
5. The executed Agreement and Plan of Merger is on file at an office
of the Surviving Corporation at 600 East Coast Avenue, Lantana, Florida 33464.
6. A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
<PAGE> 2
IN WITNESS WHEREOF, American Media has caused this
certificate to be signed as of the 7th day of May, 1999.
AMERICAN MEDIA, INC.
By: /s/ Maynard Rabinowitz
-----------------------------------
Name: Maynard Rabinowitz
Office: Vice-Chairman
<PAGE> 1
EXHIBIT 2.4
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement"), dated as of May
7, 1999, between American Media, Inc., a Delaware corporation (together with
its subsidiaries, the "Company"), and Evercore Advisors Inc., a Delaware
limited liability company ("Evercore").
WHEREAS, Evercore, by and through itself, its affiliates and
their respective officers, employees and representatives, has expertise in the
areas of management, finance, strategy, investment, acquisitions and other
matters relating to the business of the Company; and
WHEREAS, the Company desires to avail itself, for the term of
this Agreement, of the expertise of Evercore in the aforesaid areas and
Evercore wishes to provide the services to the Company as herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals
and the covenants and conditions contained herein, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the Amended and
Restated Limited Liability Agreement and Investors Rights Agreement, dated as
of February 16, 1999, of EMP Group L.L.C. (as amended from time to time, the
"LLC Agreement").
2. APPOINTMENT. The Company hereby appoints Evercore to
render the advisory and consulting services described in Section 3 hereof for
the term of this Agreement.
3. SERVICES. Evercore hereby agrees that during the term of
this Agreement it shall render to the Company and its subsidiaries, by and
through itself, its affiliates, and their respective officers, members,
employees, agents and representatives as Evercore in its sole discretion shall
designate from time to time, advisory and consulting services in relation to
the affairs of the Company and its subsidiaries in connection with ongoing
strategic and operational oversight of the Company, including, without
limitation, (i) advice in designing financing structures and advice regarding
relationships with the Company's lenders and bankers; (ii) advice regarding the
structure and timing of public offerings of debt and equity securities of the
Company; (iii) advice regarding property dispositions or acquisitions; and (iv)
such other advice directly related or ancillary to the above financial advisory
services as
<PAGE> 2
2
may be reasonably requested by the Company. It is expressly agreed that the
services to be performed hereunder shall not include investment banking or
other financial advisory services rendered by Evercore or its affiliates to the
Company in connection with any specific acquisition, divestiture, refinancing
or recapitalization by the Company or any of its subsidiaries. Evercore may be
entitled to receive additional compensation for providing services of the type
specified in the preceding sentence by mutual agreement of the Company or such
subsidiary and Evercore.
4. FEES. In consideration of the services contemplated by
Section 3, for the term of this Agreement, the Company and its successors agree
to pay to Evercore an annual monitoring fee (the "Monitoring Fee") which will
be paid annually and in advance. The first payment of $750,000 shall be paid on
the Closing Date (as defined in the Agreement and Plan of Merger, by and
between the Company and EMP Acquisition Corp. dated as of February 16, 1999).
Thereafter, commencing on June 1, 2000, on each June 1, the Company shall pay
Evercore $750,000, PROVIDED that: (a) the Company will not be required to pay
Evercore the annual Monitoring Fee in any calendar year that the EBITDA for the
Fiscal Year that ends in such calendar year (as calculated in good faith with
due care by the EBITDA Committee) is less than the EBITDA test applicable to
such Fiscal Year as set forth in Schedule 1 hereto; and (b) in the case of any
calendar year where an annual Monitoring Fee has not been paid to Evercore
pursuant to clause (a) above, (i) the Company will pay Evercore such Monitoring
Fee and any previous Monitoring Fee that could have been paid in that year
pursuant to this clause (b)(i) on June 1 of the first subsequent calendar year
(in addition to any Monitoring Fee that otherwise would be payable to Evercore
in such year) that (A) the sum of the EBITDA for the Fiscal Years from and
including the Fiscal Year that ends in the calendar year in which such
Monitoring Fee was not paid to and including the Fiscal Year that ends in such
subsequent calendar year EXCEEDS (B) the sum of the EBITDA tests for such
Fiscal Years as set forth in Schedule 1; and (ii) in the event of (A) any IPO,
merger, consolidation, recapitalization or similar transaction involving the
Company, (B) sale of all or substantially all of the assets of the Company and
its subsidiaries taken as a whole or (C) acquisition by any Person or group
(other than Evercore and its affiliates) of beneficial ownership of a majority
of the Company's outstanding common stock, the Company will promptly pay
Evercore any Monitoring Fee that has not been paid pursuant to clause (a)
(after giving effect to any subsequent payments pursuant to clause (b)) in the
event that the Members (as defined in the LLC Agreement) of the LLC have
received aggregate distributions from the LLC that, when added to the value of
the Members' remaining interests in the LLC (determined by reference to the IPO
price or the consideration paid in the relevant transaction), exceeds their
aggregate capital contributions to
<PAGE> 3
3
the LLC. For purposes of this Section 4, "EBITDA" shall have the
meaning set forth in the LLC Agreement.
5. REIMBURSEMENTS. In addition to the Monitoring Fee payable
pursuant to this Agreement, the Company shall pay directly or reimburse
Evercore for its Out-of-Pocket Expenses (as defined below). Promptly following
the Company's request therefor, Evercore will provide written back-up relating
to any Out-of-Pocket Expenses to be paid or reimbursed by the Company pursuant
to this Agreement. For the purposes of this Agreement, the term "Out-of-Pocket
Expenses" shall mean the reasonable out-of-pocket costs and expenses incurred
by Evercore or its affiliates in connection with the services rendered
hereunder, including, without limitation, (i) fees and disbursements of any
independent professionals and organizations, including independent accountants,
outside legal counsel or consultants, (ii) costs of any outside services or
independent contractors such as financial printers, couriers, business
publications, on-line financial services or similar services, (iii) research
and research related expenses and (iv) transportation, per diem costs, word
processing expenses or any similar expense not associated with its ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made
promptly upon or as soon as practicable after presentation by Evercore to the
Company of a written statement thereof.
6. INDEMNIFICATION. The Company will indemnify and hold
harmless Evercore, its affiliates and their respective partners (both general
and limited), members (both managing and otherwise), officers, directors,
employees, agents and representatives (each such person being an "Indemnified
Party") from and against any and all losses, claims, damages and liabilities,
whether joint or several, expenses of any nature (including reasonable
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, whether, civil, criminal, administrative, arbitral or
investigative, in which an Indemnified Party was involved or may be involved,
or threatened to be involved, as a party or otherwise (the "Liabilities"),
related to, arising out of or in connection with the advisory and consulting
services contemplated by this Agreement or the engagement of Evercore pursuant
to, and the performance by Evercore of the services contemplated by, this
Agreement, and any other action taken by an Indemnified Party on behalf of the
LLC, whether or not pending or threatened, and any other action taken by an
Indemnified Party on behalf of the LLC, whether or not resulting in any
liability and whether or not such action, claim, suit, investigation or
proceeding is initiated or brought by the Company. The Company will reimburse
any Indemnified Party for all reasonable costs and expenses
<PAGE> 4
4
(including reasonable attorneys' fees and expenses) as they are incurred in
connection with investigating, preparing, pursuing, defending or assisting in
the defense of any action, claim, suit, investigation or proceeding for which
the Indemnified Party would be entitled to indemnification under the terms of
the previous sentence, or any action or proceeding arising therefrom, whether
or not such Indemnified Party is a party thereto, provided that, subject to the
following sentence, the Company shall be entitled to assume the defense thereof
at its own expense, with counsel satisfactory to such Indemnified Party in its
reasonable judgment. Any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense, and in any action, claim,
suit, investigation or proceeding in which both the Company and/or one or more
of its subsidiaries, on the one hand, and an Indemnified Party, on the other
hand, is, or is reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel at the expense of the Company
and to control its own defense of such action, claim, suit, investigation or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party,
a conflict or potential conflict exists between the Company, on the one hand,
and such Indemnified Party, on the other hand, that would make such separate
representation advisable. The Company agrees that it will not, without the
prior written consent of the applicable Indemnified Party, settle, compromise
or consent to the entry of any judgment in any pending or threatened claim,
suit, investigation, action or proceeding relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been threatened to
be made a party thereto) unless such settlement, compromise or consent includes
an unconditional release of the applicable Indemnified Party and each other
Indemnified Party from all liability arising or that may arise out of such
claim, suit, investigation, action or proceeding. Provided the Company is not
in breach of its indemnification obligations hereunder, no Indemnified Party
shall settle or compromise any claim subject to indemnification hereunder
without the consent of the Company. The Company will not be liable under the
foregoing indemnification provision with respect to any Indemnified Party, to
the extent that any loss, claim, damage, liability, cost or expense is
determined by a court, in a final judgment from which no further appeal may be
taken, to have resulted primarily from the gross negligence or willful
misconduct of Evercore. If an Indemnified Party is reimbursed hereunder for any
expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Liabilities in question resulted
primarily from the gross negligence or willful misconduct of Evercore.
The Company agrees that if any indemnification sought by any
Indemnified Party pursuant to this Section 6 is
<PAGE> 5
5
unavailable for any reason or is insufficient to hold the Indemnified Party
harmless against any Liabilities referred to herein, then the Company shall
contribute to the Liabilities for which such indemnification is held
unavailable or insufficient in such proportion as is appropriate to reflect the
relative benefits received (or anticipated to be received) by the Company, on
the one hand, and Evercore, on the other hand, in connection with the
transactions which gave rise to such Liabilities or, if such allocation is not
permitted by applicable law, not only such relative benefits but also the
relative faults of the Company, on the one hand, and Evercore, on the other
hand, as well as any other equitable considerations, subject to the limitation
that in any event the aggregate contribution by the Indemnified Parties to all
Liabilities with respect to which contribution is available hereunder shall not
exceed the fees pursuant to this Agreement actually received by Evercore in
connection with the transaction which gave rise to such Liabilities (excluding
any amounts paid as reimbursement of expenses).
7. ACCURACY OF INFORMATION. The Company shall furnish or
cause to be furnished to Evercore such information as Evercore believes
appropriate to its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that Evercore (i) will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this Agreement without having independently verified the same, (ii) does not
assume responsibility for the accuracy or completeness of the Information and
such other information and (iii) is entitled to rely upon the Information
without independent verification.
8. TERM. This Agreement shall be effective as of the date
hereof and shall continue until the later of (i) the first date on which EMP
Group L.L.C. and its affiliates beneficially own in the aggregate less than 30%
of the common stock of the Company and (ii) the date on which the persons who
beneficially own interests in the LLC on the date of the LLC is dissolved no
longer beneficially own in the aggregate 30% of the common stock of the Company
(such termination date, the "Agreement Termination Date"); provided that
Section 5 shall remain in effect with respect to Out-of-Pocket Expenses
incurred prior to the Agreement Termination Date. The provisions of Sections 6,
8 and 10 and otherwise as the context so requires shall survive the termination
of this Agreement.
9. PERMISSIBLE ACTIVITIES. Subject to applicable law, nothing
herein shall in any way preclude Evercore, its affiliates or their respective
partners (both general and limited), members (both managing and otherwise),
officers, directors, employees,
<PAGE> 6
6
agents or representatives from engaging in any business activities or from
performing services for its or their own account or for the account of others,
including for companies that may be in competition with the business conducted
by the Company.
10. MISCELLANEOUS.
(a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party hereto from any such
provision, shall be effective unless the same shall be in writing and signed by
all of the parties hereto. Any amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. The
waiver by any party of any breach of this Agreement shall not operate as or be
construed to be a waiver by such party of any subsequent breach.
(b) Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
telecopier, Federal Express, or other overnight courier, addressed as follow or
to such other address of which the parties may have given notice:
If to Evercore: Evercore Advisors Inc.
65 East 55th Street
New York, New York 10022
Attention: Austin Beutner
Telecopy: (212) 857-3122
Telephone: (212) 857-3120
If to the Company: American Media, Inc.
600 South East Coast Avenue
Lantana, Florida 33464
Attention: Peter A. Nelson
Telecopy: (561) 540-1018
Telephone: (561) 540-1000
Unless otherwise specified herein, such notices or other communications shall
be deemed received (i) on the date delivered, if delivered personally or sent
by telecopier, and (ii) one business day after being sent by Federal Express or
other overnight courier.
(c) This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
<PAGE> 7
7
(d) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York. This
Agreement shall inure to the benefit of, and be binding upon, Evercore, the
Company and their respective successors and assigns. The provisions of Section
6 shall inure to the benefit of each Indemnified Party.
(e) This Agreement may be executed by one or more parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(f) The waiver by any party of any breach of this Agreement
shall not operate as or be construed to be a waiver by such party of any
subsequent breach.
(g) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers or agents as of the
date first above written.
AMERICAN MEDIA, INC.
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and CFO
EVERCORE ADVISORS INC.
By: /s/ Austin Beutner
------------------------------------
Name: Austin Beutner
Title: Founder, Vice President
and Assistant Secretary
<PAGE> 9
SCHEDULE 1
EBITDA TEST
FOR THE FISCAL YEAR ENDED (IN MILLIONS) PAYMENT DATE
- ------------------------- ------------- ------------
March 31, 2000 $ 90.0 June 1, 2000
March 31, 2001 $ 97.5 June 1, 2001
March 31, 2002 $107.5 June 1, 2002
March 31, 2003 $110.0 June 1, 2003
March 31, 2004 $120.0 June 1, 2004
Each March 31 thereafter $120.0 June 1 of each
year thereafter
<PAGE> 1
Exhibit 4.1
AMERICAN MEDIA OPERATIONS, INC.
$250,000,000
10 1/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
April 30, 1999
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
American Media Operations, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell $250,000,000 aggregate principal amount
of its 10 1/4% Senior Subordinated Notes due 2009 (the "SECURITIES"). The
Securities will be issued pursuant to an Indenture to be dated as of May 7,
1999 (the "INDENTURE") among the Company, the subsidiaries of the Company
listed on the signature pages hereof (collectively, the "GUARANTORS") and The
Chase Manhattan Bank, as trustee (the "TRUSTEE"), and will be guaranteed on an
unsecured senior subordinated basis by the Guarantors. The Company and the
Guarantors hereby confirm their agreement with Chase Securities Inc. ("CSI" or
the "INITIAL PURCHASER") concerning the purchase of the Securities from the
Company by the Initial Purchaser.
The Securities will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of 1933 (the
"SECURITIES ACT"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated April 13, 1999 (the
"PRELIMINARY OFFERING MEMORANDUM") and will prepare an offering memorandum
dated the date hereof (the "OFFERING MEMORANDUM") setting forth information
concerning the Company and the Securities. Copies of the Preliminary Offering
Memorandum have been, and copies of the Offering Memorandum will be, delivered
by the Company to the Initial Purchaser pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchaser in accordance with Section 2.
Holders of the Securities (including the Initial Purchaser
and its direct and indirect transferees) will be entitled to the benefits of an
Exchange and Registration Rights Agreement, substantially in the form attached
hereto as Annex A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the
Company will agree to file with the Securities and Exchange Commission (the
"COMMISSION") (a) a registration statement under the Securities Act (the
"EXCHANGE OFFER REGISTRATION STATEMENT") registering an issue of senior
subordinated notes of the Company (the "EXCHANGE SECURITIES") which are
identical in all material respects to the Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT").
<PAGE> 2
2
Pursuant to an Agreement and Plan of Merger (the "MERGER
AGREEMENT") dated as of February 16, 1999, between EMP Acquisition Corp., a
company formed by Evercore Capital Partners L.P. ("EVERCORE"), and American
Media, Inc., a Delaware corporation and the Company's parent company
("HOLDINGS"), (a) EMP will be merged with and into Holdings (the "MERGER"), (b)
the existing stockholders of Holdings will receive aggregate cash consideration
of $299.4 million and (c) Evercore and certain other investors (including Mr.
David Pecker) will beneficially own 100% of the common stock of Holdings.
Substantially concurrently with the Merger and as part of the financing
therefor, the Company will consummate a debt tender offer (the "Debt Tender
Offer") for its 115/8% Senior Subordinated Notes due 2004. The Securities are
being issued in connection with the Merger.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company and each of the Guarantors represent and warrant to, and agree
with, the Initial Purchaser on and as of the date hereof and the Closing Date
(as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and
the Offering Memorandum, as of its respective date, did not, and on
the Closing Date the Offering Memorandum will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; PROVIDED that the Company and the Guarantors make no
representation or warranty as to information contained in or omitted
from the Preliminary Offering Memorandum or the Offering Memorandum in
reliance upon and in conformity with written information relating to
the Initial Purchaser furnished to the Company by or on behalf of the
Initial Purchaser specifically for use therein (the "INITIAL
PURCHASER'S INFORMATION").
(b) Each of the Preliminary Offering Memorandum and
the Offering Memorandum, as of its respective date, contains all of
the information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and
warranties of the Initial Purchaser contained in Section 2 and its
compliance with the agreements set forth therein, it is not necessary,
in connection with the issuance and sale of the Securities to the
Initial Purchaser and the offer, resale and delivery of the Securities
by the Initial Purchaser in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended (the "TRUST INDENTURE ACT").
(d) The Company and each of its subsidiaries have
been duly incorporated and are validly existing as corporations in
good standing under the laws of their
<PAGE> 3
3
respective jurisdictions of incorporation, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own or
hold their respective properties and to conduct the businesses in
which they are engaged, except where the failure to so qualify or have
such power or authority would not, singularly or in the aggregate,
have a material adverse effect on the condition (financial or
otherwise), results of operations or business of the Company and its
subsidiaries taken as a whole (a "MATERIAL ADVERSE EFFECT").
(e) As of the Closing Date, the Company will have an
authorized capitalization as set forth in the Offering Memorandum
under the heading "Capitalization"; and all of the outstanding shares
of capital stock of Holdings and of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
All of the outstanding shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and, except with respect to Frontline,
Inc., a Delaware corporation, 80% of the capital stock of which is
owned by the Company, and Biocide, Inc., a Delaware corporation, 80%
of the capital stock of which is owned by the Company, and as
described in the Offering Memorandum under the caption "Description of
Other Indebtedness," are owned directly or indirectly by the Company,
free and clear of any lien, charge, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third
party. All the capital stock (i) of the Company is owned directly by
Holdings and (ii) of Holdings, after giving effect to the
Transactions, will be owned directly by EMP Group L.L.C., a Delaware
limited liability company (the "LLC"), in each case, except as
described in the Offering Memorandum under the caption "Description of
Other Indebtedness," free and clear of any lien, charge, encumbrance,
security interest, restriction upon voting or transfer or any other
claim of any third party. As of the Closing Date, Evercore has the
power to appoint a majority of the managers of the Board of Managers
of the LLC.
(f) The statements set forth in the Offering
Memorandum under the captions "Summary--The Transactions," "The
Transactions," "Outstanding Voting Securities" and "Certain
Relationships and Related Transactions" insofar as they purport to
describe the documents referred to therein constitute a fair summary
thereof.
(g) Holdings, the Company and the Guarantors each
have or had, as applicable, full right, power and authority to execute
and deliver, as applicable, this Agreement, the Indenture, the
Registration Rights Agreement, the Merger Agreement, the Credit
Agreement dated as of the date hereof among Holdings, the Company, the
lenders thereunder and The Chase Manhattan Bank, as administrative
agent (the "CREDIT AGREEMENT"), and the Securities (collectively, the
"TRANSACTION DOCUMENTS") and to perform their respective obligations
hereunder and thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and delivery of
each of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and validly taken.
(h) This Agreement has been duly authorized,
executed and delivered by the Company and each of the Guarantors and
constitutes a valid and legally binding agreement of the Company and
each of the Guarantors.
<PAGE> 4
4
(i) The Registration Rights Agreement has been duly
authorized by the Company and each of the Guarantors and, when duly
executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement
of the Company and each of the Guarantors enforceable against the
Company and each of the Guarantors in accordance with its terms,
except to the extent that (i) such enforceability may be limited by
(A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and (B) general equitable principles (whether
considered in a proceeding in equity or at law) and the discretion of
the court before which any proceeding therefor may be brought and (ii)
any rights to indemnity or contribution thereunder may be limited by
federal or state securities laws or public policy considerations.
(j) The Indenture has been duly authorized by the
Company and each of the Guarantors and, when duly executed and
delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of the Company
and each of the Guarantors enforceable against the Company and each of
the Guarantors in accordance with its terms, except to the extent that
such enforceability may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and (ii)
general equitable principles (whether considered in a proceeding in
equity or at law) and the discretion of the court before which any
proceeding therefor may be brought. On the Closing Date, the Indenture
will conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(k) The Securities have been duly authorized by the
Company and each of the Guarantors and, when duly executed,
authenticated, issued and delivered as provided in the Indenture and
paid for as provided herein, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations
of the Company, as issuer, and each of the Guarantors, as guarantors,
entitled to the benefits of the Indenture and enforceable against the
Company as issuer, and each of the Guarantors, as guarantors, in
accordance with their terms, except to the extent that such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and (ii)
general equitable principles (whether considered in a proceeding in
equity or at law) and the discretion of the court before which any
proceeding therefor may be brought.
(l) The Merger Agreement has been duly authorized,
executed and delivered by Holdings and constitutes a valid and legally
binding agreement of Holdings enforceable against Holdings in
accordance with its terms, except to the extent that such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and (ii)
general equitable principles (whether considered in a proceeding in
equity or at law) and the discretion of the court before which any
proceeding therefor may be brought.
<PAGE> 5
5
(m) The Credit Agreement has been duly authorized,
executed and delivered by Holdings and the Company and constitutes a
valid and legally binding agreement of Holdings and the Company
enforceable against Holdings and the Company in accordance with its
terms, except to the extent that such enforceability may be limited by
(i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and the discretion of
the court before which any proceeding therefor may be brought.
(n) Each Transaction Document conforms in all
material respects to the description thereof contained in the Offering
Memorandum.
(o) The execution, delivery and performance by the
Company and each of the Guarantors of each of the applicable
Transaction Documents to which each is a party, the issuance,
authentication, sale and delivery of the Securities and compliance by
the Company and each of the Guarantors with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any judgment, order, decree, rule or
regulation of any court or arbitrator or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets; and no consent, approval, authorization
or order of, or filing or registration with, any such court or
arbitrator or governmental agency or body under any such statute,
judgment, order, decree, rule or regulation is required for the
execution, delivery and performance by the Company and each of the
Guarantors of each of the Transaction Documents to which each is a
party, the issuance, authentication, sale and delivery of the
Securities and compliance by the Company and each of the Guarantors
with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents, except for such consents,
approvals, authorizations, filings, registrations or qualifications
(i) which shall have been obtained or made prior to the Closing Date
and (ii) as may be required to be obtained or made under the
Securities Act and applicable state securities laws as provided in the
Registration Rights Agreement.
(p) Arthur Andersen LLP ("ARTHUR ANDERSEN") are
independent certified public accountants with respect to the Company
and its subsidiaries within the meaning of Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants ("AICPA") and its interpretations and rulings thereunder.
The historical financial statements (including the related notes)
contained in the Offering Memorandum comply in all material respects
with the requirements applicable to a registration statement on Form
S-1 under the Securities Act (except that certain supporting schedules
are omitted); such financial statements have been prepared in
accordance with generally accepted accounting principles
<PAGE> 6
6
consistently applied throughout the periods covered thereby and fairly
present the financial position of the entities purported to be covered
thereby at the respective dates indicated and the results of their
operations and their cash flows for the respective periods indicated;
and the financial information contained in the Offering Memorandum
under the headings "Summary--Summary Historical Financial Data,"
"Capitalization," "Selected Historical Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are derived from the accounting
records of the Company and its subsidiaries and fairly present the
information purported to be shown thereby. The pro forma financial
information contained in the Offering Memorandum under the headings
"Summary--Summary Unaudited Pro Forma Consolidated Financial
Information" and "Unaudited Pro Forma Consolidated Financial
Statements" has been prepared on a basis consistent with the
historical financial statements contained in the Offering Memorandum
(except for the pro forma adjustments specified therein), includes all
material adjustments to the historical financial information required
by Rule 11-02 of Regulation S-X under the Securities Act and the
Exchange Act to reflect the transactions described in the Offering
Memorandum, gives effect to assumptions made on a reasonable basis and
fairly presents the historical and proposed transactions contemplated
by the Offering Memorandum and the Transaction Documents. The other
historical financial and statistical information and data included in
the Offering Memorandum are, in all material respects, fairly
presented.
(q) There are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property or assets of the Company or any of its
subsidiaries is the subject which, (i) singularly or in the aggregate,
if determined adversely to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect or (ii)
question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and to
the best knowledge of the Company, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(r) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the issuance of the
Securities or suspends the sale of the Securities in any jurisdiction;
no injunction, restraining order or order of any nature by any federal
or state court of competent jurisdiction has been issued with respect
to the Company or any of its subsidiaries which would prevent or
suspend the issuance or sale of the Securities or the use of the
Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to
the best knowledge of the Company and each of the Guarantors,
threatened against or affecting the Company or any of its subsidiaries
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, which could reasonably be expected to
interfere with or adversely affect the issuance of the Securities or
in any manner draw into question the validity or enforceability of any
of the Transaction Documents or any action taken or to be taken
pursuant thereto; and the Company has complied with any and all
requests by any securities authority in any jurisdiction for
additional information to be included in the Preliminary Offering
Memorandum and the Offering Memorandum.
<PAGE> 7
7
(s) Neither the Company nor any of its subsidiaries
is (i) in violation of its charter or by-laws, (ii) in default in any
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject or (iii)
in violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may
be subject except, in the case of (ii) and (iii), for any such
violation or default that would not, singularly or in the aggregate,
have a Material Adverse Effect.
(t) The Company and each of its subsidiaries possess
all material licenses, certificates, authorizations and permits issued
by, and have made all declarations and filings with, the appropriate
federal, state or foreign regulatory agencies or bodies which are
necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses as described
in the Offering Memorandum, except where the failure to possess or
make the same would not, singularly or in the aggregate, have a
Material Adverse Effect, and neither the Company nor any of its
subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or permit
or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course
except where the revocation or modification of any such license,
certificate, authorization or permit, or the failure to renew any such
license, certificate, authorization or permit, would not, singularly
or in the aggregate, have a Material Adverse Effect.
(u) The Company and each of its subsidiaries have
filed all federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof and have paid all
taxes due thereon, and no tax deficiency has been determined adversely
to the Company or any of its subsidiaries which has had (nor does the
Company or any of its subsidiaries have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have) a Material Adverse
Effect.
(v) Neither the Company nor any of its subsidiaries
is (i) an "investment company" or a company "controlled by" an
investment company within the meaning of the Investment Company Act of
1940, as amended (the "INVESTMENT COMPANY ACT"), and the rules and
regulations of the Commission thereunder or (ii) a "holding company"
or a "subsidiary company" of a holding company or an "affiliate"
thereof within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(w) The Company and each of its subsidiaries have
insurance covering their respective properties, operations, personnel
and businesses, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Company and its
subsidiaries and their respective businesses. Neither the Company nor
any of its subsidiaries has received notice from any insurer or agent
of such insurer that capital improvements or other expenditures are
required or necessary to be made in order to continue such insurance.
<PAGE> 8
8
(x) The Company and each of its subsidiaries own or
possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of their respective businesses;
and the conduct of their respective businesses will not conflict in
any material respect with, and the Company and its subsidiaries have
not received any notice of any claim of conflict with, any such rights
of others.
(y) The Company and each of its subsidiaries have
good and marketable title in fee simple to, or have valid rights to
lease or otherwise use, all items of real and personal property which
are material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances, claims and
defects and imperfections of title except those (i) described in the
Offering Memorandum under the caption "Description of Other
Indebtedness," (ii) which do not materially interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries or (iii) could not reasonably be expected to have a
Material Adverse Effect.
(z) No labor disturbance by or dispute with the
employees of the Company or any of its subsidiaries exists or, to the
best knowledge of the Company, is contemplated or threatened.
(aa) No "prohibited transaction" (as defined in
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations
thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended from time to time (the "CODE")) or "accumulated
funding deficiency" (as defined in Section 302 of ERISA) or any of the
events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived) has occurred with respect to any employee
benefit plan of the Company or any of its subsidiaries which could
reasonably be expected to have a Material Adverse Effect; each such
employee benefit plan is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company and each of
its subsidiaries have not incurred and do not expect to incur
liability under Title IV of ERISA with respect to the termination of,
or withdrawal from, any pension plan for which the Company or any of
its subsidiaries would have any liability; and each such pension plan
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which could reasonably be
expected to cause the loss of such qualification.
(bb) There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission or
other release of any kind of toxic or other wastes or other hazardous
substances by, due to or caused by the Company or any of its
subsidiaries (or, to the best knowledge of the Company, any other
entity (including any predecessor) for whose acts or omissions the
Company or any of its subsidiaries is or could reasonably be expected
to be liable) upon any of the property now or previously owned or
leased by the Company or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or which would, under
any statute or
<PAGE> 9
9
any ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any
violation or liability that could not reasonably be expected to have,
singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; and there has been no
disposal, discharge, emission or other release of any kind onto such
property or into the environment surrounding such property of any
toxic or other wastes or other hazardous substances with respect to
which the Company or any of the Guarantors has knowledge, except for
any such disposal, discharge, emission or other release of any kind
which could not reasonably be expected to have, singularly or in the
aggregate with all such discharges and other releases, a Material
Adverse Effect.
(cc) Neither the Company nor, to the best knowledge
of the Company and each of the Guarantors, any director, officer,
agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries has (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of
1977; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(dd) On and immediately after the Closing Date, the
Company (after giving effect to the issuance of the Securities and to
the other transactions related thereto as described in the Offering
Memorandum) will be Solvent. As used in this paragraph, the term
"Solvent" means, with respect to a particular date, that on such date
(i) the present fair market value (or present fair saleable value) of
the assets of the Company is not less than the total amount required
to pay the probable liabilities of the Company on its total existing
debts and liabilities (including contingent liabilities) as they
become absolute and matured, (ii) the Company is able to realize upon
its assets and pay its debts and other liabilities, contingent
obligations and commitments as they mature and become due in the
normal course of business, (iii) assuming the sale of the Securities
as contemplated by this Agreement and the Offering Memorandum, the
Company is not incurring debts or liabilities beyond its ability to
pay as such debts and liabilities mature and (iv) the Company is not
engaged in any business or transaction, and is not about to engage in
any business or transaction, for which its property would constitute
unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which the Company is engaged.
In computing the amount of such contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that,
in the 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.
(ee) Except as described in the Offering Memorandum,
there are no outstanding subscriptions, rights, warrants, calls or
options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity or other
ownership interest in Holdings, the Company or any of its subsidiaries
other than those listed on Schedule 2 hereto.
(ff) Neither the Company nor any of its subsidiaries
owns any "margin securities" as that term is defined in Regulation U
of the Board of Governors of the
<PAGE> 10
10
Federal Reserve System (the "FEDERAL RESERVE BOARD"), and none of the
proceeds of the sale of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security
or for any other purpose which might cause any of the Securities to be
considered a "purpose credit" within the meanings of Regulation T, U
or X of the Federal Reserve Board.
(gg) Neither the Company nor any of its subsidiaries
is a party to any contract, agreement or understanding with any person
that would give rise to a valid claim against the Company or the
Initial Purchaser for a brokerage commission, finder's fee or like
payment in connection with the offering and sale of the Securities.
(hh) The Securities satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act.
(ii) None of the Company, any of its affiliates or
any person acting on its or their behalf has engaged or will engage in
any directed selling efforts (as such term is defined in Regulation S
under the Securities Act ("REGULATION S")), and all such persons have
complied and will comply with the offering restrictions requirement of
Regulation S to the extent applicable.
(jj) Neither the Company nor any of its affiliates
has, directly or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
such term is defined in the Securities Act), which is or will be
integrated with the sale of the Securities in a manner that would
require registration of the Securities under the Securities Act.
(kk) None of the Company or any of its affiliates or
any other person acting on its or their behalf has engaged, in
connection with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act.
(ll) There are no securities of the Company or
Holdings registered under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), or listed on a national securities
exchange or quoted in a U.S. automated inter-dealer quotation system
other than the Company's 115/8% Senior Subordinated Notes due 2004 and
Holdings' Class A common stock.
(mm) None of the Company or any of the Guarantors
has taken or will take, directly or indirectly, any action prohibited
by Regulation M under the Exchange Act in connection with the offering
of the Securities.
(nn) No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in the Preliminary Offering Memorandum or the
Offering Memorandum has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good faith.
(oo) The Company and its subsidiaries are
implementing a comprehensive, detailed program to analyze and address
the risk that the computer hardware and
<PAGE> 11
11
software used by them may be unable to recognize and properly execute
date-sensitive functions involving certain dates prior to and any
dates after December 31, 1999 (the "YEAR 2000 PROBLEM"), and
reasonably believe that such risk will be remedied on a timely basis
without material expense and will not have a material adverse effect
upon the financial condition and results of operations of the Company
and its subsidiaries, taken as a whole; and the Company believes,
after due inquiry, that each supplier, vendor, customer or financial
service organization used or serviced by the Company and its
subsidiaries has remedied or will remedy on a timely basis the Year
2000 Problem, except to the extent that a failure to remedy by any
such supplier, vendor, customer or financial service organization
would not have a Material Adverse Effect.
(pp) Since the date as of which information is given
in the Offering Memorandum, except as otherwise stated therein, (i)
there has been no material adverse change or any development involving
a prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or management of the
Company or any of the Guarantors, whether or not arising in the
ordinary course of business, (ii) none of the Company or any of the
Guarantors has incurred any material liability or obligation, direct
or contingent, other than in the ordinary course of business, (iii)
none of the Company or any of the Guarantors has entered into any
material transaction other than in the ordinary course of business and
(iv) there has not been any change in the capital stock or long-term
debt of the Company or any of the Guarantors, or any dividend or
distribution of any kind declared, paid or made by the Company or any
of the Guarantors on any class of their respective capital stock.
2. PURCHASE AND RESALE OF THE SECURITIES. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, $250,000,000 principal amount of Securities at a purchase price equal
to 97.00% of the principal amount thereof. The Company shall not be obligated
to deliver any of the Securities except upon payment for all of the Securities
to be purchased as provided herein.
(b) The Initial Purchaser has advised the Company that it
proposes to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. The Initial
Purchaser represents and warrants to and agrees with the Company and the
Guarantors that (i) it is purchasing the Securities pursuant to a private sale
exempt from registration under the Securities Act, (ii) it has not solicited
offers for, or offered or sold, and will not solicit offers for, or offer or
sell, the Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("REGULATION D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of their
initial offering, only (A) within the United States to persons whom it
reasonably believes to be qualified institutional buyers ("QUALIFIED
INSTITUTIONAL BUYERS"), as defined in Rule 144A under the Securities Act ("RULE
144A"), or if any such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only when such person
has represented to it that each such account is a Qualified Institutional Buyer
to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A and in each case, in transactions in
<PAGE> 12
12
accordance with Rule 144A and (B) outside the United States to persons other
than U.S. persons in reliance on Regulation S under the Securities Act
("REGULATION S").
(c) In connection with the offer and sale of Securities in
reliance on Regulation S, the Initial Purchaser represents, warrants and agrees
that:
(i) it has complied and will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells
or delivers Securities or has in its possession or distributed the
Preliminary Offering Memorandum or the Offering Memorandum;
(ii) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in transactions not subject to, the registration
requirements of the Securities Act;
(iii) the Initial Purchaser has offered and sold the Securities,
and will offer and sell the Securities, (A) as part of their
distribution at any time and (B) otherwise until 40 days after the
later of the commencement of the offering of the Securities and the
Closing Date, only in accordance with Regulation S or Rule 144A or any
other available exemption from registration under the Securities Act;
(iv) none of the Initial Purchaser or any of its affiliates or
any other person acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities,
and all such persons have complied and will comply with the offering
restriction requirements of Regulation S;
(v) at or prior to the confirmation of sale of any Securities
sold in reliance on Regulation S, it will have sent to each
distributor, dealer or other person receiving a selling concession,
fee or other remuneration that purchase Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons
(i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement
of the offering of the Securities and the date of original
issuance of the Securities, except in accordance with
Regulation S or Rule 144A or any other available exemption
from registration under the Securities Act. Terms used above
have the meanings given to them by Regulation S"; and
(vi) it has not and will not enter into any contractual
arrangement with any distributor with respect to the distribution of
the Securities, except with its affiliates or with the prior written
consent of the Company.
Terms used in this Section 2(c) have the meanings given to them by Regulation
S.
(d) The Initial Purchaser represents, warrants and agrees that
(i) it has not offered or sold and prior to the date six months after the
Closing Date will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
<PAGE> 13
13
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Public Offers of Securities Regulations
1995 with respect to anything done by it in relation to the Securities in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
(e) The Initial Purchaser agrees that, prior to or simultaneously
with the confirmation of sale by the Initial Purchaser to any purchaser of any
of the Securities purchased by the Initial Purchaser from the Company pursuant
hereto, the Initial Purchaser shall furnish to that purchaser a copy of the
Offering Memorandum (and any amendment or supplement thereto that the Company
shall have furnished to the Initial Purchaser prior to the date of such
confirmation of sale). In addition to the foregoing, the Initial Purchaser
acknowledges and agrees that the Company and, for purposes of the opinions to
be delivered to the Initial Purchaser pursuant to Sections 5(e) and (f),
counsel for the Company and for the Initial Purchaser, respectively, may rely
upon the accuracy of the representations and warranties of the Initial
Purchaser and their compliance with their agreements contained in this Section
2, and the Initial Purchaser hereby consents to such reliance.
(f) The Company and each of the Guarantors acknowledge and agree
that the Initial Purchaser may sell Securities to any affiliate of the Initial
Purchaser and that any such affiliate may sell Securities purchased by it to
the Initial Purchaser.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. (a) Delivery
of and payment for the Securities shall be made at the offices of Simpson
Thacher & Bartlett, New York, New York, or at such other place as shall be
agreed upon by the Initial Purchaser and the Company, at 10:00 A.M., New York
City time, on May 7, 1999 or at such other time or date, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchaser
and the Company (such date and time of payment and delivery being referred to
herein as the "CLOSING DATE").
(b) On the Closing Date, payment of the purchase price for
the Securities shall be made to the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior
to the Closing Date or by such other means as the parties hereto shall agree
prior to the Closing Date against delivery to the Initial Purchaser of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligations of the Initial Purchaser hereunder. Upon
delivery, the Securities shall be in global form, registered in such names and
in such denominations as the Initial Purchaser shall have requested in writing
not less than two full business days prior to the Closing Date. The Company
agrees to make one or more global certificates evidencing the Securities
available for inspection by the Initial Purchaser in New York, New York at
least 24 hours prior to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The
Company and each of the Guarantors agree with the Initial Purchaser:
<PAGE> 14
14
(a) to advise the Initial Purchaser promptly and, if
requested, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the
Offering Memorandum untrue or which requires the making of any
additions to or changes in the Offering Memorandum (as amended or
supplemented from time to time) in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; to advise the Initial Purchaser promptly of any order
preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum, of any suspension of the
qualification of the Securities for offering or sale in any
jurisdiction and of the initiation or threatening of any proceeding
for any such purpose; and to use its best efforts to prevent the
issuance of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or
suspending any such qualification and, if any such suspension is
issued, to obtain the lifting thereof at the earliest possible time;
(b) to furnish promptly to the Initial Purchaser and
counsel for the Initial Purchaser, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum (and
any amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to
the Offering Memorandum, to furnish a copy thereof to the Initial
Purchaser and counsel for the Initial Purchaser and not to effect any
such amendment or supplement to which the Initial Purchaser shall
reasonably object by notice to the Company after a reasonable period
to review;
(d) if, at any time prior to completion of the
resale of the Securities by the Initial Purchaser, any event shall
occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the Initial Purchaser or counsel for the
Company, to amend or supplement the Offering Memorandum in order that
the Offering Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Offering Memorandum
to comply with applicable law, to promptly prepare such amendment or
supplement as may be necessary to correct such untrue statement or
omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, to furnish to holders of the Securities and
prospective purchasers of the Securities designated by such holders,
upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act, unless the Company is then subject to and in
compliance with Section 13 or 15(d) of the Exchange Act (the foregoing
agreement being for the benefit of the holders from time to time of
the Securities and prospective purchasers of the Securities designated
by such holders);
<PAGE> 15
15
(f) for so long as the Securities are outstanding,
to furnish to the Initial Purchaser copies of any documents, reports
and information as shall be furnished by the Company to the Trustee or
to the holders of the Securities pursuant to the Indenture or the
Exchange Act or any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions
as the Initial Purchaser may reasonably request to qualify the
Securities for offering and sale under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchaser may designate and to
continue such qualifications in effect for so long as required for the
resale of the Securities; and to arrange for the determination of the
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchaser may reasonably request;
PROVIDED that the Company and its subsidiaries shall not be obligated
to qualify as foreign corporations in any jurisdiction in which they
are not so qualified or to file a general consent to service of
process in any jurisdiction;
(h) to assist the Initial Purchaser in arranging for
the Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and
settlement through The Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to,
sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as such term is defined in the Securities
Act) which could be integrated with the sale of the Securities in a
manner which would require registration of the Securities under the
Securities Act;
(j) except following the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration
Statement, as the case may be, not to, and to cause its affiliates not
to, and not to authorize or knowingly permit any person acting on
their behalf to, solicit any offer to buy or offer to sell the
Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act; and not to offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any securities under circumstances
where such offer, sale, contract or disposition would cause the
exemption afforded by Section 4(2) of the Securities Act to cease to
be applicable to the offering and sale of the Securities as
contemplated by this Agreement and the Offering Memorandum;
(k) for a period of 90 days from the date of the
Offering Memorandum, not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a registration
statement for, or announce any offer, sale, contract for sale of or
other disposition of any debt securities issued or guaranteed by the
Company or any of its subsidiaries (other than the Securities) without
the prior written consent of the Initial Purchaser;
(l) during the period from the Closing Date until
two years after the Closing Date, without the prior written consent of
the Initial Purchaser, not to, and not permit any of its affiliates
(as defined in Rule 144 under the Securities Act) to, resell any
<PAGE> 16
16
of the Securities that have been reacquired by them, except for
Securities purchased by the Company or any of its affiliates and
resold in a transaction registered under the Securities Act;
(m) not to, for so long as the Securities are
outstanding, be or become, or be or become owned by, an open-end
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act, and to not be or become, or be or become owned
by, a closed-end investment company required to be registered, but not
registered thereunder;
(n) in connection with the offering of the
Securities, until the Initial Purchaser shall have notified the
Company of the completion of the resale of the Securities, not to, and
to cause its affiliated purchasers (as defined in Regulation M under
the Exchange Act) not to, either alone or with one or more other
persons, bid for or purchase, for any account in which it or any of
its affiliated purchasers has a beneficial interest, any Securities,
or attempt to induce any person to purchase any Securities; and not
to, and to cause its affiliated purchasers not to, make bids or
purchase for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Securities;
(o) in connection with the offering of the
Securities, to make its officers, employees, independent accountants
and legal counsel reasonably available upon request by the Initial
Purchaser;
(p) to do and perform all things required to be done
and performed by it under this Agreement that are within its control
prior to or after the Closing Date, and to use its best efforts to
satisfy all conditions precedent on its part to the delivery of the
Securities;
(q) except as contemplated by the Offering
Memorandum, to not take any action prior to the execution and delivery
of the Indenture which, if taken after such execution and delivery,
would have violated any of the covenants contained in the Indenture;
(r) to not take any action prior to the Closing Date
which would require the Offering Memorandum to be amended or
supplemented pursuant to Section 4(d);
(s) prior to the Closing Date, not to issue any
press release or other communication directly or indirectly or hold
any press conference with respect to the Company, its condition,
financial or otherwise, or earnings or business affairs (except for
routine oral marketing communications in the ordinary course of
business and consistent with the past practices of the Company and of
which the Initial Purchaser is notified), without the prior written
consent of the Initial Purchaser, which consent shall not be
unreasonably withheld, unless in the judgment of the Company and its
counsel, and after notification to the Initial Purchaser, such press
release or communication is required by law; and
(t) to apply the net proceeds from the sale of the
Securities as set forth in the Offering Memorandum under the heading
"Use of Proceeds".
<PAGE> 17
17
5. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser hereunder are subject to the accuracy, on
and as of the date hereof and the Closing Date, of the representations and
warranties of the Company and each of the Guarantors contained herein, to the
accuracy of the statements of the Company and each of the Guarantors and their
respective officers made in any certificates delivered pursuant hereto, to the
performance by the Company and each of the Guarantors of their respective
obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Offering Memorandum (and any amendments or
supplements thereto) shall have been printed and copies distributed to
the Initial Purchaser as promptly as practicable on or following the
date of this Agreement or at such other date and time as to which the
Initial Purchaser may agree; and no stop order suspending the sale of
the Securities in any jurisdiction shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(b) The Initial Purchaser shall not have discovered
and disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchaser, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal
matters incident to the authorization, form and validity of each of
the Transaction Documents and the Offering Memorandum, and all other
legal matters relating to the Transaction Documents and the
transactions contemplated thereby, shall be satisfactory in all
material respects to the Initial Purchaser, and the Company shall have
furnished to the Initial Purchaser all documents and information that
they or their counsel may reasonably request to enable them to pass
upon such matters.
(d) The Initial Purchaser shall have received true
and correct copies of all agreements entered into in connection with
the Merger, including, without limitation, the Merger Agreement and
the LLC Agreement, as amended through the date hereof.
(e) Simpson Thacher & Bartlett, special counsel to
the Company, and Harvey Blicksilver, general counsel to the Company,
shall have furnished to the Initial Purchaser their respective written
opinions, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchaser, substantially to the effect set forth in Annexes B-1 and
B-2 hereto.
(f) The Initial Purchaser shall have received from
Cravath, Swaine & Moore, counsel for the Initial Purchaser, such
opinion or opinions, dated the Closing Date, with respect to such
matters as the Initial Purchaser may reasonably require, and the
Company shall have furnished to such counsel such documents and
information as they request for the purpose of enabling them to pass
upon such matters.
(g) The Company shall have furnished to the Initial
Purchaser a letter (the "INITIAL LETTER") of Arthur Andersen,
addressed to the Initial Purchaser and dated the date hereof, in form
and substance satisfactory to the Initial Purchaser, substantially to
the effect set forth in Annex C hereto.
<PAGE> 18
18
(h) The Company shall have furnished to the Initial
Purchaser a letter (the "BRING-DOWN LETTER") of Arthur Andersen,
addressed to the Initial Purchaser and dated the Closing Date (i)
confirming that they are independent public accountants with respect
to the Company and its subsidiaries within the meaning of Rule 101 of
the Code of Professional Conduct of the AICPA and its interpretations
and rulings thereunder, (ii) stating, as of the date of the Bring-Down
Letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information
is given in the Offering Memorandum, as of a date not more than three
business days prior to the date of the Bring-Down Letter), that the
conclusions and findings of such accountants with respect to the
financial information and other matters covered by the Initial Letter
are accurate and (iii) confirming in all material respects the
conclusions and findings set forth in the Initial Letter.
(i) The Company and each of the Guarantors shall
have furnished to the Initial Purchaser a certificate, dated the
Closing Date, of their respective chief executive officers and their
respective chief financial officers stating that (i) such officers
have carefully examined the Offering Memorandum, (ii) in their
opinion, the Offering Memorandum, as of its date, did not include any
untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, and since the date of the
Offering Memorandum, no event has occurred which should have been set
forth in a supplement or amendment to the Offering Memorandum so that
the Offering Memorandum (as so amended or supplemented) would not
include any untrue statement of a material fact and would not omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (iii) as of
the Closing Date, the representations and warranties of the Company or
the particular Guarantor, as applicable, in this Agreement are true
and correct in all material respects, the Company or the particular
Guarantor, as applicable, has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder on or prior to the Closing Date, and (iv) except for the
Transactions, subsequent to the date of the most recent financial
statements contained in the Offering Memorandum, there has been no
material adverse change in the financial position or results of
operation of the Company or any of its subsidiaries, or any change, or
any development involving a prospective change, in or affecting the
condition (financial or otherwise), results of operations or business
of the Company and its subsidiaries taken as a whole.
(j) The Initial Purchaser shall have received a
counterpart of the Registration Rights Agreement which shall have been
executed and delivered by a duly authorized officer of the Company.
(k) The Indenture shall have been duly executed and
delivered by the Company, the Guarantors and the Trustee, and the
Securities shall have been duly executed and delivered by the Company
and duly authenticated by the Trustee.
(l) The Securities shall have been approved by the
NASD for trading in the PORTAL Market.
<PAGE> 19
19
(m) If any event shall have occurred that requires
the Company under Section 4(d) to prepare an amendment or supplement
to the Offering Memorandum, such amendment or supplement shall have
been prepared, the Initial Purchaser shall have been given a
reasonable opportunity to comment thereon, and copies thereof shall
have been delivered to the Initial Purchaser reasonably in advance of
the Closing Date.
(n) There shall not have occurred any invalidation
of Rule 144A under the Securities Act by any court or any withdrawal
or proposed withdrawal of any rule or regulation under the Securities
Act or the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission which in the judgment of the
Initial Purchaser would materially impair the ability of the Initial
Purchaser to purchase, hold or effect resales of the Securities as
contemplated hereby.
(o) Except for the Transactions or as described in
the Offering Memorandum under the captions "Recent Developments,"
subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there
shall not have been any change in the capital stock or long-term debt
or any change, or any development involving a prospective change, in
or affecting the condition (financial or otherwise), results of
operations or business of the Company and its subsidiaries taken as a
whole, the effect of which, in any such case described above, is, in
the judgment of the Initial Purchaser, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated
by this Agreement and the Offering Memorandum (exclusive of any
amendment or supplement thereto).
(p) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued
by any governmental agency or body which would, as of the Closing
Date, prevent the issuance or sale of the Securities; and no
injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance or sale
of the Securities.
(q) Subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating
accorded the Securities or any of the Company's other debt securities
or preferred stock by any "nationally recognized statistical rating
organization", as such term is defined by the Commission for purposes
of Rule 436(g)(2) of the rules and regulations of the Commission under
the Securities Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its
rating of the Securities or any of the Company's other debt securities
or preferred stock.
(r) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been
suspended or limited, or minimum prices shall have been established
<PAGE> 20
20
on any such exchange or market by the Commission, by any such exchange
or by any other regulatory body or governmental authority having
jurisdiction, or trading in any securities of the Company on any
exchange or in the over-the-counter market shall have been suspended
or (ii) any moratorium on commercial banking activities shall have
been declared by federal or New York state authorities or (iii) an
outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or (iv) a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) the effect of which, in the case of this
clause (iv), is, in the judgment of the Initial Purchaser, so material
and adverse as to make it impracticable or inadvisable to proceed with
the sale or the delivery of the Securities on the terms and in the
manner contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(s) All conditions to the consummation of the Merger
(including, without limitation, the execution of the Credit Agreement
and the consummation of the Debt Tender Offer), other than the
Offering of the Securities, shall have been satisfied. The Merger, the
Debt Tender Offer and the initial funding under the Credit Agreement
shall be consummated substantially concurrently with the sale of the
Securities hereunder. All conditions to the other Transactions other
than the sale of the Securities shall have been satisfied.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
6. TERMINATION. The obligations of the Initial Purchaser
hereunder may be terminated by the Initial Purchaser, in their absolute
discretion, by notice given to and received by the Company prior to delivery of
and payment for the Securities if, prior to that time, any of the events
described in Section 5(n), (o), (p), (q) or (r) shall have occurred and be
continuing.
7. REIMBURSEMENT OF INITIAL PURCHASER'S EXPENSES. If (a) this
Agreement shall have been terminated pursuant to Section 6 (other than pursuant
to Section 5(r)), (b) the Company shall fail to tender the Securities for
delivery to the Initial Purchaser for any reason permitted under this Agreement
(other than by reason of any failure by the Initial Purchaser to comply with
any of its material covenants under this Agreement) or (c) the Initial
Purchaser shall decline to purchase the Securities for any reason permitted
under this Agreement, the Company and the Guarantors shall reimburse the
Initial Purchaser for such out-of-pocket expenses (including reasonable fees
and disbursements of counsel) as shall have been reasonably incurred by the
Initial Purchaser in connection with this Agreement and the proposed purchase
and resale of the Securities.
8. INDEMNIFICATION. (a) The Company and each of the
Guarantors shall jointly and severally indemnify and hold harmless the Initial
Purchaser, its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Initial
Purchaser within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 8(a) and Section 9 as
the Initial Purchaser), from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, without
limitation, any loss, claim, damage, liability or action relating to purchases
and sales of the Securities), to which the Initial Purchaser may
<PAGE> 21
21
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum
or the Offering Memorandum or in any amendment or supplement thereto or in any
information provided by the Company pursuant to Section 4(e) or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
shall reimburse the Initial Purchaser promptly upon demand for any legal or
other expenses reasonably incurred by that Initial Purchaser in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that none of the
Company and the Guarantors shall be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Initial Purchaser's Information; and PROVIDED, FURTHER, that with respect to
any such untrue statement in or omission from the Preliminary Offering
Memorandum, the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of any such Initial Purchaser to the extent that the sale
to the person asserting any such loss, claim, damage, liability or action was
an initial resale by the Initial Purchaser and any such loss, claim, damage,
liability or action of or with respect to the Initial Purchaser results from
the fact that both (A) to the extent required by applicable law, a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Company
with Section 4(b).
(b) The Initial Purchaser shall indemnify and hold harmless
the Company, its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 8(b) and Section 9 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any
Initial Purchaser's Information, and shall reimburse the Company for any legal
or other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred.
<PAGE> 22
22
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party pursuant to Section 8(a) or 8(b), notify the
indemnifying party in writing of the claim or the commencement of that action;
PROVIDED, HOWEVER, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8 except to
the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and, PROVIDED, FURTHER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
PROVIDED, HOWEVER, that an indemnified party shall have the right to employ its
own counsel in any such action, but the fees, expenses and other charges of
such counsel for the indemnified party will be at the expense of such
indemnified party unless (i) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (ii) the indemnified
party has reasonably concluded (based upon advice of counsel to the indemnified
party) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (iii) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (iv) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 8(a) and 8(b),
shall use all reasonable efforts to cooperate with the indemnifying party in
the defense of any such action or claim. No indemnifying party shall be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment for the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
<PAGE> 23
23
The obligations of the Company, the Guarantors and the
Initial Purchaser in this Section 8 and in Section 9 are in addition to any
other liability that the Company, the Guarantors or the Initial Purchaser, as
the case may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.
9. CONTRIBUTION. If the indemnification provided for in
Section 8 is unavailable or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Guarantors on the
one hand and the Initial Purchaser on the other from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Guarantors on the one hand and the
Initial Purchaser on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors on the one hand and the
Initial Purchaser on the other with respect to such offering shall be deemed to
be in the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by or on behalf of the Company and the Guarantors, on the one hand, and the
total discounts and commissions received by the Initial Purchaser with respect
to the Securities purchased under this Agreement, on the other, bear to the
total gross proceeds from the sale of the Securities under this Agreement. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Company or information
supplied by the Company and the Guarantors on the one hand or to any Initial
Purchaser's Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company, the Guarantors and the Initial
Purchaser agree that it would not be just and equitable if contributions
pursuant to this Section 9 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 9 shall be deemed to include, for
purposes of this Section 9, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 9, the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the total discounts and commissions
received by the Initial Purchaser with respect to the Securities purchased by
it under this Agreement exceeds the amount of any damages which such Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchaser, the
Company, the Guarantors and their respective successors. This Agreement and the
terms and
<PAGE> 24
24
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 8 and 9 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company, the
Guarantors and the Initial Purchaser and in Section 4(e) with respect to
holders and prospective purchasers of the Securities. Nothing in this Agreement
is intended or shall be construed to give any person, other than the persons
referred to in this Section 10, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. EXPENSES. The Company and the Guarantors agree with the
Initial Purchaser to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum
and any amendments or supplements thereto; (c) the costs of reproducing and
distributing each of the Transaction Documents; (d) the costs incident to the
preparation, printing and delivery of the certificates evidencing the
Securities, including stamp duties and transfer taxes, if any, payable upon
issuance of the Securities; (e) the fees and expenses of the Company's counsel
and independent accountants; (f) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided
in Section 4(h) and of preparing, printing and distributing Blue Sky Memoranda
(including related fees and expenses of counsel for the Initial Purchaser); (g)
any fees charged by rating agencies for rating the Securities; (h) all expenses
and application fees incurred in connection with the application for the
inclusion of the Securities on the PORTAL Market and the approval of the
Securities for book-entry transfer by DTC; and (i) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement which are not otherwise specifically provided for in this Section 11;
PROVIDED, HOWEVER, that (i) except as provided in this Section 11 and Section
7, the Initial Purchaser shall pay its own costs and expenses and (ii) the
Initial Purchaser shall pay the costs of the airplane used for the "road show."
12. SURVIVAL. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Company, the
Guarantors and the Initial Purchaser contained in this Agreement or made by or
on behalf of the Company, the Guarantors or the Initial Purchaser pursuant to
this Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancelation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
13. NOTICES, ETC.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered
or sent by mail or telecopy transmission to Chase Securities Inc., 270
Park Avenue, New York, New York 10017, Attention: Alexis Pugliese
(telecopier no.: (212) 270-0994); or
(b) if to the Company, shall be delivered or sent by
mail or telecopy transmission to the address of the Company set forth
in the Offering Memorandum, Attention: Chief Financial Officer
(telecopier no.: (561) 540-1010);
PROVIDED that any notice to the Initial Purchaser pursuant to Section 8(c)
shall also be delivered or sent by mail to the Initial Purchaser at its address
set forth on the signature page
<PAGE> 25
25
hereof. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the
Initial Purchaser by CSI.
14. DEFINITION OF TERMS. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth
in Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
15. INITIAL PURCHASER'S INFORMATION. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchaser's Information consists solely of the following information in the
Preliminary Offering Memorandum and the Offering Memorandum: (a) the last two
bullet points on the front cover page concerning the terms of the offering by
the Initial Purchaser and (b) the statements concerning the Initial Purchaser
contained in the third, ninth, tenth, eleventh and twelfth paragraphs under the
heading "Plan of Distribution."
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
18. AMENDMENTS. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
19. HEADINGS. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
<PAGE> 26
26
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement between the Company, the
Guarantors and the Initial Purchaser in accordance with its terms.
Very truly yours,
On behalf of
AMERICAN MEDIA OPERATIONS, INC.,
NATIONAL ENQUIRER, INC., SOM
PUBLISHING, INC., WEEKLY WORLD
NEWS, INC., COUNTRY WEEKLY, INC.,
DISTRIBUTION SERVICES, INC.,
FAIRVIEW PRINTING, INC., NDSI,
INC., HEALTH XTRA, INC., RETAIL
MARKETING NETWORK, INC., BIOCIDE,
INC., AMERICAN MEDIA MARKETING,
INC., and MARKETING SERVICES, INC.,
By /s/ Maynard Rabinowitz
--------------------------------
Name: Maynard Rabinowitz
Title: Secretary
STAR EDITORIAL, INC.,
By /s/ Michael J. Boylan
--------------------------------
Name: Michael J. Boylan
Title: President
<PAGE> 27
27
Accepted:
CHASE SECURITIES INC.,
By /s/ Joe Purcell
-----------------------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th Floor
New York, New York 10081
Attention: Legal Department
<PAGE> 28
28
SCHEDULE 1
Amended and Restated Limited Liability Company Agreement and Investors Rights
Agreement of EMP Group L.L.C., dated as of February 16, 1999, by and among
Evercore Capital Partners, L.P., Circulation, LLC, Chase Equity Associates,
L.P., Tandem Journalism Investments, L.P., BG Media Investors, L.P., David J.
Pecker, Karen Pecker and Holdings, and Aetna Life Insurance Company and Capital
Communications CDPQ Inc., each as guarantors.
<PAGE> 29
29
ANNEX B-1
Form of Opinion of Simpson Thacher & Bartlett
See attached.
<PAGE> 30
30
ANNEX B-2
Form of Opinion of General Counsel for the Company
See attached.
<PAGE> 31
31
ANNEX C
Form of Initial Comfort Letter
The Company shall have furnished to the Initial Purchaser a
letter of Arthur Andersen, addressed to the Initial Purchaser and dated the
date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchaser, substantially to the effect set forth below:
(i) they are independent certified public
accountants with respect to the Company within the meaning of Rule 101
of the Code of Professional Conduct of the AICPA and its
interpretations and rulings;
(ii) in their opinion, the audited financial
statements and pro forma financial information included in the
Offering Memorandum and reported on by them comply in form in all
material respects with the accounting requirements of the Exchange Act
and the related published rules and regulations of the Commission
thereunder that would apply to the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on
Form S-1 under the Securities Act (except that certain supporting
schedules are omitted);
(iii) based upon a reading of the latest unaudited
financial statements made available by the Company, the procedures of
the AICPA for a review of interim financial information as described
in Statement of Auditing Standards No. 71, reading of minutes and
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters and certain other limited
procedures requested by the Initial Purchaser and described in detail
in such letter, nothing has come to their attention that causes them
to believe that (A) any unaudited financial statements included in the
Offering Memorandum do not comply as to form in all material respects
with applicable accounting requirements, (B) any material
modifications should be made to the unaudited financial statements
included in the Offering Memorandum for them to be in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Offering Memorandum or (C) the information included
under the headings "Summary--Summary Historical Financial Data,"
"Capitalization," "Selected Historical Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" is not in conformity with the
disclosure requirements of Regulation S-K that would apply to the
Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 under the Securities
Act;
(iv) based upon the procedures detailed in such
letter with respect to the period subsequent to the date of the last
available balance sheet, including reading of minutes and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters, nothing has come to their attention that
causes them to believe that (A) at a specified date not more than
three business days prior to the date of such letter, there was any
change in capital stock, increase in long-term debt or decrease in net
current assets as compared with the amounts shown in the
<PAGE> 32
32
December 28, 1998 unaudited balance sheet included in the Offering
Memorandum or (B) for the period from December 28, 1998 to a specified
date not more than three business days prior to the date of such
letter, there were any decreases, as compared with the corresponding
period in the preceding year, in net sales, income from operations,
except in all instances for changes, increases or decreases that the
Offering Memorandum discloses have occurred or which are set forth in
such letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchaser;
(v) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature (which
is limited to accounting, financial or statistical information derived
from the general accounting records of the Company) set forth in the
Offering Memorandum agrees with the accounting records of the Company,
excluding any questions of legal interpretation; and
(vi) on the basis of a reading of the unaudited pro
forma financial information included in the Offering Memorandum,
carrying out certain specified procedures, reading of minutes and
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial information, nothing
came to their attention which caused them to believe that the pro
forma financial information does not comply in form in all material
respects with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
information.
<PAGE> 1
Exhibit 4.2
AMERICAN MEDIA OPERATIONS, INC.
10 1/4% Senior Subordinated Notes due 2009
---------
INDENTURE
Dated as of May 7, 1999
---------
THE CHASE MANHATTAN BANK,
as Trustee
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions............................................................. 1
SECTION 1.02. Other Definitions....................................................... 20
SECTION 1.03. Incorporation by Reference of Trust Indenture Act....................... 20
SECTION 1.04. Rules of Construction................................................... 21
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating......................................................... 21
SECTION 2.02. Execution and Authentication............................................ 22
SECTION 2.03. Registrar and Paying Agent.............................................. 22
SECTION 2.04. Paying Agent to Hold Money in Trust..................................... 23
SECTION 2.05. Holder Lists............................................................ 23
SECTION 2.06. Transfer and Exchange................................................... 23
SECTION 2.07. Replacement Notes....................................................... 24
SECTION 2.08. Outstanding Notes....................................................... 25
SECTION 2.09. Temporary Notes......................................................... 25
SECTION 2.10. Cancelation............................................................. 25
SECTION 2.11. Defaulted Interest...................................................... 25
SECTION 2.12. CUSIP and ISIN Numbers.................................................. 26
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee...................................................... 26
SECTION 3.02. Selection of Notes To Be Redeemed....................................... 26
SECTION 3.03. Notice of Redemption.................................................... 26
SECTION 3.04. Effect of Notice of Redemption.......................................... 27
SECTION 3.05. Deposit of Redemption Price............................................. 27
SECTION 3.06. Notes Redeemed in Part.................................................. 27
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ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes........................................................ 28
SECTION 4.02. SEC Reports............................................................. 28
SECTION 4.03. Limitation on Indebtedness.............................................. 28
SECTION 4.04 Limitation on Restricted Payments....................................... 31
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.............................................. 36
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock...................... 36
SECTION 4.07. Limitation on Transactions with Affiliates.............................. 39
SECTION 4.08. Change of Control....................................................... 40
SECTION 4.09. Compliance Certificate.................................................. 41
SECTION 4.10. Further Instruments and Acts............................................ 42
SECTION 4.11. Future Note Guarantors.................................................. 42
SECTION 4.12. Limitation on Lines of Business......................................... 42
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.............................................. 42
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer Assets............................... 42
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default....................................................... 44
SECTION 6.02. Acceleration............................................................ 45
SECTION 6.03. Other Remedies.......................................................... 46
SECTION 6.04. Waiver of Past Defaults................................................. 46
SECTION 6.05. Control by Majority..................................................... 46
SECTION 6.06. Limitation on Suits..................................................... 46
SECTION 6.07. Rights of Holders to Receive Payment.................................... 47
SECTION 6.08. Collection Suit by Trustee.............................................. 47
SECTION 6.09. Trustee May File Proofs of Claim........................................ 47
SECTION 6.10. Priorities.............................................................. 47
SECTION 6.11. Undertaking for Costs................................................... 48
SECTION 6.12. Waiver of Stay of Extension Laws........................................ 48
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ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee....................................................... 48
SECTION 7.02. Rights of Trustee....................................................... 49
SECTION 7.03. Individual Rights of Trustee............................................ 50
SECTION 7.04. Trustee's Disclaimer.................................................... 50
SECTION 7.05. Notice of Defaults...................................................... 50
SECTION 7.06. Reports by Trustee to Holders........................................... 51
SECTION 7.07. Compensation and Indemnity.............................................. 51
SECTION 7.08. Replacement of Trustee.................................................. 52
SECTION 7.09. Successor Trustee by Merger............................................. 52
SECTION 7.10. Eligibility; Disqualification........................................... 53
SECTION 7.11. Preferential Collection of Claims Against Company....................... 53
ARTICLE 8
DISCHARGE OF INDENTURE, DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance............................. 53
SECTION 8.02. Conditions to Defeasance................................................ 54
SECTION 8.03. Application of Trust Money.............................................. 55
SECTION 8.04. Repayment to Company.................................................... 55
SECTION 8.05. Indemnity for Government Obligations.................................... 56
SECTION 8.06. Reinstatement........................................................... 56
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.............................................. 56
SECTION 9.02. With Consent of Holders................................................. 57
SECTION 9.03. Compliance with Trust Indenture Act..................................... 58
SECTION 9.04. Revocation and Effect of Consents and Waivers........................... 58
SECTION 9.05. Notation on or Exchange of Notes........................................ 58
SECTION 9.06. Trustee To Sign Amendments.............................................. 59
SECTION 9.07. Payment for Consent..................................................... 59
ARTICLE 10
SUBORDINATION
SECTION 10.01. Agreement to Subordinate................................................ 59
SECTION 10.02. Liquidation, Dissolution, Bankruptcy.................................... 59
SECTION 10.03. Default on Senior Indebtedness.......................................... 60
SECTION 10.04. Acceleration of Payment of Notes........................................ 61
SECTION 10.05. When Distribution Must Be Paid Over..................................... 61
SECTION 10.06. Subrogation............................................................. 61
SECTION 10.07. Relative Rights......................................................... 61
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SECTION 10.08. Subrogation May Not Be Impaired by Company.............................. 61
SECTION 10.09. Rights of Trustee and Paying Agent...................................... 62
SECTION 10.10. Distribution or Notice to Representative................................ 62
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right to Accelerate.................................................. 62
SECTION 10.12. Trust Moneys Not Subordinated........................................... 62
SECTION 10.13. Trustee Entitled To Rely................................................ 62
SECTION 10.14. Trustee to Effectuate Subordination..................................... 63
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness........................................................ 63
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions............................................. 63
ARTICLE 11
NOTE GUARANTEES
SECTION 11.01. Note Guarantees......................................................... 63
SECTION 11.02. Limitation on Liability................................................. 65
SECTION 11.03. Successors and Assigns.................................................. 66
SECTION 11.04. No Waiver............................................................... 66
SECTION 11.05. Modification............................................................ 66
SECTION 11.06. Execution of Supplemental Indenture for Future
Note Guarantors...................................................... 66
SECTION 11.07. Non-Impairment.......................................................... 67
ARTICLE 12
SUBORDINATION OF THE NOTE GUARANTEES
SECTION 12.01. Agreement To Subordinate................................................ 67
SECTION 12.02. Liquidation, Dissolution, Bankruptcy.................................... 67
SECTION 12.03. Default on Designated Senior Indebtedness of a
Note Guarantor....................................................... 68
SECTION 12.04. Demand for Payment...................................................... 69
SECTION 12.05. When Distribution Must Be Paid Over..................................... 69
SECTION 12.06. Subrogation............................................................. 69
SECTION 12.07. Relative Rights......................................................... 69
SECTION 12.08. Subordination May Not Be Impaired by a Note
Guarantor............................................................ 69
SECTION 12.09. Rights of Trustee and Paying Agent...................................... 70
SECTION 12.10. Distribution or Notice to Representative................................ 70
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Accelerate.................................................. 70
SECTION 12.12. Trustee Entitled to Rely................................................ 70
SECTION 12.13. Trustee To Effectuate Subordination..................................... 71
</TABLE>
<PAGE> 6
5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness
of a Note Guarantor.................................................. 71
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Note Guarantor on Subordination
Provisions.......................................................... 71
SECTION 12.16. Defeasance.............................................................. 71
ARTICLE 13
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls............................................ 71
SECTION 13.02. Notices................................................................. 72
SECTION 13.03. Communication of Holders with Other Holders............................. 72
SECTION 13.04. Certificate and Opinion as to Conditions Precedent...................... 72
SECTION 13.05. Statements Required in Certificate or Opinion........................... 72
SECTION 13.06. When Notes Disregarded.................................................. 73
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............................ 73
SECTION 13.08. Legal Holidays.......................................................... 73
SECTION 13.09. Governing Law........................................................... 73
SECTION 13.10. No Recourse Against Others.............................................. 73
SECTION 13.11. Successors.............................................................. 74
SECTION 13.12. Multiple Originals...................................................... 74
SECTION 13.13. Table of Contents; Headings............................................. 74
Appendix A - Provisions Relating to Initial Notes,
Private Exchange Notes and Exchange Notes
Exhibit A - Form of Initial Note
Exhibit B - Form of Exchange Note
Exhibit C - Form of Supplemental Indenture
Exhibit D - Form of Transferee Letter of Representation
</TABLE>
<PAGE> 7
INDENTURE dated as of May 7, 1999, among
American Media Operations, Inc., a Delaware
corporation (the "Company"), National Enquirer,
Inc., a Florida corporation, Star Editorial, Inc., a
Delaware corporation, SOM Publishing, Inc., a
Florida corporation, Weekly World News, Inc., a
Florida corporation, Country Weekly, Inc., a
Delaware corporation, Distribution Services, Inc., a
Delaware corporation, Fairview Printing, Inc., a
Florida corporation, NDSI, Inc., a Delaware
corporation, Biocide, Inc., a Delaware corporation,
Health Xtra, Inc., a Florida corporation, Retail
Marketing Network, Inc., a Delaware corporation,
American Media Marketing, Inc., a Florida
corporation, and Marketing Services, Inc., a
Delaware corporation (collectively, the "Note
Guarantors"), and The Chase Manhattan Bank, a New
York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of (a) the
Company's 10 1/4% Senior Subordinated Notes due 2009 issued on the date hereof
(the "Initial Notes"), (b) if and when issued as provided in the Registration
Agreement (as defined in Appendix A hereto (the "Appendix")), the Company's 10
1/4% Senior Subordinated Notes due 2009 issued in the Registered Exchange Offer
(as defined in the Appendix) in exchange for any Initial Notes (the "Exchange
Notes") and (c) if and when issued as provided in the Registration Agreement,
the Private Exchange Notes (as defined in the Appendix, and together with the
Initial Notes and any Exchange Notes issued hereunder, the "Notes") issued in
the Private Exchange (as defined in the Appendix). Except as otherwise provided
herein, the Notes shall be limited to $250,000,000 in aggregate principal
amount outstanding.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Additional Assets" means (a) any property or assets (other
than Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (b) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (c) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted Subsidiary
described in clauses (b) or (c) above is primarily engaged in a Permitted
Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also
mean any beneficial owner of shares representing 10% or more of the total
<PAGE> 8
2
voting power of the Voting Stock (on a fully diluted basis) of the Company or
Holdings or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (a) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (b) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or (c)
any other assets of the Company or any Restricted Subsidiary outside of the
ordinary course of business of the Company or such Restricted Subsidiary; other
than, in the case of (a), (b) and (c) above, (i) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Note Guarantor, (ii) any sale of Capital Stock in, or Indebtedness or other
securities of, an Unrestricted Subsidiary, (iii) transactions permitted under
Section 5.01(a), (iv) an issuance of Capital Stock by a Restricted Subsidiary
of the Company to the Company or to a Restricted Subsidiary, (v) for purposes
of Section 4.06 only, a disposition subject to Section 4.04, (vi) any Permitted
Asset Swap and (vii) any disposition of assets with a Fair Market Value of not
more than $500,000.
"Attributable Debt" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Notes, compounded annually) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (a) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment, by (b) the sum
of all such payments.
"Bank Indebtedness" means any and all amounts payable under
or in respect of the Credit Agreement and any Refinancing Indebtedness with
respect thereto, as amended from time to time, including principal, premium (if
any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of the Board
of Directors of the Company.
"Business Day" means each day which is not a Legal Holiday.
<PAGE> 9
3
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be prepaid
by the lessee without payment of a penalty.
"Change of Control" means the occurrence of any of the
following events:
(a) prior to the earlier to occur of (i) the first public
offering of common stock of Holdings or (ii) the first public offering
of common stock of the Company, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate
of the total voting power of the Voting Stock of the Company or
Holdings, whether as a result of issuance of securities of Holdings or
the Company, any merger, consolidation, liquidation or dissolution of
Holdings or the Company, any direct or indirect transfer of securities
by any Permitted Holder or otherwise (for purposes of this clause (a)
and clause (b) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of an entity (the "specified
entity") held by any other entity (the "parent entity") so long as the
Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the
Voting Stock of the parent entity);
(b) (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (a)
above, except that for purposes of this clause (b) such person shall
be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company or Holdings and (ii) the Permitted Holders
"beneficially own" (as defined in clause (a) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Company or Holdings than such other
person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the
board of directors of the Company or Holdings, as the case may be (for
the purposes of this clause (b), such other person shall be deemed to
beneficially own any Voting Stock of a specified entity held by a
parent entity, if such other person is the beneficial owner (as
defined in this clause (b)), directly or indirectly, of more than 35%
of the voting power of the Voting Stock of such parent entity and the
Permitted Holders "beneficially own" (as defined in clause (a) above),
directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of
<PAGE> 10
4
such parent entity and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity);
(c) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of directors
of the Company or Holdings, as the case may be (together with any new
directors whose election by such board of directors of the Company or
Holdings, as the case may be, or whose nomination for election by the
shareholders of the Company or Holdings, as the case may be, was
approved by a vote of 66 2/3% of the directors of the Company or
Holdings, as the case may be, then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the board of directors of the
Company or Holdings, as the case may be, then in office;
(d) the adoption of a plan relating to the liquidation or
dissolution of the Company or Holdings;
(e) the merger or consolidation of the Company or Holdings
with or into another Person or the merger of another Person with or
into the Company or Holdings, or the sale of all or substantially all
the assets of the Company or Holdings to another Person (other than a
Person that is controlled by the Permitted Holders), and, in the case
of any such merger or consolidation, the securities of the Company or
Holdings that are outstanding immediately prior to such transaction
and which represent 100% of the aggregate voting power of the Voting
Stock of the Company or Holdings are changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving Person or transferee that
represent immediately after such transaction, at least a majority of
the aggregate voting power of the Voting Stock of the surviving Person
or transferee; or
(f) Evercore no longer has the direct or indirect power to
appoint or to approve the appointment of a majority of the managers of
(or other individuals comprising) the board of managers or other
governing body of EMP Group L.L.C.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its Consolidated Restricted
Subsidiaries, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (a)
interest expense attributable to Capitalized Lease Obligations
<PAGE> 11
5
and the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, (b) amortization of debt discount and debt issuance
costs, (c) capitalized interest, (d) noncash interest expense, (e) commissions,
discounts and other fees and charges attributable to letters of credit and
bankers' acceptance financing, (f) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by the Company or
any Restricted Subsidiary, (g) net costs associated with Hedging Obligations,
(h) dividends in respect of all Disqualified Stock of the Company and all
Preferred Stock of any of the Restricted Subsidiaries of the Company, to the
extent held by Persons other than the Company or a Wholly Owned Subsidiary, (i)
interest Incurred in connection with investments in discontinued operations and
(j) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust. Notwithstanding anything to the
contrary contained herein, commissions, discounts, yield and other fees and
charges Incurred in connection with any transaction pursuant to which the
Company or any Subsidiary of the Company may sell, convey or otherwise transfer
or grant a security interest in any accounts receivable or related assets shall
be included in Consolidated Interest Expense.
"Consolidated Net Income" means, for any period, the net
income of the Company and its Consolidated Subsidiaries for such period;
PROVIDED, HOWEVER, that there shall not be included in such Consolidated Net
Income:
(a) any net income of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that (i) subject to
the limitations contained in clause (d) below, the Company's equity in
the net income of any such Person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company
or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution made to a
Restricted Subsidiary, to the limitations contained in clause (c)
below) and (ii) the Company's equity in a net loss of any such Person
for such period shall be included in determining such Consolidated Net
Income to the extent such loss has been funded with cash from the
Company or a Restricted Subsidiary;
(b) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
(c) any net income (or loss) of any Restricted Subsidiary
(other than any Note Guarantor) if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (i)
subject to the limitations contained in clause (d) below, the
Company's equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution made to another
Restricted Subsidiary, to the limitation contained in this clause) and
(ii) the Company's
<PAGE> 12
6
equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income;
(d) any gain (loss) realized upon the sale or other
disposition of any asset of the Company or its Consolidated
Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
that is not sold or otherwise disposed of in the ordinary course of
business and any gain (loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(e) any extraordinary gain or loss; and
(f) the cumulative effect of a change in accounting
principles.
"Consolidation" means the consolidation of the amounts of
each of the Restricted Subsidiaries with those of the Company in accordance
with GAAP consistently applied; PROVIDED, HOWEVER, that "Consolidation" shall
not include consolidation of the accounts of any Unrestricted Subsidiary, but
the interest of the Company or any Restricted Subsidiary in an Unrestricted
Subsidiary shall be accounted for as an investment. The term "Consolidated" has
a correlative meaning.
"Credit Agreement" means the credit agreement dated as of May
7, 1999, initially among Holdings, the Company, the lenders thereunder and The
Chase Manhattan Bank, as administrative agent for such lenders, as amended,
restated, supplemented, waived, replaced (whether or not upon termination),
restructured, repaid, refunded, refinanced or otherwise modified from time to
time including any agreement extending the maturity thereof or otherwise
restructuring all or any portion of the Indebtedness under such agreement or
increasing the amount loaned thereunder or altering the maturity thereof.
"Currency Agreement" means with respect to any Person any
foreign exchange contract, currency swap agreements or other similar agreement
or arrangement to which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Noncash Consideration" means the Fair Market
Value of noncash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Disposition that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, less the amount of Temporary Cash
Investments received in connection with a subsequent sale of such Designated
Noncash Consideration.
"Designated Senior Indebtedness" of the Company means (a) the
Bank Indebtedness and (b) any other Senior Indebtedness of the Company that, at
the date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to, at least $10.0 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture. "Designated
Senior Indebtedness" of a Note Guarantor has a correlative meaning.
<PAGE> 13
7
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (b) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding Capital Stock convertible or
exchangeable solely at the option of the Company or a Restricted Subsidiary;
PROVIDED that any such conversion or exchange shall be deemed an Incurrence of
Indebtedness or an issuance of Disqualified Stock, as applicable) or (c) is
redeemable at the option of the holder thereof, in whole or in part, in the
case of each of clauses (a), (b) and (c) on or prior to 91 days after the
Stated Maturity of the Notes; PROVIDED, HOWEVER, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to 91 days after the Stated Maturity of the Notes shall not
constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the provisions of Sections 4.06 and 4.08;
PROVIDED, HOWEVER, that only the portion of Capital Stock which so matures or
is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such date shall be
deemed to be Disqualified Stock; PROVIDED FURTHER, HOWEVER, that if such
Capital Stock is issued to any employee or to any plan for the benefit of
employees of the Company or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Stock solely
because it may be required to be repurchased by the Company in order to satisfy
applicable statutory or regulatory obligations or as a result of such
employee's termination, death or disability.
"EBITDA" for any period means the Consolidated Net Income for
such period, plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (a) Consolidated income tax expense,
(b) Consolidated Interest Expense, (c) Consolidated depreciation expense, (d)
Consolidated amortization expense (excluding amortization expense attributable
to a prepaid cash item that was paid in a prior period), (e) any nonrecurring
expenses or charges related to any Equity Offering, Permitted Investment,
acquisition or Indebtedness permitted to be incurred by this Indenture (whether
or not successful) (including fees, expenses or charges related to the
Transactions, including the Make-Whole Payments), (f) the amount of any annual
monitoring fees paid to Evercore in an amount not to exceed $750,000 during any
fiscal year, (g) any severance expenses related to the Transactions or
make-whole or similar payments or any corporate relocation expenses arising
from the relocation of the Company or such Restricted Subsidiary from any of
the facilities in which they are located on the Closing Date, in each case
Incurred or made within eighteen months after the Closing Date in an amount,
taken together with all other amounts under this clause (g), not to exceed $3.0
million in the aggregate, and (h) any other noncash charges reducing
Consolidated Net Income for such period (excluding any such charge which
consists of or requires an accrual of, or cash reserve for, any anticipated
cash charges for any prior or in any future period). Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization and non-cash charges of, a Restricted Subsidiary
of the Company shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income;
PROVIDED, HOWEVER, that with respect to any Restricted Subsidiary other than a
Note Guarantor, such amount shall be added to Consolidated Net Income to
compute
<PAGE> 14
8
EBITDA only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Equity Offering" means any public or private sale of common
stock or Preferred Stock of the Company or Holdings (other than Disqualified
Stock), other than public offerings with respect to the Company's or Holdings's
common stock registered on Form S-8 or other issuances upon exercise of options
by employees of the Company or any of its Restricted Subsidiaries.
"Evercore" means Evercore Capital Partners L.P., a Delaware
limited partnership, and its Affiliates.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. For purposes of (a) Section 4.04(a) (iv) (3)(B), (b) the
definition of "Permitted Asset Swap" and (c) calculating the Fair Market Value
of Designated Noncash Consideration, the Fair Market Value of property or
assets other than cash which involves (i) an aggregate amount in excess of $2.0
million, shall be set forth in a resolution approved by at least a majority of
the Board of Directors and (ii) an aggregate amount in excess of $10.0 million,
shall have been determined in writing by a nationally recognized appraisal or
investment banking firm. For all other purposes of this Indenture, Fair Market
Value shall be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution of the Board of
Directors.
"GAAP" means generally accepted accounting principles in the
United States as in effect as of the Closing Date, including those set forth in
(a) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (b) statements and
pronouncements of the Financial Accounting Standards Board, (c) such other
statements by such other entities as approved by a significant segment of the
accounting profession and (d) unless otherwise indicated, all ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary
<PAGE> 15
9
course of business. The term "Guarantee" used as a verb has a corresponding
meaning. The term "Guarantor" shall mean any Person Guaranteeing any
obligation.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name a Note is registered
on the Registrar's books.
"Holdings" means the parent of the Company, American Media,
Inc., a Delaware corporation, until a successor replaces it and, thereafter,
means the successor.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Subsidiary. The term "Incurrence" when
used as a noun shall have a correlative meaning. The accretion of principal of
a non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication),
(a) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(b) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(c) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement
obligations with respect thereto);
(d) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except Trade Payables),
which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto
or the completion of such services;
(e) all Capitalized Lease Obligations and all Attributable
Debt of such Person;
(f) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, any Preferred
Stock (but excluding, in each case, any accrued dividends);
(g) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed
by such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of
such Person shall be the lesser of (i) the Fair Market Value of such
asset at such date of determination and (ii) the amount of such
Indebtedness of such other Persons;
<PAGE> 16
10
(h) Hedging Obligations of such Person;
(i) to the extent not otherwise included, the amount then
outstanding (I.E., advanced, and received by, and available for use
by, such Person) under any receivables financing (as set forth in the
books and records of such Person and confirmed by the agent, trustee
or other representative of the institution or group providing such
receivables financing); and
(j) all obligations of the type referred to in clauses (a)
through (i) of other Persons and all dividends of other Persons for
the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Interest Rate Agreement" means with respect to any Person
any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or is a
beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender) or other extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person; PROVIDED that
(a) Hedging Obligations entered into in the ordinary course of business and in
compliance with this Indenture, (b) endorsements of negotiable instruments and
documents in the ordinary course of business and (c) an acquisition of assets,
Capital Stock or other securities by the Company for consideration consisting
exclusively of Capital Stock (other than Disqualified Stock) of the Company
shall not be deemed to be an Investment. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04:
(a) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the Fair Market
Value of the net assets of any Subsidiary of the Company at the time
that such Subsidiary is designated an Unrestricted Subsidiary;
PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to
<PAGE> 17
11
(i) the Company's "Investment" in such Subsidiary at
the time of such redesignation less
(ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value
of the net assets of such Subsidiary at the time of such
redesignation; and
(b) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of
such transfer.
"Leverage Ratio" as of any date of determination means the
ratio of:
(a) Total Consolidated Indebtedness as of the date of
determination to
(b) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at the end of the most
recent fiscal quarter for which financial statements are available;
PROVIDED, HOWEVER, that
(i) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period
that remains outstanding on such date of determination or if
the transaction giving rise to the need to calculate the
Leverage Ratio is an Incurrence of Indebtedness, EBITDA and,
for the purpose of calculating EBITDA, Consolidated Interest
Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period,
(ii) if the Company or any Restricted Subsidiary has
repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any
Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness
Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to the
need to calculate the Leverage Ratio, EBITDA and, for the
purpose of calculating EBITDA, Consolidated Interest Expense
for such period shall be calculated on a pro forma basis as
if such discharge had occurred on the first day of such
period and as if the Company or such Restricted Subsidiary
has not earned the interest income actually earned during
such period in respect of cash or Temporary Cash Investments
used to repay, repurchase, defease or otherwise discharge
such Indebtedness,
(iii) if since the beginning of such period the
Company or any Restricted Subsidiary shall have made any
Asset Disposition, EBITDA for such period shall be reduced by
an amount equal to EBITDA (if positive) directly attributable
to the assets that are the subject of such Asset
<PAGE> 18
12
Disposition for such period or increased by an amount equal
to EBITDA (if negative) directly attributable thereto for
such period and, for the purpose of calculating EBITDA,
Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company
and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale),
(iv) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary
(or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA
and, for the purpose of calculating EBITDA, Consolidated
Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period, and
(v) if since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (iii) or
(iv) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and, for the purpose of
calculating EBITDA, Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or
acquisition of assets occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of
the Company. Any such pro forma calculations may include operating expense
reductions for such period resulting from the acquisition which is being given
pro forma effect that (a) would be permitted pursuant to Article XI of
Regulation S-X under the Securities Act or (b) have been realized or for which
the steps necessary for realization have been taken or are reasonably expected
to be taken within six months following any such acquisition, including the
execution or termination of any contracts, the termination of any personnel or
the closing (or approval by the Board of Directors of any closing) of any
facility, as applicable, PROVIDED that, in either case, such adjustments are
set forth in an Officers' Certificate signed by the Company's chief
<PAGE> 19
13
financial officer and another Officer which states (i) the amount of such
adjustment or adjustments, (ii) that such adjustment or adjustments are based
on the reasonable good faith beliefs of the Officers executing such Officers'
Certificate at the time of such execution and (iii) that any related Incurrence
of Indebtedness is permitted pursuant to this Indenture. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term as at the
date of determination in excess of twelve months).
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"liquidated damages" means any liquidated damages payable
under the Registration Agreement.
"Make-Whole Payments" means payments in the aggregate of
approximately $4.0 million that David J. Pecker, under his employment agreement
with EMP Group L.L.C., as in effect on the Closing Date (which agreement shall
be assumed by Holdings in the Merger), is entitled to in connection with the
compensation he forfeited upon termination of his employment with Hachette
Filipacchi Magazines, Inc., a portion of which became payable upon Mr. Pecker's
termination of employment on March 31, 1999 and the remaining portion of which
shall be payable on April 15, 2000.
"Merger" means the merger of EMP Acquisition Corp., a company
formed by Evercore, with and into Holdings pursuant to an Agreement and Plan of
Merger dated as of February 16, 1999. Holdings will be the surviving
corporation of the Merger.
"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other noncash form)
therefrom, in each case net of (a) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (b) all
payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(c) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (d) appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed of in
<PAGE> 20
14
such Asset Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Note Guarantee" means each Guarantee of the obligations with
respect to the Notes issued by any Person pursuant to the terms of this
Indenture.
"Note Guarantor" means any Person that has issued a Note
Guarantee.
"Notes" means the Notes issued under this Indenture.
"Officer" means the Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company. An "Officer" of a
Note Guarantor has a correlative meaning.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or a Note Guarantor, as applicable, or the Trustee.
"Permitted Asset Swap" means any one or more transactions in
which the Company or any Restricted Subsidiary exchanges assets (other than the
trademarks or other assets related to the publication titled NATIONAL ENQUIRER
or the publication titled STAR) for consideration consisting of (a) assets used
or useful in a Permitted Business and (b) any cash or Temporary Cash
Investments (PROVIDED that such cash or Temporary Cash investments will be
considered Net Available Cash from an Asset Disposition); PROVIDED, HOWEVER,
that the Fair Market Value of the assets received by the Company or such
Restricted Subsidiary in such exchange, together with the amount of any cash or
Temporary Cash Investments also received in such exchange, shall be at least
equal to the Fair Market Value of the assets exchanged by the Company or such
Restricted Subsidiary.
"Permitted Business" means any business engaged in by the
Company or any Restricted Subsidiary on the Closing Date and any Related
Business.
"Permitted Holders" means EMP Group L.L.C. and any Person
acting in the capacity of an underwriter in connection with a public or private
offering of the Company's or Holdings' Capital Stock.
"Permitted Investment" means
(a) an Investment by the Company or any Restricted Subsidiary
in the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
PROVIDED, HOWEVER, that the primary business of such Restricted
Subsidiary is a Permitted Business;
<PAGE> 21
15
(b) an Investment by the Company or any Restricted Subsidiary
in another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted
Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is
a Permitted Business;
(c) an Investment by the Company or any Restricted Subsidiary
in Temporary Cash Investments;
(d) receivables owing to the Company or any Restricted
Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
PROVIDED, HOWEVER, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances;
(e) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the
ordinary course of business;
(f) loans or advances to employees of the Company or such
Restricted Subsidiary made in the ordinary course of business not
exceeding $5 million in the aggregate outstanding at any time;
(g) an Investment by the Company or any Restricted Subsidiary
in stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments;
(h) an Investment by the Company or any Restricted Subsidiary
in any Person to the extent such Investment represents the noncash
portion of the consideration received for an Asset Disposition that
was made pursuant to and in compliance with Section 4.06;
(i) any Investment existing on the Closing Date;
(j) Guarantees (including the Note Guarantees) of
Indebtedness permitted under this Indenture; and
(k) without duplication, any Investment in any Person, the
amount of which, together with all other Investments in other Persons
made pursuant to this clause (k), does not exceed $25.0 million in the
aggregate at any time outstanding.
"Permitted Junior Securities" shall mean debt or equity
securities of the Company or any successor corporation issued pursuant to a
plan of reorganization or readjustment of the Company that are subordinated to
the payment of all then outstanding Senior Indebtedness of the Company at least
to the same extent that the Notes are subordinated to the payment of all Senior
Indebtedness of the Company on the Closing Date, so long as to the extent that
any Senior Indebtedness of the Company outstanding on the date of consummation
of any such plan of reorganization or readjustment is not paid in full in cash
or Cash Equivalents on such date, the holders of
<PAGE> 22
16
any such Senior Indebtedness not so paid in full in cash have consented to the
terms of such plan or reorganization or readjustment. "Permitted Junior
Securities" of a Note Guarantor has a correlative meaning.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) that
is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus
the premium, if any, payable on the Note which is due or overdue or is to
become due at the relevant time.
"Purchase Money Indebtedness" means Indebtedness (a)
consisting of the deferred purchase price of an asset, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, in each case where the maturity of such Indebtedness does
not exceed the anticipated useful life of the asset being financed, and (b)
incurred to finance the acquisition by the Company or a Restricted Subsidiary
of such asset, including additions and improvements; PROVIDED, HOWEVER, that
such Indebtedness is incurred within 180 days after the acquisition by the
Company or such Restricted Subsidiary of such asset.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is
Incurred to refund, refinance, replace, renew, repay or extend (including
pursuant to any defeasance or discharge mechanism) any Indebtedness of the
Company or any Restricted Subsidiary existing on the Closing Date or Incurred
in compliance with this Indenture including Indebtedness of the Company that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (a) the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (b) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced, (c) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price), plus costs related to the issuance of such Refinancing Indebtedness,
that is equal to or less than the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being Refinanced and (d) if the Indebtedness being Refinanced is
subordinated in right of payment to the Notes, such Refinancing Indebtedness is
subordinated in right of payment to the Notes at least to the same extent as
the Indebtedness being Refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing
Indebtedness shall not include (i) Indebtedness of a Restricted Subsidiary
other than a
<PAGE> 23
17
Note Guarantor that Refinances Indebtedness of the Company or (ii) Indebtedness
of the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Closing Date.
"Representative" means the trustee, agent or representative
(if any) for an issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien. "Secured Indebtedness" of a Note Guarantor has a correlative
meaning.
"Securities Act" means the Securities Act of 1933.
"Senior Indebtedness" of the Company or any Note Guarantor
means the principal of, premium (if any) and accrued and unpaid interest on
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company or any Note Guarantor,
regardless of whether or not a claim for post-filing interest is allowed in
such proceedings) and fees and other amounts owing in respect of, Bank
Indebtedness and all other Indebtedness of the Company or any Note Guarantor,
whether outstanding on the Closing Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are not superior, or are
subordinated, in right of payment to the Notes or such Note Guarantor's Note
Guarantee; PROVIDED, HOWEVER, that Senior Indebtedness shall not include (a)
any obligation of the Company to any Subsidiary of the Company or of such Note
Guarantor to the Company or any other Subsidiary of the Company, (b) any
liability for Federal, state, local or other taxes owed or owing by the Company
or such Note Guarantor, (c) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (d) any Indebtedness or
obligation of the Company or such Note Guarantor (and any accrued and unpaid
interest in respect thereof) that by its terms is subordinate or junior in any
respect to any other Indebtedness or obligation of the Company or such Note
Guarantor, including any Senior Subordinated Indebtedness and any Subordinated
Obligations, (e) any obligations with respect to any Capital Stock or (f) any
Indebtedness Incurred in violation of this Indenture.
<PAGE> 24
18
"Senior Subordinated Indebtedness" of the Company means the
Notes and any other Indebtedness of the Company that specifically provides that
such Indebtedness is to rank PARI PASSU with the Notes in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness. "Senior
Subordinated Indebtedness" of a Note Guarantor has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Closing Date or thereafter Incurred) that
is subordinate or junior in right of payment to the Notes pursuant to a written
agreement. "Subordinated Obligation" of a Note Guarantor has a correlative
meaning.
"Subsidiary" of any Person means any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (a) such Person,
(b) such Person and one or more Subsidiaries of such Person or (c) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (a)
any investment in direct obligations of the United States or any agency thereof
or obligations Guaranteed by the United States or any agency thereof, (b)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by
a bank or trust company that is organized under the laws of the United States,
any state thereof or any foreign country recognized by the United States having
capital, surplus and undivided profits aggregating in excess of $250,000,000
(or the foreign currency equivalent thereof) and whose long-term debt is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act), (c) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (a) above
entered into with a bank meeting the qualifications described in clause (b)
above, (d) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
or any foreign country recognized by the United States with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"), and (e) investments in securities with maturities of six months or
less from the date of
<PAGE> 25
19
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, or by any political subdivision or taxing authority
thereof, and rated at least "A" by S&P or "A" by Moody's Investors Service,
Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the Closing Date.
"Total Assets" means the total Consolidated assets of the
Company and its Restricted Subsidiaries, as shown on the most recent balance
sheet of the Company.
"Total Consolidated Indebtedness" means the aggregate amount
of all Indebtedness of the Company and its Restricted Subsidiaries, outstanding
as of the date of determination, determined on a Consolidated basis, after
giving effect to any Incurrence of Indebtedness and the application of the
proceeds therefrom giving rise to such determination.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transactions" has the meaning assigned thereto in the
Offering Memorandum relating to the issuance of the Notes dated April 30, 1999.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the
President or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (a) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED, HOWEVER, that either (i) the Subsidiary to be so
designated has total Consolidated assets of $1,000 or less or (ii) if such
Subsidiary has Consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that
immediately after giving effect to such designation (1) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (2) no Default shall
have occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee
<PAGE> 26
20
a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States is pledged and which
are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of
the Company all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- -----------
<S> <C>
"Affiliate Transaction".......................................................... 4.07(a)
"Bankruptcy Law"................................................................. 6.01
"Blockage Notice"................................................................ 10.03
"covenant defeasance option"..................................................... 8.01(b)
"Custodian"...................................................................... 6.01
"Event of Default"............................................................... 6.01
"Exchange Offer Registration Statement".......................................... Appendix
"Guarantee Blockage Notice"...................................................... 12.03
"Guarantee Payment Blockage Period".............................................. 12.03
"Issue Date"..................................................................... Appendix
"legal defeasance option"........................................................ 8.01(b)
"Legal Holiday".................................................................. 13.08
"Offer".......................................................................... 4.06(b)
"Offer Amount"................................................................... 4.06(c)(2)
"Offer Period"................................................................... 4.06(c)(2)
"pay the Notes".................................................................. 10.03
"pay the Guarantees"............................................................. 12.03
"Paying Agent"................................................................... 2.03
"Payment Blockage Period"........................................................ 10.03
"protected purchaser"............................................................ 2.07
"Purchase Date".................................................................. 4.06(c)(i)
"Registered Exchange Offer":..................................................... Appendix
"Registrar"...................................................................... 2.03
"Registered Exchange Offer"...................................................... Appendix
"Registration Agreement"......................................................... Appendix
"Shelf Registration Statement"................................................... Appendix
"Successor Company".............................................................. 5.01(a)
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT. This Indenture is subject to the mandatory provisions of the TIA, which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes and the Note
Guarantees.
"indenture security holder" means a Holder.
<PAGE> 27
21
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, the
Note Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock, whichever is greater.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING. Provisions relating to the
Initial Notes, the Private Exchange Notes and the Exchange Notes are set forth
in the Appendix, which is hereby incorporated in and expressly made a part of
this Indenture. The (a) Initial Notes and the Trustee's certificate of
authentication and (b) Private Exchange Notes and the Trustee's certificate of
authentication shall each be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
<PAGE> 28
22
and expressly made a part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company or any Note Guarantor is subject, if any, or usage (provided
that any such notation, legend or endorsement is in a form acceptable to the
Company). Each Note shall be dated the date of its authentication. The Notes
shall be issuable only in registered form without interest coupons and only in
denominations of $1,000 and integral multiples thereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION. One Officer shall
sign the Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until an authorized officer or
authorized signatory of the Trustee manually signs the certificate of
authentication on the Note. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall authenticate and make available for
delivery Notes as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Notes. Any such appointment shall
be evidenced by an instrument signed by a Trust Officer, a copy of which shall
be furnished to the Company. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where Notes
may be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent, and the term "Registrar"
includes any co-registrars. The Company initially appoints the Trustee's
corporate trust office at 1201 Main Street, 18th Floor,
<PAGE> 29
23
Dallas, Texas 75202 as (a) Registrar and Paying Agent in connection with the
Notes and (b) the Notes Custodian (as defined in the Appendix) with respect to
the Global Notes (as defined in the Appendix).
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Company shall notify the
Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically organized Wholly Owned Subsidiaries may act
as Paying Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon
written notice to such Registrar or Paying Agent and to the Trustee; PROVIDED,
HOWEVER, that no such removal shall become effective until (a) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered
into by the Company and such successor Registrar or Paying Agent, as the case
may be, and delivered to the Trustee or (b) notification to the Trustee that
the Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (a). The Registrar or Paying Agent may
resign at any time upon written notice to the Company and the Trustee.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to
each due date of the principal and interest on any Note, the Company shall
deposit with the Paying Agent (or if the Company or a Subsidiary is acting as
Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Notes and shall notify the Trustee
of any default by the Company in making any such payment, and shall at any time
during the continuance of any such default, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying
Agent. If the Company or a Subsidiary of the Company acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Holders. If the Trustee is not the Registrar,
the Company shall furnish, or cause the Registrar to furnish, to the Trustee,
in writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Holders.
SECTION 2.06. TRANSFER AND EXCHANGE. The Notes shall be
issued in registered form and shall be transferable only upon the surrender of
a Note for registration of transfer and in compliance with the Appendix. When a
Note is presented
<PAGE> 30
24
to the Registrar with a request to register a transfer, the Registrar shall
register the transfer as requested if its requirements therefor are met. When
Notes are presented to the Registrar with a request to exchange them for an
equal principal amount of Notes of other denominations, the Registrar shall
make the exchange as requested if same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Notes at the Registrar's request. The Company may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Notes selected for redemption (except,
in the case of Notes to be redeemed in part, the portion thereof not to be
redeemed) or any Notes for a period of 15 days before a selection of Notes to
be redeemed.
Prior to the due presentation for registration of transfer of
any Note, the Company, the Note Guarantors, the Trustee, the Paying Agent, and
the Registrar may deem and treat the Person in whose name a Note is registered
as the absolute owner of such Note for the purpose of receiving payment of
principal of and (subject to paragraph 2 of the Notes) interest, if any, on
such Note and for all other purposes whatsoever, whether or not such Note is
overdue, and none of the Company, any Note Guarantor, the Trustee, the Paying
Agent, or the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interest in such Global Note
may be effected only through a book-entry system maintained by (a) the Holder
of such Global Note (or its agent) or (b) any Holder of a beneficial interest
in such Global Note, and that ownership of a beneficial interest in such Global
Note shall be required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Notes surrendered upon such
transfer or exchange.
SECTION 2.07. REPLACEMENT NOTES. If a mutilated Note is
surrendered to the Registrar or if the Holder of a Note claims that the Note
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the requirements of Section
8-405 of the Uniform Commercial Code are met, such that the Holder (a)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (b) makes such
request to the Company or the Trustee prior to the Note being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (c) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Note is replaced. The Company and the Trustee may
charge the Holder for their expenses in replacing a Note. In the event any such
mutilated, lost, destroyed or wrongfully taken Note has become or is about to
become due and payable, the Company in its discretion may pay such Note instead
of issuing a new Note in replacement thereof.
<PAGE> 31
25
Every replacement Note is an additional obligation of the
Company.
The provisions of this Section 2.07 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, lost, destroyed or wrongfully taken
Notes.
SECTION 2.08. OUTSTANDING NOTES. Notes outstanding at any
time are all Notes authenticated by the Trustee except for those canceled by
it, those delivered to it for cancelation and those described in this Section
as not outstanding. Subject to Section 13.06, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest and liquidated damages payable on
that date with respect to the Notes (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited from
paying such money to the Holders of Notes on that date pursuant to the terms of
this Indenture, then on and after that date such Notes (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. TEMPORARY NOTES. In the event that Definitive
Notes (as defined in the Appendix) are to be issued under the terms of this
Indenture, until such Definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of Definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Notes and deliver them in exchange for temporary Notes
upon surrender of such temporary Notes at the office or agency of the Company,
without charge to the Holder.
SECTION 2.10. CANCELATION. The Company at any time may
deliver Notes to the Trustee for cancelation. The Registrar and the Paying
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Notes surrendered for registration of transfer, exchange,
payment or cancelation and shall dispose of canceled Notes in accordance with
its customary procedures or deliver canceled Notes to the Company pursuant to
written direction by an Officer. The Company may not issue new Notes to replace
Notes it has redeemed, paid or delivered to the Trustee for cancelation. The
Trustee shall not authenticate Notes in place of canceled Notes other than
pursuant to the terms of this Indenture.
SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in
a payment of interest on the Notes, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the Persons who
are Holders on a subsequent special record date. The Company shall fix or cause
to be fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly
<PAGE> 32
26
mail or cause to be mailed to each Holder a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP AND ISIN NUMBERS. The Company in issuing
the Notes may use "CUSIP" and/or "ISIN" numbers (if then generally in use) and,
if so, the Trustee shall use "CUSIP" and/or "ISIN" numbers in notices of
redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption
and that reliance may be placed only on the other identification numbers
printed on the Notes, and any such redemption shall not be affected by any
defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to
redeem Notes pursuant to paragraph 5 of the Notes, it shall notify the Trustee
in writing of the redemption date and the principal amount of Notes to be
redeemed.
The Company shall give each notice to the Trustee provided
for in this Section at least 60 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the effect
that such redemption shall comply with the conditions herein. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If fewer
than all the Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed pro rata or by lot or by a method that the Trustee in its sole
discretion shall deem to be fair and appropriate. The Trustee shall make the
selection from outstanding Notes not previously called for redemption. The
Trustee may select for redemption portions of the principal of Notes that have
denominations larger than $1,000. Notes and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions
of this Indenture that apply to Notes called for redemption also apply to
portions of Notes called for redemption. The Trustee shall notify the Company
promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not
more than 60 days before a date for redemption of Notes, the Company shall mail
a notice of redemption by first-class mail to each Holder of Notes to be
redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price and the amount of accrued interest
to the redemption date;
<PAGE> 33
27
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(e) if fewer than all the outstanding Notes are to be
redeemed, the certificate numbers and principal amounts of the
particular Notes to be redeemed;
(f) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Notes (or
portion thereof) called for redemption ceases to accrue on and after
the redemption date;
(g) the CUSIP and/or ISIN number, if any, printed on the
Notes being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP and/or ISIN number, if any, listed in such
notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
this Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Notes shall be paid at the redemption price
stated in the notice, plus accrued interest and liquidated damages, if any, to
the redemption date; PROVIDED, HOWEVER, that if the redemption date is after a
regular record date and on or prior to the interest payment date, the accrued
interest and liquidated damages, if any, shall be payable to the Holder of the
redeemed Notes registered on the relevant record date. Failure to give notice
or any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to 10:00
a.m. on the redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest and liquidated damages, if any, on all Notes to be redeemed on that
date other than Notes or portions of Notes called for redemption that have been
delivered by the Company to the Trustee for cancelation. On and after the
redemption date, interest shall cease to accrue on Notes or portions thereof
called for redemption so long as the Company has deposited with the Paying
Agent funds sufficient to pay the principal of, plus accrued and unpaid
interest and liquidated damages (if any) on, the Notes to be redeemed, unless
the Paying Agent is prohibited from making such payment pursuant to the terms
of this Indenture.
SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a
Note that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
<PAGE> 34
28
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall promptly
pay the principal of and interest on the Notes on the dates and in the manner
provided in the Notes and in this Indenture. Principal and interest shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay all principal
and interest then due and the Trustee or the Paying Agent, as the case may be,
is not prohibited from paying such money to the Holders on that date pursuant
to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC REPORTS. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC, and provide the Trustee and
Holders and prospective Holders (upon request) within 15 days after it files
them with the SEC, copies of its annual report and the information, documents
and other reports that are specified in Section 13 and 15(d) of the Exchange
Act; PROVIDED, HOWEVER, the Company shall not be so obligated to file such
reports with the SEC if the SEC does not permit such filing, in which event the
Company shall make available such information to the Trustee, Holders and
prospective Holders (upon request) within 15 days after the time the Company
would be required to file such information with the SEC if it were subject to
Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such
requirements shall be deemed satisfied prior to the commencement of the
Registered Exchange Offer (as defined in the Appendix) or the effectiveness of
the Shelf Registration Statement (as defined in the Appendix) by the filing
with the SEC of the Exchange Offer Registration Statement (as defined in the
Appendix) and/or Shelf Registration Statement, and any amendments thereto, with
such financial information that satisfies Regulation S-X of the Securities Act.
The Company also shall comply with the other provisions of TIA Section 314(a).
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur, directly
or indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company or any
Note Guarantor may Incur Indebtedness if on the date of such Incurrence and
after giving effect thereto, the Leverage Ratio would be less than (i) 6.5:1 if
Incurred on or prior to June 30, 2001 and (ii) 6.25:1 if Incurred thereafter.
(b) Notwithstanding Section 4.03(a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Bank Indebtedness Incurred in an aggregate principal
amount not to exceed $400.0 million at any one time outstanding less
the aggregate amount of all mandatory prepayments, repayments,
redemptions or purchases of principal of such Indebtedness made
pursuant to Section 4.06;
<PAGE> 35
29
(ii) Indebtedness of the Company owed to and held by any
Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed
to and held by the Company or any Restricted Subsidiary; PROVIDED,
HOWEVER, that (1) any subsequent issuance or transfer of any Capital
Stock or any other event that results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of any such Indebtedness (except to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the issuer thereof, (2) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Notes, (3) if a Restricted Subsidiary
is the obligor, any such Indebtedness is made pursuant to an
intercompany note and (4) if a Note Guarantor is the obligor, such
Indebtedness is subordinated in right of payment to the Note Guarantee
of such Note Guarantor;
(iii) Indebtedness (1) represented by the Notes and the Note
Guarantees, (2) outstanding on the Closing Date (other than the
Indebtedness described in clauses (i) and (ii) above), (3) consisting
of Refinancing Indebtedness Incurred in respect of any Indebtedness
described in this clause (iii) (including Refinancing Indebtedness) or
Section 4.03(a) and (4) consisting of Guarantees by the Company or any
Note Guarantor of any Indebtedness permitted hereunder; PROVIDED that
if such Indebtedness is by its express terms subordinated in right of
payment to the Notes or a Note Guarantee of a Note Guarantor, as
applicable, any such Guarantee with respect to such Indebtedness shall
be subordinated in right of payment to the Notes or such Note
Guarantor's Note Guarantee substantially to the same extent as such
Indebtedness is subordinated to the Notes or the Note Guarantee, as
applicable;
(iv) (1) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Subsidiary of or was otherwise acquired by the
Company); PROVIDED, HOWEVER, that on the date that such Restricted
Subsidiary is acquired by the Company, the Company would have been
able to Incur $1.00 of additional Indebtedness pursuant to Section
4.03(a) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (iv) and (2) Refinancing Indebtedness Incurred
by a Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (iv);
(v) Indebtedness (including Capitalized Lease Obligations)
Incurred by the Company or any Note Guarantor, to finance the
purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate
principal amount which, when aggregated with the principal amount of
all other Indebtedness then outstanding and Incurred pursuant to this
clause (v) and including all Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness Incurred pursuant
to this clause (v) does not exceed 2% of Total Assets;
<PAGE> 36
30
(vi) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of
business, including letters of credit in respect of workers'
compensation claims or self-insurance, or other Indebtedness with
respect to reimbursement type obligations regarding workers'
compensation claims; PROVIDED, HOWEVER, that upon the drawing of such
letters of credit or the Incurrence of such Indebtedness, such
obligations are reimbursed within 30 days following such drawing or
Incurrence;
(vii) Indebtedness arising from agreements of the Company or
a Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, Incurred or
assumed in connection with the disposition of any business, assets or
a Subsidiary of the Company in accordance with the terms of this
Indenture, other than Guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or a
Subsidiary of the Company for the purpose of financing such
acquisition; PROVIDED, HOWEVER, that (1) such Indebtedness is not
reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance sheet
shall not be deemed to be reflected on such balance sheet for purposes
of this clause (1)) and (2) the maximum assumable liability in respect
of all such Indebtedness shall at no time exceed the gross proceeds
including the Fair Market Value of noncash proceeds (such Fair Market
Value of such noncash proceeds being measured at the time received and
without giving effect to any subsequent changes in value) actually
received by the Company and its Restricted Subsidiaries in connection
with such disposition;
(viii) Hedging Obligations that are Incurred in the ordinary
course of business (but in any event excluding Hedging Obligations
entered into for speculative purposes); PROVIDED, HOWEVER, that such
Hedging Obligations do not increase the Indebtedness of the Company
outstanding at any time other than as a result of fluctuations in
interest rates or currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(ix) Obligations in respect of performance and surety bonds
and completion guarantees that are Incurred by the Company or any
Restricted Subsidiary in the ordinary course of business;
(x) Indebtedness arising from honoring by a bank or other
financial institution of a check, draft or similar instrument (except
in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; PROVIDED, HOWEVER, that such
Indebtedness is extinguished within five Business Days; and
(xi) Indebtedness (other than Indebtedness permitted to be
Incurred pursuant to Section 4.03(a) or any other clause of this
Section 4.03(b)) in an aggregate principal amount on the date of
Incurrence that, when added to all other Indebtedness Incurred
pursuant to this clause (xi) and then outstanding, shall not exceed
$25.0 million (it being understood that any Indebtedness incurred
pursuant to this clause (xi) shall cease to be deemed to be Incurred
or outstanding for purposes hereof but shall be deemed Incurred for
purposes of Section 4.03(a)
<PAGE> 37
31
from and after the first date on which the Company could have Incurred
such Indebtedness under Section 4.03(a) without reliance on this
clause (xi)).
(c) Notwithstanding the foregoing, the Company shall not
Incur any Indebtedness pursuant to Section 4.03(b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem, defease,
retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations. The Company shall not Incur any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness. In addition, the Company shall not Incur any Secured
Indebtedness which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or on a senior basis to, in the case of Indebtedness subordinated in
right of payment to the Notes) such Secured Indebtedness for so long as such
Secured Indebtedness is secured by a Lien. A Note Guarantor shall not Incur any
Indebtedness if such Indebtedness is by its terms expressly subordinate or
junior in ranking in any respect to any Senior Indebtedness of such Note
Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such
Note Guarantor or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor
shall not Incur any Secured Indebtedness that is not Senior Indebtedness of
such Note Guarantor unless contemporaneously therewith effective provision is
made to secure the Note Guarantee of such Note Guarantor equally and ratably
with (or on a senior basis to, in the case of Indebtedness subordinated in
right of payment to such Note Guarantee) such Secured Indebtedness for as long
as such Secured Indebtedness is secured by a Lien.
(d) Notwithstanding any other provision of this Section 4.03,
the maximum amount of Indebtedness that the Company or any Restricted
Subsidiary may Incur pursuant to this Section shall not be deemed to be
exceeded solely as a result of fluctuations in the exchange rates of
currencies. For purposes of determining the outstanding principal amount of any
particular Indebtedness Incurred pursuant to this Section 4.03, (i)
Indebtedness Incurred pursuant to the Credit Agreement prior to or on the
Closing Date shall be treated as Incurred pursuant to Section 4.03(b)(i), (ii)
Indebtedness permitted by this Section 4.03 need not be permitted solely by
reference to one provision permitting such Indebtedness but may be permitted in
part by one such provision and in part by one or more other provisions of this
Section permitting such Indebtedness and (iii) in the event that Indebtedness
meets the criteria of more than one of the types of Indebtedness described in
this Section, the Company, in its sole discretion, shall classify such
Indebtedness and only be required to include the amount of such Indebtedness in
one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) or similar payment to the direct
or indirect holders of its Capital Stock except dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and except
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary has shareholders other than the
Company or other Restricted Subsidiaries, to its other shareholders on a pro
rata
<PAGE> 38
32
basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of Holdings, the Company or any Restricted Subsidiary held by
Persons other than the Company or another Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition and other than
Indebtedness described in Section 4.03(b)(ii)) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment") if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (including, if the amount so expended is
other than in cash, the Fair Market Value of such Restricted Payments)
declared or made subsequent to the Closing Date would exceed the sum
of, without duplication:
(A) (x) 100% of EBITDA accrued during the period
(treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter
during which the Closing Date occurs to the end of the most
recent fiscal quarter ending prior to the date of such
Restricted Payment for which financial statements are
available (or, in case such EBITDA during such period is a
deficit minus 100% of such deficit), minus (y) 150% of
Consolidated Interest Expense accrued during the period
(treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter
during which the Closing Date occurs to the end of the most
recent fiscal quarter ending prior to the date of such
Restricted Payment for which financial statements are
available;
(B) the aggregate Net Cash Proceeds and the Fair
Market Value of property or assets used or useful in a
Permitted Business, in each case received by the Company from
capital contributions or the issue or sale of its Capital
Stock (other than Disqualified Stock) subsequent to the
Closing Date (other than an issuance or sale to (x) a
Subsidiary of the Company or (y) an employee stock ownership
plan or other trust established by the Company or any of its
Subsidiaries to the extent such sale is financed by loans
from or from Indebtedness Guaranteed by the Company unless
such loans or Indebtedness have been repaid with cash on or
prior to the date of determination);
(C) the amount by which Indebtedness of the Company
or its Restricted Subsidiaries is reduced on the Company's
balance sheet upon
<PAGE> 39
33
the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Closing Date of any Indebtedness
of the Company or its Restricted Subsidiaries issued after
the Closing Date which is convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or the Fair Market Value of
other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange);
(D) 100% of the aggregate amount received in cash
from (x) the sale or other disposition (other than to the
Company or a Restricted Subsidiary) of Investments (other
than Permitted Investments) ("Restricted Investments") made
by the Company and its Restricted Subsidiaries after the
Closing Date and from repurchases and redemptions of such
Restricted Investments from the Company and its Restricted
Subsidiaries by any Person (other than the Company or any of
its Subsidiaries or Affiliates) and from repayments of loans
or advances which constituted Restricted Investments or (y)
the sale (other than to the Company or a Subsidiary or an
Affiliate) of the Capital Stock of an Unrestricted
Subsidiary, in an amount not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments; PROVIDED,
HOWEVER, that no amount will be included in this clause (D)
to the extent it is already included in Consolidated Net
Income; and
(E) the amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from (x)
payments of dividends, repayments of the principal of loans
or advances or other transfers of assets to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries or
(y) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in
the definition of "Investment") not to exceed, in the case of
any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in
the calculation of the amount of Restricted Payments;
PROVIDED, HOWEVER, that no amount will be included in this
clause (E) to the extent it is already included in
Consolidated Net Income.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase, repurchase, retirement or other acquisition
or retirement for value of Capital Stock or Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to
a Subsidiary of the Company or an employee stock ownership plan or
other trust established by the Company or any of its Subsidiaries to
the extent such sale is financed by loans from or from Indebtedness
guaranteed by the Company unless such loans or Indebtedness have been
repaid with cash on or prior to the date of determination); PROVIDED,
HOWEVER, that (1) such Restricted Payment shall be excluded in
subsequent
<PAGE> 40
34
calculations of the amount of Restricted Payments and (2) the Net Cash
Proceeds from such sale applied in the manner set forth in this clause
(i) shall be excluded from the calculation of amounts under of Section
4.04(a)(iv)(3)(B);
(ii) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Company that is
permitted to be Incurred pursuant to Section 4.03; PROVIDED, HOWEVER,
that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in subsequent
calculations of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations
from Net Available Cash to the extent permitted by Section 4.06;
PROVIDED, HOWEVER, that such purchase or redemption shall be excluded
in subsequent calculations of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.04; PROVIDED, HOWEVER, that such
dividend shall be included in subsequent calculations of the amount of
Restricted Payments;
(v) the repurchase or other acquisition of shares of, or
options to purchase shares of, Capital Stock of the Company or any of
its Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by
the Board of Directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such common
stock; PROVIDED, HOWEVER, that the aggregate amount of such
repurchases or acquisitions in any fiscal year of the Company shall
not exceed, together with the aggregate amount of all payments made
under Section 4.04(b)(vi)(3) during such fiscal year, in the aggregate
$5.0 million, up to a maximum aggregate amount, together with the
aggregate amount of all payments made under Section 4.04(b)(vi)(3), of
$10.0 million during the term of this Indenture; PROVIDED FURTHER,
HOWEVER, that such repurchases and other acquisitions shall be
included in subsequent calculations of the amount of Restricted
Payments; or
(vi) the payment of dividends, other distributions or other
amounts by the Company for the purposes set forth in clauses (1)
through (4) below; PROVIDED, HOWEVER, that such dividend, distribution
or amount set forth in clauses (1) through (4) shall be included in
subsequent calculations of the amount of Restricted Payments for the
purposes of Section 4.04(a):
(1) to Holdings in amounts equal to the amounts
required for Holdings to pay franchise taxes and other fees
required to maintain its corporate existence and provide for
other operating costs of up to $2.0 million per fiscal year;
<PAGE> 41
35
(2) to Holdings in amounts equal to amounts required
for Holdings to pay federal, state and local income taxes to
the extent such income taxes are attributable to the income
of the Company and its Restricted Subsidiaries (and, to the
extent of amounts actually received from its Unrestricted
Subsidiaries, in amounts required to pay such taxes to the
extent attributable to the income of such Unrestricted
Subsidiaries);
(3) to Holdings in amounts equal to amounts expended
by Holdings to repurchase Capital Stock of Holdings owned by
former employees of the Company or its Subsidiaries or their
assigns, estates and heirs; PROVIDED, HOWEVER, that the
aggregate amount paid, loaned or advanced to Holdings
pursuant to this clause (3) in any fiscal year of the Company
shall not exceed, together with the aggregate amount of all
payments made pursuant to Section 4.04 (b)(v) during such
fiscal year, in the aggregate, $5.0 million, up to a maximum
aggregate amount, together with the aggregate amount of all
payments made under Section 4.04(b)(v), of $10.0 million
during the term of this Indenture, plus any amounts
contributed by Holdings to the Company as a result of resales
of such repurchased shares of Capital Stock; and
(4) to Holdings in amounts required to pay the
annual monitoring fee to Evercore; PROVIDED, HOWEVER, that
the aggregate amount paid, loaned or delivered to Holdings
pursuant to this clause (4) shall not, in the aggregate,
exceed $750,000 per fiscal year;
(vii) the payment of dividends on the Company's common stock
(or the payment of dividends to Holdings to fund the payment by
Holdings of dividends on Holdings' common stock) following the first
public offering of common stock of the Company or Holdings, as the
case may be, after the Closing Date, of up to 6% per annum of the net
proceeds received by the Company or contributed to the Company by
Holdings from such public offering; PROVIDED, HOWEVER, that (1) the
aggregate amount of all such dividends shall not exceed the aggregate
amount of net proceeds received by the Company or contributed to the
Company by Holdings from such public offering, (2) at the time of, and
after giving effect to, any payment permitted under this clause (vii),
no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof and (3) any such payment shall
be included in subsequent calculations of the amount of Restricted
Payments;
(viii) the declaration and payment of dividends or
distributions to holders of any class or series of Disqualified Stock
of the Company or any of its Restricted Subsidiaries issued or
Incurred in accordance with Section 4.03; PROVIDED, HOWEVER, that such
payments shall be excluded in subsequent calculations of the amount of
Restricted Payments; or
(ix) other Restricted Payments in an aggregate amount not to
exceed $20.0 million; PROVIDED, HOWEVER, that at the time of, and
after giving effect to, any payment permitted under this clause (ix),
no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and PROVIDED FURTHER that any
such payment shall be included in subsequent calculations of the
amount of Restricted Payments.
<PAGE> 42
36
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS
FROM RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock or pay any Indebtedness or other obligations owed to the
Company or any of its Restricted Subsidiaries, (b) make any loans or advances
to the Company or any of its Restricted Subsidiaries or (c) transfer any of its
property or assets to the Company or any of its Restricted Subsidiaries,
except:
(i) any encumbrance or restriction pursuant to applicable law
or an agreement in effect at or entered into on the Closing Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary prior to the date
on which such Restricted Subsidiary was acquired by the Company (other
than Indebtedness Incurred as consideration in, in contemplation of,
or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was otherwise acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (i) or (ii) of this Section 4.05 or
this clause (iii) or contained in any amendment to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii); PROVIDED, HOWEVER, that the encumbrances and restrictions
contained in any such Refinancing agreement or amendment are no less
favor able, in the aggregate, to the Holders than the encumbrances and
restrictions contained in such predecessor agreements;
(iv) in the case of clause (c), any encumbrance or
restriction (1) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a
lease, license or similar contract or (2) contained in security
agreements securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restriction restricts the transfer of the
property subject to such security agreements;
(v) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition; and
(vi) in the case of clause (c), any encumbrance or
restriction pursuant to any agreement relating to Purchase Money
Indebtedness that is Incurred subsequent to the Closing Date in
compliance with Section 4.03.
SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY
STOCK. (a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration (including by way of relief from,
or by any other Person assuming sole
<PAGE> 43
37
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the Fair Market Value of the shares
and assets subject to such Asset Disposition, (ii) at least 80% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or Temporary Cash Investments; PROVIDED that the amount of
(1) any liabilities (as shown on the Company's or such Restricted Subsidiary's
most recent balance sheet or in the notes thereto) of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes), that are assumed by the transferee of any such
assets (PROVIDED that the Company or such Restricted Subsidiary is released
from all liability with respect thereto), (2) any securities received by the
Company or such Restricted Subsidiary from such transferee that are converted
by the Company or such Restricted Subsidiary into cash (to the extent of the
cash received) within 90 days following the closing of such Asset Disposition
and (3) any Designated Noncash Consideration received by the Company or any of
its Restricted Subsidiaries in such Asset Disposition having an aggregate Fair
Market Value, taken together with all other Designated Noncash Consideration
received pursuant to this clause (3) that is at that time outstanding, not to
exceed the greater of (A) $25.0 million or (B) 3% of Total Assets at time of
receipt of such Designated Noncash Consideration (with the Fair Market Value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value), shall be
deemed to be cash for purposes of this provision and for no other purpose; and
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be) (1) FIRST, (A) to the extent the Company elects (or is required by
the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than any Disqualified Stock)
of a Restricted Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company and other than Preferred Stock) or (B)
to the extent the Company or such Restricted Subsidiary elects, to acquire
Additional Assets (including by means of an Investment in Additional Assets by
a Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary), in the case of each of clauses (A) and (B),
within one year after the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (2) SECOND, to the extent of the balance of
such Net Available Cash after application in accordance with clause (1), to
make an Offer to purchase the Notes pursuant to and subject to the conditions
of Section 4.06(b); PROVIDED, HOWEVER, that if the Company elects (or is
required by the terms of any Senior Subordinated Indebtedness), such Offer may
be made ratably to purchase the Notes and other Senior Subordinated
Indebtedness of the Company; and (3) THIRD, to the extent of the balance of
such Net Available Cash after application in accordance with clauses (1) and
(2), for any general corporate purpose permitted pursuant to the terms of this
Indenture; PROVIDED, HOWEVER that in connection with any prepayment, repayment
or purchase of Indebtedness pursuant to clause (1) (A) or (2) above, the
Company or such Restricted Subsidiary shall retire such Indebtedness and shall
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, the Company and
the Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this Section 4.06(a) except to the extent that the
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this Section 4.06 (a) exceeds $5.0 million.
(b) In the event of an Asset Disposition that requires the
purchase of Notes (and other Senior Subordinated Indebtedness) pursuant to
Section 4.06(a)(iii)(2),
<PAGE> 44
38
the Company shall be required to purchase Notes (and other Senior Subordinated
Indebtedness) tendered pursuant to an offer by the Company for the Notes (and
other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of
100% of their principal amount plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) in accordance with the procedures (including prorating
in the event of oversubscription) set forth in Section 4.06(c). If the
aggregate purchase price of Notes (and other Senior Subordinated Indebtedness)
tendered pursuant to the Offer is less than the Net Available Cash allotted to
the purchase of the Notes (and other Senior Subordinated Indebtedness), the
Company may apply the remaining Net Available Cash for any general corporate
purpose permitted pursuant to the terms of this Indenture. The Company shall
not be required to make an Offer for Notes (and other Senior Subordinated
Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available
therefor (after application of the proceeds as provided in Section
4.06(a)(iii)(1)) is less than $10.0 million for any particular Asset
Disposition (which lesser amount shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(c) (i) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Notes purchased by the
Company either in whole or in part (subject to prorating as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum shall
include (1) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of the Company filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Dispositions otherwise described in the
offering materials (or corresponding successor reports), (2) a description of
material developments in the Company's business subsequent to the date of the
latest of such reports, and (3) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Notes
pursuant to the Offer, together with the address referred to in clause (iii).
(ii) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided above, the Company shall deliver
to the Trustee an Officers' Certificate as to (1) the amount of the Offer (the
"Offer Amount"), (2) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (3) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provi sions of
this Section. Upon the expiration of the period for which the Offer remains
open (the "Offer Period"), the Company shall deliver to the Trustee for
cancelation the Notes or portions thereof that have been properly tendered to
and are to be accepted by the
<PAGE> 45
39
Company. The Trustee (or the Paying Agent, if not the Trustee) shall, on the
date of purchase, mail or deliver payment to each tendering Holder in the
amount of the purchase price. In the event that the Offer Amount delivered by
the Company to the Trustee is greater than the purchase price of the Notes (and
other Senior Subordinated Indebtedness) tendered, the Trustee shall deliver the
excess to the Company immediately after the expiration of the Offer Period for
application in accordance with this Section 4.06.
(iii) Holders electing to have a Note purchased shall be
required to surrender the Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note which
was delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased. If at the expiration of
the Offer Period the aggregate principal amount of Notes and any other Senior
Subordinated Indebtedness included in the Offer surrendered by holders thereof
exceeds the Offer Amount, the Company shall select the Notes and other Senior
Subordinated Indebtedness to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes and
other Senior Subordinated Indebtedness in denominations of $1,000, or integral
multiples thereof, shall be purchased). Holders whose Notes are purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
(iv) At the time the Company delivers Notes to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Notes are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Note shall be
deemed to have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Notes pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a)
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into or conduct any transaction or series of
related transactions (including, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless such Affiliate Transaction is on terms (i) that
are no less favorable to the Company or such Restricted Subsidiary, as the case
may be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (ii) that, in
the event such Affiliate Transaction involves an aggregate amount in excess of
$2.0 million, (1) are set forth in writing and (2) have been approved by a
majority of the members of the Board of Directors having no personal stake in
such Affiliate
<PAGE> 46
40
Transaction and (iii) that, in the event such Affiliate Transaction involves an
amount in excess of $10.0 million, have been determined in writing by a
nationally recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries or not
materially less favorable than those that might reasonably have been obtained
in an arm's-length transaction.
(b) The provisions of Section 4.07(a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to employees and directors of the
Company pursuant to plans approved by the Board of Directors, (iv) loans or
advances to employees of the Company or any of its Restricted Subsidiaries in
the ordinary course of business not in excess of $5.0 million in the aggregate
outstanding at any one time, (v) the payment of reasonable fees to directors of
the Company and its Subsidiaries who are not employees of the Company or its
Subsidiaries, or (vi) any transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries.
SECTION 4.08. CHANGE OF CONTROL. (a) Upon a Change of
Control, each Holder shall have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), in accordance with the terms contemplated in
Section 4.08(b); PROVIDED, HOWEVER, that notwithstanding the occurrence of a
Change of Control, the Company shall not be obligated to purchase the Notes
pursuant to this Section 4.08 in the event that it has exercised its right to
redeem all the Notes under paragraph 5 of the Notes. In the event that at the
time of such Change of Control the terms of the Bank Indebtedness restrict or
prohibit the repurchase of Notes pursuant to this Section 4.08, then prior to
the mailing of the notice to Holders provided for in Section 4.08(b) below but
in any event within 30 days following any Change of Control, the Company shall
(i) repay in full all Bank Indebtedness or offer to repay in full all Bank
Indebtedness and repay the Bank Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the agreements governing
the Bank Indebtedness to permit the repurchase of the Notes as provided for in
Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Company
shall mail a notice to each Holder with a copy to the Trustee (the "Change of
Control Offer") stating:
(i) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase all or a
portion of such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date);
(ii) the circumstances and relevant facts and financial
information regarding such Change of Control;
<PAGE> 47
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(iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by the Company, consistent
with this Section, that a Holder must follow in order to have its
Notes purchased.
(c) Holders electing to have a Note purchased shall be
required to surrender the Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the purchase date a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note which
was delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Note purchased. Holders whose Notes are
purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered.
(d) On the purchase date, all Notes purchased by the Company
under this Section shall be delivered to the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in Section 4.08(b) applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
(f) At the time the Company delivers Notes to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Notes are to be accepted by the Company
pursuant to and in accordance with the terms of this Section 4.08. A Note shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(g) Prior to any Change of Control Offer, the Company shall
deliver to the Trustee an Officers' Certificate stating that all conditions
precedent contained herein to the right of the Company to make such offer have
been complied with.
(h) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Notes pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.09. COMPLIANCE CERTIFICATE. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and
<PAGE> 48
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whether or not the signers know of any Default that occurred during such
period. If they do, the certificate shall describe the Default, its status and
what action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of
the Trustee, the Company shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. FUTURE NOTE GUARANTORS. The Company shall cause
each domestic Restricted Subsidiary organized or acquired after the date hereof
to become a Note Guarantor, and, execute and deliver to the Trustee a
supplemental indenture substantially in the form of Exhibit C pursuant to which
such Restricted Subsidiary shall Guarantee payment of the Notes.
SECTION 4.12. LIMITATION ON LINES OF BUSINESS. The Company
shall not, and shall not permit any Restricted Subsidiary to, engage in any
business, other than a Permitted Business.
SECTION 4.13. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL
STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not sell or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary, and shall
not permit any Restricted Subsidiary, directly or indirectly, to issue or sell
or otherwise dispose of any shares of its Capital Stock except: (a) to the
Company or a Restricted Subsidiary; or (b) if, immediately after giving effect
to such issuance or sale, such Restricted Subsidiary would continue to be a
Restricted Subsidiary or if, immediately after giving effect to such issuance
or sale, such Restricted Subsidiary would no longer be a Restricted Subsidiary
and the Investment of the Company in such Person after giving effect to such
issuance or sale would have been permitted to be made under Section 4.04 if
made on the date of such issuance or sale (and such Investment shall be deemed
to be an Investment made for the purpose of Section 4.04). The proceeds of any
sale of such Capital Stock permitted hereby shall be treated as Net Available
Cash from an Asset Disposition and shall be applied in accordance with Section
4.06.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. (a) WHEN COMPANY MAY MERGE OR TRANSFER ASSETS.
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation organized and existing
under the laws of the United States, any State thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by a supplemental indenture hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and this Indenture;
<PAGE> 49
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(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); and
(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but
the predecessor Company in the case of a conveyance, transfer or lease of all
or substantially all its assets shall not be released from the obligation to
pay the principal of and interest on the Notes.
(b) The Company shall not permit any Note Guarantor to
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of its assets to any Person unless: (i) the resulting,
surviving or transferee Person will be a corporation organized and existing
under the laws of the United States, any State thereof or the District of
Columbia, and such Person (if not such Note Guarantor) shall expressly assume,
by a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such Note Guarantor under
its Note Guarantee; (ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person as a result of such transaction as having been
Incurred by such Person at the time of such transaction), no Default shall have
occurred and be continuing; and (iii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture; PROVIDED, HOWEVER, that the foregoing shall not
apply to any such consolidation or merger with or into, or conveyance, transfer
or lease to, any Person if the resulting, surviving or transferee Person shall
not be a Subsidiary of the Company and the other terms of this Indenture,
including Section 4.06, are complied with.
(c) Notwithstanding the foregoing, (i) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (ii) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
<PAGE> 50
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs
if:
(a) the Company defaults in any payment of interest on any
Note when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(b) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at its Stated Maturity,
upon required redemption or repurchase, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article 10;
(c) the Company or any Note Guarantor fails to comply with
Section 5.01;
(d) the Company fails to comply with Section 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12 or 4.13 (other than a failure
to purchase Notes when required under Section 4.06 or 4.08) and such
failure continues for 30 days after the notice specified below;
(e) the Company or any Note Guarantor fails to comply with
any of its agreements in the Notes or this Indenture (other than those
referred to in (a), (b), (c) or (d) above) and such failure continues
for 60 days after the notice specified below;
(f) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
the acceleration by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $10.0
million or its foreign currency equivalent at the time and such
failure continues for 10 days after the notice specified below;
(g) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief
against it in an involuntary case;
(iii) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(iv) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
<PAGE> 51
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(i) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(iii) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(i) any judgment or decree for the payment of money in excess
of $10.0 million or its foreign currency equivalent (net of any
amounts with respect to which a reputable and creditworthy insurance
company has acknowledged liability in writing) is rendered against the
Company or any Restricted Subsidiary and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or
decree or (B) there is a period of 60 days following the entry of such
judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed; or
(j) any Note Guarantee ceases to be in full force and effect
(except as contemplated by the terms thereof) or any Note Guarantor or
Person acting by or on behalf of such Note Guarantor denies or
disaffirms its obligations under this Indenture or any Note Guarantee
and such Default continues for 10 days after the notice specified
below.
The foregoing shall constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (d), (e), (f) or (j) above is not an
Event of Default until the Trustee notifies the Company or the Holders of at
least 25% in principal amount of the outstanding Notes notify the Company and
the Trustee of the Default and the Company or the Note Guarantor, as
applicable, does not cure such Default within the time specified after receipt
of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice in the form of an Officers'
Certificate of any event which with the giving of notice or the lapse of time
would become an Event of Default, its status and what action the Company is
taking or proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other
than an Event of Default specified in Section 6.01(g) or (h) with respect to
the Company) occurs
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and is continuing, the Trustee by notice to the Company, or the Holders of at
least 25% in principal amount of the outstanding Notes by notice to the Company
and the Trustee, may declare the principal of and accrued but unpaid interest
on all the Notes to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
specified in Section 6.01(g) or (h) with respect to the Company occurs, the
principal of and interest on all the Notes shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. The Holders of a majority in principal amount of
the Notes by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a
majority in principal amount of the Notes by notice to the Trustee may waive an
existing Default and its consequences except (a) a Default in the payment of
the principal of or interest on a Note, (b) a Default arising from the failure
to redeem or purchase any Note when required pursuant to the terms of this
Indenture or (c) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each Holder affected. When a Default
is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority
in principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is unduly prejudicial
to the rights of other Holders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due,
no Holder may pursue any remedy with respect to this Indenture or the Notes
unless:
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47
(a) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(b) the Holders of at least 25% in principal amount of the
Notes then outstanding make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(e) the Holders of a majority in principal amount of the
Notes then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Holder may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over another Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and liquidated damages and interest on the
Notes held by such Holder, on or after the respective due dates expressed or
provided for in the Notes, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company and any other obligor on the Notes for the whole amount
then due and owing (together with interest on overdue principal and (to the
extent lawful) on any unpaid interest at the rate provided for in the Notes)
and the amounts provided for in Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Holders allowed
in any judicial proceedings relative to the Company, any Subsidiary or Note
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses, disburse
ments and advances of the Trustee, its agents and its counsel, and any other
amounts due the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money
or property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
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SECOND: to holders of Senior Indebtedness of the Company to
the extent required by Article 10 and to holders of Senior
Indebtedness of the Note Guarantors to the extent required by Article
12;
THIRD: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, and any liquidated damages without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, any liquidated damages and
interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section. At least 15 days before such
record date, the Trustee shall mail to each Holder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the Notes.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. Neither the
Company nor any Note Guarantor (to the extent it may lawfully do so) shall at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company and each Note Guarantor (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the exe cution of
every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05; and
(iv) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Notes at
the time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in
its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, any Note Guarantee or the Notes, it shall not be accountable
for the Company's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Company or any Note Guarantor in this
Indenture or in any document issued in connection with the sale of the Notes or
in the Notes other than the Trustee's certificate of authentication. The
Trustee shall not be charged with knowledge of any Default or Event of Default
under Sections 6.01(c), (d), (e), (f), (i) or (j) or of the identity of any
Significant Subsidiary unless either (a) a Trust Officer shall have actual
knowledge thereof or (b) the Trustee shall have notice thereof in accordance
with Section 13.02 hereof from the Company, any Note Guarantor or any Holder.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder notice of the Default within the earlier of 90 days after it occurs or
30 days after it is known to a Trust Officer or written notice of it is
received by the Trustee. Except in the case of a Default in payment of
principal of, premium, if any, or interest on any Note (including payments
pursuant to the redemption provisions of such Note), the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each March 15 beginning with the March 15 following the date
of this Indenture, and in any event prior to May 15 in each year, the Trustee
shall mail to each Holder a brief report dated as of such March 15 that
complies with Section 313(a) of the TIA if and to the extent required thereby.
The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Holders
shall be filed with the SEC and each stock exchange (if any) on which the Notes
are listed. The Company agrees to notify promptly the Trustee whenever the
Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Note Guarantor, jointly and severally shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by or in connection with the
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Company of any claim for which it may seek indemnity
promptly upon obtaining actual knowledge thereof; PROVIDED, HOWEVER, that any
failure so to notify the Company shall not relieve the Company or any Note
Guarantor of its indemnity obligations hereunder. The Company shall defend the
claim and the indemnified party shall provide reasonable cooperation at the
Company's expense in the defense. Such indemnified parties may have separate
counsel and the Company and the Note Guarantors, as applicable shall pay the
fees and expenses of such counsel; PROVIDED, HOWEVER, that the Company shall
not be required to pay such fees and expenses if it assumes such indemnified
parties' defense and, in such indemnified parties' reasonable judgment, there
is no conflict of interest between the Company and the Note Guarantors, as
applicable, and such parties in connection with such defense. The Company need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by an indemnified party through such party's own wilful misconduct,
negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Notes.
The Company's payment obligations pursuant to this Section
shall survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. Without prejudice to any other rights available to the
Trustee under applicable law, when the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.01(g) or (h) with respect to the
Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
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SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Notes may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Notes and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the
<PAGE> 59
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Trustee may adopt the certificate of authentication of any predecessor trustee,
and deliver such Notes so authenticated; and in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b) subject to its right to apply for a stay of its
duty to resign under the penultimate paragraph of TIA Section 310(b); PROVIDED,
HOWEVER, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
(a) When (i) all outstanding Notes (other than Notes replaced or paid pursuant
to Section 2.07) have been canceled or delivered to the Trustee for cancelation
or (ii) all outstanding Notes have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article 3
hereof, and the Company irrevocably deposits with the Trustee funds in an
amount sufficient or U.S. Government Obligations, the principal of and interest
on which will be sufficient, or a combination thereof sufficient, in the
written opinion of a nationally recognized firm of independent public
accountants delivered to the Trustee (which delivery shall only be required if
U.S. Government Obligations have been so deposited) to pay principal of and
interest on the outstanding Notes when due at maturity or upon redemption,
including interest thereon to maturity or such redemption date (other than
Notes replaced or paid pursuant to Section 2.07), and if in either case the
Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on
demand of the Company accompanied by an Officers' Certificate and an Opinion of
Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all of its obligations under the Notes and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12 and 4.13 and the operation
of Section 5.01(a)(iii), 6.01(d), 6.01(f), 6.01(g) (with respect to Significant
Subsidiaries of the Company only), 6.01(h) (with respect to Significant
Subsidiaries of the Company only) and 6.01(i) ("covenant defeasance
<PAGE> 60
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option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. In the event that the
Company terminates all of its obligations under the Notes and this Indenture by
exercising its legal defeasance option, the obligations under the Note
Guarantees shall each be terminated simultaneously with the termination of such
obligations.
If the Company exercises its legal defeasance option, payment
of the Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Notes may not
be accelerated because of an Event of Default specified in Section 6.01(d),
6.01(f), 6.01(g) (with respect to Significant Subsidiaries of the Company
only), 6.01(h) (with respect to Significant Subsidiaries of the Company only)
or 6.01(i) or because of the failure of the Company to comply with clause
Section 5.01(a)(iii).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in
this Article 8 shall survive until the Notes have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04, 8.05 and 8.06
shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(a) the Company irrevocably deposits in trust with the
Trustee money in an amount sufficient or U.S. Government Obligations,
the principal of and interest on which will be sufficient, or a
combination thereof sufficient, to pay the principal, premium (if any)
and interest on the Notes when due at maturity or redemption, as the
case may be, including interest thereon to maturity or such redemption
date;
(b) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the pay ments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Notes to maturity or redemption, as the
case may be;
(c) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(g) or (h) with
respect to the Company occurs which is continuing at the end of the
period;
(d) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(e) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
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(f) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred;
(g) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such deposit and covenant defeasance had not
occurred; and
(h) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Notes as
contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Notes. Money and
securities so held in trust are not subject to Article 10 or 12.
SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any money or
U.S. Government Obligations held by it as provided in this Article which, in
the written opinion of a nationally recognized firm of independent public
accountants delivered to the Trustee (which delivery shall only be required if
U.S. Government Obligations have been so deposited), are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent discharge or defeasance in accordance with this Article.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed
for two years, and, thereafter, Holders entitled to the money must look to the
Company for payment as general creditors and the Trustee and the Paying Agent
shall have no further liability with respect to such monies.
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SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to this Article 8 until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, if the
Company has made any payment of interest on or principal of any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, the
Note Guarantors and the Trustee may amend this Indenture or the Notes without
notice to or consent of any Holder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5;
(c) to provide for uncertificated Notes in addition to or in
place of certificated Notes; PROVIDED, HOWEVER, that the
uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Notes are described in Section 163(f)(2)(B) of the Code;
(d) to make any change in Article 10 or Article 12 that would
limit or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10 or Article
12;
(e) to add additional Guarantees with respect to the Notes or
to secure the Notes;
(f) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(g) to comply with any requirement of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA;
(h) to make any change that does not adversely affect the
rights of any Holder; or
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(i) to provide for the issuance of the Exchange Notes or
Private Exchange Notes, which shall have terms substantially identical
in all material respects to the Initial Notes (except that the
transfer restrictions contained in the Initial Notes shall be modified
or eliminated, as appropriate), and which shall be treated, together
with any outstanding Initial Notes, as a single issue of securities.
An amendment under this Section 9.01 may not make any change
that adversely affects the rights under Article 10 or Article 12 of any holder
of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment.
However, the failure to give such notice to all Holders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company, the Note
Guarantors and the Trustee may amend this Indenture or the Notes without notice
to any Holder but with the written consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes). However,
without the consent of each Holder affected, an amendment may not:
(a) reduce the amount of Notes whose Holders must consent to
an amendment;
(b) reduce the rate of or extend the time for payment of
interest or any liquidated damages on any Note;
(c) reduce the principal of or extend the Stated Maturity of
any Note;
(d) reduce the premium payable upon the redemption of any
Note or change the time at which any Note may be redeemed in
accordance with Article 3 and paragraph 5 of the Notes.
(e) make any Note payable in money other than that stated in
the Note;
(f) make any change in Article 10 or Article 12 that
adversely affects the rights of any Holder under Article 10 or Article
12;
(g) impair the right of any Holder to receive payment of
principal of, and interest or any liquidated damages on, such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes;
(h) make any change in Section 6.04 or 6.07 or the second
sentence of this
Section 9.02; or
(i) modify the Note Guarantees in any manner adverse to the
Holders.
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It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 may not make any change
that adversely affects the rights under Article 10 or Article 12 of any holder
of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every
amendment to this Indenture or the Notes shall comply with the TIA as then in
effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS.
A consent to an amendment or a waiver by a Holder of a Note shall bind the
Holder and every subsequent Holder of that Note or portion of the Note that
evidences the same debt as the consenting Holder's Note, even if notation of
the consent or waiver is not made on the Note. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Note or
portion of the Note if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officers' Certificate from the Company
certifying that the requisite number of consents have been received. After an
amendment or waiver becomes effective, it shall bind every Holder. An amendment
or waiver becomes effective upon the (a) receipt by the Company or the Trustee
of the requisite number of consents, (b) satisfaction of conditions to
effectiveness as set forth in this Indenture and any indenture supplemental
hereto containing such amendment or waiver and (c) execution of such amendment
or waiver (or supplemental indenture) by the Company and the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. If an
amendment changes the terms of a Note, the Trustee may require the Holder of
the Note to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Note regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or to
issue a new Note shall not affect the validity of such amendment.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture and
that such amendment is the legal, valid and binding obligation of the Company
and the Note Guarantors enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor
any Affiliate of the Company shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees,
and each Holder by accepting a Note agrees, that the Indebtedness evidenced by
the Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment in full of all Senior
Indebtedness of the Company and that the subordination is for the benefit of
and enforceable by the holders of such Senior Indebtedness. The Notes shall in
all respects rank PARI PASSU with all other Senior Subordinated Indebtedness of
the Company and shall rank senior to all existing and future Subordinated
Obligations of the Company and only Indebtedness of the Company that is Senior
Indebtedness of the Company shall rank senior to the Notes in accordance with
the provisions set forth herein. For purposes of this Article 10, the
Indebtedness evidenced by the Notes shall be deemed to include the liquidated
damages payable pursuant to the provisions set forth in the Notes and the
Registration Agreement. All provisions of this Article 10 shall be subject to
Section 10.12.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(a) the holders of Senior Indebtedness of the Company shall
be entitled to receive payment in full of such Senior Indebtedness
before Holders shall be entitled to receive any payment of principal
of or interest on the Notes; and
(b) until such Senior Indebtedness of the Company is paid in
full, any payment or distribution to which Holders would be entitled
but for this Article 10
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shall be made to holders of such Senior Indebtedness as their
interests may appear (except that Holders may receive and retain (i)
Permitted Junior Securities and (ii) payments made from the trust
described in Section 8.02 so long as, on the date or dates the
respective amounts were paid into the trust, such payments were made
with respect to the Notes without violating this Article 10); if a
distribution is made to Holders that due to this Article 10 should not
have been made to them, such Holders will be required to hold it in
trust for the holders of Senior Indebtedness of the Company and pay it
over to them as their interests may appear.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Company
may not pay principal of, premium (if any) or interest on the Notes or make any
deposit pursuant to Article 8 and may not otherwise repurchase, redeem or
otherwise retire any Notes (except that Holders may receive and retain
Permitted Junior Securities and payments made from the trust described in
Section 8.02) (collectively, "pay the Notes") if (a) any Designated Senior
Indebtedness of the Company is not paid when due or (b) any other default on
such Designated Senior Indebtedness occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (i) the default has been cured or waived and any such acceleration
has been rescinded or (ii) such Designated Senior Indebtedness has been paid in
full; PROVIDED, HOWEVER, that the Company may pay the Notes without regard to
the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of such Designated Senior Indebtedness
with respect to which either of the events set forth in clause (a) or (b) of
this sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (a) or (b) of the preceding
sentence) with respect to any Designated Senior Indebtedness of the Company
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company
may not pay the Notes for a period (a "Payment Blockage Period") commencing
upon the receipt by the Trustee (with a copy to the Company) of written notice
(a "Blockage Notice") of such default from the Representative of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (a) by written notice to the Trustee and the
Company from the Person or Persons who gave such Blockage Notice, (b) by
repayment in full of such Designated Senior Indebtedness or (c) because no
defaults are continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company
may resume payments on the Notes after the end of such Payment Blockage Period,
including any missed payments. Not more than one Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period; PROVIDED,
HOWEVER, that if any Blockage Notice within such 360-day period is given by or
on behalf of any holders of Designated Senior Indebtedness of the Company other
than the Bank Indebtedness, the Representative of the Bank Indebtedness may
give another Blockage Notice within such period; PROVIDED FURTHER, HOWEVER,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section 10.03, no default or event
of default that existed or was continuing on the date of the
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commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by
the Representative of such Designated Senior Indebtedness, whether or not
within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. ACCELERATION OF PAYMENT OF NOTES. If payment
of the Notes is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of the Company (or their Representative) of the acceleration; PROVIDED,
HOWEVER, that, in the case of the Trustee, the Trustee shall have received
written notice from the Company or a Representative identifying such Designated
Senior Indebtedness, on which notice the Trustee shall be entitled to
conclusively rely. If any Designated Senior Indebtedness of the Company is
outstanding, the Company may not pay the Notes until five Business Days after
such holders or the Representative of such Designated Senior Indebtedness
receive notice of such acceleration and, thereafter, may pay the Notes only if
this Article 10 otherwise permits payment at that time.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution is made to Holders that because of this Article 10 should not have
been made to them, the Holders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of the Company and pay it over to them
as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness of
the Company is paid in full and until the Notes are paid in full, Holders shall
be subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to Senior Indebtedness of the Company. A distribution
made under this Article 10 to holders of such Senior Indebtedness of the
Company which otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on such Senior Indebtedness.
SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the
relative rights of Holders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on and liquidated damages in respect of, the
Notes in accordance with their terms; or
(2) prevent the Trustee or any Holder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Holders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or by its failure to comply with this
Indenture.
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SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Notes and shall not be charged with knowledge of the existence
of facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of
the Trustee receives notice satisfactory to it that payments may not be made
under this Article 10. The Company, the Registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of the Company may give the
notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness of the
Company has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of the Company with the same rights it would have if it
were not Trustee. The Registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness of the Company which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07 or any other section
of this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Company, the distribution may be made and the notice given
to their Representative (if any).
SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Notes
by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Holders or the Trustee to accelerate the
maturity of the Notes.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Notes shall not be subordinated
to the prior payment of any Senior Indebtedness of the Company or subject to
the restrictions set forth in this Article 10, and none of the Holders shall be
obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Holders shall be
entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (b) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Holders or (c) upon the Representatives for the holders of Senior Indebtedness
of the Company for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 10. In the event that the
Trustee determines, in good faith, that evidence is
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required with respect to the right of any Person as a holder of Senior
Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial deter mination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Holder by accepting a Note authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders and the holders of Senior
Indebtedness of the Company as provided in this Article 10 and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Holders or the
Company or any other Person, money or assets to which any holders of Senior
Indebtedness of the Company shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Holder by accepting a Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
the Company, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE 11
NOTE GUARANTEES
SECTION 11.01. NOTE GUARANTEES. Each Note Guarantor hereby
jointly and severally irrevocably and unconditionally Guarantees, as a primary
obligor and not merely as a surety, to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment when due, whether at
Stated Maturity, by acceleration, by redemption or otherwise, of all
obligations of the Company under this Indenture (including obligations to the
Trustee) and the Notes, whether for payment of principal of, interest on or
liquidated damages in respect of the Notes and all other monetary obligations
of the Company under this Indenture and the Notes and (b) the full and punctual
performance within applicable grace periods of all other obligations of the
Company whether for fees, expenses, indemnification or otherwise under this
Indenture and the Notes (all the foregoing being hereinafter collectively
called the "Guaranteed Obligations"). Each Note Guarantor further agrees that
the Guaranteed Obligations may
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be extended or renewed, in whole or in part, without notice or further assent
from each such Note Guarantor, and that each such Note Guarantor shall remain
bound under this Article 11 notwithstanding any extension or renewal of any
Guaranteed Obligation.
Each Note Guarantor waives presentation to, demand of payment
from and protest to the Company of any of the Guaranteed Obligations and also
waives notice of protest for nonpayment. Each Note Guarantor waives notice of
any default under the Notes or the Guaranteed Obligations. The obligations of
each Note Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the Notes
or any other agreement or otherwise; (b) any extension or renewal of any
thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Notes or any other agreement; (d)
the release of any security held by any Holder or the Trustee for the
Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee
to exercise any right or remedy against any other guarantor of the Guaranteed
Obligations; or (f) any change in the ownership of such Note Guarantor, except
as provided in Section 11.02(b).
Each Note Guarantor hereby waives any right to which it may
be entitled to have its obligations hereunder divided among the Note
Guarantors, such that such Note Guarantor's obligations would be less than the
full amount claimed. Each Note Guarantor hereby waives any right to which it
may be entitled to have the assets of the Company first be used and depleted as
payment of the Company's or such Note Guarantor's obligations hereunder prior
to any amounts being claimed from or paid by such Note Guarantor hereunder.
Each Note Guarantor hereby waives any right to which it may be entitled to
require that the Company be sued prior to an action being initiated against
such Note Guarantor.
Each Note Guarantor further agrees that its Note Guarantee
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Guaranteed Obligations.
The Note Guarantee of each Note Guarantor is, to the extent
and in the manner set forth in Article 12, subordinated and subject in right of
payment to the prior payment in full of the principal of and premium, if any,
and interest on all Senior Indebtedness of the relevant Note Guarantor and is
made subject to such provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and
11.06, the obligations of each Note Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall
not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Note Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, wilful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing
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which may or might in any manner or to any extent vary the risk of any Note
Guarantor or would otherwise operate as a discharge of any Note Guarantor as a
matter of law or equity.
Each Note Guarantor agrees that its Note Guarantee is a
continuing Guarantee and shall remain in full force and effect until payment in
full of all the Guaranteed Obligations. Each Note Guarantor further agrees that
its Note Guarantee herein shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of principal of
or interest on any Guaranteed Obligation is rescinded or must otherwise be
restored by any Holder or the Trustee upon the bankruptcy or reorganization of
the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Note Guarantor by virtue hereof, upon the failure of the Company to pay the
principal of or interest on any Guaranteed Obligation when and as the same
shall become due, whether at maturity, by acceleration, by redemption or
otherwise, or to perform or comply with any other Guaranteed Obligation, each
Note Guarantor hereby promises to and shall, upon receipt of written demand by
the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (a) the unpaid principal amount of such
Guaranteed Obligations, (b) accrued and unpaid interest on such Guaranteed
Obligations (but only to the extent not prohibited by law) and (c) all other
monetary obligations of the Company to the Holders and the Trustee.
Each Note Guarantor agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Guaranteed Obligations guaranteed hereby until payment in full of all
Guaranteed Obligations and all obligations to which the Guaranteed Obligations
are subordinated as provided in Article 12. Each Note Guarantor further agrees
that, as between it, on the one hand, and the Holders and the Trustee, on the
other hand, (a) the maturity of the Guaranteed Obligations guaranteed hereby
may be accelerated as provided in Article 6 for the purposes of any Note
Guarantee herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Guaranteed Obligations
guaranteed hereby, and (b) in the event of any declaration of acceleration of
such Guaranteed Obligations as provided in Article 6, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by such Note Guarantor for the purposes of this Section 11.01.
Each Note Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees and expenses) incurred by the
Trustee or any Holder in enforcing any rights under this Section 11.01.
Upon request of the Trustee, each Note Guarantor shall
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of
this Indenture.
SECTION 11.02. LIMITATION ON LIABILITY. (a) Any term or
provision of this Indenture to the contrary notwithstanding, the maximum
aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Note
Guarantor shall not exceed the maximum amount that can be hereby Guaranteed
without rendering this Indenture, as it relates to such Note Guarantor,
voidable under applicable law relating to fraudulent
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conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) A Note Guarantee as to any Note Guarantor shall terminate
and be of no further force or effect and such Note Guarantor shall be deemed to
be released from all obligations under this Article 11 upon (i) the merger or
consolidation of such Note Guarantor with or into any Person other than the
Company or a Subsidiary or Affiliate of the Company where such Note Guarantor
is not the surviving entity of such consolidation or merger or (ii) the sale or
transfer by the Company or any Subsidiary of the Company of the Capital Stock
of such Note Guarantor (or by any other Person as a result of a foreclosure of
any Lien on such Capital Stock securing Senior Indebtedness), where, after such
sale or transfer, such Note Guarantor is no longer a Subsidiary of the Company;
PROVIDED, HOWEVER, that each such merger, consolidation, sale or transfer by
the Company or such Subsidiary or Affiliate (1) shall comply with this
Indenture, including the provisions of Section 4.06 or (2) in the case of a
sale or transfer as a result of a foreclosure of any Lien securing Senior
Indebtedness by the holder of such Lien, the net proceeds therefrom shall be
applied in compliance with the terms of this Indenture that would apply to a
sale thereof by the Company. At the request of the Company, the Trustee shall
execute and deliver an appropriate instrument evidencing such release (in the
form provided by the Company).
SECTION 11.03. SUCCESSORS AND ASSIGNS. This Article 11 shall
be binding upon each Note Guarantor and its successors and assigns and shall
inure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Notes shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.04. NO WAIVER. Neither a failure nor a delay on
the part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege. The rights, remedies and benefits of the Trustee
and the Holders herein expressly specified are cumulative and not exclusive of
any other rights, remedies or benefits which either may have under this Article
11 at law, in equity, by statute or otherwise.
SECTION 11.05. MODIFICATION. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
any Note Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Note Guarantor in any case shall entitle
such Note Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 11.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE
NOTE GUARANTORS. Each Subsidiary which is required to become a Note Guarantor
pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit C hereto pursuant to which such
Subsidiary shall become a Note Guarantor under this Article 11 and shall
guarantee the Guaranteed Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the
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Company shall deliver to the Trustee an Opinion of Counsel and an Officers'
Certificate to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Note Guarantee of such Note Guarantor is a legal, valid and binding
obligation of such Note Guarantor, enforceable against such Note Guarantor in
accordance with its terms and to such other matters as the Trustee may
reasonably request.
SECTION 11.07. NON-IMPAIRMENT. The failure to endorse a Note
Guarantee on any Note shall not affect or impair the validity thereof.
ARTICLE 12
SUBORDINATION OF THE NOTE GUARANTEES
SECTION 12.01. AGREEMENT TO SUBORDINATE. Each Note Guarantor
agrees, and each Holder by accepting a Note agrees, that the obligations of a
Note Guarantor hereunder are subordinated in right of payment, to the extent
and in the manner provided in this Article 12, to the prior payment in full of
all Senior Indebtedness of such Note Guarantor and that the subordination is
for the benefit of and enforceable by the holders of such Senior Indebtedness
of such Note Guarantor. The obligations hereunder with respect to a Note
Guarantor shall in all respects rank PARI PASSU with all other Senior
Subordinated Indebtedness of such Note Guarantor and shall rank senior to all
existing and future Subordinated Obligations of such Note Guarantor; and only
Indebtedness of such Note Guarantor that is Senior Indebtedness of such Note
Guarantor shall rank senior to the obligations of such Note Guarantor in
accordance with the provisions set forth herein.
SECTION 12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of a Note Guarantor to creditors upon a
total or partial liquidation or a total or partial dissolution of such Note
Guarantor or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to such Note Guarantor or its property:
(a) the holders of Senior Indebtedness of such Note Guarantor
shall be entitled to receive payment in full of such Senior
Indebtedness before Holders shall be entitled to receive any payment
pursuant to any Guaranteed Obligations from such Note Guarantor; and
(b) until such Senior Indebtedness of such Note Guarantor is
paid in full, any payment or distribution to which Holders would be
entitled but for this Article 12 shall be made to holders of such
Senior Indebtedness as their respective interests may appear, (except
that Holders may receive and retain (i) Permitted Junior Securities
and (ii) payments made from the trust described in Section 8.02 so
long as, on the date or dates the respective amounts were paid into
the trust, such payments were made with respect to the Note Guarantees
without violating this Article 12); if a distribution is made to
Holders that due to this Article 12 should not have been made to them,
such Holders shall be required
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to hold it in trust for the holders of Senior Indebtedness of such
Note Guarantor and pay it over to them as their interests may appear.
SECTION 12.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF A
NOTE GUARANTOR. A Note Guarantor may not make any payment pursuant to any of
the Guaranteed Obligations or repurchase, redeem or otherwise retire any Notes
(except that Holders may receive and retain Permitted Junior Securities and
payments made from the trust described in Section 8.02) (collectively, "pay its
Guarantee") if (a) any Designated Senior Indebtedness of such Note Guarantor is
not paid when due or (b) any other default on Designated Senior Indebtedness of
such Note Guarantor occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either
case, (i) the default has been cured or waived and any such acceleration has
been rescinded or (ii) such Designated Senior Indebtedness has been paid in
full; PROVIDED, HOWEVER, that such Note Guarantor may pay its Guarantee without
regard to the foregoing if such Note Guarantor and the Trustee receive written
notice approving such payment from the Representative of the holders of such
Designated Senior Indebtedness with respect to which either of the events in
clause (a) or (b) of this sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (a) or (b)
of the preceding sentence) with respect to any Designated Senior Indebtedness
of a Note Guarantor pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
such Note Guarantor may not pay its Guarantee for a period (a "Guarantee
Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to such Note Guarantor and the Company) of written notice (a "Guarantee
Blockage Notice") of such default from the Representative of the holders of
such Designated Senior Indebtedness of such Note Guarantor specifying an
election to effect a Guarantee Payment Blockage Period and ending 179 days
thereafter (or earlier if such Guarantee Payment Blockage Period is terminated
(a) by written notice to the Trustee (with a copy to such Note Guarantor and
the Company) from the Person or Persons who gave such Guarantee Blockage
Notice, (b) by repayment in full of such Designated Senior Indebtedness or (c)
because no defaults are continuing). Notwithstanding the provisions described
in the immediately preceding sentence (but subject to the provisions contained
in the first sentence of this Section 12.03), unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, such Note
Guarantor may resume to paying its Guarantee after such Guarantee Payment
Blockage Period, including any missed payments. Not more than one Guarantee
Blockage Notice may be given with respect to a Note Guarantor in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of such Note Guarantor during such period;
PROVIDED, HOWEVER, that if any Guarantee Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior
Indebtedness of such Note Guarantor other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Guarantee Blockage
Notice within such period; PROVIDED FURTHER, HOWEVER, that in no event may the
total number of days during which any Guarantee Payment Blockage Period or
Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section 12.03, no default or event
of default that existed or was continuing on the date of the commencement of
any Guarantee Payment Blockage Period with respect to the Designated Senior
Indebtedness initiating such Guarantee Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Guarantee Payment
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Blockage Period by the Representative of such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such default or
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
SECTION 12.04. DEMAND FOR PAYMENT. If payment of the Notes is
accelerated because of an Event of Default and a demand for payment is made on
a Note Guarantor pursuant to Article 11, such Note Guarantor or the Trustee
shall promptly notify the holders of the Designated Senior Indebtedness of such
Note Guarantor (or the Representative of such holders) of such demand;
PROVIDED, HOWEVER, that, in the case of the Trustee, the Trustee shall have
received written notice from the Company, such Note Guarantor or a
Representative identifying such Designated Senior Indebtedness, on which notice
the Trustee shall be entitled to conclusively rely. If any Designated Senior
Indebtedness of such Note Guarantor is outstanding, such Note Guarantor may not
pay its Guarantee until five Business Days after such holders or the
Representative of the holders of the Designated Senior Indebtedness of such
Note Guarantor receive notice of such demand and, thereafter, may pay its
Guarantee only if this Article 12 otherwise permits payment at that time.
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
payment or distribution is made to Holders that because of this Article 12
should not have been made to them, the Holders who receive the payment or
distribution shall hold such payment or distribution in trust for holders of
the Senior Indebtedness of the relevant Note Guarantor and pay it over to them
as their respective interests may appear.
SECTION 12.06. SUBROGATION. After all Senior Indebtedness of
a Note Guarantor is paid in full and until the Notes are paid in full, Holders
shall be subrogated to the rights of holders of Senior Indebtedness of such
Note Guarantor to receive distributions applicable to Senior Indebtedness of
such Note Guarantor. A distribution made under this Article 12 to holders of
Senior Indebtedness of such Note Guarantor which otherwise would have been made
to Holders is not, as between such Note Guarantor and Holders, a payment by
such Note Guarantor on Senior Indebtedness of such Note Guarantor.
SECTION 12.07. RELATIVE RIGHTS. This Article 12 defines the
relative rights of Holders and holders of Senior Indebtedness of a Note
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Note Guarantor and Holders, the
obligation of a Note Guarantor which is absolute and unconditional, to
make payments with respect to the Guaranteed Obligations to the extent
set forth in Article 11; or
(2) prevent the Trustee or any Holder from exercising its
available remedies upon a default by a Note Guarantor under its
obligations with respect to the Guaranteed Obligations, subject to the
rights of holders of Senior Indebtedness of such Note Guarantor to
receive distributions otherwise payable to Holders.
SECTION 12.08. SUBORDINATION MAY NOT BE IMPAIRED BY A NOTE
GUARANTOR. No right of any holder of Senior Indebtedness of a Note Guarantor to
enforce the subordination of the obligations of such Note Guarantor hereunder
shall be impaired
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by any act or failure to act by such Note Guarantor or by its failure to comply
with this Indenture.
SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 12.03, the Trustee or the Paying Agent may continue to
make payments on the Notes and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 12. A Note Guarantor, the Registrar or co-registrar,
the Paying Agent, a Representative or a holder of Senior Indebtedness of a Note
Guarantor may give the notice; PROVIDED, HOWEVER, that if an issue of Senior
Indebtedness of a Note Guarantor has a Representative, only the Representative
may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of a Note Guarantor with the same rights it would have if
it were not Trustee. The Registrar and co-registrar and the Paying Agent may do
the same with like rights. The Trustee shall be entitled to all the rights set
forth in this Article 12 with respect to any Senior Indebtedness of a Note
Guarantor which may at any time be held by it, to the same extent as any other
holder of Senior Indebtedness of such Note Guarantor; and nothing in Article 7
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article 12 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07 or any other section of this Indenture.
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of a Note Guarantor, the distribution may be made and the notice
given to their Representative (if any).
SECTION 12.11. ARTICLE 12 NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE. The failure of a Note Guarantor to make a payment on
any of its obligations by reason of any provision in this Article 12 shall not
be construed as preventing the occurrence of a default by such Note Guarantor
under such obligations. Nothing in this Article 12 shall have any effect on the
right of the Holders or the Trustee to make a demand for payment on a Note
Guarantor pursuant to Article 11.
SECTION 12.12. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Holders shall be
entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
12.02 are pending, (b) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Holders or (c) upon the Representatives for the holders of Senior Indebtedness
of a Note Guarantor for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness of a Note Guarantor and other Indebtedness of a Note Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
12. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness of a Note Guarantor to participate in any payment or distribution
pursuant to this Article 12, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of such
<PAGE> 77
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Note Guarantor held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Holder by accepting a Note authorizes and directs the Trustee on his or her
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders and the holders of Senior
Indebtedness of each of the Note Guarantors as provided in this Article 12 and
appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS OF A NOTE GUARANTOR. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of a Note Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Holders or the relevant Note Guarantor or any other Person, money
or assets to which any holders of Senior Indebtedness of such Note Guarantor
shall be entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF
A NOTE GUARANTOR ON SUBORDINATION PROVISIONS. Each Holder by accepting a Note
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of a Note Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
SECTION 12.16. DEFEASANCE. The terms of this Article 12 shall
not apply to payments from money or the proceeds of U.S. Government Obligations
held in trust by the Trustee for the payment of principal of and interest on
the Notes pursuant to the provisions described in Section 8.03.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of TIA Sections 310 to 318, inclusive,
such imposed duties or incorporated provision shall control.
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72
SECTION 13.02. NOTICES. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
American Media Operations, Inc.
600 East Coast Avenue
Lantana, Florida 33464-0002
Attention of: Chief Financial Officer
if to the Trustee:
The Chase Manhattan Bank
3800 Colonnade Parkway
Birmingham, AL 35243
Attention of: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be
mailed, first class mail, to the Holder at the Holder's address as it appears
on the registration books of the Registrar and shall be sufficiently given if
so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 13.03. COMMUNICATION OF HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(a) an Officers' Certificate in form reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(b) an Opinion of Counsel in form reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture (other than pursuant to Section 4.09)
shall include:
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73
(a) a statement that the individual making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. WHEN NOTES DISREGARDED. In determining whether
the Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Company, any Note Guarantor or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any Note Guarantor shall
be disregarded and deemed not to be outstanding, except that, for the purpose
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee knows are so owned
shall be so disregarded. Subject to the foregoing, only Notes outstanding at
the time shall be considered in any such determination.
SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR.
The Trustee may make reasonable rules for action by or a meeting of Holders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. LEGAL HOLIDAYS. A "Legal Holiday" is a
Saturday, a Sunday or other day on which banking institutions are not required
by law or by regulation to be open in the State of New York. If a payment date
is a Legal Holiday, payment shall be made on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
If a regular record date is a Legal Holiday, the record date shall not be
affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.10. NO RECOURSE AGAINST OTHERS. A director,
officer, employee or stockholder, as such, of the Company or any Note Guarantor
shall not have any liability for any obligations of the Company or such Note
Guarantor under the Notes or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Note, each Holder shall waive and release all such lia bility. The waiver and
release shall be part of the consideration for the issue of the Notes.
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SECTION 13.11. SUCCESSORS. All agreements of the Company and
each Note Guarantor in this Indenture and the Notes shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. MULTIPLE ORIGINALS. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 13.13. TABLE OF CONTENTS; HEADINGS. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 81
75
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
On behalf of
AMERICAN MEDIA OPERATIONS, INC.,
NATIONAL ENQUIRER, INC., STAR
EDITORIAL, INC., SOM PUBLISHING,
INC., WEEKLY WORLD NEWS, INC.,
COUNTRY WEEKLY, INC., DISTRIBUTION
SERVICES, INC., FAIRVIEW PRINTING,
INC., NDSI, INC., HEALTH XTRA,
INC., RETAIL MARKETING NETWORK,
INC., BIOCIDE, INC., AMERICAN MEDIA
MARKETING, INC., and MARKETING
SERVICES, INC.,
By /s/ Peter A. Nelson
---------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and CFO
THE CHASE MANHATTAN BANK, as Trustee
By /s/ Roy Wessinger
---------------------------------
Name: Roy Wessinger
Title: Authorized Signatory
<PAGE> 82
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES,
PRIVATE EXCHANGE NOTES
AND EXCHANGE NOTES
1. DEFINITIONS
1.1 DEFINITIONS
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer
or transaction involving a Regulation S Global Note or beneficial interest
therein, the rules and procedures of the Depositary for such Global Note,
Euroclear and Cedel, in each case to the extent applicable to such transaction
and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities
clearing agency.
"Definitive Note" means a certificated Initial Note, Private
Exchange Note or Exchange Note (bearing the Restricted Notes Legend if the
transfer of such Note is restricted by applicable law) that does not include
the Global Notes Legend.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means the Euroclear Clearance System or any
successor securities clearing agency.
"Exchange Offer Registration Statement" means a registration
statement filed by the Company with the SEC in connection with a Registered
Exchange Offer.
"Global Notes Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchaser" means Chase Securities Inc.
"Issue Date" means the date on which the Initial Notes are
originally issued.
"Private Exchange" means an offer by the Company, pursuant to
the Registration Agreement, to issue and deliver to certain purchasers, in
exchange for the Initial Notes held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Notes.
"Private Exchange Notes" means the Notes of the Company
issued in exchange for Initial Notes pursuant to this Indenture in connection
with the Private Exchange pursuant to the Registration Agreement.
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"Purchase Agreement" means the Purchase Agreement dated April
30, 1999, among the Company, the Note Guarantors and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Agreement, to certain Holders of Initial Notes, to
issue and deliver to such Holders, in exchange for their Initial Notes, a like
aggregate principal amount of Exchange Notes registered under the Securities
Act.
"Registration Agreement" means the Exchange and Registration
Rights Agreement dated May 7, 1999, among the Company, the Note Guarantors and
the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Notes" means all Initial Notes offered and sold
outside the United States in reliance on Regulation S.
"Restricted Period", with respect to any Notes, means the
period of 40 consecutive days beginning on and including the later of (a) the
day on which such Notes are first offered to persons other than distributors
(as defined in Regulation S under the Securities Act) in reliance on Regulation
S, notice of which day shall be promptly given by the Company to the Trustee,
and (b) the Issue Date with respect to such Notes.
"Restricted Notes Legend" means the legend set forth in
Section 2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Notes" means all Initial Notes offered and sold to
QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as
amended.
"Notes Custodian" means the custodian with respect to a
Global Note (as appointed by the Depositary) or any successor person thereto,
who shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement
filed by the Company in connection with the offer and sale of Initial Notes
pursuant to the Registration Agreement.
"Transfer Restricted Notes" means Definitive Notes and any
other Notes that bear or are required to bear the Restricted Notes Legend.
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1.2 OTHER DEFINITIONS
Term: Defined in Section:
----- -------------------
"Agent Members".....................................................2.1(b)
"IAI Global Note"...................................................2.1(a)
"Global Note".......................................................2.1(a)
"Regulation S Global Note"..........................................2.1(a)
"Rule 144A Global Note".............................................2.1(a)
2. THE NOTES
2.1 FORM AND DATING
The Initial Notes issued on the date hereof shall be (a)
offered and sold by the Company pursuant to the Purchase Agreement and (b)
resold, initially only to (i) QIBs in reliance on Rule 144A and (ii) Persons
other than U.S. Persons (as defined in Regulation S) in reliance on Regulation
S. Such Initial Notes may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501.
(a) GLOBAL NOTES. Rule 144A Notes shall be issued initially
in the form of one or more permanent global Notes in definitive, fully
registered form (collectively, the "Rule 144A Global Note") and Regulation S
Notes shall be issued initially in the form of one or more global Notes
(collectively, the "Regulation S Global Note"), in each case without interest
coupons and bearing the Global Notes Legend and Restricted Notes Legend, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Notes Custodian, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by
the Trustee as provided in this Indenture. One or more global securities in
definitive, fully registered form without interest coupons and bearing the
Global Notes Legend and the Restricted Notes Legend (collectively, the "IAI
Global Note") shall also be issued on the Closing Date, deposited with the
Notes Custodian, and registered in the name of the Depositary or a nominee of
the Depositary, duly executed by the Company and authenticated by the Trustee
as provided in this Indenture to accommodate transfers of beneficial interests
in the Notes to IAIs subsequent to the initial distribution. Beneficial
ownership interests in the Regulation S Global Note shall not be exchangeable
for interests in the Rule 144A Global Note, the IAI Global Note or any other
Note without a Restricted Notes Legend until the expiration of the Restricted
Period. The Rule 144A Global Note, the IAI Global Note and the Regulation S
Global Note are each referred to herein as a "Global Note" and are collectively
referred to herein as "Global Notes"; PROVIDED, that the term "Global Note"
when used in Sections 2.1(b) (third paragraph), 2.1(c), 2.3(g)(i), 2.3(h)(i)
and 2.4 shall also include any Note in global form issued in connection with a
Registered Exchange Offer or Private Exchange. The aggregate principal amount
of the Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee and on the schedules thereto as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply
only to a Global Note deposited with or on behalf of the Depositary.
<PAGE> 85
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The Company shall execute and the Trustee shall, in
accordance with this Section 2.1(b) and Section 2.2 and pursuant to an order of
the Company signed by one Officer, authenticate and deliver initially one or
more Global Notes that (i) shall be registered in the name of the Depositary
for such Global Note or Global Notes or the nominee of such Depositary and (ii)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as Notes Custodian.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary or by the Trustee as Notes
Custodian or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwith
standing the foregoing, nothing herein shall prevent the Company, the Trustee
or any agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
a holder of a beneficial interest in any Global Note.
(c) DEFINITIVE NOTES. Except as provided in Section 2.3 or
2.4, owners of beneficial interests in Global Notes shall not be entitled to
receive physical delivery of certificated Notes.
2.2 AUTHENTICATION. The Trustee shall authenticate and make available
for delivery upon a written order of the Company signed by one Officer (a)
Initial Notes for original issue on the date hereof in an aggregate principal
amount of $250,000,000, (b) the (i) Exchange Notes for issue only in a
Registered Exchange Offer and (ii) Private Exchange Notes for issue only in the
Private Exchange, in the case of each of (i) and (ii) pursuant to the
Registration Agreement and for a like principal amount of Initial Notes
exchanged pursuant thereto. Such order shall specify the amount of the Notes to
be authenticated, the date on which the original issue of Notes is to be
authenticated and whether the Notes are to be Initial Notes, Exchange Notes or
Private Exchange Notes. The aggregate principal amount of Notes outstanding at
any time may not exceed $250,000,000 except as provided in Sections 2.07 and
2.08 of this Indenture.
2.3 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE
NOTES. When Definitive Notes are presented to the Registrar with a request:
(i) to register the transfer of such Definitive Notes; or
(ii) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; PROVIDED, HOWEVER,
that the Definitive Notes surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
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(2) in the case of Initial Notes, are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Notes are being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse
side of the Initial Note); or
(B) if such Definitive Notes are being transferred
to the Company, a certification to that effect (in the form
set forth on the reverse side of the Initial Note); or
(C) if such Definitive Notes are being transferred
pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act or in reliance upon another
exemption from the registration requirements of the
Securities Act, (i) a certification to that effect (in the
form set forth on the reverse side of the Initial Note) and
(ii) if the Company so requests, an opinion of counsel or
other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the legend set
forth in Section 2.3(e)(i).
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE NOTE FOR A
BENEFICIAL INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged
for a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the Registrar, together with:
(i) certification (in the form set forth on the reverse side
of the Initial Note) that such Definitive Note is being transferred
(A) to a QIB in accordance with Rule 144A, (B) to an IAI that has
furnished to the Trustee a signed letter substantially in the form of
Exhibit D or (C) outside the United States in an offshore transaction
within the meaning of Regulation S and in compliance with Rule 904
under the Securities Act; and
(ii) written instructions directing the Trustee to make, or
to direct the Notes Custodian to make, an adjustment on its books and
records with respect to such Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global
Note, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Notes Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased by the aggregate principal amount of the Definitive Note to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Note equal
to the principal amount of the Definitive Note so canceled. If no Global Notes
are then outstanding and the Global Note has not been previously exchanged for
certificated securities pursuant to Section 2.4, the Company shall issue and
the Trustee shall authenticate, upon written order of the Company in the form
of an Officers' Certificate, a new Global Note in the appropriate principal
amount.
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(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. (i) The transfer
and exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor. A transferor of a beneficial interest in a Global Note
shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Note or
another Global Note and such account shall be credited in accordance with such
order with a beneficial interest in the applicable Global Note and the account
of the Person making the transfer shall be debited by an amount equal to the
beneficial interest in the Global Note being transferred. Transfers by an owner
of a beneficial interest in the Rule 144A Global Note or the IAI Global Note to
a transferee who takes delivery of such interest through the Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
shall be made only upon receipt by the Trustee of a certification from the
transferor in the form provided on the reverse side of the Initial Note to the
effect that such transfer is being made in accordance with Regulation S or (if
available) Rule 144 under the Securities Act and that, if such transfer is
being made prior to the expiration of the Restricted Period, the interest
transferred shall be held immediately thereafter through Euroclear or Cedel. In
the case of a transfer of a beneficial interest in either the Regulation S
Global Note or the Rule 144A Global Note for an interest in the IAI Global
Note, the transferee must furnish a signed letter substantially in the form of
Exhibit D to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Note to a beneficial interest in another Global Note, the
Registrar shall reflect on its books and records the date and an increase in
the principal amount of the Global Note to which such interest is being
transferred in an amount equal to the principal amount of the interest to be so
transferred, and the Registrar shall reflect on its books and records the date
and a corresponding decrease in the principal amount of Global Note from which
such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
(iv) In the event that a Global Note is exchanged for Definitive Notes
pursuant to Section 2.4 prior to the consummation of the Registered Exchange
Offer or the effectiveness of the Shelf Registration Statement with respect to
such Notes, such Notes may be exchanged only in accordance with such procedures
as are substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse side of the
Initial Notes intended to ensure that such transfers comply with Rule 144A,
Regulation S or such other applicable exemption from registration under the
Securities Act, as the case may be) and such other procedures as may from time
to time be adopted by the Company.
(d) RESTRICTIONS ON TRANSFER OF REGULATION S GLOBAL NOTE. (i)
Prior to the expiration of the Restricted Period, interests in the Regulation S
Global Note may only be held through Euroclear or Cedel. During the Restricted
Period, beneficial ownership interests in the Regulation S Global Note may only
be sold, pledged or transferred through Euroclear or Cedel in accordance with
the Applicable Procedures and only (1) to the
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Company, (2) so long as such security is eligible for resale pursuant to Rule
144A, to a person whom the selling holder reasonably believes is a QIB that
purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule
144A, (3) in an offshore transaction in accordance with Regulation S, (4)
pursuant to an exemption from registration under the Securities Act provided by
Rule 144 (if applicable) under the Securities Act, (5) to an IAI purchasing for
its own account, or for the account of such an IAI, in a minimum principal
amount of Notes of $250,000 or (6) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. Prior to the
expiration of the Restricted Period, transfers by an owner of a beneficial
interest in the Regulation S Global Note to a transferee who takes delivery of
such interest through the Rule 144A Global Note or the IAI Global Note shall be
made only in accordance with Applicable Procedures and upon receipt by the
Trustee of a written certification from the transferor of the beneficial
interest substantially in the form provided on the reverse side of the Initial
Note to the effect that such transfer is being made to (A) a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(B) an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount of the Notes of $250,000. Such written
certification shall no longer be required after the expiration of the
Restricted Period. In the case of a transfer of a beneficial interest in the
Regulation S Global Note for an interest in the IAI Global Note, the transferee
must furnish a signed letter substantially in the form of Exhibit D to the
Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Note shall be
transferable in accordance with applicable law and the other terms of
this Indenture.
(e) LEGEND.
(i) Except as permitted by the following paragraphs (ii),
(iii) or (iv), each Note certificate evidencing the Global Notes and
the Definitive Notes (and all Notes issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the
following form (each defined term in the legend being defined as such
for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A
<PAGE> 89
8
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"),
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE."
Each Definitive Note shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Note
that is a Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a Definitive
Note that does not bear the legends set forth above and rescind any
restriction on the transfer of such Transfer Restricted Note if the
Holder certifies in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such certification to be in
the form set forth on the reverse side of the Initial Note).
(iii) After a transfer of any Initial Notes or Private
Exchange Notes during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Notes or Private
Exchange Notes, as the case may be, all requirements pertaining to the
Restricted Notes Legend on such Initial Notes or such Private Exchange
Notes shall cease to apply and the requirements that any such Initial
Notes or such Private Exchange Notes be issued in global form shall
continue to apply.
<PAGE> 90
9
(iv) Upon the consummation of a Registered Exchange Offer
with respect to the Initial Notes pursuant to which Holders of such
Initial Notes are offered Exchange Notes in exchange for their Initial
Notes, all requirements pertaining to Initial Notes that Initial Notes
be issued in global form shall continue to apply, and Exchange Notes
in global form without the Restricted Notes Legend shall be available
to Holders that exchange such Initial Notes in such Registered
Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Notes pursuant to which Holders of such Initial Notes
are offered Private Exchange Notes in exchange for their Initial
Notes, all requirements pertaining to such Initial Notes that Initial
Notes be issued in global form shall continue to apply, and Private
Exchange Notes in global form with the Restricted Notes Legend shall
be available to Holders that exchange such Initial Notes in such
Private Exchange.
(vi) Upon a sale or transfer after the expiration of the
Restricted Period of any Initial Note acquired pursuant to Regulation
S, all requirements that such Initial Note bear the Restricted Notes
Legend shall cease to apply and the requirements requiring any such
Initial Note be issued in global form shall continue to apply.
(f) CANCELATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as
all beneficial interests in a Global Note have either been exchanged for
Definitive Notes, transferred, redeemed, repurchased or canceled, such Global
Note shall be returned by the Depositary to the Trustee for cancelation or
retained and canceled by the Trustee. At any time prior to such cancelation, if
any beneficial interest in a Global Note is exchanged for Definitive Notes,
transferred in exchange for an interest in another Global Note, redeemed,
repurchased or canceled, the principal amount of Notes represented by such
Global Note shall be reduced and an adjustment shall be made on the books and
records of the Trustee (if it is then the Notes Custodian for such Global Note)
with respect to such Global Note, by the Trustee or the Notes Custodian, to
reflect such reduction.
(g) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
NOTES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate, Definitive
Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge
payable upon exchanges or transfer pursuant to Sections 2.09, 3.06,
4.06, 4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of
transfer of any Note, the Company, the Trustee, the Paying Agent or
the Registrar may deem and treat the person in whose name a Note is
registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note is overdue,
and none of the Company, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
<PAGE> 91
10
(iv) All Notes issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall
be entitled to the same benefits under this Indenture as the Notes
surrendered upon such transfer or exchange.
(h) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Note, a member of, or a participant
in the Depositary or any other Person with respect to the accuracy of
the records of the Depositary or its nominee or of any participant or
member thereof, with respect to any ownership interest in the Notes or
with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depositary) of any notice
(including any notice of redemption or repurchase) or the payment of
any amount, under or with respect to such Notes. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Notes shall be given or made only to the
registered Holders (which shall be the Depositary or its nominee in
the case of a Global Note). The rights of beneficial owners in any
Global Note shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Trustee may
rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants
and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under this Inden ture or under applicable law with
respect to any transfer of any interest in any Note (including any
transfers between or among Depositary participants, members or
beneficial owners in any Global Note) other than to require delivery
of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by,
the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements
hereof.
2.4 DEFINITIVE NOTES
(a) A Global Note deposited with the Depositary or with the
Trustee as Notes Custodian pursuant to Section 2.1 or issued in connection with
a Registered Exchange Offer or Private Exchange shall be transferred to the
beneficial owners thereof in the form of Definitive Notes in an aggregate
principal amount equal to the principal amount of such Global Note, in exchange
for such Global Note, only if such transfer complies with Section 2.3 and (i)
the Depositary notifies the Company that it is unwilling or unable to continue
as a Depositary for such Global Note or if at any time the Depositary ceases to
be a "clearing agency" registered under the Exchange Act, and a successor
depositary is not appointed by the Company within 90 days of such notice or
after the Company becomes aware of such cessation, or (ii) an Event of Default
has occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Notes under this Indenture.
(b) Any Global Note that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depositary to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Note, an equal
<PAGE> 92
11
aggregate principal amount of Definitive Notes of authorized denominations. Any
portion of a Global Note transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depositary shall
direct. Any certificated Initial Note in the form of a Definitive Note
delivered in exchange for an interest in the Global Note shall, except as
otherwise provided by Section 2.3(e), bear the Restricted Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company shall promptly make
available to the Trustee a reasonable supply of Definitive Notes in fully
registered form without interest coupons.
<PAGE> 93
EXHIBIT A
FORM OF FACE OF INITIAL NOTE AND PRIVATE EXCHANGE NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S
<PAGE> 94
2
UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Definitive Note shall bear the following additional legend:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
<PAGE> 95
No. [ ] $[__________]
10 1/4% Senior Subordinated Note due 2009
CUSIP No. [______]
[ISIN No: [ ]]
American Media Operations, Inc., a Delaware corporation,
promises to pay to [ ], or registered assigns, the principal sum
[of $ ] [listed on the Schedule of Increases or Decreases in Global Note
attached hereto](1) on May 1, 2009.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
- --------
(1) Use the Schedule of Increases and Decreases language if Note is in global
form.
<PAGE> 96
2
Additional provisions of this Note are set forth on the other
side of this Note.
IN WITNESS WHEREOF, the parties have caused this instrument
to be duly executed.
AMERICAN MEDIA OPERATIONS, INC.,
By
-------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By:
--------------------------------------
Authorized [Officer] [Signatory]
- -------------------
*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL NOTES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
<PAGE> 97
3
FORM OF REVERSE SIDE OF INITIAL NOTE AND PRIVATE EXCHANGE NOTE
10 1/4% Senior Subordinated Note due 2009
1. INTEREST
(a) American Media Operations, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Note at the rate per annum shown above
until the principal hereof is paid or duly provided for. The Company shall pay
interest semiannually on May 1 and November 1 of each year. Interest on the
Notes shall accrue from the most recent date to which interest has been paid or
duly provided for, or, if no interest has been paid or duly provided for, from
May 7, 1999. Interest shall be computed on the basis of a 360-day year or
twelve 30-day months.
(b) LIQUIDATED DAMAGES. The holder of this Note is entitled
to the benefits of an Exchange and Registration Rights Agreement, dated as of
May 7, 1999, among the Company, National Enquirer, Inc., Star Editorial, Inc.,
SOM Publishing, Inc., Weekly World News, Inc., Country Weekly, Inc., Fairview
Printing, Inc., NDSI, Inc., Health Xtra, Inc., Retail Marketing Network, Inc.,
Biocide, Inc., American Media Marketing, Inc. and Marketing Services, Inc., as
guarantors (the "Note Guarantors"), and the Initial Purchaser named therein
(the "Registration Agreement"). Capitalized terms used in this paragraph (b)
but not defined herein have the meanings assigned to them in the Registration
Agreement. If (i) the Shelf Registration Statement or the Exchange Offer
Registration Statement, as applicable under the Registration Agreement, is not
filed with the Commission on or prior to 105 days after the Issue Date, (ii)
the Shelf Registration Statement or the Exchange Offer Registration Statement,
as the case may be, is not declared effective within 165 days after the Issue
Date, (iii) the Registered Exchange Offer is not consummated on or prior to 195
days after the Issue Date, or (iv) the Shelf Registration Statement is filed
and declared effective within 195 days after the Issue Date but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 90 days by
an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default"), the
Company shall pay liquidated damages to each holder of Transfer Restricted
Notes, during the period of such Registration Default, in an amount equal to
$0.192 per week per $1,000 principal amount of the Notes constituting Transfer
Restricted Notes held by such holder until the applicable Registration
Statement is filed or declared effective, the Registered Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as the
case may be. All accrued liquidated damages shall be paid to holders in the
same manner as interest payments on the Notes on semi-annual payment dates
which correspond to interest payment dates for the Notes. Following the cure of
all Registration Defaults, the accrual of liquidated damages shall cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages. For purposes of the foregoing, "Transfer
Restricted Notes" means (i) each Initial Note until the date on which such
Initial Note has been exchanged for a freely transferable Exchange Note in the
Registered Exchange Offer, (ii) each Initial Note or Private Exchange Note
until the date on which such Initial Note or Private Exchange Note has been
effectively registered under the Securities Act and disposed of in accordance
with a Shelf Registration Statement or (iii) each Initial Note or Private
Exchange Note until the date on which such Initial Note or Private Exchange
<PAGE> 98
4
Note is distributed to the public pursuant to Rule 144 under the Securities Act
or is saleable pursuant to Rule 144(k) under the Securities Act.
2. METHOD OF PAYMENT
The Company shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered holders of Notes at the close of
business on the April 15 or October 15 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal, premium, liquidated
damages and interest in money of the United States of America that at the time
of payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Note (including principal,
premium, liquidated damages and interest) shall be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company shall make all payments in respect of a certificated Note
(including principal, premium and interest), by mailing a check to the
registered address of each Holder thereof; PROVIDED, HOWEVER, that payments on
the Notes may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Notes, by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, The Chase Manhattan Bank, a New York banking
corporation (the "Trustee"), shall act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Notes under an Indenture dated as of
May 7, 1999 (the "Indenture"), among the Company, the Note Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Notes are subject to all terms and
provisions of the Indenture, and Holders are referred to the Indenture and the
TIA for a statement of such terms and provisions.
The Notes are senior subordinated unsecured obligations of
the Company limited to $250,000,000 aggregate principal amount at any one time
outstanding (subject to Section 2.07 of the Indenture). This Note is one of the
Initial Notes referred to in the Indenture issued in an aggregate principal
amount of $250,000,000. The Notes include the Initial Notes and any Exchange
Notes and Private Exchange Notes issued in exchange for Initial Notes. The
Initial Notes, the Exchange Notes and the Private Exchange Notes are treated as
a single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other
<PAGE> 99
5
things, make certain Investments and other Restricted Payments, pay dividends
and other distributions, incur Indebtedness, enter into consensual restrictions
upon the payment of certain dividends and distributions by such Restricted
Subsidiaries, issue or sell shares of capital stock of such Restricted
Subsidiaries, enter into or permit certain transactions with Affiliates, sell
assets and enter into new lines of business. The Indenture also imposes
limitations on the ability of the Company to consolidate or merge with or into
any other Person or convey, transfer or lease all or substantially all of the
property of the Company.
To guarantee the due and punctual payment of the principal
and interest on the Notes and all other amounts payable by the Company under
the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of
the Notes and the Indenture, the Note Guarantors have jointly and severally
unconditionally guaranteed the Guaranteed Obligations on a senior subordinated
basis pursuant to the terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes
shall not be redeemable at the option of the Company prior to May 1, 2004.
Thereafter, the Notes shall be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on May 1 of the years set forth
below:
REDEMPTION
YEAR PRICE
---- ----------
2004 105.125%
2005 103.417%
2006 101.708%
2007 and thereafter 100.000%
In addition, prior to May 1, 2002, the Company may on one or
more occasions, also redeem up to a maximum of 35% of the original aggregate
principal amount of the Notes with the Net Cash Proceeds of one or more Equity
Offerings (a) by the Company or (b) by Holdings to the extent the Net Cash
Proceeds thereof are contributed to the Company or used to purchase Capital
Stock (other than Disqualified Stock) of the Company from the Company, at a
redemption price equal to 110.25% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages thereon, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER,
that after giving effect to any such redemption, at least 65% of the original
aggregate principal amount of the Notes remains outstanding. Any such
redemption shall be made within 60 days of such Equity Offering upon not less
than 30 nor more than 60 days' notice mailed to each holder of Notes being
redeemed and otherwise in accordance with the procedures set forth in the
Indenture.
<PAGE> 100
6
6. SINKING FUND
The Notes are not subject to any sinking fund.
7. NOTICE OF REDEMPTION
Notice of redemption shall be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at his or her registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages, if any, on all Notes (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.
8. REPURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
Upon a Change of Control, any Holder of Notes will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Notes of such Holder at a purchase
price equal to 101% of the principal amount of the Notes to be repurchased plus
accrued and unpaid interest and liquidated damages, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date that is on
or prior to the date of purchase) as provided in, and subject to the terms of,
the Indenture.
In accordance with Section 4.06 of the Indenture, the Company
will be required to offer to purchase Notes upon the occurrence of certain
events.
9. SUBORDINATION
The Notes are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Notes may be paid. The Company and each Note Guarantor
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Notes in accordance with the Indenture. Upon any transfer or exchange,
the Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes
required by law or permitted by the Indenture. The Regis trar need not register
the transfer of or exchange any Notes selected for redemption (except, in the
case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) or to transfer or exchange any Notes for a period of 15 days prior to
a selection of Notes to be redeemed.
<PAGE> 101
7
11. PERSONS DEEMED OWNERS
Except as provided in paragraph 2 hereof, the registered
Holder of this Note may be treated as the owner of it for all purposes.
12. UNCLAIMED MONEY
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
13. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Notes and the Indenture if
the Company deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Notes to redemption or maturity,
as the case may be.
14. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (a)
the Indenture or the Notes may be amended without prior notice to any Holder
but with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Notes and (b) any default may be waived
with the written consent of the Holders of at least a majority in principal
amount of the outstanding Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Notes, the Company and the
Trustee may amend the Indenture or the Notes (a) to cure any ambiguity,
omission, defect or inconsistency; (b) to comply with Article 5 of the
Indenture; (c) to provide for uncertificated Notes in addition to or in place
of certificated Notes; (d) to add Note Guarantees with respect to the Notes;
(e) to secure the Notes; (f) to add additional covenants or to surrender rights
and powers conferred on the Company; (g) to comply with the requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
TIA; (h) to make any change that does not adversely affect the rights of any
Holder; (i) to make any change in the subordination provisions of the Indenture
that would limit or terminate the benefits available to any holder of Senior
Indebtedness of the Company (or any representative thereof) under such
subordination provisions; or (j) to provide for the issuance of the Exchange
Notes or Private Exchange Notes.
15. DEFAULTS AND REMEDIES
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. If an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Notes shall become immediately due and payable without any declaration or other
act on the part of the
<PAGE> 102
8
Trustee or any Holders. Under certain circumstances, the Holders of a majority
in principal amount of the outstanding Notes may rescind any such acceleration
with respect to the Notes and its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense and certain other conditions are complied with. Except to
enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (a) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (b) Holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee in writing to pursue the
remedy, (c) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (d) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (e) the Holders of a majority in
principal amount of the outstanding Notes have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
16. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it
were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the
Company or any Note Guarantor shall not have any liability for any obligations
of the Company under the Notes or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Note, each Holder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
18. AUTHENTICATION
This Note shall not be valid until an authorized officer or
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Note.
<PAGE> 103
9
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP [AND ISIN] NUMBERS
The Company has caused CUSIP [and ISIN] numbers to be printed
on the Notes and has directed the Trustee to use CUSIP [and ISIN] numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN
IT THE TEXT OF THIS NOTE.
<PAGE> 104
10
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of
the Company. The agent may substitute another to act for him.
- ------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
<PAGE> 105
11
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Notes held in (check
applicable space) ____ book-entry or _____ definitive form by the undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depositary a
Note or Notes in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof
indicated above);
/ / has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / to the Registrar for registration in the name of
the Holder, without transfer
(3) / / pursuant to an effective registration statement
under the Securities Act of 1933; or
(4) / / inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933) that purchases for its
own account or for the account of a qualified
institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance
with Rule 144A under the Securities Act of 1933; or
(5) / / outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933 and such Note shall be
held immediately after the transfer through
Euroclear and Cedel until the expiration of the
Restricted Period (as defined in the Indenture); or
(6) / / to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) that has furnished to the
Trustee a signed letter containing certain
representations and agreements; or
(7) / / pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
<PAGE> 106
12
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of
any Person other than the registered holder thereof; PROVIDED,
HOWEVER, that if box (5), (6) or (7) is checked, the Trustee may
require, prior to registering any such transfer of the Notes, such
legal opinions, certifications and other information as the Company
has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
______________________________________
Your Signature
Signature Guarantee:
Date: _________________________ ______________________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ___________________________________
NOTICE: To be executed by
an executive officer
<PAGE> 107
13
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of this Global Note is $[ ]. The
following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Note following such officer or signatory of
Exchange Global Note Global Note decrease or increase Trustee or Notes Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 108
14
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY
THE COMPANY PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF
CONTROL) OF THE INDENTURE, CHECK THE BOX:
ASSET DISPOSITION / / CHANGE OF CONTROL / /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE
PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE,
STATE THE AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: ________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)
SIGNATURE GUARANTEE:__________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE> 109
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE> 110
2
No. $__________
10 1/4% Senior Subordinated Note due 2009
CUSIP No. ______
[ISIN No._____]
American Media Operations, Inc., a Delaware corporation,
promises to pay to [ ], or registered assigns, the principal sum
[of $ ] [listed on the Schedule of Increases or Decreases in Global Note
attached hereto](2) on May 1, 2009.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
- --------
(2) Use the Schedule of Increases and Decreases language if Note is in global
form.
<PAGE> 111
3
Additional provisions of this Note are set forth on the other
side of this Note.
IN WITNESS WHEREOF, the parties have caused this instrument
to be duly executed.
AMERICAN MEDIA OPERATIONS, INC.,
By
-----------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE CHASE MANHATTAN BANK,
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By
-----------------------------------
Authorized [Officer] [Signatory]
- ------------------------
*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL NOTES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
<PAGE> 112
4
FORM OF REVERSE SIDE OF EXCHANGE NOTE
10 1/4% Senior Subordinated Note due 2009
1. INTEREST.
American Media Operations, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on
the principal amount of this Note at the rate per annum shown above until the
principal hereof is paid or duly provided for. The Company shall pay interest
semiannually on May 1 and November 1 of each year. Interest on the Notes shall
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from May 7,
1999. Interest shall be computed on the basis of a 360-day year or twelve
30-day months.
2. METHOD OF PAYMENT
The Company shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered holders of Notes at the close of
business on the April 15 or October 15 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal, premium and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Notes represented by a Global Note (including principal, premium and interest)
shall be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments
in respect of a certificated Note (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof; PROVIDED,
HOWEVER, that payments on the Notes may also be made, in the case of a Holder
of at least $1,000,000 aggregate principal amount of Notes, by wire transfer to
a U.S. dollar account maintained by the payee with a bank in the United States
if such Holder elects pay ment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, The Chase Manhattan Bank, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Notes under an Indenture dated as of
May 7, 1999 (the "Indenture"), among the Company, the Note Guarantors (as
defined in the Indenture) and the Trustee. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect
on the date of the Indenture (the "TIA"). Terms defined in the Indenture
<PAGE> 113
5
and not defined herein have the meanings ascribed thereto in the Indenture. The
Notes are subject to all terms and provisions of the Indenture, and Holders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Notes are senior subordinated unsecured obligations of
the Company limited to $250,000,000 aggregate principal amount at any one time
outstanding, of which $250,000,000 in aggregate principal amount will be
initially issued on the Closing Date. This Note is one of the Exchange Notes
referred to in the Indenture. The Notes include the Initial Notes and any
Exchange Notes and Private Exchange Notes issued in exchange for the Initial
Notes pursuant to the Indenture. The Initial Notes, the Exchange Notes and the
Private Exchange Notes are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, sell assets and enter into
new lines of business. The Indenture also imposes limitations on the ability of
the Company to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal
and interest, if any, on the Notes and all other amounts payable by the Company
under the Indenture and the Notes when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Notes and the Indenture, the Note Guarantors have, jointly and
severally, unconditionally guaranteed the Guaranteed Obligations on a senior
basis subordinated pursuant to the terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes
shall not be redeemable at the option of the Company prior to May 1, 2004.
Thereafter, the Notes shall be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on May 1, of the years set forth
below:
REDEMPTION
YEAR PRICE
---- ----------
2004 105.125%
2005 103.417%
2006 101.708%
2007 and thereafter 100.000%
In addition, prior to May 1, 2002, the Company may, on one or
more occasions, also redeem up to a maximum of 35% of the original aggregate
principal amount of the Notes with the Net Cash Proceeds of one or more Equity
Offerings (a) by the Company or (b) by Holdings to the extent the Net Cash
Proceeds thereof are contributed to
<PAGE> 114
6
the Company or used to purchase Capital Stock (other than Disqualified Stock)
of the Company from the Company, at a redemption price equal to 110.25% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages thereon, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that after giving effect to
any such redemption, at least 65% of the original aggregate principal amount of
the Notes remains outstanding. Any such redemption shall be made within 60 days
of such Equity Offering upon not less than 30 nor more than 60 days' notice
mailed to each holder of Notes being redeemed and otherwise in accordance with
the procedures set forth in the Indenture.
6. SINKING FUND
The Notes are not subject to any sinking fund.
7. NOTICE OF REDEMPTION
Notice of redemption shall be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at his or her registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest and liquidated damages, if any, on all Notes (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.
8. REPURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
Upon a Change of Control, any Holder of Notes will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Notes of such Holder at a purchase
price equal to 101% of the principal amount of the Notes to be repurchased plus
accrued and unpaid interest and liquidated damages, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date that is on
or prior to the date of purchase) as provided in, and subject to the terms of,
the Indenture.
In accordance with Section 4.06 of the Indenture, the Company
will be required to offer to purchase Notes upon the occurrence of certain
events.
9. SUBORDINATION
The Notes are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Notes may be paid. The Company and each Note Guarantor
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
<PAGE> 115
7
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Notes in accordance with the Indenture. Upon any transfer or exchange,
the Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes
required by law or permitted by the Indenture. The Regis trar need not register
the transfer of or exchange any Notes selected for redemption (except, in the
case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) or to transfer or exchange any Notes for a period of 15 days prior to
a selection of Notes to be redeemed or 15 days before an interest payment date.
11. PERSONS DEEMED OWNERS
Except as provided in paragraph 2 hereof, the registered
Holder of this Note may be treated as the owner of it for all purposes.
12. UNCLAIMED MONEY
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
13. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Notes and the Indenture if
the Company deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Notes to redemption or maturity,
as the case may be.
14. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (a)
the Indenture or the Notes may be amended without prior notice to any Holder
but with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Notes and (b) any default may be waived
with the written consent of the Holders of at least a majority in principal
amount of the outstanding Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Notes, the Company and the
Trustee may amend the Indenture or the Notes (a) to cure any ambiguity,
omission, defect or inconsistency; (b) to comply with Article 5 of the
Indenture; (c) to provide for uncertificated Notes in addition to or in place
of certificated Notes; (d) to add Note Guarantees with respect to the Notes;
(e) to secure the Notes; (f) to add additional covenants or to surrender rights
and powers conferred on the Company; (g) to comply with the requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
TIA; (h) to make any change that does not adversely affect the rights of any
Holder; (i) to make any change in the subordination provisions of the Indenture
that would limit or terminate the benefits available to any holder of Senior
Indebtedness of the Company (or any representative thereof) under such
subordination provisions; or (j) to provide for the issuance of the Exchange
Notes, or Private Exchange Notes.
<PAGE> 116
8
15. DEFAULTS AND REMEDIES
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. If an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Notes shall become immediately due and payable without any declaration or other
act on the part of the Trustee or any Holders. Under certain circumstances, the
Holders of a majority in principal amount of the outstanding Notes may rescind
any such acceleration with respect to the Notes and its consequences.
If an Event of Default occurs and is continuing, the Trustee
shall be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense and certain other conditions are complied with. Except to
enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (a) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (b) Holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee in writing to pursue the
remedy, (c) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (d) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (e) the Holders of a majority in
principal amount of the outstanding Notes have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
16. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it
were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the
Company or any Note Guarantor shall not have any liability for any obligations
of the Company under the Notes or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Note, each Holder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
<PAGE> 117
9
18. AUTHENTICATION
This Note shall not be valid until an authorized officer or
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Note.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP [AND ISIN] NUMBERS
The Company has caused CUSIP [and ISIN] numbers to be printed
on the Notes and has directed the Trustee to use CUSIP [and ISIN] numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN
IT THE TEXT OF THIS NOTE.
<PAGE> 118
10
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the
Company. The agent may substitute another to act for him.
- ------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note. Signature
must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor acceptable to the Trustee.
<PAGE> 119
11
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of this Global Note is $[ ]. The
following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Note following such officer or signatory of
Exchange Global Note Global Note decrease or increase Trustee or Notes Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 120
12
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF
CONTROL) OF THE INDENTURE, CHECK THE BOX:
ASSET DISPOSITION / / CHANGE OF CONTROL / /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE
PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE,
STATE THE AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE NOTE)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE.
<PAGE> 121
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture") dated as of , among [GUARANTOR]
(the "New Guarantor"), a subsidiary of AMERICAN
MEDIA OPERATIONS, INC. (or its successor), a
Delaware corporation (the "Company"), National
Enquirer, Inc., Star Editorial, Inc., SOM
Publishing, Inc., Weekly World News, Inc., Country
Weekly, Inc., Distribution Services, Inc., Fairview
Printing, Inc., NDSI, Inc., Health Xtra, Inc.,
Retail Marketing Network, Inc., Biocide, Inc.,
American Media Marketing, Inc. and Marketing
Services, Inc., as guarantors (the "Existing
Guarantors"), and THE CHASE MANHATTAN BANK, a New
York banking corporation, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company and Existing Guarantors has heretofore
executed and delivered to the Trustee an Indenture (the "Indenture") dated as
of May 7, 1999, providing for the issuance of an aggregate principal amount of
up to $250,000,000 of 10 1/4% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS Section 4.11 of the Indenture provides that under
certain circumstances the Company is required to cause the New Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor shall unconditionally guarantee all the Company's obligations
under the Notes pursuant to a Note Guarantee on the terms and conditions set
forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the
Trustee, the Company and the Existing Guarantors are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the New Guarantor, the Company, the Existing Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Notes as follows:
1. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees,
jointly and severally with all the Existing Guarantors, to unconditionally
guarantee the Company's obligations under the Notes on the terms and subject to
the conditions set forth in Articles 11 and 12 of the Indenture and to be bound
by all other applicable provisions of the Indenture and the Notes.
2. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby.
<PAGE> 122
2
3. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
4. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
By
------------------------------------
Name:
Title:
AMERICAN MEDIA OPERATIONS, INC.,
By
------------------------------------
Name:
Title:
NATIONAL ENQUIRER, INC.,
By
------------------------------------
Name:
Title:
STAR EDITORIAL, INC.,
By
------------------------------------
Name:
Title:
<PAGE> 123
3
SOM PUBLISHING, INC.,
By
------------------------------------
Name:
Title:
WEEKLY WORLD NEWS, INC.,
By
------------------------------------
Name:
Title:
COUNTRY WEEKLY, INC.,
By
------------------------------------
Name:
Title:
DISTRIBUTION SERVICES, INC.,
By
------------------------------------
Name:
Title:
FAIRVIEW PRINTING, INC.,
By
------------------------------------
Name:
Title:
NDSI, INC.,
By
------------------------------------
Name:
Title:
HEALTH XTRA, INC.,
By
------------------------------------
Name:
Title:
RETAIL MARKETING NETWORK, INC.,
By
------------------------------------
Name:
Title:
<PAGE> 124
4
BIOCIDE, INC.,
By
------------------------------------
Name:
Title:
AMERICAN MEDIA MARKETING, INC.,
By
------------------------------------
Name:
Title:
MARKETING SERVICES, INC.,
By
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee,
By
------------------------------------
Name:
Title:
<PAGE> 125
EXHIBIT D
Form of
Transferee Letter of Representation
American Media Operations, Inc.
c/o The Chase Manhattan Bank
1201 Main Street, 18th Floor
Dallas, Texas 75202
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[ ] principal
amount of the 10 1/4% Senior Subordinated Notes due 2009 (the "Notes") of
American Media Operations, Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such
an institutional "accredited investor" at least $250,000 principal amount of
the Notes, and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the Notes,
and we invest in or purchase securities similar to the Notes in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted
in the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date that is two years after the later of the
date of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
a registration statement that has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under
the Securities Act ("Rule 144A"), to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for
its own account or for the account of a QIB and to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000, or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times
<PAGE> 126
2
within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Notes is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Notes for
investment purposes and not for distribution in violation of the Securities
Act. Each purchaser acknowledges that the Company and the Trustee reserve the
right prior to the offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clause (d), (e) or (f)
above to require the delivery of an opinion of counsel, certifications or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:_______________________,
By:________________________________
<PAGE> 1
Exhibit 4.3
AMERICAN MEDIA OPERATIONS, INC.
$250,000,000
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 7, 1999
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
American Media Operations, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Chase Securities Inc. ("CSI" or the
"INITIAL PURCHASER"), upon the terms and subject to the conditions set forth in
a purchase agreement dated April 30, 1999 (the "PURCHASE AGREEMENT"),
$250,000,000 aggregate principal amount of its 10 1/4% Senior Subordinated
Notes due 2009 (the "SECURITIES") to be jointly and severally guaranteed on a
senior subordinated basis by certain of the Company's subsidiaries signatory
hereto (the "Note Guarantors"). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchaser to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchaser thereunder, the Company and the Note Guarantors agree with
the Initial Purchaser, for the benefit of the holders (including the Initial
Purchaser) of the Securities, the Exchange Securities (as defined herein) and
the Private Exchange Securities (as defined herein) (collectively, the
"HOLDERS"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company and the Note
Guarantors shall (a) prepare and, not later than 105 days following the date of
original issuance of the Securities (the "ISSUE DATE"), file with the
Commission a registration statement (the "EXCHANGE OFFER REGISTRATION
STATEMENT") on an appropriate form under the Securities Act with respect to a
proposed offer to the Holders of the Securities (the "REGISTERED EXCHANGE
OFFER") to issue and deliver to such Holders, in exchange for the Securities, a
like aggregate principal amount of debt securities of the Company (the
"EXCHANGE SECURITIES") that are identical in all material respects to the
Securities, except for the transfer restrictions relating to the Securities,
(b) use their reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act no later than 165 days
after the Issue Date and the Registered Exchange Offer to be consummated no
later than 195 days after the Issue Date and (c) keep the Exchange Offer
Registration Statement effective for not less than 20 business days (or longer,
if required by applicable law) after the date on which notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "EXCHANGE
OFFER REGISTRATION PERIOD"). The Exchange Securities will be issued under the
Indenture or an indenture (the "EXCHANGE SECURITIES INDENTURE") among the
Company, the Note Guarantors and the Trustee or such other bank or trust
company that is reasonably satisfactory to the Initial Purchaser, as trustee
(the "EXCHANGE SECURITIES TRUSTEE"), such indenture to be identical in all
material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer,
it being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as
defined herein) not complying with the requirements of the next sentence, (b)
is not the Initial Purchaser holding Securities that have, or that are
reasonably likely to have, the status of an
<PAGE> 2
2
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Note Guarantors, the
Initial Purchaser and each Exchanging Dealer acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the
Securities Act, each Holder that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making
activities or other trading activities, for Exchange Securities (an "EXCHANGING
DEALER"), is required to deliver a prospectus containing substantially the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received
by such Exchanging Dealer pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange
Offer, any Holder holds any Securities acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment
in an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer, issue and deliver to any such Holder, in exchange
for the Securities held by such Holder (the "PRIVATE EXCHANGE"), a like
aggregate principal amount of debt securities of the Company (the "PRIVATE
EXCHANGE SECURITIES") that are identical in all material respects to the
Exchange Securities, except for the transfer restrictions relating to such
Private Exchange Securities. The Private Exchange Securities will be issued
under the same indenture as the Exchange Securities, and the Company shall use
its reasonable best efforts to cause the Private Exchange Securities to bear
the same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the
Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York;
(d) permit Holders to withdraw tendered Securities at any
time prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(b) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
<PAGE> 3
3
(c) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder,
Exchange Securities or Private Exchange Securities, as the case may
be, equal in principal amount to the Securities of such Holder so
accepted for exchange.
The Company and the Note Guarantors shall use their
reasonable best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the prospectus contained therein in order
to permit such prospectus to be used by all persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as such
persons must comply with such requirements in order to resell the Exchange
Securities; PROVIDED that (a) in the case where such prospectus and any
amendment or supplement thereto must be delivered by an Exchanging Dealer, such
period shall be the lesser of 180 days and the date on which all Exchanging
Dealers have sold all Exchange Securities held by them and (b) the Company
shall make such prospectus and any amendment or supplement thereto available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 180 days after the consummation of the
Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the
case may be, shall provide that the Securities, the Exchange Securities and the
Private Exchange Securities shall vote and consent together on all matters as
one class and that none of the Securities, the Exchange Securities or the
Private Exchange Securities will have the right to vote or consent as a
separate class on any matter.
Interest on each Exchange Security and Private Exchange
Security issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue from the last interest payment date on which interest was
paid on the Securities surrendered in exchange therefor or, if no interest has
been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (a) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(b) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (c) such Holder is not an
affiliate of the Company or, if it is such an affiliate, such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and
the Note Guarantors will ensure that (a) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities
Act and the rules and regulations of the Commission thereunder, (b) any
Exchange Offer Registration Statement and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (c) any prospectus forming part of any
Exchange Offer Registration Statement, and any supplement to such prospectus,
does not, as of the consummation of the Registered Exchange Offer, include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
2. SHELF REGISTRATION. If (a) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (b) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 195 days after
the Issue Date, or (c) the Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered
<PAGE> 4
4
Exchange Offer, or (d) any applicable law or interpretations do not permit any
Holder to participate in the Registered Exchange Offer, or (e) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Securities in exchange for tendered Securities, or (f)
the Company so elects, then the following provisions shall apply:
(a) The Company and the Note Guarantors shall use their
reasonable best efforts to file as promptly as practicable (but in no
event more than 45 days after so required or requested pursuant to
this Section 2) with the Commission, and thereafter shall use their
reasonable best efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities
(as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such
registration statement (hereafter, a "SHELF REGISTRATION STATEMENT"
and, together with any Exchange Offer Registration Statement, a
"REGISTRATION STATEMENT").
(b) The Company and the Note Guarantors shall use their
reasonable best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the prospectus forming part
thereof to be used by Holders of Transfer Restricted Securities for a
period ending on the earlier of (i) two years from the Issue Date or
such shorter period that will terminate when all the Transfer
Restricted Securities covered by the Shelf Registration Statement have
been sold pursuant thereto and (ii) the date on which the Securities
become eligible for resale without volume restrictions pursuant to
Rule 144 under the Securities Act (in any such case, such period being
called the "SHELF REGISTRATION PERIOD"). The Company and the Note
Guarantors shall be deemed not to have used their reasonable best
efforts to keep the Shelf Registration Statement effective during the
requisite period if any of them voluntarily take any action that would
result in Holders of Transfer Restricted Securities covered thereby
not being able to offer and sell such Transfer Restricted Securities
during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company
and the Note Guarantors will ensure that (i) any Shelf Registration
Statement and any amendment thereto and any prospectus forming part
thereof and any supplement thereto complies in all material respects
with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to
information included therein in reliance upon or in conformity with
written information furnished to the Company by or on behalf of any
Holder specifically for use therein (the "HOLDERS' INFORMATION")) does
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such
prospectus (in either case, other than with respect to Holders'
Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company
and the Note Guarantors fail to fulfill their obligations under Section 1 or
Section 2, as applicable, and that it would not be feasible to ascertain the
extent of such damages. Accordingly, if (i) the applicable Registration
Statement is not filed with the Commission on or prior to 105 days after the
Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, is not declared effective within
165 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 60 days after
publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 195 days after the Issue Date,
or (iv) the Shelf Registration Statement is filed and declared effective within
<PAGE> 5
5
165 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 60 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company and the Note Guarantors are
obligated to maintain the effectiveness thereof) without being succeeded within
90 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), the Company and the Note Guarantors will be jointly and severally
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $ 0.192 per week per $1,000 principal amount of Transfer
Restricted Securities held by such Holder until (1) the applicable Registration
Statement is filed, (2) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (3) the Shelf
Registration Statement is declared effective or (4) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease. As
used herein, the term "TRANSFER RESTRICTED SECURITIES" means (i) each Security
until the date on which such Security has been exchanged for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) each
Security or Private Exchange Security until the date on which it has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) each Security or Private
Exchange Security until the date on which it is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act. Notwithstanding anything to the contrary in
this Section 3(a), the Company shall not be required to pay liquidated damages
to a Holder of Transfer Restricted Securities if such Holder failed to comply
with its obligations to make the representations set forth in the second to
last paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent
under the Indenture immediately upon the happening of each and every
Registration Default. The Company and the Note Guarantors shall pay the
liquidated damages due on the Transfer Restricted Securities by depositing with
the Paying Agent (which may not be the Company for these purposes), in trust,
for the benefit of the Holders thereof, prior to 10:00 a.m., New York City
time, on the next interest payment date specified by the Indenture and the
Securities, sums sufficient to pay the liquidated damages then due. The
liquidated damages due shall be payable on each interest payment date specified
by the Indenture and the Securities to the record holder entitled to receive
the interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be
filed, (ii) the Shelf Registration Statement to remain effective or (iii) the
Exchange Offer Registration Statement to be declared effective and the
Registered Exchange Offer to be consummated, in each case to the extent
required by this Agreement.
4. REGISTRATION PROCEDURES. In connection with any
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to the Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and shall use its
reasonable best efforts to reflect in each such document, when so
filed with the Commission, such comments as the Initial Purchaser may
reasonably propose; (ii) include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section
and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a
<PAGE> 6
6
part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by any Initial Purchaser, include the information required
by Items 507 or 508 of Regulation S-K, as applicable, in the
prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise the Initial Purchaser, each
Exchanging Dealer and the Holders (if applicable) and, if requested by
any such person, confirm such advice in writing (which advice pursuant
to clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have
been made):
(i) when any Registration Statement and any
amendment thereto has been filed with the Commission and when
such Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to any Registration Statement or
the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities, the Exchange Securities or
the Private Exchange Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the
prospectus included therein in order that the statements
therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) The Company and the Note Guarantors will make every
reasonable effort to obtain the withdrawal at the earliest possible
time of any order suspending the effectiveness of any Registration
Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if any such
Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale
of the Transfer Restricted Securities covered by such prospectus or
any amendment or supplement thereto.
<PAGE> 7
7
(f) The Company will furnish to the Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules and, if the Initial Purchaser or
Exchanging Dealer or any such Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly
deliver to the Initial Purchaser, each Exchanging Dealer and such
other persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement or
the Shelf Registration Statement and any amendment or supplement
thereto as the Initial Purchaser, such Exchanging Dealer or other
persons may reasonably request; and the Company and the Note
Guarantors consent to the use of such prospectus or any amendment or
supplement thereto by the Initial Purchaser, such Exchanging Dealer or
other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement,
the Company and the Note Guarantors will use their reasonable best
efforts to register or qualify, or cooperate with the Holders of
Securities, Exchange Securities or Private Exchange Securities
included therein and their respective counsel in connection with the
registration or qualification of, such Securities, Exchange Securities
or Private Exchange Securities for offer and sale under the securities
or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the
Securities, Exchange Securities or Private Exchange Securities covered
by such Registration Statement; PROVIDED that the Company and the Note
Guarantors will not be required to qualify generally to do business in
any jurisdiction where they are not then so qualified or to take any
action which would subject them to general service of process or to
taxation in any such jurisdiction where they are not then so subject.
(i) The Company and the Note Guarantors will cooperate with
the Holders of Securities, Exchange Securities or Private Exchange
Securities to facilitate the timely preparation and delivery of
certificates representing Securities, Exchange Securities or Private
Exchange Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing
prior to sales of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company and the Note Guarantors
are required to maintain an effective Registration Statement, the
Company and the Note Guarantors will promptly prepare and file with
the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of
the Securities, Exchange Securities or Private Exchange Securities
from a Holder, the prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for
the Securities, the Exchange Securities and the Private Exchange
Securities, as the case may be, and provide the applicable trustee
with printed certificates for the Securities, the Exchange Securities
or the Private Exchange Securities, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
<PAGE> 8
8
(l) The Company and the Note Guarantors will comply with all
applicable rules and regulations of the Commission and the Company
will make generally available to its security holders as soon as
practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section
11(a) of the Securities Act; PROVIDED that in no event shall such
earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the applicable Registration
Statement, which statement shall cover such 12-month period.
(m) The Company and the Note Guarantors will cause the
Indenture or the Exchange Securities Indenture, as the case may be, to
be qualified under the Trust Indenture Act as required by applicable
law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the
Holder and the distribution of such Transfer Restricted Securities as
the Company may from time to time reasonably require for inclusion in
such Shelf Registration Statement, and the Company may exclude from
such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that,
upon receipt of any notice from the Company pursuant to Section
4(b)(ii) through (v), such Holder will discontinue disposition of such
Transfer Restricted Securities until such Holder's receipt of copies
of the supplemental or amended prospectus contemplated by Section 4(j)
or until advised in writing (the "ADVICE") by the Company that the use
of the applicable prospectus may be resumed. If the Company shall give
any notice under Section 4(b)(ii) through (v) during the period that
the Company is required to maintain an effective Registration
Statement (the "EFFECTIVENESS PERIOD"), such Effectiveness Period
shall be extended by the number of days during such period from and
including the date of the giving of such notice to and including the
date when each seller of Transfer Restricted Securities covered by
such Registration Statement shall have received (i) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (ii) the Advice (if
no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company
and the Note Guarantors shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold or the managing underwriters
(if any) shall reasonably request in order to facilitate any
disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by a representative
of, and Special Counsel (as defined below) acting for, Holders of a
majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "INSPECTOR") in connection
with such Shelf Registration Statement.
<PAGE> 9
9
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to
deliver an opinion relating to the Shelf Registration Statement and
the Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and
deliver all customary documents and certificates requested by Holders
of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold, their
Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter or letters
in customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. REGISTRATION EXPENSES. The Company and the Note Guarantors
will jointly and severally bear all expenses incurred in connection with the
performance of its obligations under Sections 1, 2, 3 and 4 and the Company
will reimburse the Initial Purchaser and the Holders for the reasonable fees
and disbursements of one firm of attorneys (in addition to any local counsel)
chosen by the Holders of a majority in aggregate principal amount of the
Securities, the Exchange Securities and the Private Exchange Securities to be
sold pursuant to each Registration Statement (the "SPECIAL COUNSEL") acting for
the Initial Purchaser or Holders in connection therewith.
6. INDEMNIFICATION. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by the Initial Purchaser or Exchanging Dealer, as
applicable, the Company and the Note Guarantors shall jointly and severally
indemnify and hold harmless each Holder (including, without limitation, the
Initial Purchaser or such Exchanging Dealer), its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6 and
Section 7 as a Holder) from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, without
limitation, any loss, claim, damage, liability or action relating to purchases
and sales of Securities, Exchange Securities or Private Exchange Securities),
to which that Holder may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in any such
Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other expenses reasonably incurred by that Holder
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER,
that the Company and the Note Guarantors shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with any Holders' Information; and PROVIDED, FURTHER, that with
respect to any such untrue statement in or omission from any related
preliminary prospectus, the indemnity agreement contained in this Section 6(a)
shall not inure to the benefit of any Holder from whom the person asserting any
such loss, claim, damage, liability or action received Securities, Exchange
Securities or Private Exchange Securities to the extent that such loss, claim,
damage, liability or action of or with respect to such Holder results from the
fact that both (A) a copy of the final prospectus was not sent or given to such
person at or prior to the written confirmation of the sale of such Securities,
Exchange Securities or Private Exchange Securities to such person and (B) the
untrue statement in or omission from the related preliminary prospectus was
corrected in the final prospectus unless, in either case, such
<PAGE> 10
10
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each
Holder shall indemnify and hold harmless the Company, its affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act (collectively referred to for purposes of this Section
6(b) and Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in any such
Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any Holders'
Information furnished to the Company by such Holder, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER,
that no such Holder shall be liable for any indemnity claims hereunder in
excess of the amount of net proceeds received by such Holder from the sale of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party pursuant to Section 6(a) or 6(b), notify the
indemnifying party in writing of the claim or the commencement of that action;
PROVIDED, HOWEVER, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 6 except to
the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and PROVIDED, FURTHER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 6. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than the reasonable costs of investigation;
PROVIDED, HOWEVER, that an indemnified party shall have the right to employ its
own counsel in any such action, but the fees, expenses and other charges of
such counsel for the indemnified party will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based upon advice of counsel to the indemnified
party) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in
connection with any
<PAGE> 11
11
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate firm
of attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. CONTRIBUTION. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company from the offering and
sale of the Securities, on the one hand, and a Holder with respect to the sale
by such Holder of Securities, Exchange Securities or Private Exchange
Securities, on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Note Guarantors, on the one
hand, and such Holder, on the other, with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Note Guarantors, on the one
hand, and a Holder, on the other, with respect to such offering and such sale
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) received by or on behalf
of the Company as set forth in the table on the cover of the Offering
Memorandum, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Securities, Exchange Securities or Private Exchange
Securities, on the other. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to the Company and the Note Guarantors or information supplied by the
Company and the Note Guarantors, on the one hand, or to any Holders'
Information supplied by such Holder, on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7
were to be determined by PRO RATA allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 7 shall be deemed to include, for purposes of
this Section 7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or preparing to
defend any such action or claim. Notwithstanding the provisions of this Section
7, an indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to
any purchaser exceeds the amount of any damages which such indemnifying party
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
<PAGE> 12
12
8. RULES 144 AND 144A. The Company shall use its reasonable
best efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the written request
of any Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company and the Note Guarantors covenant
that they will take such further action as any Holder of Transfer Restricted
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer
Restricted Securities, the Company and the Note Guarantors shall deliver to
such Holder a written statement as to whether they have complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
9. UNDERWRITTEN REGISTRATIONS. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be
sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will administer the offering will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld or delayed), and such Holders
shall be responsible for all underwriting commissions and discounts in
connection therewith.
No person may participate in any underwritten registration
hereunder unless such person (a) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each
Holder, the address of such Holder maintained by the Registrar under
the Indenture, with a copy in like manner to Chase Securities Inc.;
(ii) if to the Initial Purchaser, initially at its address
set forth in the Purchase Agreement; and
(iii) if to the Company, initially at the address of the
Company set forth in the Purchase Agreement.
<PAGE> 13
13
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the
recipient's telecopier machine, if sent by telecopier.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and its successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) DEFINITION OF TERMS. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth
in Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
(f) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
(h) REMEDIES. In the event of a breach by the Company, any
Note Guarantor or by any Holder of any of their obligations under this
Agreement, each Holder, the Company or any Note Guarantor, as the case may be,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages (other than the recovery of damages for a breach by the
Company or any Note Guarantor of its obligations under Sections 1 or 2 hereof
for which liquidated damages have been paid pursuant to Section 3 hereof), will
be entitled to specific performance of its rights under this Agreement. The
Company, the Note Guarantors and each Holder agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by
each such person of any of the provisions of this Agreement and hereby further
agree that, in the event of any action for specific performance in respect of
such breach, each such person shall waive the defense that a remedy at law
would be adequate.
(i) NO INCONSISTENT AGREEMENTS. The Company and each Note
Guarantor represents, warrants and agrees that (i) it has not entered into,
shall not, on or after the date of this Agreement, enter into any agreement
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii) (with
respect to the Company) without limiting the generality of the foregoing,
without the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(j) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any
of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
<PAGE> 14
14
(k) SEVERABILITY. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
<PAGE> 15
15
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Note Guarantors and the Initial Purchaser.
Very truly yours,
AMERICAN MEDIA OPERATIONS, INC.,
NATIONAL ENQUIRER, INC., STAR
EDITORIAL, INC., SOM PUBLISHING,
INC., WEEKLY WORLD NEWS, INC.,
COUNTRY WEEKLY, INC., DISTRIBUTION
SERVICES, INC., FAIRVIEW PRINTING,
INC., NDSI, INC., HEALTH XTRA,
INC., RETAIL MARKETING NETWORK,
INC., BIOCIDE, INC., AMERICAN MEDIA
MARKETING, INC., and MARKETING
SERVICES, INC.,
By /s/ Peter A. Nelson
---------------------------------
Name: Peter A. Nelson
Title: Executive Vice President
and CFO
Accepted:
CHASE SECURITIES INC.
By /s/ Joe Purcell
------------------------------------
Authorized Signatory
<PAGE> 16
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
<PAGE> 17
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE> 18
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the Expiration
Date, it will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition,
until [ ], 1999, all dealers effecting transactions in the Exchange Securities
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Registered Exchange Offer (including the expenses of
one counsel for the Holders of the Securities) other than commissions or
concessions of any broker-dealers and will indemnify the Holders of the
Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
<PAGE> 19
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF
ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 4.4
CONFORMED COPY
===============================================================================
CREDIT AGREEMENT
dated as of
May 7, 1999
among
AMERICAN MEDIA, INC.,
AMERICAN MEDIA OPERATIONS, INC.,
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
---------------------------
CHASE SECURITIES INC.,
as Arranger
===============================================================================
[CSM Ref. No. 6700-719]
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.......................................... 1
SECTION 1.02. Classification of Loans and Borrowings................. 31
SECTION 1.03. Terms Generally........................................ 31
SECTION 1.04. Accounting Terms; GAAP; Treatment
of Unrestricted Subsidiaries.......................... 32
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments............................................ 33
SECTION 2.02. Loans and Borrowings................................... 33
SECTION 2.03. Requests for Borrowings................................ 34
SECTION 2.04. Swingline Loans........................................ 35
SECTION 2.05. Letters of Credit...................................... 37
SECTION 2.06. Funding of Borrowings ................................. 42
SECTION 2.07. Interest Elections .................................... 43
SECTION 2.08. Termination and Reduction of Commitments .............. 45
SECTION 2.09. Repayment of Loans; Evidence of Debt .................. 45
SECTION 2.10. Amortization of Term Loans ............................ 46
SECTION 2.11. Prepayment of Loans ................................... 48
SECTION 2.12. Fees .................................................. 51
SECTION 2.13. Interest .............................................. 52
SECTION 2.14. Alternate Rate of Interest ............................ 53
SECTION 2.15. Increased Costs ....................................... 54
SECTION 2.16. Break Funding Payments ................................ 55
SECTION 2.17. Taxes ................................................. 56
SECTION 2.18. Payments Generally; Pro Rata Treatment;
Sharing of Setoffs .................................. 58
SECTION 2.19. Mitigation Obligations; Replacement of Lenders ........ 60
i
<PAGE> 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers .................................. 61
SECTION 3.02. Authorization; Enforceability ......................... 61
SECTION 3.03. Governmental Approvals; No Conflicts .................. 62
SECTION 3.04. Financial Condition; No Material Adverse Change....... 62
SECTION 3.05. Properties ............................................ 63
SECTION 3.06. Litigation and Environmental Matters................... 64
SECTION 3.07. Compliance with Laws and Agreements ................... 64
SECTION 3.08. Investment and Holding Company Status ................. 65
SECTION 3.09. Taxes ................................................. 65
SECTION 3.10. ERISA ................................................. 65
SECTION 3.11. Disclosure ............................................ 65
SECTION 3.12. Subsidiaries .......................................... 66
SECTION 3.13. Insurance ............................................. 66
SECTION 3.14. Labor Matters ......................................... 66
SECTION 3.15. Solvency .............................................. 67
SECTION 3.16. Senior Indebtedness ................................... 67
SECTION 3.17. Year 2000 ............................................. 67
SECTION 3.18. Security Documents .................................... 67
SECTION 3.19. Merger ................................................ 69
SECTION 3.20. Capitalization of Holdings ............................ 69
ARTICLE IV
CONDITIONS
SECTION 4.01. Effective Date ........................................ 69
SECTION 4.02. Each Credit Event ..................................... 74
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Financial Statements and Other Information ............ 75
SECTION 5.02. Notices of Material Events ............................ 77
SECTION 5.03. Information Regarding Collateral ...................... 78
SECTION 5.04. Existence; Conduct of Business ........................ 78
SECTION 5.05. Payment of Obligations ................................ 79
SECTION 5.06. Maintenance of Properties ............................. 79
SECTION 5.07. Insurance ............................................. 79
SECTION 5.08. Casualty and Condemnation ............................. 79
ii
<PAGE> 4
SECTION 5.09. Books and Records; Inspection and
Audit Rights ........................................ 80
SECTION 5.10. Compliance with Laws .................................. 80
SECTION 5.11. Use of Proceeds and Letters of Credit ................. 80
SECTION 5.12. Additional Subsidiaries ............................... 80
SECTION 5.13 Further Assurances .................................... 81
SECTION 5.14. Interest Rate Protection .............................. 82
SECTION 5.15. Redemption of Existing Notes .......................... 82
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Indebtedness; Certain Equity Securities ............... 82
SECTION 6.02. Liens ................................................. 84
SECTION 6.03. Fundamental Changes ................................... 85
SECTION 6.04. Investments, Loans, Advances,
Guarantees and Acquisitions .......................... 87
SECTION 6.05 Asset Sales ........................................... 90
SECTION 6.06. Sale and Leaseback Transactions ....................... 90
SECTION 6.07. Hedging Agreements .................................... 91
SECTION 6.08. Restricted Payments; Certain Payments
of Indebtedness ...................................... 91
SECTION 6.09. Transactions with Affiliates .......................... 93
SECTION 6.10. Restrictive Agreements ................................ 93
SECTION 6.11. Amendment of Material Documents ....................... 94
SECTION 6.12. Leverage Ratio ........................................ 94
SECTION 6.13. Senior Leverage Ratio ................................. 95
SECTION 6.14. Consolidated Interest Expense Coverage Ratio .......... 95
SECTION 6.15. Consolidated Fixed Charge Coverage Ratio .............. 96
SECTION 6.16. Capital Expenditures .................................. 97
ARTICLE VII
EVENTS OF DEFAULT ..................................... 97
ARTICLE VIII
THE AGENTS ............................................ 101
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices ............................................... 103
SECTION 9.02. Waivers; Amendments ................................... 104
iii
<PAGE> 5
SECTION 9.03. Expenses; Indemnity; Damage Waiver .................... 106
SECTION 9.04. Successors and Assigns ................................ 108
SECTION 9.05. Survival .............................................. 111
SECTION 9.06. Counterparts; Integration; Effectiveness .............. 112
SECTION 9.07. Severability .......................................... 112
SECTION 9.08. Right of Setoff ....................................... 112
SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process .................................. 113
SECTION 9.10. WAIVER OF JURY TRIAL .................................. 114
SECTION 9.11. Headings .............................................. 114
SECTION 9.12. Confidentiality ....................................... 114
SECTION 9.13. Interest Rate Limitation .............................. 114
SCHEDULES:
Schedule 1.01(a) -- Mortgaged Property
Schedule 2.01 -- Commitments
Schedule 3.05(b) -- Intellectual Property
Schedule 3.05(c) -- Real Property
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 3.18(d) -- Mortgaged Property Filing Offices
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Investments
Schedule 6.10 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Borrower's Counsel
Exhibit B-2 -- Form of Opinion of Local Counsel
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E -- Form of Pledge Agreement
Exhibit F -- Form of Security Agreement
iv
<PAGE> 6
CREDIT AGREEMENT dated as of May 7, 1999,
among AMERICAN MEDIA INC., AMERICAN MEDIA
OPERATIONS, INC., the LENDERS party hereto, and THE
CHASE MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Alternate Base Rate.
"ACQUISITION" means the Merger and the other transactions
contemplated by the Merger Agreement and the other Acquisition Documents.
"ACQUISITION DOCUMENTS" means the Merger Agreement and the
LLC Agreement.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
<PAGE> 7
2
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"APPLICABLE PERCENTAGE" means, with respect to any Revolving
Lender, the percentage of the total Revolving Commitments represented by such
Lender's Revolving Commitment. If the Revolving Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the
Revolving Commitments most recently in effect, giving effect to any
assignments.
"APPLICABLE RATE" means, for any day (a) with respect to any
Tranche B Term Loan, (i) 2.50% per annum, in the case of an ABR Loan, or (ii)
3.50% per annum, in the case of a Eurodollar Loan, and (b) with respect to any
ABR Loan or Eurodollar Loan that is a Revolving Loan or a Tranche A Term Loan
or any ABR Loan that is a Swingline Loan, or with respect to the commitment
fees payable hereunder, as the case may be, the applicable rate per annum set
forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment
Fee Rate", as the case may be, based upon the Leverage Ratio as of the most
recent determination date; PROVIDED that until the date that is six months
after the Effective Date the "Applicable Rate" for purposes of clause (b) shall
be the applicable rate per annum set forth below in Category 1:
<TABLE>
<CAPTION>
ABR Eurodollar Commitment Fee
Leverage Ratio: Spread Spread Rate
--------------- ------ ---------- ---------------
<S> <C> <C> <C>
CATEGORY 1 2.00% 3.00% 0.50%
----------
Greater than or equal to 5.50
to 1.00
- ---------------------------------------------------------------------------------------
CATEGORY 2 1.75% 2.75% 0.50%
----------
Less than 5.50 to 1.00 but
greater than or equal to 5.00
to 1.00
- ---------------------------------------------------------------------------------------
CATEGORY 3 1.50% 2.50% 0.50%
----------
Less than 5.00 to 1.00 but
greater than or equal to 4.50
to 1.00
- ---------------------------------------------------------------------------------------
CATEGORY 4 1.25% 2.25% 0.50%
----------
Less than 4.50 to 1.00 but
greater than or equal to 4.00
to 1.00
- ---------------------------------------------------------------------------------------
CATEGORY 5 1.00% 2.00% 0.375%
----------
Less than 4.00 to 1.00 but
greater than or equal to 3.50
to 1.00
- ---------------------------------------------------------------------------------------
CATEGORY 6 0.75% 1.75% 0.375%
----------
Less than 3.50 to 1.00
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
3
For purposes of the foregoing, (i) the Leverage Ratio shall
be determined as of the end of each fiscal quarter of the Borrower's fiscal
year based upon the Borrower's consolidated financial statements delivered
pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate
resulting from a change in the Leverage Ratio shall be effective during the
period commencing on and including the date of delivery to the Administrative
Agent of such consolidated financial statements indicating such change and
ending on the date immediately preceding the effective date of the next such
change; PROVIDED that the Leverage Ratio shall be deemed to be in Category 1
(A) at any time that an Event of Default has occurred and is continuing or (B)
at the option of the Administrative Agent or at the request of the Required
Lenders if the Borrower fails to deliver the consolidated financial statements
required to be delivered by it pursuant to Section 5.01(a) or (b) during the
period from the expiration of the time for delivery thereof until such
consolidated financial statements are delivered.
"ASSESSMENT RATE" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; PROVIDED that if, as a result of
any change in any law, rule or regulation, it is no longer possible to
determine the Assessment Rate as aforesaid, then the Assessment Rate shall be
such annual rate as shall be determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and
acceptance entered into by a Lender and an assignee (with the consent of any
party whose consent is required by Section 9.04), and accepted by the
Administrative Agent, in the form of Exhibit A or any other form approved by
the Administrative Agent.
"BASE CD RATE" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"BOARD" means the Board of Governors of the Federal Reserve
System of the United States of America.
"BORROWER" means American Media Operations, Inc., a Delaware
corporation.
<PAGE> 9
4
"BORROWING" means (a) Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect, or (b) a Swingline Loan.
"BORROWING REQUEST" means a request by the Borrower for a
Borrowing in accordance with Section 2.03.
"BUSINESS DAY" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are authorized or
required by law to remain closed; PROVIDED that, when used in connection with a
Eurodollar Loan, the term "BUSINESS DAY" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"CAPITAL EXPENDITURES" means, for any period, (a) the
additions to property, plant and equipment and other capital expenditures of
the Borrower and its Restricted Subsidiaries that are (or would be) set forth
in a consolidated statement of cash flows of the Borrower and its Restricted
Subsidiaries for such period prepared in accordance with GAAP and (b) Capital
Lease Obligations incurred by the Borrower and its Restricted Subsidiaries
during such period.
"CAPITAL LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CHANGE IN CONTROL" means:
(a)(i) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person other than Holdings of any
Equity Interest in the Borrower (other than up to 20% of the common
stock of the Borrower held by Persons other than Holdings in
accordance with Section 6.03(e)), (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the board of directors of Holdings (together with any new
directors whose election by such board of directors of Holdings or
whose nomination for election by the stockholders of Holdings was
<PAGE> 10
5
approved by a vote of at least 66-2/3% of the directors of Holdings
then still in office who were either directors at the beginning of
such period or whose nomination for election was previously so
approved) ceasing for any reason to constitute a majority of the board
of directors of Holdings, or (iii) the occurrence of a "Change of
Control", as defined in the Subordinated Debt Documents or the
Holdings Discount Notes Documents;
(b) prior to the first public offering of common Equity
Interests of Holdings, EMP Group L.L.C. ceasing to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of the total
voting power of the voting Equity Interests of Holdings, whether as a
result of issuance of securities of Holdings, any merger,
consolidation, liquidation or dissolution of Holdings, any direct or
indirect transfer of securities by EMP Group L.L.C. or otherwise (for
purposes of this clause (b) and clause (c) below, EMP Group L.L.C.
shall be deemed to beneficially own any voting Equity Interests of an
entity (the "specified entity") held by any other entity (the
"Holdings entity") so long as EMP Group L.L.C. beneficially owns (as
so defined), directly or indirectly, in the aggregate a majority of
the voting power of the voting Equity Interests of the Holdings
entity);
(c)(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than EMP Group L.L.C., being or
becoming the beneficial owner (as defined in clause (b) above, except
that for purposes of this clause (c) such person shall be deemed to
have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
30% of the total voting power of the voting Equity Interests of
Holdings and (ii) EMP Group L.L.C. "beneficially owning" (as defined
in clause (b) above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the voting Equity
Interests of Holdings than such other person and not having the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of
Holdings (for the purposes of this clause (c), such other person shall
<PAGE> 11
6
be deemed to beneficially own any voting Equity Interests of a
specified entity held by a Holdings entity, if such other person is
the beneficial owner (as defined in this clause (c)), directly or
indirectly, of more than 30% of the voting power of the voting Equity
Interests of such Holdings entity and EMP Group L.L.C. "beneficially
owns" (as defined in clause (b) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the voting Equity
Interests of such Holdings entity and does not have the right or
ability by voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such Holdings
entity); or
(d) Evercore no longer having the direct or indirect power to
appoint a majority of the managers of (or other individuals
comprising) the board of managers or other governing body of EMP Group
L.L.C.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.
"CLASS", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans, Tranche A Term Loans, Tranche B Term Loans or Swingline Loans
and, when used in reference to any Commitment, refers to whether such
Commitment is a Revolving Commitment, Tranche A Commitment or Tranche B
Commitment.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL" means any and all "Collateral", as defined in
any applicable Security Document.
"COLLATERAL AGENT" means the "Collateral Agent", as defined
in the Security Agreement.
"COMMITMENT" means a Revolving Commitment, Tranche A
Commitment or Tranche B Commitment, or any combination thereof (as the context
requires).
<PAGE> 12
7
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period (adjusted to exclude any extraordinary losses, charges
or gains and to exclude any gain or loss recognized in connection with the sale
of any assets outside the ordinary course of business), PLUS, without
duplication and to the extent deducted from revenues in determining
Consolidated Net Income, the sum of (a) the aggregate amount of interest
expense for such period, (b) the aggregate amount of income tax expense for
such period, (c) all amounts attributable to depreciation, amortization and
other noncash charges (excluding any such charge that (i) consists of or
requires an accrual of, or cash reserve for, any anticipated cash changes for
any prior or in any future period or (ii) consists of a writedown or writeoff
of any current assets) for such period, including the amortization of debt
discounts and deferred financing charges, all as determined on a consolidated
basis with respect to the Borrower and the Restricted Subsidiaries in
accordance with GAAP, (d) the aggregate amount of management fees paid to
Affiliates of the Borrower in such period pursuant to Section 6.09, (e)
payments made by the Borrower and its Restricted Subsidiaries in such period
pursuant to profit sharing plans; PROVIDED that such payments are discretionary
under the terms of such plans, (f) the aggregate amount, not to exceed
$5,000,000, of nonrecurring charges resulting from severance, restructuring,
corporate relocation expenses and other adjustments made as a result of or in
connection with the Transactions and recognized on or prior to the date that is
18 months subsequent to the Effective Date and (g) any nonrecurring cash
expenses or charges (not exceeding $3,000,000 in the aggregate for such period)
related to any initial public offering, investment, Permitted Acquisition or
Indebtedness, and MINUS the amount of any Restricted Payments made to Holdings
by the Borrower pursuant to Section 6.08(a)(iv) (as such amount may be
supplemented in accordance with Section 6.08(a)(viii)) during such period to
the extent of any losses, charges or expenses that reduced Holdings' net income
(or increased its net loss) during such period. For purposes of calculating
Consolidated EBITDA for any period (each, a "Reference Period") in connection
with a determination of the Leverage Ratio or the Senior Leverage Ratio for
such period, if during such Reference Period (or, in the case of PRO FORMA
calculations, during the period from the last day of such Reference Period to
<PAGE> 13
8
and including the date as of which such calculation is made) the Borrower or
any Restricted Subsidiary shall have made a Material Disposition or Material
Acquisition, Consolidated EBITDA for such Reference Period shall be calculated
after giving PRO FORMA effect thereto as if such Material Disposition or
Material Acquisition occurred on the first day of such Reference Period (with
the Reference Period for the purposes of PRO FORMA calculations being the most
recent period of four consecutive fiscal quarters for which the relevant
financial information is available); PROVIDED that such PRO FORMA calculations
shall give effect to operating expense reductions and other cost savings only
to the extent that such reductions and savings are approved by the
Administrative Agent and realization thereof is reasonably expected by the
Borrower to be achieved within six months after such Material Acquisition or
Material Disposition. As used in this definition, "Material Acquisition" means
any Permitted Acquisition or series of related Permitted Acquisitions that
involves consideration (including any noncash consideration) with a fair market
value in excess of $5,000,000; and "Material Disposition" means any disposition
of property or series of related dispositions of property that involves assets
comprising all or substantially all of an operating unit of a business or
constitutes all or substantially all of the Equity Interests of a Subsidiary.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
of (a) Consolidated Interest Expense for such period, (b) the aggregate amount
of scheduled principal payments of Long-Term Indebtedness made during such
period by the Borrower or any Restricted Subsidiary to any Person other than
the Borrower or any wholly owned Restricted Subsidiary and (c) the aggregate
amount of scheduled principal payments of Long-Term Indebtedness that would
have been required to be made during such period by the Borrower or any
Restricted Subsidiary to the extent any such scheduled payment is not required
to be made by reason of any optional prepayment (other than an optional
prepayment to the extent financed with the proceeds of an incurrence of
Long-Term Indebtedness) made within one year prior to the date such scheduled
principal payment would have been due.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the
sum of (a) interest expense (including the interest component in respect of
Capital Lease Obligations but excluding the amortization of debt discounts,
deferred financing charges and other non-cash interest expenses) of the
Borrower and the Restricted Subsidiaries during such period, determined on a
consolidated basis in accordance with GAAP, and (b) the amount of any
Restricted Payments made by the Borrower to Holdings pursuant to Section
6.08(a)(vii)(B) during such period.
"CONSOLIDATED NET INCOME" means, for any period, net income
or loss of the Borrower and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; PROVIDED that there
shall be excluded (a) the income of any Person in which any other Person (other
<PAGE> 14
9
than the Borrower or any of the Restricted Subsidiaries or any director holding
qualifying shares in compliance with applicable law) has an ownership interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or any of the Restricted Subsidiaries by such Person
during such period, and (b) the income (or loss) of any Person accrued prior to
the date it becomes a Restricted Subsidiary or is merged into or consolidated
with the Borrower or any of the Restricted Subsidiaries or the date that
Person's assets are acquired by the Borrower or any of the Restricted
Subsidiaries.
"CONTROL" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEBT TENDER OFFER" means the tender offer and consent
solicitation made by the Borrower for all the outstanding Existing Notes
pursuant to the Debt Tender Offer Materials and the provisions of the Merger
Agreement.
"DEBT TENDER OFFER MATERIALS" means the offer to purchase
distributed by the Borrower to holders of the Existing Notes with respect to
the Debt Tender Offer, and all related materials similarly distributed in
accordance with this Agreement.
"DEFAULT" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless
cured or waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.
"DISQUALIFIED STOCK" means, with respect to any Person, any
Equity Interest which by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable or exercisable) or upon the
happening of any event:
(a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise;
<PAGE> 15
10
(b) is convertible or exchangeable for Indebtedness or
Disqualified Stock (excluding Equity Interests convertible or
exchangeable solely at the option of Holdings, the Borrower or a
Restricted Subsidiary; PROVIDED that any such conversion or exchange
shall be deemed an issuance of Disqualified Stock, as applicable); or
(c) is redeemable, or subject to mandatory purchase by
Holdings, the Borrower or any Subsidiary, at the option of the holder
thereof, in whole or in part.
"DOLLARS" or "$" refers to lawful money of the United States
of America.
"EFFECTIVE DATE" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).
"ENVIRONMENTAL LAWS" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources or the management, release or threatened release of any Hazardous
Material.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of Holdings, the Borrower or any
Subsidiary directly or indirectly resulting from or based upon (a) violation of
any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
"EQUITY CONTRIBUTION" means the cash equity contribution to
be made by EMP Group L.L.C. to Merger Sub prior to the Merger in an aggregate
amount of not less than $235,000,000.
"EQUITY INTERESTS" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person.
<PAGE> 16
11
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate
of any notice, or the receipt by any Multiemployer Plan from the Borrower or
any ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected to
be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"EURODOLLAR", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing,
are bearing interest at a rate determined by reference to the Adjusted LIBO
Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VII.
"EVERCORE" means Evercore Partners Inc. and any investment
fund Controlled by Evercore Partners Inc.
"EXCESS CASH FLOW" means, for any fiscal year, the sum
(without duplication) of:
<PAGE> 17
12
(a) Consolidated Net Income for such fiscal year, adjusted to
exclude any gains or losses attributable to Prepayment Events; PLUS
(b) depreciation, amortization and other non-cash charges or
losses deducted in determining such Consolidated Net Income for such
fiscal year; PLUS
(c) the sum of (i) the amount, if any, by which Net Working
Capital decreased during such fiscal year plus (ii) the net amount, if
any, by which the long-term consolidated deferred revenues of the
Borrower and its Restricted Subsidiaries increased during such fiscal
year; MINUS
(d) the sum of (i) any noncash gains included in determining
such Consolidated Net Income for such fiscal year plus (ii) the
amount, if any, by which Net Working Capital increased during such
fiscal year plus (iii) the net amount, if any, by which the long-term
consolidated deferred revenues of the Borrower and its Restricted
Subsidiaries decreased during such fiscal year; MINUS
(e) the sum of (i) Capital Expenditures for such fiscal year
(except to the extent attributable to the incurrence of Capital Lease
Obligations or otherwise financed by incurring Long-Term Indebtedness
or attributable to the reinvestment of Net Proceeds of a Prepayment
Event) plus (ii) cash consideration paid during such fiscal year to
make acquisitions or other capital investments (except to the extent
financed by incurring Long-Term Indebtedness or attributable to the
reinvestment of Net Proceeds of a Prepayment Event); MINUS
(f) the aggregate principal amount of Long-Term Indebtedness
repaid or prepaid by the Borrower and its Restricted Subsidiaries
during such fiscal year, excluding (i) Indebtedness in respect of
Swingline Loans, Revolving Loans and Letters of Credit, (ii) Term
Loans prepaid pursuant to Section 2.11(c) or (d) and (iii) repayments
or prepayments of Long-Term Indebtedness financed by incurring other
Long-Term Indebtedness.
"EXCLUDED TAXES" means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income
or franchise taxes imposed on (or measured by) its net income by the United
<PAGE> 18
13
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction described in clause (a) above and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that (i) is in effect and
would apply to amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to any withholding
tax pursuant to Section 2.17(a), or (ii) is attributable to such Foreign
Lender's failure to comply with Section 2.17(e).
"EXISTING CREDIT AGREEMENT" means the Fourth Amended and
Restated Credit Agreement dated as of June 5, 1998, among the Borrower, certain
of its subsidiaries, certain banks from time to time parties thereto and The
Chase Manhattan Bank, as agent.
"EXISTING NOTES" means the 11 5/8% Senior Subordinated Notes
due 2004 of the Borrower.
"EXISTING NOTES INDENTURE" means the Indenture dated as of
November 1, 1994, between the Borrower (f/k/a Enquirer/Star, Inc.) and United
States Trust Company of New York, as trustee, as amended pursuant to the Debt
Tender Offer.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
<PAGE> 19
14
"FINANCING TRANSACTIONS" means (a) the execution, delivery
and performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans, the use of the proceeds thereof and the issuance
of Letters of Credit hereunder and (b) the execution, delivery and performance
by each Loan Party of the Subordinated Debt Documents to which it is to be a
party, the issuance of the Subordinated Debt and the use of the proceeds
thereof.
"FOREIGN LENDER" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"FOREIGN SUBSIDIARY" means any Subsidiary that is organized
under the laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
<PAGE> 20
15
Indebtedness or obligation; PROVIDED that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"GUARANTEE AGREEMENT" means the Guarantee Agreement,
substantially in the form of Exhibit C, among Holdings, the Subsidiary Loan
Parties and the Collateral Agent for the benefit of the Secured Parties.
"HAZARDOUS MATERIALS" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.
"HOLDINGS" means American Media, Inc., a Delaware
corporation.
"HOLDINGS DISCOUNT NOTES" means discount notes of Holdings
(a) that are issued on a single date that is after the Effective Date, (b) with
an initial aggregate accreted value of up to $25,000,000, (c) with respect to
which no cash interest shall be payable until the fifth anniversary of issuance
and cash interest shall be payable semi-annually after such fifth anniversary,
(d) that mature no earlier than the tenth anniversary of issuance and do not
require any amortization or other required redemption or repayment prior to
maturity (other than redemption on the fifth anniversary of issuance of a
portion of such discount notes not exceeding the Holdings Discount Notes
Redemption Amount at a redemption price of 100% of the principal amount so
redeemed), (e) that are not Guaranteed by the Borrower or any Subsidiary, (f)
the Net Proceeds of the issuance of which are contributed as common equity to
the Borrower and (g) that have such other terms and conditions (including with
respect to covenants and events of default) that (i) are customary for
high-yield discount notes issued by holding companies and (ii) are approved by
the Administrative Agent.
"HOLDINGS DISCOUNT NOTES DOCUMENTS" means the indenture under
which the Holdings Discount Notes are issued and all other instruments,
agreements and other documents evidencing or governing the Holdings Discount
Notes or providing for any other right in respect thereof.
<PAGE> 21
16
"HOLDINGS DISCOUNT NOTES REDEMPTION AMOUNT" means the amount
equal to (a)(i) the excess of the aggregate accreted value of Holdings Discount
Notes on the fifth anniversary of the date of their issuance over (ii) the
aggregate accreted value of the Holdings Discount Notes on the date of their
issuance, less (b) an amount equal to simple interest for one year on the
aggregate accreted value of the Holdings Discount Notes on the date of their
issuance at a per annum rate equal to the yield to maturity of such Holdings
Discount Notes.
"INDEBTEDNESS" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others 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 owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrower, the Subsidiary Loan Parties and the
Administrative Agent.
<PAGE> 22
17
"INFORMATION MEMORANDUM" means the Confidential Information
Memorandum dated April 1999 relating to the Borrower and the Transactions.
"INTEREST ELECTION REQUEST" means a request by the Borrower
to convert or continue a Revolving Borrowing or Term Borrowing in accordance
with Section 2.07.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR
Loan (other than a Swingline Loan), the last day of each March, June, September
and December, (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a Eurodollar Borrowing with an Interest Period of more than
three months' duration, each day prior to the last day of such Interest Period
that occurs at intervals of three months' duration after the first day of such
Interest Period, and (c) with respect to any Swingline Loan, the day that such
Loan is required to be repaid.
"INTEREST PERIOD" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two, three
or six months thereafter (or nine or twelve months thereafter if, at the time
of the relevant Borrowing, all Lenders participating therein agree to make
interest periods of such duration available), as the Borrower may elect;
PROVIDED that (a) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period.
For purposes hereof, the date of a Borrowing initially shall be the date on
which such Borrowing is made and thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
"ISSUING BANK" means The Chase Manhattan Bank, in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.05(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.
<PAGE> 23
18
"LC DISBURSEMENT" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any
Revolving Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.
"LENDERS" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance. Unless the context otherwise
requires, the term "Lenders" includes the Swingline Lender.
"LETTER OF CREDIT" means any letter of credit issued pursuant
to this Agreement.
"LEVERAGE RATIO" means, on any date, the ratio of (a) Total
Debt as of such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ended on such date (or, solely for purposes of
determining the Applicable Rate, two times Consolidated EBITDA for the period
of two consecutive fiscal quarters ended on such date), all determined on a
consolidated basis in accordance with GAAP.
"LIBO RATE" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO RATE"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
<PAGE> 24
19
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"LLC AGREEMENT" means the Amended and Restated Limited
Liability Company Agreement and Investors Rights Agreement of EMP Group L.L.C.
dated as of February 16, 1999.
"LOAN DOCUMENTS" means this Agreement, the Guarantee
Agreement, the Indemnity, Subrogation and Contribution Agreement and the
Security Documents.
"LOAN PARTIES" means Holdings, the Borrower and the
Subsidiary Loan Parties.
"LOANS" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"LONG-TERM INDEBTEDNESS" means any Indebtedness that, in
accordance with GAAP, constitutes (or, when incurred, constituted) a long-term
liability.
"MANAGEMENT AGREEMENT" means the Side Letter dated February
16, 1999 among the members of EMP Group L.L.C.
"MARGIN STOCK" shall have the meaning assigned to such term
in Regulation U of the Board.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, assets, operations or condition, financial or otherwise, of
Holdings, the Borrower and the Restricted Subsidiaries taken as a whole, (b)
the ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to the Lenders under any
Loan Document.
<PAGE> 25
20
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Holdings, the Borrower and its Restricted
Subsidiaries in an aggregate principal amount exceeding $5,000,000. For
purposes of determining Material Indebtedness, the "principal amount" of the
obligations of Holdings, the Borrower or any Restricted Subsidiary in respect
of any Hedging Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that Holdings, the Borrower or such
Restricted Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"MERGER" means the merger of Merger Sub with and into
Holdings, with Holdings as the surviving corporation, pursuant to the Merger
Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger,
dated as of February 16, 1999, by and between Holdings and Merger Sub.
"MERGER SUB" means EMP Acquisition Corp., a Delaware
corporation.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means a mortgage, deed of trust, assignment of
leases and rents, leasehold mortgage or other security document granting a Lien
on any Mortgaged Property to secure the Obligations. Each Mortgage shall be
satisfactory in form and substance to the Collateral Agent.
"MORTGAGED PROPERTY" means, initially, each parcel of real
property and the improvements thereto owned by a Loan Party and identified on
Schedule 1.01(a), and includes each other parcel of real property and
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.12 or 5.13.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET PROCEEDS" means, with respect to any event (a) the cash
proceeds received in respect of such event including (i) any cash received in
respect of any non-cash proceeds, but only as and when received, (ii) in the
case of a casualty, insurance proceeds, and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, net of (b) the sum
of (i) all reasonable fees and out-of-pocket expenses paid by Holdings, the
<PAGE> 26
21
Borrower and the Restricted Subsidiaries to third parties (other than
Affiliates) in connection with such event, (ii) in the case of a sale, transfer
or other disposition of an asset (including pursuant to a sale and leaseback
transaction or a casualty or a condemnation or similar proceeding), the amount
of all payments required to be made by Holdings, the Borrower and the
Restricted Subsidiaries as a result of such event to repay Indebtedness (other
than Loans) secured by such asset or otherwise subject to mandatory prepayment
as a result of such event, and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) by Holdings, the Borrower and the
Restricted Subsidiaries, and the amount of any reserves established by
Holdings, the Borrower and the Restricted Subsidiaries to fund contingent
liabilities reasonably estimated to be payable, in each case during the year
that such event occurred or the next succeeding year and that are directly
attributable to such event (as determined reasonably and in good faith by the
chief financial officer of the Borrower).
"NET WORKING CAPITAL" means, at any date, (a) the
consolidated current assets of the Borrower and its consolidated Restricted
Subsidiaries as of such date (excluding cash and Permitted Investments) minus
(b) the consolidated current liabilities of the Borrower and its consolidated
Restricted Subsidiaries as of such date (excluding current liabilities in
respect of Indebtedness). Net Working Capital at any date may be a positive or
negative number. Net Working Capital increases when it becomes more positive or
less negative and decreases when it becomes less positive or more negative.
"OBLIGATIONS" has the meaning assigned to such term in the
Security Agreement.
"OTHER TAXES" means any and all present or future recording,
stamp, documentary, excise, transfer, sales, property or similar taxes, charges
or levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor entity performing similar
functions.
"PERFECTION CERTIFICATE" means a certificate in the form of
Annex II to the Security Agreement or any other form approved by the Collateral
Agent.
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22
"PERMITTED ACQUISITION" means any acquisition by the Borrower
or any Restricted Subsidiary of all or substantially all the assets of, or all
the Equity Interests in, a Person or division or line of business of a Person
if, immediately after giving effect thereto, (a) no Default has occurred and is
continuing or would result therefrom, (b) the principal business of such Person
shall be reasonably related, ancillary or complementary, to a business in which
the Borrower and its Restricted Subsidiaries were engaged on the Effective
Date, (c) each Subsidiary formed for the purpose of or resulting from such
acquisition shall be a Restricted Subsidiary and all of the Equity Interests of
each such Subsidiary shall be owned directly by the Borrower or a Restricted
Subsidiary of the Borrower and all actions required to be taken with respect to
such acquired or newly formed Subsidiary under Sections 5.12 and 5.13 have been
taken, (d) the Borrower and its Restricted Subsidiaries are in compliance, on a
PRO FORMA basis after giving effect to such acquisition (and any operating
expense reductions related thereto that would be permitted to be deducted in
any calculation of Consolidated EBITDA in accordance with the definition of
such term contained herein), with the covenants contained in Sections 6.12,
6.13, 6.14 and 6.15 (based on the required compliance level for September 27,
1999, in the case of an acquisition made prior to such date) recomputed as at
the last day of the most recently ended fiscal quarter of the Borrower for
which financial statements are available, as if such acquisition had occurred
on the first day of each relevant period for testing such compliance and (e)
the Borrower has delivered to the Administrative Agent an officers' certificate
to the effect set forth in clauses (a), (b), (c) and (d) above, together with
all relevant financial information for the Person or assets to be acquired and
reasonably detailed calculations demonstrating satisfaction of the requirement
set forth in clause (d) above.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes that are not yet due or
are being contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.05;
<PAGE> 28
23
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business
of the Borrower or any Subsidiary;
PROVIDED that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of
and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the
date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date
of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic
office of any commercial bank organized under the laws of the United
States of America or any State thereof which has a combined capital
and surplus and undivided profits of not less than $500,000,000; and
<PAGE> 29
24
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"PERSON" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"PLEDGE AGREEMENT" means the Pledge Agreement among the Loan
Parties and the Collateral Agent for the benefit of the Secured Parties,
substantially in the form of Exhibit E.
"PREPAYMENT EVENT" means:
(a) any sale, transfer or other disposition (including
pursuant to a sale and leaseback transaction) of any property or asset
of the Borrower or any Restricted Subsidiary, other than (i)
dispositions described in clauses (a) and (b) of Section 6.05 and (ii)
any other disposition (or series of related dispositions) as to which
the Net Proceeds do not exceed $100,000; or
(b) any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of the Borrower or any Restricted
Subsidiary, but only to the extent that the Net Proceeds therefrom
have not been applied to repair, restore or replace such property or
asset within 360 days after such event; or
(c) the issuance by Holdings, the Borrower or any Restricted
Subsidiary of any Equity Interests, or the receipt by Holdings, the
Borrower or any Restricted Subsidiary of any capital contribution,
other than (i) any such issuance of Equity Interests to, or receipt of
any such capital contribution from, Holdings, the Borrower or a
Restricted Subsidiary or (ii) any such issuance of Equity Interests by
Holdings in a private placement; or
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25
(d) the incurrence by Holdings, the Borrower or any
Restricted Subsidiary of any Indebtedness, other than Indebtedness
permitted by Section 6.01.
"PRIME RATE" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly
announced as being effective.
"REGISTER" has the meaning set forth in Section 9.04.
"RELATED FUND" means, with respect to any Lender that is a
fund that invests in bank loans in the ordinary course of business, any other
fund that invests in bank loans in the ordinary course of business and is
advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"RELATED PARTIES" means, with respect to any specified
Person, such Person's Affiliates and the respective directors, officers,
employees, trustees, agents and advisors of such Person and such Person's
Affiliates.
"REQUIRED LENDERS" means, at any time, Lenders having
Revolving Exposures, Term Loans and unused Commitments representing more than
50% of the sum of the total Revolving Exposures, outstanding Term Loans and
unused Commitments at such time.
"RESTRICTED PAYMENT" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in Holdings, the Borrower or any Restricted Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any Subordinated Debt or any Equity
Interests in Holdings, the Borrower or any Restricted Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in Holdings, the
Borrower or any Restricted Subsidiary.
"RESTRICTED SUBSIDIARY" means any Subsidiary that is not an
Unrestricted Subsidiary.
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"REVOLVING AVAILABILITY PERIOD" means the period from and
including the Effective Date to but excluding the earlier of the Revolving
Maturity Date and the date of termination of the Revolving Commitments.
"REVOLVING COMMITMENT" means, with respect to each Lender,
the commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit and Swingline Loans hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender's Revolving
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Revolving Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Revolving Commitment, as applicable. The initial aggregate
amount of the Lenders' Revolving Commitments is $60,000,000.
"REVOLVING EXPOSURE" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure and Swingline Exposure at such time.
"REVOLVING LENDER" means a Lender with a Revolving Commitment
or, if the Revolving Commitments have terminated or expired, a Lender with
Revolving Exposure.
"REVOLVING LOAN" means a Loan made pursuant to clause (c) of
Section 2.01.
"REVOLVING MATURITY DATE" means April 1, 2006.
"S&P" means Standard & Poor's.
"SECURED PARTIES" has the meaning assigned to such term in
the Security Agreement.
"SECURITY AGREEMENT" means the Security Agreement,
substantially in the form of Exhibit F, among the Borrower, Holdings, the
Subsidiary Loan Parties and the Collateral Agent for the benefit of the Secured
Parties.
"SECURITY DOCUMENTS" means the Security Agreement, the Pledge
Agreement, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 to secure
any of the Obligations.
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"SENIOR LEVERAGE RATIO" means, on any date, the ratio of (a)
Total Senior Debt as of such date to (b) Consolidated EBITDA for the period of
four consecutive fiscal quarters ended on such date, all determined on a
consolidated basis in accordance with GAAP.
"STATUTORY RESERVE RATE" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal
to three months and (b) with respect to the Adjusted LIBO Rate, for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"SUBORDINATED DEBT" means the Senior Subordinated Notes due
2009 to be issued by the Borrower on or prior to the Effective Date in the
aggregate principal amount of $250,000,000 and the Indebtedness represented
thereby.
"SUBORDINATED DEBT DOCUMENTS" means the indenture under which
the Subordinated Debt is issued and all other instruments, agreements and other
documents evidencing or governing the Subordinated Debt or providing for any
Guarantee or other right in respect thereof.
"SUBSIDIARY" means, with respect to any Person (the "PARENT")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
<PAGE> 33
28
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent.
"SUBSIDIARY" means any subsidiary of the Borrower.
"SUBSIDIARY LOAN PARTY" means any Restricted Subsidiary that
is not a Foreign Subsidiary.
"SWINGLINE EXPOSURE" means, at any time, the aggregate
principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be its Applicable Percentage of the
total Swingline Exposure at such time.
"SWINGLINE LENDER" means The Chase Manhattan Bank, in its
capacity as lender of Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to Section 2.04.
"TAXES" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"TERM LOANS" means Tranche A Term Loans and Tranche B Term
Loans.
"THREE-MONTH SECONDARY CD RATE" means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day) or, if such rate is not
so reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day is not a Business Day, on the next
preceding Business Day) by the Administrative Agent from three negotiable
certificate of deposit dealers of recognized standing selected by it.
"TOTAL ASSETS" means, as of any date of determination, the
total consolidated assets of the Borrower and the Restricted Subsidiaries as of
the end of the most recent fiscal quarter for which financial statements have
been delivered pursuant to clause (a) or (b) of Section 5.01, determined on a
consolidated basis in accordance with GAAP.
<PAGE> 34
29
"TOTAL DEBT" means, as of any date of determination, the
aggregate principal amount of Indebtedness (excluding Indebtedness consisting
of contingent liabilities in respect of undrawn letters of credit) of the
Borrower and the Restricted Subsidiaries outstanding as of such date,
determined on a consolidated basis in accordance with GAAP.
"TOTAL SENIOR DEBT" means, as of any date of determination,
(a) Total Debt as of such date minus (b) the portion of Total Debt as of such
date represented by the Subordinated Debt and Existing Notes.
"TRANCHE A COMMITMENT" means, with respect to each Lender,
the commitment, if any, of such Lender to make a Tranche A Term Loan hereunder
on the Effective Date, expressed as an amount representing the maximum
principal amount of the Tranche A Term Loan to be made by such Lender
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Tranche A Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Tranche A Commitment, as applicable. The initial aggregate amount of the
Lenders' Tranche A Commitments is $100,000,000.
"TRANCHE A LENDER" means a Lender with a Tranche A Commitment
or an outstanding Tranche A Term Loan.
"TRANCHE A MATURITY DATE" means April 1, 2006.
"TRANCHE A TERM LOAN" means a Loan made pursuant to clause
(a) of Section 2.01.
"TRANCHE B COMMITMENT" means, with respect to each Lender,
the commitment, if any, of such Lender to make a Tranche B Term Loan hereunder
on the Effective Date, expressed as an amount representing the maximum
principal amount of the Tranche B Term Loan to be made by such Lender
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Tranche B Commitment is set forth on Schedule 2.01, or in the
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30
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Tranche A Commitment, as applicable. The initial aggregate amount of the
Lenders' Tranche B Commitments is $240,000,000.
"TRANCHE B LENDER" means a Lender with a Tranche B Commitment
or an outstanding Tranche B Term Loan.
"TRANCHE B MATURITY DATE" means April 1, 2007.
"TRANCHE B TERM LOAN" means a Loan made pursuant to clause
(b) of Section 2.01.
"TRANSACTION COSTS" means any amounts paid or payable by
Holdings or the Borrower in respect of financing fees, investment banking and
consulting fees, accounting and legal fees, printing costs and any similar fees
and expenses, in each case incurred in connection with the Transactions.
"TRANSACTIONS" means the Acquisition, the Debt Tender Offer
and the Financing Transactions.
"TYPE", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of the
Borrower that shall have been designated an Unrestricted Subsidiary by the
Borrower in the manner provided below and (b) any Subsidiary of an Unrestricted
Subsidiary. The Borrower may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if (i)
neither such Subsidiary nor any of its Subsidiaries owns any Equity Interests
or Indebtedness of, or holds any Lien on any property of, Holdings, the
Borrower or any other Restricted Subsidiary, (ii) after giving effect to such
designation, the Borrower shall be in compliance with clause (d) of Section
6.04 (it being understood that, for purposes of determining such compliance,
all investments made by Loan Parties in, loans or advances made by Loan Parties
to and Guarantees made by Loan Parties of Indebtedness of any Subsidiary so
designated, shall be deemed to be investments, loans, advances and Guarantees
in, to or on behalf of an Unrestricted Subsidiary), (iii) after giving effect
to such designation, the Borrower and the Restricted Subsidiaries shall be in
compliance on a PRO FORMA basis with the covenants contained in Sections 6.12,
6.13, 6.14, 6.15 and 6.16 recomputed as at the last day of the most recently
<PAGE> 36
31
completed fiscal quarter of the Borrower for which financial statements are
available, as if such designation had occurred on the first day of each
relevant period for testing such compliance and (iv) no Default shall have
occurred and be continuing or would result therefrom. The Borrower may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary if (i) no
Default shall have occurred and be continuing or would result therefrom and
(ii) after giving effect to such designation, the Borrower and the Restricted
Subsidiaries are in compliance on a PRO FORMA basis with the covenants
contained in Sections 6.12, 6.13, 6.14, 6.15 and 6.16 recomputed as at the last
day of the most recently completed fiscal quarter of the Borrower for which
financial statements are available, as if such designation had occurred on the
first day of each relevant period for testing such compliance. The Borrower
shall promptly notify the Administrative Agent in writing of any such
designation (and the Administrative Agent shall notify the Lenders) and shall
deliver to the Administrative Agent a certificate signed by a Financial Officer
of the Borrower certifying that such designation complied with the foregoing
provisions together with reasonably detailed calculations demonstrating
satisfaction of the requirement set forth in clause (iii) of the second
sentence of this definition or in clause (ii) of the third sentence of this
definition, as applicable.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For
purposes of this Agreement, Loans may be classified and referred to by Class
(E.G., a "Revolving Loan") or by Type (E.G., a "Eurodollar Loan") or by Class
and Type (E.G., a "Eurodollar Revolving Loan"). Borrowings also may be
classified and referred to by Class (E.G., a "Revolving Borrowing") or by Type
(E.G., a "Eurodollar Borrowing") or by Class and Type (E.G., a "Eurodollar
Revolving Borrowing").
SECTION 1.03. TERMS GENERALLY. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
<PAGE> 37
32
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.04. ACCOUNTING TERMS; GAAP; TREATMENT OF
UNRESTRICTED SUBSIDIARIES. (a) Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time; PROVIDED that, if the Borrower
notifies the Administrative Agent that the Borrower requests an amendment to
any provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Borrower that the
Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
(b) Except as otherwise expressly provided herein, all
accounting and financial calculations and determinations hereunder shall be
made without consolidating the accounts of Unrestricted Subsidiaries with those
of the Borrower or any Restricted Subsidiary, notwithstanding that such
treatment is inconsistent with GAAP.
<PAGE> 38
33
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. Subject to the terms and
conditions set forth herein, each Lender agrees (a) to make a Tranche A Term
Loan to the Borrower on the Effective Date in a principal amount not exceeding
its Tranche A Commitment, (b) to make a Tranche B Term Loan to the Borrower on
the Effective Date in a principal amount not exceeding its Tranche B Commitment
and (c) to make Revolving Loans to the Borrower from time to time during the
Revolving Availability Period in an aggregate principal amount that will not
result in such Lender's Revolving Exposure exceeding such Lender's Revolving
Commitment. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
Amounts repaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. LOANS AND BORROWINGS. (a) Each Loan (other than
a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of
the same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; PROVIDED that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing and
Term Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as
the Borrower may request in accordance herewith; PROVIDED that all Borrowings
made on the Effective Date must be made as ABR Borrowings. Each Swingline Loan
shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; PROVIDED that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $10,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $100,000 and not less than $1,000,000;
PROVIDED that an ABR Revolving Borrowing may be in an aggregate amount that is
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34
equal to the entire unused balance of the total Revolving Commitments or that
is required to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.05(e). Each Swingline Loan shall be in an amount that is not less
than $100,000. Borrowings of more than one Type and Class may be outstanding at
the same time; PROVIDED that there shall not at any time be more than a total
of ten Eurodollar Borrowings of any Class outstanding.
(d) Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Revolving Maturity Date, Tranche A Maturity Date or Tranche
B Maturity Date, as applicable.
SECTION 2.03. REQUESTS FOR BORROWINGS. To request a Revolving
Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 11:00 a.m., New York City time, three Business Days before the date
of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later
than 11:00 a.m., New York City time, one Business Day before the date of the
proposed Borrowing; PROVIDED that any such notice of an ABR Revolving Borrowing
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e) may be given not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving
Borrowing, Tranche A Term Borrowing or Tranche B Term Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business
Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
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35
(vi) the location and number of the Borrower's account to
which funds are to be disbursed, which shall comply with the
requirements of Section 2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Revolving Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. SWINGLINE LOANS. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Revolving Availability
Period, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans
exceeding $5,000,000 or (ii) the sum of the total Revolving Exposures exceeding
the total Revolving Commitments; PROVIDED that the Swingline Lender shall not
be required to make a Swingline Loan to refinance an outstanding Swingline
Loan. Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify
the Administrative Agent of such request by telephone (confirmed by telecopy),
not later than 12:00 noon, New York City time, on the day of a proposed
Swingline Loan. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. The Administrative Agent will promptly advise the Swingline
Lender of any such notice received from the Borrower. The Swingline Lender
shall make each Swingline Loan available to the Borrower by means of a credit
to the general deposit account of the Borrower with the Swingline Lender (or,
in the case of a Swingline Loan made to finance the reimbursement of an LC
Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank)
by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.
<PAGE> 41
36
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 12:00 noon, New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Revolving Lender,
specifying in such notice such Lender's Applicable Percentage of such Swingline
Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to the Administrative
Agent, for the account of the Swingline Lender, such Lender's Applicable
Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges
and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Revolving Lender shall comply with its obligation
under this paragraph by wire transfer of immediately available funds, in the
same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, MUTATIS MUTANDIS, to the payment
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Revolving Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Revolving
Lenders that shall have made their payments pursuant to this paragraph and to
the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof. Notwithstanding the
foregoing, a Revolving Lender shall not have any obligation to acquire a
participation in a Swingline Loan pursuant to this paragraph if an Event of
Default shall have occurred and be continuing at the time such Swingline Loan
<PAGE> 42
37
was made and such Lender shall have notified the Swingline Lender in writing,
at least one Business Day prior to the time such Swingline Loan was made, that
such Event of Default has occurred and that such Lender will not acquire
participations in Swingline Loans made while such Event of Default is
continuing.
SECTION 2.05. LETTERS OF CREDIT. (a) GENERAL. Subject to the
terms and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION;
CERTAIN CONDITIONS. To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance
of the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
of this Section), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the Borrower also shall submit a letter of credit application on
the Issuing Bank's standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if (and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that), after giving
effect to such issuance, amendment, renewal or extension (i) the LC Exposure
shall not exceed $5,000,000 and (ii) the total Revolving Exposures shall not
exceed the total Revolving Commitments.
<PAGE> 43
38
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Revolving Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees
to pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if the Borrower shall have received notice
of such LC Disbursement prior to 10:00 a.m., New York City time, on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 12:00 noon, New York City time, on the Business
Day immediately following the day that the Borrower receives such notice;
PROVIDED that the Borrower may, subject to the conditions to borrowing set
forth herein, request in accordance with Section 2.03 or 2.04 that such payment
be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent
<PAGE> 44
39
amount and, to the extent so financed, the Borrower's obligation to make such
payment shall be discharged and replaced by the resulting ABR Revolving
Borrowing or Swingline Loan. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Revolving Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender's Applicable Percentage thereof. Promptly following
receipt of such notice, each Revolving Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, MUTATIS mutandis, to the payment
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders. Promptly following receipt by the Administrative Agent of
any payment from the Borrower pursuant to this paragraph, the Administrative
Agent shall distribute such payment to the Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this paragraph to reimburse
the Issuing Bank, then to such Lenders and the Issuing Bank as their interests
may appear. Any payment made by a Revolving Lender pursuant to this paragraph
to reimburse the Issuing Bank for any LC Disbursement (other than the funding
of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not
constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.
(f) OBLIGATIONS ABSOLUTE. The Borrower's obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of
any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower's obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank,
nor any of their Related Parties, shall have any liability or responsibility by
<PAGE> 45
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reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; PROVIDED that the foregoing shall not be
construed to excuse the Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Bank's
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or wilful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; PROVIDED that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such
LC Disbursement.
(h) INTERIM INTEREST. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
<PAGE> 46
41
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
PROVIDED that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) REPLACEMENT OF THE ISSUING BANK. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank.
The Administrative Agent shall notify the Lenders of any such replacement of
the Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.12(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the
term "Issuing Bank" shall be deemed to refer to such successor or to any
previous Issuing Bank, or to such successor and all previous Issuing Banks, as
the context shall require. After the replacement of an Issuing Bank hereunder,
the replaced Issuing Bank shall remain a party hereto and shall continue to
have all the rights and obligations of an Issuing Bank under this Agreement
with respect to Letters of Credit issued by it prior to such replacement, but
shall not be required to issue additional Letters of Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Revolving Lenders with LC Exposure representing
greater than 50% of the total LC Exposure) demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account
with the Administrative Agent, in the name of the Administrative Agent and for
the benefit of the Lenders, an amount in cash equal to the LC Exposure as of
such date plus any accrued and unpaid interest thereon; PROVIDED that the
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obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. Each
such deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrower under this
Agreement. The Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the Administrative Agent and at the
Borrower's risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys
in such account shall be applied by the Administrative Agent to reimburse the
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated (but subject to the consent
of Revolving Lenders with LC Exposure representing greater than 50% of the
total LC Exposure), be applied to satisfy other obligations of the Borrower
under this Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived.
SECTION 2.06. FUNDING OF BORROWINGS. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; PROVIDED that Swingline Loans shall be made
as provided in Section 2.04. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request; PROVIDED that ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's share
<PAGE> 48
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of such Borrowing, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with paragraph (a) of this
Section and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. INTEREST ELECTIONS. (a) Each Revolving
Borrowing and Term Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different
Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing,
may elect Interest Periods therefor, all as provided in this Section. The
Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing. This
Section shall not apply to Swingline Borrowings, which may not be converted or
continued.
(b) To make an election pursuant to this Section, the
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Interest Election Request in a form approved by the Administrative
Agent and signed by the Borrower.
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(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after giving effect to
such election, which shall be a period contemplated by the definition
of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Borrower, then,
so long as an Event of Default is continuing (i) no outstanding Borrowing may
be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid,
each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of
the Interest Period applicable thereto.
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SECTION 2.08. TERMINATION AND REDUCTION OF COMMITMENTS. (a)
Unless previously terminated, (i) the Tranche A Commitments and Tranche B
Commitments shall terminate at 5:00 p.m., New York City time, on the Effective
Date and (ii) the Revolving Commitments shall terminate on the Revolving
Maturity Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments of any Class; PROVIDED that (i) each reduction of
the Commitments of any Class shall be in an amount that is an integral multiple
of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not
terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.11,
the sum of the Revolving Exposures would exceed the total Revolving
Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; PROVIDED that a notice
of termination of the Revolving Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice
to the Administrative Agent on or prior to the specified effective date) if
such condition is not satisfied. Any termination or reduction of the
Commitments of any Class shall be permanent. Each reduction of the Commitments
of any Class shall be made ratably among the Lenders in accordance with their
respective Commitments of such Class.
SECTION 2.09. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Term Loan of such Lender as provided in Section 2.10 and (iii)
to the Swingline Lender the then unpaid principal amount of each Swingline Loan
<PAGE> 51
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on the Revolving Maturity Date; PROVIDED that on each date that a Revolving
Borrowing is made, the Borrower shall repay all Swingline Loans that were
outstanding on the date such Borrowing was requested.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it
be evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).
SECTION 2.10. AMORTIZATION OF TERM LOANS. (a) Subject to
adjustment pursuant to paragraph (d) of this Section, the Borrower shall repay
Tranche A Term Borrowings on each date set forth below in the aggregate
principal amount set forth opposite such date:
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DATE AMOUNT
---- ------
July 1, 2001 $ 2,500,000
October 1, 2001 $ 2,500,000
January 2, 2002 $ 2,500,000
April 1, 2002 $ 2,500,000
July 1, 2002 $ 3,750,000
October 1, 2002 $ 3,750,000
January 2, 2003 $ 3,750,000
April 1, 2003 $ 3,750,000
July 1, 2003 $ 5,000,000
October 1, 2003 $ 5,000,000
January 2, 2004 $ 5,000,000
April 1, 2004 $ 5,000,000
July 1, 2004 $6,250,000
October 1, 2004 $6,250,000
January 2, 2005 $6,250,000
April 1, 2005 $6,250,000
July 1, 2005 $7,500,000
October 1, 2005 $7,500,000
January 2, 2006 $7,500,000
April 1, 2006 $7,500,000
(b) Subject to adjustment pursuant to paragraph (d) of this
Section, the Borrower shall repay Tranche B Term Borrowings on each date set
forth below in the aggregate principal amount set forth opposite such date:
DATE AMOUNT
---- ------
July 1, 2001 $ 600,000
October 1, 2001 $ 600,000
January 2, 2002 $ 600,000
April 1, 2002 $ 600,000
July 1, 2002 $ 600,000
October 1, 2002 $ 600,000
January 2, 2003 $ 600,000
April 1, 2003 $ 600,000
July 1, 2003 $ 600,000
October 1, 2003 $ 600,000
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January 2, 2004 $ 600,000
April 1, 2004 $ 600,000
July 1, 2004 $ 600,000
October 1, 2004 $ 600,000
January 2, 2005 $ 600,000
April 1, 2005 $ 600,000
July 1, 2005 $ 600,000
October 1, 2005 $ 600,000
January 2, 2006 $ 600,000
April 1, 2006 $ 600,000
July 1, 2006 $57,000,000
October 1, 2006 $57,000,000
January 2, 2007 $57,000,000
April 1, 2007 $57,000,000
(c) To the extent not previously paid, (i) all Tranche A Term
Loans shall be due and payable on the Tranche A Maturity Date and (ii) all
Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date.
(d) Any prepayment of a Term Borrowing of either Class shall
be applied to reduce the subsequent scheduled repayments of the Term Borrowings
of such Class to be made pursuant to this Section ratably. If the initial
aggregate amount of the Lenders' Term Commitments of either Class exceeds the
aggregate principal amount of Term Loans of such Class that are made on the
Effective Date, then the scheduled repayments of Term Borrowings of such Class
to be made pursuant to this Section shall be reduced ratably by an aggregate
amount equal to such excess.
(e) Prior to any repayment of any Term Borrowings of either
Class hereunder, the Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall notify the Administrative Agent by
telephone (confirmed by telecopy) of such selection not later than 11:00 a.m.,
New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Borrowing shall be applied ratably to the Loans
included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
SECTION 2.11. PREPAYMENT OF LOANS. (a) The Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to the requirements of this Section.
(b) In the event and on such occasion that the sum of the
Revolving Exposures exceeds the total Revolving Commitments, the Borrower shall
prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings
are outstanding, deposit cash collateral in an account with the Administrative
Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.
<PAGE> 54
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(c) In the event and on each occasion that any Net Proceeds
are received by or on behalf of Holdings, the Borrower or any Restricted
Subsidiary in respect of any Prepayment Event, the Borrower shall, within five
Business Days after such Net Proceeds are received, prepay Term Borrowings in
an aggregate amount equal to such Net Proceeds (or, in the case of an event
described in clause (c) of the definition of the term Prepayment Event, 50% of
such Net Proceeds); PROVIDED that, in the case of any event described in clause
(a) of the definition of the term Prepayment Event, if the Borrower shall
deliver to the Administrative Agent a certificate of a Financial Officer to the
effect that the Borrower and the Restricted Subsidiaries intend to apply the
Net Proceeds from such event (or a portion thereof specified in such
certificate), within 360 days after receipt of such Net Proceeds, (i) to
acquire assets (including by making a Permitted Acquisition) productive in the
Borrower's line of business as conducted on the Effective Date, or ancillary or
complementary thereto, or (ii) to the extent such Prepayment Event arises from
the sale, transfer or disposition of any investment in an Unrestricted
Subsidiary, to make investments in one or more other Unrestricted Subsidiaries,
and, in each case, certifying that no Default has occurred and is continuing,
then no prepayment shall be required pursuant to this paragraph in respect of
the Net Proceeds in respect of such event (or the portion of such Net Proceeds
specified in such certificate, if applicable) except to the extent of any such
Net Proceeds therefrom that have not been so applied by the end of such 360-day
period, at which time a prepayment shall be required in an amount equal to such
Net Proceeds that have not been so applied.
(d) Following the end of each fiscal year of the Borrower,
commencing with the fiscal year ending March 26, 2001, the Borrower shall
prepay Term Borrowings in an aggregate amount equal to 50% of Excess Cash Flow
for such fiscal year. Each prepayment pursuant to this paragraph shall be made
on or before the date on which financial statements are delivered pursuant to
Section 5.01 with respect to the fiscal year for which Excess Cash Flow is
being calculated (and in any event within 90 days after the end of such fiscal
year).
(e) Prior to any optional or mandatory prepayment of
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (f) of this Section. In the event of any optional or
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mandatory prepayment of Term Borrowings made at a time when Term Borrowings of
both Classes remain outstanding, the Borrower shall select Term Borrowings to
be prepaid so that the aggregate amount of such prepayment is allocated between
the Tranche A Term Borrowings and Tranche B Term Borrowings pro rata based on
the aggregate principal amount of outstanding Borrowings of each such Class;
PROVIDED that any Tranche B Lender may elect, by notice to the Administrative
Agent by telephone (confirmed by telecopy) by 12:00 noon, New York City time,
at least two Business Days prior to the prepayment date, to decline all or any
portion of any mandatory prepayment of its Tranche B Term Loans pursuant to
this Section, in which case the aggregate amount of the prepayment that would
have been applied to prepay Tranche B Term Loans but was so declined shall be
applied to prepay Tranche A Term Borrowings.
(f) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of any Borrowing (other than a Swingline Loan or an optional
prepayment of an ABR Borrowing), not later than 11:00 a.m., New York City time,
three Business Days before the date of prepayment, (ii) in the case of an
optional prepayment of an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment or (iii) in the case
of prepayment of a Swingline Loan, not later than 12:00 noon, New York City
time, on the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date, the principal amount of each Borrowing or
portion thereof to be prepaid and, in the case of a mandatory prepayment, a
reasonably detailed calculation of the amount of such prepayment; PROVIDED
that, if a notice of optional prepayment is given in connection with a
conditional notice of termination of the Revolving Commitments as contemplated
by Section 2.08, then such notice of prepayment may be revoked if such notice
of termination is revoked in accordance with Section 2.08. Promptly following
receipt of any such notice (other than a notice relating solely to Swingline
Loans), the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02, except as necessary to apply fully the required
amount of a mandatory prepayment. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section
2.13.
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SECTION 2.12. FEES. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Lender a commitment fee,
which shall accrue at the Applicable Rate on the average daily unused amount of
the Revolving Commitment of such Lender during the period from and including
the Effective Date to but excluding the date on which such Revolving Commitment
terminates. Accrued commitment fees shall be payable in arrears on the last day
of March, June, September and December of each year and on the date on which
the Revolving Commitments terminate, commencing on the first such date to occur
after the date hereof. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of computing
commitment fees with respect to Revolving Commitments, a Revolving Commitment
of a Lender shall be deemed to be used to the extent of the outstanding
Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of
such Lender shall be disregarded for such purpose).
(b) The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Revolving Lender a participation fee with respect
to its participations in Letters of Credit, which shall accrue at the same
Applicable Rate as interest on Eurodollar Revolving Loans on the average daily
amount of such Lender's LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to
have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall
accrue at the rate of 0.25% per annum on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.
Participation fees and fronting fees accrued through and including the last day
of March, June, September and December of each year shall be payable on the
third Business Day following such last day, commencing on the first such date
to occur after the Effective Date; PROVIDED that all such fees shall be payable
<PAGE> 57
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on the date on which the Revolving Commitments terminate and any such fees
accruing after the date on which the Revolving Commitments terminate shall be
payable on demand. Any other fees payable to the Issuing Bank pursuant to this
paragraph shall be payable within 10 days after demand. All participation fees
and fronting fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates
due, in immediately available funds, to the Administrative Agent (or to the
Issuing Bank, in the case of fees payable to it) for distribution, in the case
of commitment fees and participation fees, to the Lenders entitled thereto.
Fees paid shall not be refundable under any circumstances.
SECTION 2.13. INTEREST. (a) The Loans comprising each ABR
Borrowing (including each Swingline Loan) shall bear interest at the Alternate
Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration
or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount,
2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a)
of this Section.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving
Loans, upon termination of the Revolving Commitments; PROVIDED that (i)
interest accrued pursuant to paragraph (c) of this Section shall be payable on
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demand, (ii) in the event of any repayment or prepayment of any Loan (other
than a prepayment of an ABR Revolving Loan prior to the end of the Revolving
Availability Period), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of
a year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate or Adjusted LIBO Rate shall be determined by the Administrative
Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.14. ALTERNATE RATE OF INTEREST. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate
for such Interest Period; or
(b) the Administrative Agent is advised by the Required
Lenders that the Adjusted LIBO Rate for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
<PAGE> 59
54
SECTION 2.15. INCREASED COSTS. (a) If any Change in Law
shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or
on the capital of such Lender's or the Issuing Bank's holding company, if any,
as a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender's or the Issuing Bank's holding company for any such reduction
suffered.
<PAGE> 60
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(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such
compensation; PROVIDED that the Borrower shall not be required to compensate a
Lender or the Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Bank's intention to claim compensation therefor; PROVIDED FURTHER
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.
SECTION 2.16. BREAK FUNDING PAYMENTS. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan or Term Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(f) and is revoked in accordance therewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.19, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
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in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement
of such period, for dollar deposits of a comparable amount and period from
other banks in the Eurodollar market. A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.17. TAXES. (a) Any and all payments by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; PROVIDED that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent, Lender or Issuing Bank
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent,
each Lender and the Issuing Bank, within 30 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
<PAGE> 62
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(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate, provided that
such Foreign Lender has received written notice from the Borrower advising it
of the availability of such exemption or reduction and containing all
applicable documentation.
(f) If the Administrative Agent or a Lender determines, in
its sole discretion, that it has received a refund of any Taxes or Other Taxes
as to which it has been indemnified by the Borrower or with respect to which
the Borrower has paid additional amounts pursuant to this Section 2.17, it
shall pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section
2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net
of all out-of-pocket expenses of the Administrative Agent or such Lender and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); PROVIDED, that the Borrower, upon the
request of the Administrative Agent or such Lender, agrees to repay the amount
refunded to the Borrower (plus any penalties, interest or other charges imposed
by the relevant Governmental Authority) to the Administrative Agent or such
Lender in the event the Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority. This Section shall not be
construed to require the Administrative Agent or any Lender (i) to make
available its tax returns (or any other information relating to its taxes which
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it deems confidential) to the Borrower or any other Person or (ii) to determine
whether it is entitled to apply for, or to apply for, a refund of any Taxes or
Other Taxes.
SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING
OF SETOFFS. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest,
fees or reimbursement of LC Disbursements, or of amounts payable under Section
2.15, 2.16 or 2.17, or otherwise) prior to the time expressly required
hereunder or under such other Loan Document for such payment (or, if no such
time is expressly required, prior to 12:00 noon, New York City time), on the
date when due, in immediately available funds, without setoff or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue,
New York, New York, except payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension. All payments under each Loan Document shall be
made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
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Disbursements or Swingline Loans resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Revolving Loans, Term Loans
and participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans; PROVIDED that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
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the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or
9.03(c), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are
fully paid.
SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.15, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender
in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15,
or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then
the Borrower may, at its sole expense and effort, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); PROVIDED that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and
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Swingline Lender), which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or the Borrower (in the case of all other
amounts) and (iii) in the case of any such assignment resulting from a claim
for compensation under Section 2.15 or payments required to be made pursuant to
Section 2.17, such assignment will result in a material reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of Holdings and the Borrower represents and warrants to
the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. Each of Holdings, the
Borrower and its Restricted Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
has all requisite power and authority to carry on its business as now conducted
and, except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is qualified
to do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions
to be entered into by each Loan Party are within such Loan Party's corporate
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each of Holdings and the Borrower and constitutes, and each other
Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation of Holdings, the Borrower or such Loan Party (as the case may be),
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
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SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of Holdings, the Borrower or any of its Subsidiaries
or any order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument (other than any
indenture, agreement or other instrument in respect of Indebtedness that will
be repaid on the Effective Date) binding upon Holdings, the Borrower or any of
its Restricted Subsidiaries or its assets, or give rise to a right thereunder
to require any payment to be made by Holdings, the Borrower or any of its
Restricted Subsidiaries, and (d) will not result in the creation or imposition
of any Lien on any asset of Holdings, the Borrower or any of its Restricted
Subsidiaries, except Liens created under the Loan Documents.
SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE
CHANGE. (a) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders' equity and
cash flows (i) as of and for the fiscal year ended March 30, 1998, reported on
by Arthur Andersen LLP, independent public accountants, and (ii) as of and for
the fiscal quarter and the portion of the fiscal year ended December 28, 1998,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) The Borrower has heretofore furnished to the Lenders its
pro forma consolidated balance sheet as of December 28, 1998, prepared giving
effect to the Transactions as if the Transactions had occurred on such date.
Such pro forma consolidated balance sheet (i) has been prepared in good faith
based on the same assumptions used to prepare the pro forma financial
statements included in the Information Memorandum (which assumptions are
believed by Holdings and the Borrower to be reasonable), (ii) is based on the
best information available to Holdings and the Borrower after due inquiry,
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(iii) accurately reflects all adjustments necessary to give effect to the
Transactions and (iv) presents fairly, in all material respects, the pro forma
financial position of the Borrower and its consolidated Subsidiaries as of
December 28, 1998 as if the Transactions had occurred on such date.
(c) Except as disclosed in the financial statements referred
to above or the notes thereto or in the Information Memorandum and except for
the Disclosed Matters, after giving effect to the Transactions, none of
Holdings, the Borrower or its Subsidiaries has, as of the Effective Date, any
material contingent liabilities, unusual long-term commitments or unrealized
losses.
(d) Since March 30, 1998, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial
or otherwise, of Holdings, the Borrower and its Restricted Subsidiaries, taken
as a whole.
SECTION 3.05. PROPERTIES. (a) Each of Holdings, the Borrower
and its Restricted Subsidiaries has good title to, or valid leasehold interests
in, all its real and personal property material to its business (including its
Mortgaged Properties), except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to utilize
such properties for their intended purposes.
(b) Each of Holdings, the Borrower and its Restricted
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by Holdings, the Borrower and its Restricted Subsidiaries
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. Schedule 3.05(b) sets forth a
complete list of all trademarks, tradenames, copyrights, patents and other
intellectual property owned by the Borrower and its Restricted Subsidiaries as
of the Effective Date that has been duly registered in, filed in or issued by
the United States Patent and Trademark Office or the United States Copyright
Office or any other appropriate office.
(c) Schedule 3.05(c) sets forth the address of each real
property that is owned or leased by the Borrower or any of its Subsidiaries as
of the Effective Date after giving effect to the Transactions.
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(d) As of the Effective Date, neither Holdings, the Borrower
nor any of its Subsidiaries has received notice of, or has knowledge of, any
pending or contemplated condemnation proceeding affecting any Mortgaged
Property or any sale or disposition thereof in lieu of condemnation. Neither
any Mortgaged Property nor any interest therein is subject to any right of
first refusal, option or other contractual right to purchase such Mortgaged
Property or interest therein.
SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS. (a) There
are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of Holdings or the
Borrower, threatened against or affecting Holdings, the Borrower or any of its
Subsidiaries (i) that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters), (ii) that involve any of the Loan Documents or (iii) that involve the
Transactions, are not frivolous and, if adversely determined, could reasonably
be expected, individually or in the aggregate, to be adverse to the interests
of the Lenders.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither
Holdings, the Borrower nor any of its Subsidiaries (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
asserting that Holdings, the Borrower or any of its Subsidiaries is obligated
to redress any Environmental Liability or (iv) knows of any basis for any
Environmental Liability that Holdings, the Borrower or any of its Subsidiaries
is reasonably likely to become obligated to redress.
(c) Since the date of this Agreement, there has been no
change in the status of the Disclosed Matters that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of
Holdings, the Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
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SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither
Holdings, the Borrower nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.09. TAXES. Each of Holdings, the Borrower and its
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) any Taxes that are being contested
in good faith by appropriate proceedings and for which Holdings, the Borrower
or such Subsidiary, as applicable, has set aside on its books adequate reserves
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Effect. The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $15,000,000 the fair market value
of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts,
exceed by more than $15,000,000 the fair market value of the assets of all such
underfunded Plans.
SECTION 3.11. DISCLOSURE. The Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to
which Holdings, the Borrower or any of its Subsidiaries is subject, and all
other matters known to any of them, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. Neither
the Information Memorandum nor any of the other reports, financial statements,
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certificates or other information furnished by or on behalf of any Loan Party
to the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or thereunder
(as modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; PROVIDED that, with respect to projected financial
information, Holdings and the Borrower represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.
SECTION 3.12. SUBSIDIARIES. Holdings does not have any
subsidiaries other than the Borrower and the Borrower's Subsidiaries. Schedule
3.12 sets forth the name of, and the ownership interest of the Borrower in,
each Subsidiary of the Borrower and identifies each Subsidiary that is a
Subsidiary Loan Party, in each case as of the Effective Date. As of the
Effective Date, all Subsidiaries are Restricted Subsidiaries.
SECTION 3.13. INSURANCE. Schedule 3.13 sets forth a
description of all insurance maintained by or on behalf of the Borrower and its
Subsidiaries as of the Effective Date. As of the Effective Date, all premiums
in respect of such insurance have been paid. Holdings and the Borrower believe
that the insurance maintained by or on behalf of the Borrower and its
Subsidiaries is adequate.
SECTION 3.14. LABOR MATTERS. As of the Effective Date, there
are no strikes, lockouts or slowdowns against Holdings, the Borrower or any
Subsidiary pending or, to the knowledge of Holdings or the Borrower,
threatened. The hours worked by and payments made to employees of Holdings, the
Borrower and the Restricted Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable Federal, state, local or foreign
law dealing with such matters. All payments due from Holdings, the Borrower or
any Restricted Subsidiary, or for which any claim may be made against Holdings,
the Borrower or any Restricted Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of Holdings, the Borrower or such Restricted Subsidiary.
The consummation of the Transactions will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which Holdings, the Borrower or any
Subsidiary is bound.
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SECTION 3.15. SOLVENCY. Immediately after the consummation of
the Transactions to occur on the Effective Date and immediately following the
making of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Effective Date.
SECTION 3.16. SENIOR INDEBTEDNESS. The Obligations constitute
"Senior Indebtedness" under and as defined in the Subordinated Debt Documents.
SECTION 3.17. YEAR 2000. Any reprogramming required to permit
the proper functioning (but only to the extent that such proper functioning
would otherwise be impaired by the occurrence of the year 2000), in and
following the year 2000, of the computer systems of the Borrower and its
Subsidiaries and the testing of all such systems as so reprogrammed, will be
completed by July 1, 1999, except to the extent that the failure to do so would
not have any reasonable likelihood of having a Material Adverse Effect. The
cost to the Borrower and its Subsidiaries of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including reprogramming errors and the failure of others' systems
or equipment) will not result in a Material Adverse Effect.
SECTION 3.18. SECURITY DOCUMENTS. (a) The Pledge Agreement
is effective to create in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable security
interest in the Collateral (as defined in the Pledge Agreement) and, when the
portion of the Collateral constituting certificated securities (as defined in
the Uniform Commercial Code) is delivered to the Collateral Agent, the Pledge
Agreement shall constitute a fully perfected first priority Lien on, and
security interest in, all right, title and interest of the pledgor thereunder
in such Collateral, in each case prior and superior in right to any other
Person.
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(b) The Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are
filed in the offices specified on Schedule 6 to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral (other than the Intellectual Property (as defined in the Security
Agreement)), in each case prior and superior in right to any other Person,
other than with respect to Liens expressly permitted by the Security Agreement.
(c) When the Security Agreement is filed in the United States
Patent and Trademark Office and the United States Copyright Office, the
security interest created thereunder shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Loan Parties
in the Intellectual Property (as defined in the Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens expressly
permitted by the Security Agreement (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the United
States Copyright Office may be necessary to perfect a lien on registered
trademarks, trademark applications and copyrights acquired by the Loan Parties
after the date hereof).
(d) Each Mortgage is effective to create, subject to the
exceptions listed in each title insurance policy covering such Mortgage, in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties,
a legal, valid and enforceable Lien on all of the Loan Parties' right, title
and interest in and to the Mortgaged Property thereunder and the proceeds
thereof, and when such Mortgage is filed in the offices specified on Schedule
3.18(d), such Mortgage shall constitute a Lien on, and security interest in,
all right, title and interest of the Loan Parties in such Mortgaged Property
and the proceeds thereof, in each case prior and superior in right to any other
Person, other than with respect to the rights of Persons pursuant to Liens
expressly permitted by such Mortgage.
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SECTION 3.19. MERGER. The Merger Agreement has been duly
authorized, executed and delivered by each of the parties thereto and
constitutes a legal, valid and binding obligation of each such party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law. A true, correct and
complete copy of the Merger Agreement has been furnished to the Administrative
Agent.
SECTION 3.20. CAPITALIZATION OF HOLDINGS. As of the date of
this Agreement, the authorized capital stock of Holdings consists of
100,000,000 shares of Class A Common Stock, par value $.01 per share, of which
22,786,536 shares are issued and outstanding, 20,000,000 shares of Class B
Common Stock, par value $.01 per share, of which no shares are outstanding, and
25,000,000 shares of Class C Common Stock, par value $.01 per share, of which
20,702,005 shares are outstanding. All such outstanding shares of stock are
fully paid and nonassessable.
ARTICLE IV
CONDITIONS
SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders
to make Loans and of the Issuing Bank to issue Letters of Credit hereunder
shall not become effective until the date on which each of the following
conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of each of (i) Simpson Thacher &
Bartlett, counsel for the Borrower, substantially in the form of
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Exhibit B-1, and (ii) local counsel in each jurisdiction where a
Mortgaged Property is located, substantially in the form of Exhibit
B-2, and, in the case of each such opinion required by this paragraph,
covering such other matters relating to the Loan Parties, the Loan
Documents or the Transactions as the Required Lenders shall reasonably
request. The Borrower hereby requests such counsel to deliver such
opinions.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and
good standing of each Loan Party, the authorization of the
Transactions and any other legal matters relating to the Loan Parties,
the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.
(e) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses (including fees, charges and disbursements of
counsel) required to be reimbursed or paid by any Loan Party hereunder
or under any other Loan Document.
(f) The Collateral Agent shall have received counterparts of
the Pledge Agreement signed on behalf of Holdings, the Borrower and
each Subsidiary Loan Party, together with stock certificates
representing all the outstanding shares of capital stock of the
Borrower and each Subsidiary owned by or on behalf of any Loan Party
as of the Effective Date after giving effect to the Transactions
(except that stock certificates representing shares of common stock of
a Foreign Subsidiary may be limited to 65% of the outstanding shares
of common stock of such Foreign Subsidiary), promissory notes
evidencing all intercompany Indebtedness owed to any Loan Party by
Holdings, the Borrower or any Subsidiary as of the Effective Date
after giving effect to the Transactions and stock powers and
instruments of transfer, endorsed in blank, with respect to such stock
certificates and promissory notes.
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(g) The Collateral Agent shall have received counterparts of
the Security Agreement signed on behalf of Holdings, the Borrower and
each Subsidiary Loan Party, together with the following:
(i) all documents and instruments, including Uniform
Commercial Code financing statements, required by law or
reasonably requested by the Collateral Agent to be filed,
registered or recorded to create or perfect the Liens
intended to be created under the Security Agreement; and
(ii) a completed Perfection Certificate dated the
Effective Date and signed by an executive officer or
Financial Officer of the Borrower, together with all
attachments contemplated thereby, including the results of a
search of the Uniform Commercial Code (or equivalent) filings
made with respect to the Loan Parties in the jurisdictions
contemplated by the Perfection Certificate and copies of the
financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Collateral
Agent that the Liens indicated by such financing statements
(or similar documents) are permitted by the Security
Agreement or have been released.
(h) The Collateral Agent shall have received (i) counterparts
of a Mortgage with respect to each Mortgaged Property signed on behalf
of the record owner of such Mortgaged Property, (ii) a policy or
policies of title insurance issued by a nationally recognized title
insurance company, insuring the Lien of each such Mortgage as a valid
first Lien on the Mortgaged Property described therein, free of any
other Liens except as permitted by the Security Agreement, together
with such endorsements, coinsurance and reinsurance as the Collateral
Agent or the Required Lenders may reasonably request, and (iii) such
surveys, abstracts and appraisals as may be required pursuant to such
Mortgages or as the Collateral Agent or the Required Lenders may
reasonably request.
(i) The Administrative Agent shall have received counterparts
of (i) the Guarantee Agreement signed on behalf of Holdings and each
Subsidiary Loan Party and (ii) counterparts of the Indemnity,
Subrogation and Contribution Agreement signed on behalf of Holdings,
the Borrower and each Subsidiary Loan Party.
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(j) The Administrative Agent shall have received evidence
that the insurance required by Section 5.07 and the Security Documents
is in effect.
(k) All consents and approvals required to be obtained from
any Governmental Authority or other Person in connection with the
Acquisition shall have been obtained, and all applicable waiting
periods and appeal periods shall have expired, in each case without
the imposition of any burdensome conditions. The Acquisition shall
have been, or substantially simultaneously with the initial funding of
Loans on the Effective Date shall be, consummated in accordance with
the Acquisition Documents and applicable law, without any amendment to
or waiver of any material terms or conditions of the Acquisition
Documents not approved by the Required Lenders. The Administrative
Agent shall have received copies of the Acquisition Documents and all
certificates, opinions and other documents delivered thereunder,
certified by a Financial Officer as complete and correct.
(l) EMP Group L.L.C. shall have made the Equity Contribution
(with an amount satisfactory to the Administrative Agent to have been
provided by Evercore).
(m) The Borrower shall have received gross cash proceeds of
not less than $250,000,000 from the issuance of the Subordinated Debt.
Any terms and conditions of the Subordinated Debt and provisions of
the Subordinated Debt Documents that are inconsistent with those set
forth in the preliminary offering memorandum with respect to the
Subordinated Debt dated April 13, 1999, shall be satisfactory in all
respects to the Lenders. The Administrative Agent shall have received
copies of the Subordinated Debt Documents, certified by a Financial
Officer as complete and correct.
(n) All material conditions to the purchase of the Existing
Notes in the Debt Tender Offer shall have been satisfied without
giving effect to any waiver or amendment thereof not approved by the
Administrative Agent. The Borrower shall have repurchased not less
than a majority in principal amount of the Existing Notes in
accordance with the Debt Tender Offer Materials. The Supplemental
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Indenture to the Existing Notes Indenture contemplated by the Debt
Tender Offer, in the form previously approved by the Administrative
Agent, shall have been executed and delivered and be in full force and
effect.
(o) The consummation of the Debt Tender Offer and the other
transactions contemplated hereby shall not (i) violate any applicable
law, statute, rule or regulation or (ii) conflict with, or result in a
default or event of default under, any agreement of Merger Sub,
Holdings, the Borrower or any of the Subsidiaries that will be in
effect following the consummation of the Acquisition.
(p) All loans outstanding, interest thereon and other amounts
due and payable under the Existing Credit Agreement and under each
other agreement related thereto shall have been repaid in full, and
the Administrative Agent shall have received duly executed
documentation, in form and substance satisfactory to it, evidencing or
necessary for (i) the termination of the Existing Credit Agreement and
(ii) the cancelation of all related agreements, guarantees and
security interests granted by Holdings, the Borrower, its subsidiaries
or any other person in connection therewith and the discharge of all
obligations or interests thereunder.
(q) The Lenders shall have received (i) audited consolidated
and consolidating balance sheets and related statements of income,
stockholders' equity and cash flows of Holdings for the three fiscal
years ended prior to the Effective Date and (ii) unaudited
consolidated and consolidating balance sheets and related statements
of income, stockholders' equity and cash flows for Holdings for the
1999 fiscal quarters preceding the Effective Date (and, to the extent
available, for each month preceding the Effective Date since the last
such quarter), which audited and unaudited financial statements shall
be in form and scope satisfactory to the Lenders.
(r) The Lenders shall have received a pro forma consolidated
balance sheet of each of Holdings and the Borrower as of the end of
the most recent fiscal quarter ended prior to the Effective Date for
which balance sheets are available, reflecting all pro forma
adjustments as if the Transactions had been consummated on such date,
and such pro forma consolidated balance sheet shall be consistent in
all material respects with the forecasts and other information
previously provided to the Lenders. After giving effect to the
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Transactions, none of Holdings, the Borrower or any of the
Subsidiaries shall have outstanding any shares of preferred stock or
any Indebtedness, other than (i) Indebtedness incurred under the Loan
Documents, (ii) the Subordinated Debt, (iii) any Existing Notes not
purchased in the Debt Tender Offer and (iv) the Indebtedness
identified in Schedule 6.01. The aggregate amount of Transaction Costs
(including underwriting discounts and commissions) payable or
otherwise borne by Holdings, the Borrower and its Subsidiaries in
connection with the Transactions shall not exceed $60,600,000.
(s) The Administrative Agent shall have received a solvency
letter, in form and substance satisfactory to the Lenders, from
Valuation Research Corporation, with respect to the solvency of the
Loan Parties after giving effect to the Transactions.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on July
6, 1999 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
SECTION 4.02. EACH CREDIT EVENT. The obligation of each
Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank
to issue, amend, renew or extend any Letter of Credit, is subject to receipt of
the request therefor in accordance herewith and to the satisfaction of the
following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct (or, in the case
of such representations and warranties that are not qualified as to
materiality, true and correct in all material respects) on and as of
the date of such Borrowing or the date of issuance, amendment, renewal
or extension of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to
such Borrowing or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, no Default shall have occurred
and be continuing.
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Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by
Holdings and the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each of
Holdings and the Borrower covenants and agrees with the Lenders that:
SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION.
Holdings and the Borrower will furnish to the Administrative Agent (which shall
furnish a copy thereof to each Lender):
(a) within 90 days after the end of each fiscal year of the
Borrower, the audited consolidated balance sheet and related
statements of operations, stockholders' equity and cash flows of the
Borrower and its Restricted Subsidiaries as of the end of and for such
year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Arthur Andersen LLP or
other independent public accountants of recognized national standing
(without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit)
to the effect that such consolidated financial statements present
fairly in all material respects the financial condition and results of
operations of the Borrower and its Restricted Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, (i) the
consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows of the Borrower and its Restricted
Subsidiaries and (ii) statements of operations and stockholders'
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equity of (A) National Enquirer, Inc., (B) Weekly World News, Inc.,
(C) the weekly magazine known as STAR, (D) Country Weekly, Inc. and
(E) each Restricted Subsidiary formed or acquired after the Effective
Date, in each case as of the end of and for such fiscal quarter and
the then elapsed portion of the fiscal year, setting forth in each
case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial
condition and results of operations of the Borrower and its Restricted
Subsidiaries, in each case on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer of
the Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.01, 6.04, 6.05, 6.08, 6.12, 6.13, 6.14,
6.15 and 6.16, (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the Borrower's
audited financial statements referred to in Section 3.04 and, if any
such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate and (iv) if any
Unrestricted Subsidiary exists (or existed at any time during the
period covered by such financial statements), attaching consolidating
balance sheets and income statements for such Unrestricted Subsidiary
as of the same dates and covering the same periods, certified as true,
correct and complete;
(d) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the
extent required by accounting rules or guidelines);
(e) prior to the commencement of each fiscal year of the
Borrower, a detailed consolidated quarterly budget for such fiscal
year (including a projected consolidated balance sheet and related
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statements of projected operations and cash flow as of the end of and
for such fiscal year and setting forth the assumptions used for
purposes of preparing such budget) and, promptly when available, any
significant revisions of such budget;
(f) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other
materials filed by Holdings, the Borrower or any Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by Holdings to its
shareholders generally, as the case may be; and
(g) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of Holdings, the Borrower or any Subsidiary, or compliance
with the terms of any Loan Document, as the Administrative Agent or
any Lender may reasonably request.
SECTION 5.02. NOTICES OF MATERIAL EVENTS. Holdings and the
Borrower will furnish to the Administrative Agent and each Lender prompt
written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting Holdings, the Borrower or any Affiliate thereof
that, if adversely determined, could reasonably be expected to result
in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of Holdings, the Borrower and its
Subsidiaries in an aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
SECTION 5.03. INFORMATION REGARDING COLLATERAL. (a) The
Borrower will furnish to the Administrative Agent prompt written notice of any
change (i) in any Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party's chief executive office,
its principal place of business, any office in which it maintains books or
records relating to Collateral owned by it or any office or facility at which
Collateral owned by it is located (including the establishment of any such new
office or facility), (iii) in any Loan Party's identity or corporate structure
or (iv) in any Loan Party's Federal Taxpayer Identification Number. The
Borrower agrees not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Administrative Agent to continue
at all times following such change to have a valid, legal and perfected
security interest in all the Collateral. The Borrower also agrees promptly to
notify the Administrative Agent if any material portion of the Collateral is
damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, the Borrower shall deliver to the Administrative Agent a
certificate of a Financial Officer and the chief legal officer of the Borrower
setting forth the information required pursuant to Section 2 of the Perfection
Certificate or confirming that there has been no change in such information
since the date of the Perfection Certificate delivered on the Effective Date or
the date of the most recent certificate delivered pursuant to this Section.
Each certificate delivered pursuant to this Section 5.03(b) shall identify in
the format of Schedule II, III, IV or V, as applicable, of the Security
Agreement all Intellectual Property (as defined in the Security Agreement) of
any Loan Party in existence on the date thereof and not then listed on such
Schedules as previously so identified to the Collateral Agent.
SECTION 5.04. EXISTENCE; CONDUCT OF BUSINESS. Each of
Holdings and the Borrower will, and will cause each of the Restricted
Subsidiaries to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence and the rights, licenses,
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permits, privileges, franchises, patents, copyrights, trademarks and trade
names material to the conduct of its business; PROVIDED that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 6.03.
SECTION 5.05. PAYMENT OF OBLIGATIONS. Each of Holdings and
the Borrower will, and will cause each of the Restricted Subsidiaries to, pay
its Indebtedness and other obligations, including Tax liabilities, before the
same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
Holdings, the Borrower or such Restricted Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP, (c) such
contest effectively suspends collection of the contested obligation and the
enforcement of any Lien securing such obligation and (d) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.06. MAINTENANCE OF PROPERTIES. Each of Holdings and
the Borrower will, and will cause each of the Restricted Subsidiaries to, keep
and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
SECTION 5.07. INSURANCE. Each of Holdings and the Borrower
will, and will cause each of its Restricted Subsidiaries to, maintain, with
financially sound and reputable insurance companies (a) insurance in such
amounts (with no greater risk retention) and against such risks as are
customarily maintained by companies of established repute engaged in the same
or similar businesses operating in the same or similar locations, including
insurance against libel actions, and (b) all insurance required to be
maintained pursuant to the Security Documents. The Borrower will furnish to the
Lenders, upon request of the Administrative Agent, information in reasonable
detail as to the insurance so maintained.
SECTION 5.08. CASUALTY AND CONDEMNATION. The Borrower (a)
will furnish to the Administrative Agent and the Lenders prompt written notice
of any casualty or other insured damage to any material portion of any
Collateral or the commencement of any action or proceeding for the taking of
any Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding and (b) will ensure that the
Net Proceeds of any such event (whether in the form of insurance proceeds,
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condemnation awards or otherwise) are collected and applied in accordance with
the applicable provisions of the Security Documents.
SECTION 5.09. BOOKS AND RECORDS; INSPECTION AND AUDIT RIGHTS.
Each of Holdings and the Borrower will, and will cause each of its Subsidiaries
to, keep proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to its business
and activities. Each of Holdings and the Borrower will, and will cause each of
its Subsidiaries to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
SECTION 5.10. COMPLIANCE WITH LAWS. Each of Holdings and the
Borrower will, and will cause each of its Subsidiaries to, comply with all
laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.11. USE OF PROCEEDS AND LETTERS OF CREDIT. The
proceeds of the Term Loans will be used only (a) to repay amounts outstanding
under the Existing Credit Agreement on the Effective Date and (b) to purchase
Existing Notes accepted for payment pursuant to the Debt Tender Offer. The
proceeds of the Revolving Loans and Swingline Loans will be used only for
general corporate purposes. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations T, U and X. Letters of
Credit will be issued only for general corporate purposes.
SECTION 5.12. ADDITIONAL SUBSIDIARIES. If any additional
Subsidiary is formed or acquired after the Effective Date or if any
Unrestricted Subsidiary is designated as a Restricted Subsidiary, the Borrower
will notify the Administrative Agent and the Lenders thereof and (a) if such
Subsidiary is a Subsidiary Loan Party, the Borrower will cause such Subsidiary
to become a party to each of the Guarantee Agreement, the Pledge Agreement, the
Security Agreement and the Indemnity, Subrogation and Contribution Agreement
within three Business Days after such Subsidiary is formed or acquired and
promptly take such actions to create and perfect Liens on such Subsidiary's
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assets to secure the Obligations as the Administrative Agent or the Required
Lenders shall reasonably request and (b) if any Equity Interest in or
Indebtedness of such Subsidiary is owned by or on behalf of any Loan Party, the
Borrower will cause such Equity Interests and promissory notes evidencing such
Indebtedness to be pledged pursuant to the Pledge Agreement within three
Business Days after such Subsidiary is formed or acquired (except that, if such
Subsidiary is a Foreign Subsidiary, shares of common stock of such Subsidiary
to be pledged pursuant to the Pledge Agreement may be limited to 65% of the
outstanding shares of common stock of such Subsidiary).
SECTION 5.13. FURTHER ASSURANCES. (a) Each of Holdings and
the Borrower will, and will cause each Subsidiary Loan Party to, execute any
and all further documents, financing statements, agreements and instruments,
and take all such further actions (including the filing and recording of
financing statements, fixture filings, mortgages, deeds of trust and other
documents), which may be required under any applicable law, or which the
Administrative Agent or the Required Lenders may reasonably request, to
effectuate the transactions contemplated by the Loan Documents or to grant,
preserve, protect or perfect the Liens created or intended to be created by the
Security Documents or the validity or priority of any such Lien, all at the
expense of the Loan Parties. Holdings and the Borrower also agree to provide to
the Administrative Agent, from time to time upon request, evidence reasonably
satisfactory to the Administrative Agent as to the perfection and priority of
the Liens created or intended to be created by the Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the Subsidiary Loan Parties to take, such actions as shall be necessary
or reasonably requested by the Administrative Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section, all at the
expense of the Loan Parties.
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SECTION 5.14. INTEREST RATE PROTECTION. As promptly as
practicable, and in any event commencing no later than 60 days after the
Effective Date, the Borrower will enter into, and thereafter for a period of
not less than three years will maintain in effect, interest rate protection
agreements on such terms and with such parties as shall be reasonably
satisfactory to the Administrative Agent, such that the interest cost to the
Borrower with respect to at least 50% of the total Long-Term Indebtedness of
the Borrower and the Subsidiaries will either be hedged by such interest rate
protection agreements or bear interest at a fixed rate.
SECTION 5.15. REDEMPTION OF EXISTING NOTES. On November 15,
1999, if Existing Notes in an aggregate principal amount of $5,000,000 or more
remain outstanding, the Borrower shall redeem all Existing Notes then
outstanding in accordance with the redemption provisions contained in the
indenture governing such Existing Notes.
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, each of Holdings and the Borrower
covenants and agrees with the Lenders that:
SECTION 6.01. INDEBTEDNESS; CERTAIN EQUITY SECURITIES. (a)
The Borrower will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) the Subordinated Debt;
(iii) any Existing Notes that are not purchased pursuant to
the Debt Tender Offer;
(iv) Indebtedness existing on the date hereof and set forth
in Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof or result in an earlier maturity date or decreased weighted
average life thereof;
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(v) Indebtedness of the Borrower to any Restricted Subsidiary
and of any Restricted Subsidiary to the Borrower or any other
Restricted Subsidiary;
(vi) Guarantees by the Borrower of Indebtedness of any
Subsidiary and by any Restricted Subsidiary of Indebtedness of the
Borrower or any other Subsidiary; PROVIDED that Guarantees by the
Borrower or any Restricted Subsidiary of Indebtedness of any
Subsidiary that is not a Loan Party shall be subject to Section 6.04;
(vii) Indebtedness of the Borrower or any Restricted
Subsidiary incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including Capital Lease
Obligations and any Indebtedness assumed in connection with the
acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; PROVIDED that (A) such
Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement and
(B) the aggregate principal amount of Indebtedness permitted by this
clause (vii) at any time outstanding shall not exceed $10,000,000;
(viii) Indebtedness of any Person that becomes a Restricted
Subsidiary after the date hereof and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; PROVIDED that such Indebtedness
exists at the time such Person becomes a Subsidiary and is not created
in contemplation of or in connection with such Person becoming a
Subsidiary;
(ix) other unsecured Indebtedness in an aggregate principal
amount not exceeding $25,000,000 at any time outstanding; and
(x) other unsecured Indebtedness in an aggregate principal
amount not exceeding $25,000,000 at any time outstanding; PROVIDED
that, at the time of and after giving effect to the incurrence of any
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such Indebtedness permitted by this clause (x), the Leverage Ratio
(determined for this purpose based on Consolidated EBITDA for the
period of four consecutive fiscal quarters most recently ended for
which financial statements have been delivered pursuant to clause (a)
or (b) of Section 5.01) shall not exceed 5.0 to 1.0.
(b) Holdings will not create, incur, assume or permit to
exist any Indebtedness except (i) Indebtedness created under the Loan Documents
and (ii) the Holdings Discount Notes.
(c) Neither Holdings nor the Borrower will, nor will they
permit any Restricted Subsidiary to, (i) issue any preferred stock or other
preferred Equity Interests (other than preferred stock issued by Holdings that
is not Disqualified Stock) or (ii) designate any other Indebtedness as
"Designated Senior Indebtedness" under and as defined in the Subordinated Debt
Documents.
SECTION 6.02. LIENS. (a) The Borrower will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or permit to exist
any Lien on any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Borrower or
any Restricted Subsidiary existing on the date hereof and set forth in
Schedule 6.02; PROVIDED that (A) such Lien shall not apply to any
other property or asset of the Borrower or any Restricted Subsidiary
and (B) such Lien shall secure only those obligations which it secures
on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;
(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on
any property or asset of any Person that becomes a Subsidiary after
the date hereof prior to the time such Person becomes a Subsidiary;
PROVIDED that (A) such Lien is not created in contemplation of or in
connection with such acquisition or such Person becoming a Subsidiary,
as the case may be, (B) such Lien shall not apply to any other
property or assets of the Borrower or any Restricted Subsidiary and
(C) such Lien shall secure only those obligations which it secures on
the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal
amount thereof;
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(v) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Restricted Subsidiary; PROVIDED that
(A) such security interests secure Indebtedness permitted by clause
(vii) of Section 6.01(a), (B) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days
after such acquisition or the completion of such construction or
improvement, (C) the Indebtedness secured thereby does not exceed 100%
of the cost of acquiring, constructing or improving such fixed or
capital assets and (D) such security interests shall not apply to any
other property or assets of the Borrower or any Restricted Subsidiary;
(vi) Liens arising by operation of law that secure obligations
in an aggregate amount not to exceed $5,000,000 at any time
outstanding, including Liens imposed pursuant to Environmental Laws
securing obligations not reasonably expected to exceed such amount; and
(vii) any sale or assignment of accounts receivable permitted
by clause (c) of Section 6.05.
(b) Holdings will not create, incur, assume or permit to
exist any Lien on any property or asset now owned or hereafter acquired by it,
or assign or sell any income or revenues (including accounts receivable) or
rights in respect thereof, except Liens created under the Security Documents
and Permitted Encumbrances.
SECTION 6.03. FUNDAMENTAL CHANGES. (a) Neither Holdings nor
the Borrower will, nor will they permit any Restricted Subsidiary to, merge
into or consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or liquidate or dissolve, except that, if at the
time thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any Person
may merge into any Restricted Subsidiary in a transaction in which the
surviving entity is a Restricted Subsidiary and (if any party to such merger is
a Subsidiary Loan Party) is a Subsidiary Loan Party and (iii) any Restricted
Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if
the Borrower determines in good faith that such liquidation or dissolution is
in the best interests of the Borrower and is not materially disadvantageous to
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the Lenders; PROVIDED that (A) the foregoing shall not be construed to prohibit
the Merger and (B) any such merger involving a Person that is not a wholly
owned Restricted Subsidiary immediately prior to such merger shall not be
permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, engage to any material extent in any business other
than businesses of the type conducted by the Borrower and its Restricted
Subsidiaries on the date of execution of this Agreement and businesses
reasonably related thereto.
(c) Holdings will not engage in any business or activity
other than the ownership of shares of capital stock of the Borrower and
activities incidental thereto. Holdings will not own or acquire any assets
(other than shares of capital stock of the Borrower, cash and Permitted
Investments) or incur any liabilities (other than liabilities under the Loan
Documents, the Holdings Discount Notes Documents, liabilities imposed by law,
including tax liabilities, and other liabilities incidental to its existence
and permitted business and activities).
(d) Holdings shall not enter into any agreement relating to
the voting of any Equity Interests in the Borrower held by it except (i) with
respect to the election of directors of the Borrower; PROVIDED that Holdings
retains the direct or indirect power to appoint at least 80% of the directors
of the Borrower and (ii) to grant to any other holder of common stock of the
Borrower the right to approve the taking of any action by the Borrower that
would also require the approval in writing of the Lenders or the Required
Lenders, as applicable, under the terms and conditions of this Agreement or the
other Loan Documents.
(e) Holdings shall not sell or otherwise transfer any Equity
Interests of the Borrower to any Person unless (i) all the Equity Interests of
the Borrower sold or otherwise transferred to Persons other than Holdings
consist of common stock, (ii) either (A) all the common stock of the Borrower
consists of common stock of the same class and has the same rights (including
voting rights) and privileges or (B) the common stock of the Borrower that is
owned by Persons other than Holdings either does not entitle the holders
thereof to voting rights or, in the aggregate, entitles the holders thereof to
not more than 20% of the total voting power of all classes of voting common
stock of the Borrower, and (iii) all such Equity Interests are pledged to the
<PAGE> 92
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Collateral Agent for the benefit of the Secured Parties pursuant to a pledge
agreement that is substantially the same as the Pledge Agreement so that, after
giving effect to all such sales or other transfers of Equity Interests of the
Borrower, 100% of the capital stock of the Borrower remains pledged to secure
the Obligations (as defined in the Pledge Agreement).
(f) The Borrower shall not issue any Equity Interests to any
Person other than Holdings unless (i) all the Equity Interests of the Borrower
issued to Persons other than Holdings consist of common stock, (ii) either (A)
all the common stock of the Borrower consists of common stock of the same class
and has the same rights (including voting rights) and privileges or (B) the
common stock of the Borrower that is owned by Persons other than Holdings
either does not entitle the holders thereof to voting rights or, in the
aggregate, entitles the holders thereof to not more than 20% of the total
voting power of all classes of voting common stock of the Borrower, and (iii)
all such Equity Interests are pledged to the Collateral Agent for the benefit
of the Secured Parties pursuant to a pledge agreement that is substantially the
same as the Pledge Agreement so that, after giving effect to all such issuances
of Equity Interests of the Borrower, 100% of the capital stock of the Borrower
remains pledged to secure the Obligations (as defined in the Pledge Agreement).
SECTION 6.04. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS. The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Restricted Subsidiary prior to such
merger) any Equity Interests in or evidences of indebtedness or other
securities (including any option, warrant or other right to acquire any of the
foregoing) of, make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit, except:
(a) the Acquisition;
(b) Permitted Investments;
(c) investments existing on the date hereof and set forth on
Schedule 6.04;
<PAGE> 93
88
(d) investments by the Borrower and its Restricted
Subsidiaries in Equity Interests in their respective Subsidiaries;
PROVIDED that (i) any such Equity Interests in a Subsidiary held by a
Loan Party shall be pledged pursuant to the Pledge Agreement (subject
to the limitations applicable to the pledge of Equity Interests in
Foreign Subsidiaries set forth in Section 5.12), (ii) the aggregate
amount of investments by Loan Parties in, and loans and advances by
Loan Parties to, and Guarantees by Loan Parties of Indebtedness of,
Unrestricted Subsidiaries (including all such investments, loans,
advances and Guarantees existing on the Effective Date) shall not
exceed $25,000,000 at any time outstanding (it being understood that,
for purposes of determining outstanding investments in Unrestricted
Subsidiaries, the sale or disposition by a Loan Party of an investment
in an Unrestricted Subsidiary shall be deemed to reduce investments in
Unrestricted Subsidiaries by an amount equal to the Net Proceeds of
such sale or disposition) and (iii) the aggregate amount of
investments by Loan Parties in, and loans and advances by Loan Parties
to, and Guarantees by Loan Parties of Indebtedness of, Restricted
Subsidiaries that are Foreign Subsidiaries (including all such
investments, loans, advances and Guarantees existing on the Effective
Date) shall not exceed 5% of Total Assets at any time outstanding (it
being understood that, for purposes of determining outstanding
investments in Restricted Subsidiaries that are Foreign Subsidiaries,
the sale or disposition by a Loan Party of an investment in a
Restricted Subsidiary that is a Foreign Subsidiary shall be deemed to
reduce investments in Restricted Subsidiaries that are Foreign
Subsidiaries by an amount equal to the Net Proceeds of such sale or
disposition);
(e) loans or advances made by the Borrower to any Subsidiary
and made by any Restricted Subsidiary to the Borrower or any other
Subsidiary; PROVIDED that the amount of such loans and advances made
by Loan Parties to Unrestricted Subsidiaries, or to Restricted
Subsidiaries that are Foreign Subsidiaries, shall be subject to the
limitations set forth in clause (d) above;
(f) Guarantees constituting Indebtedness permitted by Section
6.01; PROVIDED that (i) a Restricted Subsidiary shall not Guarantee
the Subordinated Debt unless (A) such Restricted Subsidiary also has
Guaranteed the Obligations pursuant to the Guarantee Agreement, (B)
such Guarantee of the Subordinated Debt is subordinated to such
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Guarantee of the Obligations on terms no less favorable to the Lenders
than the subordination provisions of the Subordinated Debt and (C)
such Guarantee of the Subordinated Debt provides for the release and
termination thereof, without action by any party, upon the sale or
transfer of the Equity Interests of such Restricted Subsidiary as a
result of a foreclosure of the Lien on such Equity Interests that
secures the Obligations, where (1) after such sale or transfer, such
Restricted Subsidiary is no longer a Subsidiary and (2) the Net
Proceeds resulting from such sale or transfer are applied in
accordance with the terms of the Subordinated Debt Documents that
would apply to a sale of such Equity Interests by the Borrower, and
(ii) the aggregate principal amount of Indebtedness of Unrestricted
Subsidiaries, or of Restricted Subsidiaries that are Foreign
Subsidiaries, that is Guaranteed by any Loan Party shall be subject to
the limitations set forth in clause (d) above;
(g) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(h) Permitted Acquisitions; PROVIDED that the sum of all
consideration (other than common Equity Interests of Holdings) paid or
otherwise delivered in connection with Permitted Acquisitions
(including the principal amount of any Indebtedness issued as deferred
purchase price and the fair market value of any other non-cash
consideration but excluding the amount of Net Proceeds from Prepayment
Events described in clause (a) of the definition of the term
Prepayment Event that are applied, in accordance with Section 2.11(c),
to make such Permitted Acquisitions) plus the aggregate principal
amount of all Indebtedness otherwise incurred or assumed in connection
with, or resulting from, Permitted Acquisitions (including
Indebtedness of any acquired Persons outstanding at the time of the
applicable Permitted Acquisition) shall not exceed, on a cumulative
basis during the term of this Agreement, $50,000,000;
(i) any investments in or loans to any other Person received
as noncash consideration for sales, transfers, leases and other
dispositions permitted by Section 6.05; and
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(j) any other investments in, advances or loans to or
Guarantees of Indebtedness of, any Person in an aggregate amount not
to exceed $25,000,000 at any time outstanding.
SECTION 6.05. ASSET SALES. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, sell, transfer, lease or
otherwise dispose of any asset, including any Equity Interest owned by it, nor
will the Borrower permit any of its Restricted Subsidiaries to issue any
additional Equity Interest in such Restricted Subsidiary, except:
(a) sales of inventory, used or surplus equipment and
Permitted Investments in the ordinary course of business;
(b) sales, transfers and dispositions to the Borrower or a
Restricted Subsidiary;
(c) sales of accounts receivable (i) that are delinquent or
the amount of which is in dispute, in each case in connection with the
compromise or collection thereof in the ordinary course of business,
or (ii) of any account debtor in connection with the termination,
wind-down or restructuring of the relationship with such account
debtor in the ordinary course of business;
(d) sales, transfers and dispositions of any Equity Interests
of, loans or advances to, or other investments in, any Unrestricted
Subsidiary; and
(e) sales, transfers and other dispositions of assets (other
than Equity Interests in a Subsidiary) that are not permitted by any
other clause of this Section; PROVIDED that the aggregate fair market
value of all assets sold, transferred or otherwise disposed of in
reliance upon this clause (e) shall not exceed $30,000,000 in the
aggregate during the term of this Agreement;
PROVIDED that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by clause (b) above) shall be made for fair
value and for at least 80% cash consideration and PROVIDED, FURTHER, that the
aggregate non-cash consideration received for all sales, transfers, leases and
other dispositions permitted hereby shall not exceed $10,000,000.
SECTION 6.06. SALE AND LEASEBACK TRANSACTIONS. The Borrower
will not, and will not permit any of its Restricted Subsidiaries to, enter into
any arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
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or hereinafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred, except for any such sale of any fixed or
capital assets that is made for cash consideration in an amount not less than
the cost of such fixed or capital asset and is consummated within 90 days after
the Borrower or such Subsidiary acquires or completes the construction of such
fixed or capital asset.
SECTION 6.07. HEDGING AGREEMENTS. The Borrower will not, and
will not permit any of its Restricted Subsidiaries to, enter into any Hedging
Agreement, other than (a) Hedging Agreements required by Section 5.14 and (b)
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Restricted Subsidiary is exposed in
the conduct of its business or the management of its liabilities.
SECTION 6.08. RESTRICTED PAYMENTS; CERTAIN PAYMENTS OF
INDEBTEDNESS. (a) Other than the payment of amounts payable under the
Acquisition Documents as consideration for the Acquisition (or paying a
dividend to Holdings to enable Holdings to make any such payment), neither
Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except (i) Holdings may declare and pay dividends with respect to its capital
stock payable solely in additional shares of its common stock, (ii)
Subsidiaries may declare and pay dividends ratably with respect to their
capital stock, (iii) Holdings may make Restricted Payments (and the Borrower
may make Restricted Payments to Holdings to enable Holdings to make such
Restricted Payments), not exceeding $2,000,000 during any fiscal year, pursuant
to and in accordance with stock option plans or other benefit plans for
management or employees of the Borrower and its Subsidiaries, (iv) the Borrower
may pay dividends to Holdings at such times and in such amounts, not exceeding
$2,000,000 during any fiscal year, as shall be necessary to permit Holdings to
pay reasonable administrative expenses incurred in the ordinary course of its
business, (v) Holdings may make Restricted Payments (and the Borrower may make
Restricted Payments to Holdings to enable Holdings to make such Restricted
Payments), not exceeding $5,000,000 in any fiscal year and not exceeding
$10,000,000 in the aggregate during the term of this Agreement, to repurchase
Equity Interests in Holdings owned by employees or former employees of the
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Borrower or the Subsidiaries pursuant to the terms of agreements (including
employment agreements) with such employees, (vi) the Borrower may make
Restricted Payments to Holdings to enable Holdings to pay management fees
pursuant to the Management Agreement that are permitted to be paid pursuant to
clause (c) of Section 6.09, (vii) the Borrower may make Restricted Payments to
Holdings at such times and in such amounts (but not prior to the fifth
anniversary of the date of issuance of the Holdings Discount Notes) as shall be
necessary to enable Holdings (A) on the fifth anniversary of the date of
issuance of the Holdings Discount Notes, to redeem the amount of Holdings
Discount Notes equal to the Holdings Discount Notes Redemption Amount and (B)
after such fifth anniversary, to make interest payments in cash on such
Holdings Discount Notes as and when due; PROVIDED, that at the time of and
after giving effect to each Restricted Payment made in reliance upon this
clause (vii), the Borrower and its Restricted Subsidiaries are in compliance
with the covenants contained in Sections 6.12 and 6.13 as of the end of the
most recent fiscal quarter for which financial statements are available
assuming that Total Debt or Total Senior Debt, as applicable, as of the last
day of such quarter had been equal to the Total Debt or Total Senior Debt, as
applicable, as of the date of such Restricted Payment after giving effect to
such Restricted Payment, and (viii) Holdings and the Borrower may make
additional Restricted Payments for the purposes contemplated by clauses (iii)
through (v) of this Section 6.08(a) in an aggregate amount not to exceed
$5,000,000 during the term of this Agreement; PROVIDED that any Restricted
Payment otherwise permitted by clause (iii) and clauses (v) through (viii)
above shall not be permitted if at the time thereof and after giving effect
thereto a Default shall have occurred and be continuing; PROVIDED FURTHER, that
the provisions of clauses (iii) through (viii) above that permit certain
dividends or other Restricted Payments to Holdings shall not be construed to
permit the payment of dividends or other Restricted Payments to any other
holder of Equity Interests of the Borrower.
(b) Neither Holdings nor the Borrower will, nor will they
permit any Restricted Subsidiary to, make or agree to pay or make, directly or
indirectly, any payment or other distribution (whether in cash, securities or
other property) of or in respect of principal of or interest on any
Indebtedness, or any payment or other distribution (whether in cash, securities
or other property), including any sinking fund or similar deposit, on account
of the purchase, redemption, retirement, acquisition, cancelation or
termination of any Indebtedness, except:
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(i) payment of Indebtedness created under the Loan Documents;
(ii) payment of regularly scheduled interest and principal
payments as and when due in respect of any Indebtedness, other than
payments in respect of the Subordinated Debt or Existing Notes
prohibited by the subordination provisions thereof;
(iii) refinancings of Indebtedness to the extent permitted by
Section 6.01;
(iv) payment of secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets
securing such Indebtedness;
(v) repayment of all amounts outstanding under the Existing
Credit Agreement and purchase of the Existing Notes accepted for
payment pursuant to the Debt Tender Offer, in each case on the
Effective Date; and
(vi) redemption of any Existing Notes that remain outstanding
after consummation of the Debt Tender Offer.
SECTION 6.09. TRANSACTIONS WITH AFFILIATES. Neither Holdings
nor the Borrower will, nor will they permit any Restricted Subsidiary to, sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) transactions that do not
involve Holdings and are at prices and on terms and conditions not less
favorable to the Borrower or such Restricted Subsidiary than could be obtained
on an arm's-length basis from unrelated third parties, (b) transactions between
or among the Borrower and the Subsidiary Loan Parties not involving any other
Affiliate, (c) to pay management fees in accordance with the Management
Agreement in an aggregate amount not to exceed $750,000 in any fiscal year and
(d) any Restricted Payment permitted by Section 6.08.
SECTION 6.10. RESTRICTIVE AGREEMENTS. Neither Holdings nor
the Borrower will, nor will they permit any Restricted Subsidiary to, directly
or indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of Holdings, the Borrower or any Restricted Subsidiary to create, incur
or permit to exist any Lien upon any of its property or assets, or (b) the
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94
ability of any Restricted Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to the Borrower or any other Restricted Subsidiary or to Guarantee
Indebtedness of the Borrower or any other Restricted Subsidiary; PROVIDED that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document or Subordinated Debt Document, (ii) the foregoing shall
not apply to restrictions and conditions existing on the date hereof identified
on Schedule 6.10 (but shall apply to any amendment or modification expanding
the scope of any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases
restricting the assignment thereof.
SECTION 6.11. AMENDMENT OF MATERIAL DOCUMENTS. Neither
Holdings nor the Borrower will, nor will they permit any Subsidiary to, amend,
modify or waive any of its rights under (a) any Subordinated Debt Document, (b)
its certificate of incorporation, by-laws or other organizational documents,
(c) the Existing Notes Indenture other than as contemplated by the Debt Tender
Offer, (d) the LLC Agreement, (e) the Management Agreement and (f) the Holdings
Discount Notes Documents, in each case in any manner that is adverse to the
interests of the Lenders or the Loan Parties.
SECTION 6.12. LEVERAGE RATIO. The Borrower will not permit
the Leverage Ratio as of the last day of any fiscal quarter ending on any date
during any period set forth below to exceed the ratio set forth below opposite
such period:
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95
PERIOD RATIO
------ -----
September 27, 1999 to and
including March 31, 2000 6.50 to 1.00
April 1, 2000 to and including
September 30, 2000 6.25 to 1.00
October 1, 2000 to and including
March 31, 2001 5.75 to 1.00
April 1, 2001 to and including
March 31, 2002 5.25 to 1.00
April 1, 2002 to and including
March 31, 2003 4.75 to 1.00
April 1, 2003 to and including
March 31, 2004 4.25 to 1.00
Thereafter 4.00 to 1.00
SECTION 6.13. SENIOR LEVERAGE RATIO. The Borrower will not
permit the Senior Leverage Ratio as of the last day of any fiscal quarter
ending on any date during any period set forth below to exceed the ratio set
forth below opposite such period:
PERIOD RATIO
------ -----
September 27, 1999 to and
including September 30, 2000 4.25 to 1.00
October 1, 2000 to and including
March 31, 2002 4.00 to 1.00
April 1, 2002 to and including
March 31, 2003 3.75 to 1.00
April 1, 2003 to and including
March 31, 2004 3.50 to 1.00
Thereafter 3.00 to 1.00
SECTION 6.14. CONSOLIDATED INTEREST EXPENSE COVERAGE RATIO.
The Borrower will not permit the ratio of (a) Consolidated EBITDA to (b)
Consolidated Interest Expense for any period of four consecutive fiscal
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96
quarters ending on any date during any period set forth below to be less than
the ratio set forth below opposite such period:
PERIOD RATIO
------ -----
September 27, 1999 to and
including December 31, 1999 1.50 to 1.00
January 1, 2000 to and including
June 30, 2000 1.55 to 1.00
July 1, 2000 to and including
December 31, 2000 1.65 to 1.00
January 1, 2001 to and including
June 30, 2001 1.90 to 1.00
July 1, 2001 to and including
March 31, 2002 2.00 to 1.00
April 1, 2002 to and including
March 31, 2003 2.25 to 1.00
Thereafter 2.50 to 1.00
For purposes of determining compliance with this Section 6.14, Consolidated
Interest Expense for the period of four consecutive fiscal quarters ended (i)
September 27, 1999, shall be deemed to be equal to the product of Consolidated
Interest Expense for the fiscal quarter then ended multiplied by four, (ii)
December 27, 1999, shall be deemed to be equal to the product of Consolidated
Interest Expense for the two consecutive fiscal quarters then ended multiplied
by two and (iii) March 27, 2000, shall be deemed to be equal to the product of
Consolidated Interest Expense for the three consecutive fiscal quarters then
ended multiplied by four-thirds.
SECTION 6.15. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The
Borrower will not permit the ratio of (a) Consolidated EBITDA minus Taxes paid
in cash by Holdings, the Borrower and its Restricted Subsidiaries to (b)
Consolidated Fixed Charges for any period of four consecutive fiscal quarters
ending on any date on or after September 27, 1999, to be less than 1.10 to
1.00. For purposes of determining compliance with this Section 6.15,
Consolidated Fixed Charges for the period of four consecutive fiscal quarters
ended (i) September 27, 1999, shall be deemed to be equal to the product of
Consolidated Fixed Charges for the fiscal quarter then ended multiplied by
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97
four, (ii) December 27, 1999, shall be deemed to be equal to the product of
Consolidated Fixed Charges for the two consecutive fiscal quarters then ended
multiplied by two and (iii) March 27, 2000, shall be deemed to be equal to the
product of Consolidated Fixed Charges for the three consecutive fiscal quarters
then ended multiplied by four-thirds.
SECTION 6.16. CAPITAL EXPENDITURES. The Borrower and its
Restricted Subsidiaries shall not incur or make Capital Expenditures during any
fiscal year ending on a date set forth below in excess of the amount set forth
below opposite such date:
Fiscal Year Ending Amount
------------------ ------
March 27, 2000 $17,500,000
March 26, 2001 $18,500,000
March 25, 2002 $19,000,000
March 27, 2003 and thereafter $20,000,000
PROVIDED that 50% of the unused amount of any Capital Expenditures permitted to
be made during each fiscal year and not made during such fiscal year may be
carried over and expended during the next succeeding fiscal year (and any
amount so carried over shall be deemed the first amount applied and expended
for Capital Expenditures during such next succeeding fiscal year).
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall
occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when
and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan
or any fee or any other amount (other than an amount referred to in
clause (a) of this Article) payable under this Agreement or any other
Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three Business
Days;
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(c) any representation or warranty made or deemed made by or
on behalf of Holdings, the Borrower or any Subsidiary in or in
connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or
waiver thereunder, shall prove to have been incorrect (or, in the case
of any such representation or warranty that is not qualified as to
materiality, incorrect in any material respect) when made or deemed
made;
(d) Holdings or the Borrower shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.02, 5.04
(with respect to the existence of Holdings or the Borrower) or 5.11 or
in Article VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other
than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of any Lender);
(f) Holdings, the Borrower or any Restricted Subsidiary shall
fail to make any payment of principal or interest (regardless of
amount) in respect of any Material Indebtedness, when and as the same
shall become due and payable (after giving effect to any applicable
period of grace, in the case of interest);
(g) any event or condition occurs that results in any
Material Indebtedness becoming due prior to its scheduled maturity or
that enables or permits the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause
any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; PROVIDED that this clause (g) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;
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99
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of Holdings, the Borrower or
any Restricted Subsidiary or its debts, or of a substantial part of
its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any
Restricted Subsidiary or for a substantial part of its assets, and, in
any such case, such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) Holdings, the Borrower or any Restricted Subsidiary shall
(i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any
Restricted Subsidiary or for a substantial part of its assets, (iv)
file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for
the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(j) Holdings, the Borrower or any Restricted Subsidiary shall
become unable, admit in writing its inability or fail generally to pay
its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against
Holdings, the Borrower, any Restricted Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
attach or levy upon any assets of Holdings, the Borrower or any
Restricted Subsidiary to enforce any such judgment;
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100
(l) an ERISA Event shall have occurred that, when taken
together with all other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect;
(m) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party not
to be, a valid and perfected Lien on any Collateral, with the priority
required by the applicable Security Document, except (i) as a result
of the sale or other disposition of the applicable Collateral in a
transaction permitted under the Loan Documents or (ii) as a result of
the Administrative Agent's failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it
under the Collateral Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower;
and in case of any event with respect to the Borrower described in clause (h)
or (i) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
<PAGE> 106
101
ARTICLE VIII
THE AGENTS
Each of the Lenders and the Issuing Bank hereby irrevocably
appoints The Chase Manhattan Bank as Administrative Agent and Collateral Agent
(for purposes of this Article VIII, collectively, the "AGENT") and authorizes
the Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
The bank serving as the Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with Holdings, the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Agent hereunder.
The Agent shall not have any duties or obligations except
those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that the Agent
is required to exercise in writing by the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02), and (c) except as expressly set
forth in the Loan Documents, the Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
Holdings, the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Agent by
Holdings, the Borrower or a Lender, and the Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty or
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representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered thereunder or
in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
any Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to the Agent.
The Agent shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
The Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Agent. The Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor
Agent as provided in this paragraph, the Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with
the Borrower, to appoint a successor. If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint
a successor Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
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Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Agent's resignation
hereunder, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Agent.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related
agreement or any document furnished hereunder or thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to Holdings or the Borrower, to it at American Media
Operations, Inc., 600 East Coast Avenue, Lantana, Florida 33464-0002,
Attention of Richard W. Pickert and Peter A. Nelson (Telecopy No.
(561) 540-1018), with a copy to EMP Group L.L.C., 65 East 55th Street,
New York, New York 10022, Attention of Austin M. Beutner (Telecopy No.
(212) 857-3122);
(b) if to the Administrative Agent, to The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Janet Belden (Telecopy
No. (212) 552-5658), with a copy to The Chase Manhattan Bank, 270 Park
Avenue, New York, New York 10017, Attention of Ed deForest (Telecopy
No. (212) 270-5120);
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(c) if to the Issuing Bank, to it at The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Janet Belden (Telecopy
No. (212) 552-5658);
(d) if to the Swingline Lender, to it at The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Janet Belden (Telecopy
No. (212) 552-5658); and
(e) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by
the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender
in exercising any right or power hereunder or under any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of any Loan Document or consent to any departure by any Loan
Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
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105
or issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, the Collateral Agent,
any Lender or the Issuing Bank may have had notice or knowledge of such Default
at the time.
(b) Neither this Agreement nor any other Loan Document nor
any provision hereof or thereof may be waived, amended or modified except, in
the case of this Agreement, pursuant to an agreement or agreements in writing
entered into by Holdings, the Borrower and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Loan Party or Loan Parties that
are parties thereto, in each case with the consent of the Required Lenders;
PROVIDED that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the maturity of any Loan, or any scheduled date of
payment of the principal amount of any Term Loan under Section 2.10, or the
required date of reimbursement of any LC Disbursement, or any date for the
payment of any interest or fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration
of any Commitment, without the written consent of each Lender affected thereby,
(iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (v) change any of the provisions of this Section or the percentage set
forth in the definition of "Required Lenders" or any other provision of any
Loan Document specifying the number or percentage of Lenders (or Lenders of any
Class) required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such Class, as the case may be), (vi) release
all or any substantial part of the Guarantees made by Holdings and the
Subsidiary Loan Parties under the Guarantee Agreement (except as expressly
provided in the Guarantee Agreement), or limit their liability in respect of
all or any substantial part of such Guarantees, without the written consent of
each Lender, (vii) release all or any substantial part of the Collateral from
the Liens of the Security Documents, without the written consent of each
Lender, (viii) change any provisions of any Loan Document in a manner that by
its terms adversely affects the rights in respect of payments due to Lenders
holding Loans of any Class differently than those holding Loans of any other
Class, without the written consent of Lenders holding a majority in interest of
the outstanding Loans and unused Commitments of each adversely affected Class
or (ix) change the rights of the Tranche B Lenders to decline mandatory
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106
prepayments as provided in Section 2.11, without the written consent of Tranche
B Lenders holding a majority of the outstanding Tranche B Loans; PROVIDED
FURTHER that (A) no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent, the Collateral Agent, the Issuing
Bank or the Swingline Lender without the prior written consent of the
Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline
Lender, as the case may be, and (B) any waiver, amendment or modification of
this Agreement that by its terms affects the rights or duties under this
Agreement of the Revolving Lenders (but not the Tranche A Lenders and Tranche B
Lenders), the Tranche A Lenders (but not the Revolving Lenders and Tranche B
Lenders) or the Tranche B Lenders (but not the Revolving Lenders and Tranche A
Lenders) may be effected by an agreement or agreements in writing entered into
by Holdings, the Borrower and requisite percentage in interest of the affected
Class of Lenders. Notwithstanding the foregoing, any provision of this
Agreement may be amended by an agreement in writing entered into by the
Borrower, the Required Lenders and the Administrative Agent (and, if their
rights or obligations are affected thereby, the Issuing Bank and the Swingline
Lender) if (i) by the terms of such agreement the Commitment of each Lender not
consenting to the amendment provided for therein shall terminate upon the
effectiveness of such amendment and (ii) at the time such amendment becomes
effective, each Lender not consenting thereto receives payment in full of the
principal of and interest accrued on each Loan made by it and all other amounts
owing to it or accrued for its account under this Agreement.
SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Collateral Agent and their Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent and the Collateral Agent, in connection with the syndication of the
credit facilities provided for herein, the preparation and administration of
the Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the Administrative
Agent, the Collateral Agent, the Issuing Bank or any Lender, including the
fees, charges and disbursements of any counsel for the Administrative Agent,
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the Collateral Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with the Loan Documents,
including its rights under this Section, or in connection with the Loans made
or Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agent,
the Collateral Agent, the Issuing Bank and each Lender, and each Related Party
of any of the foregoing Persons (each such Person being called an "INDEMNITEE")
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of any Loan Document or any other agreement or
instrument contemplated hereby, the performance by the parties to the Loan
Documents of their respective obligations thereunder or the consummation of the
Transactions or any other transactions contemplated hereby, (ii) any Loan or
Letter of Credit or the use of the proceeds therefrom (including any refusal by
the Issuing Bank to honor a demand for payment under a Letter of Credit if the
documents presented in connection with such demand do not strictly comply with
the terms of such Letter of Credit), (iii) any actual or alleged presence or
release of Hazardous Materials on or from any Mortgaged Property or any other
property currently or formerly owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses resulted from the gross negligence or
wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent, the Collateral Agent,
the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent, the
Collateral Agent, the Issuing Bank or the Swingline Lender, as the case may be,
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108
such Lender's pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
PROVIDED that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent, the Collateral Agent, the Issuing Bank or the
Swingline Lender in its capacity as such. For purposes hereof, a Lender's "pro
rata share" shall be determined based upon its share of the sum of the total
Revolving Exposures, outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, neither
Holdings nor the Borrower shall assert, and each hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable
promptly after written demand therefor.
SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit), except
that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); PROVIDED that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender
or a Related Fund of a Lender, each of the Borrower and the Administrative
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Agent (and, in the case of an assignment of all or a portion of a Revolving
Commitment or any Lender's obligations in respect of its LC Exposure or
Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or a Related Fund of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, (iii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement, except that this clause (iii) shall not be
construed to prohibit the assignment of a proportionate part of all the
assigning Lender's rights and obligations in respect of one Class of
Commitments or Loans, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and PROVIDED FURTHER that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default
under clause (h) or (i) of Article VII has occurred and is continuing. Subject
to acceptance and recording thereof pursuant to paragraph (d) of this Section,
from and after the effective date specified in each Assignment and Acceptance
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e)
of this Section.
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(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in the City of New
York a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the "Register").
The entries in the Register shall be conclusive, and Holdings, the Borrower,
the Administrative Agent, the Issuing Bank and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrower,
the Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
PROVIDED 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 and (iii) Holdings, the
Borrower, the Administrative Agent, the Issuing Bank 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. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce the Loan Documents and
to approve any amendment, modification or waiver of any provision of the Loan
Documents; PROVIDED that such agreement or instrument may provide that such
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Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any
greater payment under Section 2.15 or 2.17 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.17 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; PROVIDED that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
SECTION 9.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Administrative
Agent, the Collateral Agent, the Issuing Bank or any Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect
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as long as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to
fees payable to the Administrative Agent and Collateral Agent constitute the
entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
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special, time or demand, provisional or final) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement or any other Loan Document
shall affect any right that the Administrative Agent, the Collateral Agent, the
Issuing Bank or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement or any other Loan Document against Holdings, the
Borrower or its properties in the courts of any jurisdiction.
(c) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
<PAGE> 119
114
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement or any other Loan Document will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. CONFIDENTIALITY. Each of the Administrative
Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates' and its Related Funds' directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), or to any direct or indirect contractual
counterparty in swap agreements or such contractual counterparty's professional
advisor (so long as such contractual counterparty or professional advisor
agrees to be bound by the provisions of this Section 9.12), (b) to the extent
requested by any regulatory authority, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
<PAGE> 120
115
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis from a source other
than Holdings or the Borrower. For the purposes of this Section, "INFORMATION"
means all information received from Holdings or the Borrower relating to
Holdings or the Borrower or its business, other than any such information that
is available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by Holdings or the Borrower. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.13. INTEREST RATE LIMITATION. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated
as interest on such Loan under applicable law (collectively the "CHARGES"),
shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be
contracted for, charged, taken, received or reserved by the Lender holding such
Loan in accordance with applicable law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.
<PAGE> 121
116
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
AMERICAN MEDIA, INC.,
By: /s/ Peter A. Nelson
-----------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
AMERICAN MEDIA OPERATIONS, INC.,
By: /s/ Peter A. Nelson
-----------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
By: /s/ Marian Schulman
-----------------------------------
Name: Marian Schulman
Title: Vice President
<PAGE> 122
117
CAISSE DE DEPOT ET PLACEMENT
DU QUEBEC,
By: /s/ Normand Provost
-----------------------------------
Name: Normand Provost
Title: Coordinating Vice President
By: /s/ Ginette Depelteau
-----------------------------------
Name: Ginette Depelteau
Title: Director and Corporate
Secretary
THE BANK OF NEW YORK,
By: /s/ Edward F. Ryan, Jr.
-----------------------------------
Name: Edward F. Ryan, Jr.
Title: Senior Vice President
SUMMIT BANK,
By: /s/ Henry G. Kush, Jr.
-----------------------------------
Name: Henry G. Kush, Jr.
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION,
By: /s/ Robert M. Kadlick
-----------------------------------
Name: Robert M. Kadlick
Title: Duly Authorized Signatory
HELLER FINANCIAL, INC.,
By: /s/ Robert M. Reeg
-----------------------------------
Name: Robert M. Reeg
Title: Assistant Vice President
<PAGE> 123
118
CREDIT AGRICOLE INDOSUEZ,
By: /s/ Craig Welch
-----------------------------------
Name: Craig Welch
Title: First Vice President
By: /s/ Sarah McClintock
-----------------------------------
Name: Sarah McClintock
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK AS TRUSTEE FOR A
COMINGLED TRUST (MGT HIGH
YIELD FUND),
By: /s/ David T. Ellis
-----------------------------------
Name: David T. Ellis
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK AS TRUSTEE FOR A
COMINGLED TRUST (SPECIAL
SITUATION FUND),
By: /s/ David T. Ellis
-----------------------------------
Name: David T. Ellis
Title: Vice President
DLJ CAPITAL FUNDING, INC.,
By: /s/ Stephen P. Hickey
-----------------------------------
Name: Stephen P. Hickey
Title: Managing Director
<PAGE> 124
119
CYPRESSTREE SENIOR FLOATING
RATE FUND
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC. AS
PORTFOLIO MANAGER,
By: /s/ Peter K. Merrill
-----------------------------------
Name: Peter K. Merrill
Title: Managing Director
NORTH AMERICAN SENIOR FLOATING
RATE FUND,
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC. AS
PORTFOLIO MANAGER,
By: /s/ Peter K. Merrill
-----------------------------------
Name: Peter K. Merrill
Title: Managing Director
CYPRESSTREE INVESTMENT FUND,
LLC,
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.,
ITS MANAGING MEMBER,
By: /s/ Peter K. Merrill
-----------------------------------
Name: Peter K. Merrill
Title: Managing Director
<PAGE> 125
120
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
AS: ATTORNEY-IN-FACT AND ON
BEHALF OF FIRST ALLMERICA
FINANCIAL LIFE INSURANCE
COMPANY AS PORTFOLIO
MANAGER,
By: /s/ Peter K. Merrill
-----------------------------------
Name: Peter K. Merrill
Title: Managing Director
KZH SHENKMAN LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH IV LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH SHOSHONE LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH APALOOSA LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE> 126
121
KZH SOLEIL-2 LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH WATERSIDE LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH STERLING LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH RIVERSIDE LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH CYPRESSTREE-1 LLC,
By: /s/ Virginia Conway
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE> 127
122
TRAVELERS CORPORATE LOAN FUND, INC.,
BY: TRAVELERS ASSET
MANAGEMENT INTERNATIONAL
CORPORATION
By: /s/ John W. Petchler
-----------------------------------
Name: John W. Petchler
Title: Second Vice President
THE TRAVELERS INSURANCE COMPANY,
By: /s/ John W. Petchler
-----------------------------------
Name: John W. Petchler
Title: Second Vice President
SEQUILS I, LTD.
BY: TCW ADVISORS, INC. AS ITS
COLLATERAL MANAGER,
By: /s/ Justin L. Driscoll
-----------------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
By: /s/ Jonathan R. Insull
-----------------------------------
Name: Jonathan R. Insull
Title: Vice President
FRANKLIN FLOATING RATE TRUST,
By: /s/ Chauncey Lufkin
-----------------------------------
Name: Chauncey Lufkin
Title: Vice President
<PAGE> 128
123
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST,
By: /s/ Sheila A. Finnerty
-----------------------------------
Name: Sheila A. Finnerty
Title: Vice President
NATIONSBANK, N.A.,
By: /s/ Sean P. Bonner
-----------------------------------
Name: Sean P. Bonner
Title: Vice President
SRF TRADING, INC.,
By: /s/ Kelly C. Walker
-----------------------------------
Name: Kelly C. Walker
Title: Vice President
STEIN ROE FLOATING RATE
LIMITED LIABILITY COMPANY,
By: /s/ Brian W. Good
-----------------------------------
Name: Brian W. Good
Title: Vice President
JACKSON NATIONAL LIFE
INSURANCE COMPANY
BY: PPM AMERICA, INC., AS
ATTORNEY IN FACT, ON BEHALF OF
JACKSON NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Michael King
-----------------------------------
Name: Michael King
Title: Vice President
<PAGE> 129
124
MONUMENTAL LIFE INSURANCE
COMPANY,
By: /s/ Mary T. Pech
-----------------------------------
Name: Mary T. Pech
Title: Vice President
FLOATING RATE PORTFOLIO
BY: INVESCO SENIOR SECURED
MANAGEMENT, INC. AS
ATTORNEY IN FACT,
By: /s/ Joseph Rotondo
-----------------------------------
Name: Joseph Rotondo
Title: Authorized Signatory
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
GUARANTEE AGREEMENT dated as of May
7, 1999, among AMERICAN MEDIA, INC.
("HOLDINGS"), a Delaware corporation, each
of the subsidiaries listed on Schedule I
hereto (each such subsidiary individually,
a "SUBSIDIARY" and, collectively, the
"SUBSIDIARIES"; and each such Subsidiary
and Holdings, individually, a "GUARANTOR"
and, collectively, the "GUARANTORS") and
THE CHASE MANHATTAN BANK, a New York
banking corporation, as collateral agent
(the "COLLATERAL AGENT") for the Secured
Parties (as defined in the Security
Agreement).
Reference is made to the Credit Agreement dated as of May 7, 1999 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among American Media Operations, Inc., a Delaware corporation (the
"BORROWER"), Holdings, the lenders from time to time party thereto (the
"LENDERS") and The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Subsidiaries is a direct or indirect subsidiary
of the Borrower and acknowledges that it will derive substantial benefit from
the making of the Loans by the Lenders and the issuance of Letters of Credit by
the Issuing Bank. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit are conditioned on, among other things,
the execution and delivery by the Guarantors of a Guarantee Agreement in the
form hereof. As consideration therefor and in order to induce the Lenders to
make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. GUARANTEE. Each Guarantor unconditionally guarantees,
jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, (a) the due and punctual payment of (i) the principal of
and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Loan Parties to the Secured
Parties under the Credit Agreement and the other Loan Documents, (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Loan Parties under or pursuant to the Credit Agreement and
the other Loan Documents, (c) the due and punctual payment and performance of
all obligations of the Borrower or any other Loan Party, monetary or otherwise,
under each Hedging Agreement entered into with a counterparty that was a Lender
(or an Affiliate of a Lender) at the time such Hedging Agreement was entered
into and (d) the due and punctual payment and performance of all obligations in
respect of overdrafts and related liabilities owed to the Administrative Agent
or any of its Affiliates and arising from treasury, depositary and cash
management services in connection with any automated clearing house transfers
of funds (all the monetary and other obligations referred to in the preceding
clauses (a) through (d) being collectively called the "OBLIGATIONS"). Each
Guarantor further agrees that the Obligations may be
<PAGE> 2
2
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligation.
SECTION 2. OBLIGATIONS NOT WAIVED. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from
and protest to the Borrower of any of the Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of each Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against the Borrower or any Guarantor under the provisions
of the Credit Agreement, any other Loan Document or otherwise; (b) any
recision, waiver, amendment or modification of, or any release from any terms
or provisions of this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement or (c) the failure to perfect any security interest in, or release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party.
SECTION 3. SECURITY. Each of the Guarantors authorizes the Collateral
Agent and each of the other Secured Parties to (a) take and hold security for
the payment of this Guarantee and the Obligations and exchange, enforce, waive
and release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees, other guarantors or other
obligors.
SECTION 4. GUARANTEE OF PAYMENT. Each Guarantor further agrees that
its guarantee constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Collateral Agent or any other Secured Party to any of the security held for
payment of the Obligations or to any balance of any deposit account or credit
on the books of the Collateral Agent or any other Secured Party in favor of the
Borrower or any other Person.
SECTION 5. NO DISCHARGE OR DIMINISHMENT OF GUARANTEE. The obligations
of each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment
in full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce any remedy under the Credit
Agreement, any other Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
wilful or otherwise, in the performance of the Obligations, or the failure to
perfect any security interest in, or the release of, any of the security held
by or on behalf of the Collateral Agent or any other Secured Party, or by any
other act or omission that may or might in any manner or to any extent vary the
risk of any Guarantor or that would otherwise operate as a discharge of each
Guarantor as a matter of law or equity (other than the indefeasible payment in
full in cash of all the Obligations).
SECTION 6. DEFENSES OF BORROWER WAIVED. To the fullest extent
permitted by applicable law, each of the Guarantors waives any defense based on
or arising out of any defense of the Borrower or the unenforceability of the
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower, other than the final and indefeasible payment
in full in cash of the Obligations. The Collateral Agent and the other Secured
Parties may, at their election, foreclose on any security held by one or more
of them by one or more judicial or nonjudicial sales, accept an assignment of
any such security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with the Borrower or any other
guarantor or exercise any other right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Obligations have
been fully, finally and indefeasibly
<PAGE> 3
3
paid in cash. Pursuant to applicable law, each of the Guarantors waives any
defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor or guarantor, as the case may be, or any
security.
SECTION 7. AGREEMENT TO PAY; SUBORDINATION. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Collateral
Agent or such other Secured Party as designated thereby in cash the amount of
such unpaid Obligations. Upon payment by any Guarantor of any sums to the
Collateral Agent or any Secured Party as provided above, all rights of such
Guarantor against the Borrower arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all the Obligations. In addition, any
indebtedness of any Loan Party now or hereafter held by any Guarantor is hereby
subordinated in right of payment to the prior payment in full of the
Obligations, PROVIDED that so long as no Default exists or is continuing, any
Loan Party may repay indebtedness of such Loan Party held by any other Loan
Party without regard to such subordination. If any amount shall erroneously be
paid to any Guarantor on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Secured
Parties and shall forthwith be paid to the Collateral Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of the Loan Documents.
SECTION 8. INFORMATION. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon the
risk of nonpayment of the Obligations and the nature, scope and extent of the
risks that such Guarantor assumes and incurs hereunder, and agrees that none of
the Collateral Agent or the other Secured Parties will have any duty to advise
any of the Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct.
SECTION 10. TERMINATION. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend under the Credit Agreement, the L/C
Exposure has been reduced to zero and the Issuing Bank has no further
obligation to issue Letters of Credit under the Credit Agreement and (b) shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of the Borrower, any Guarantor or otherwise.
SECTION 11. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS. Whenever
in this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the Guarantors that are
contained in this Agreement shall bind and inure to the benefit of each party
hereto and their respective successors and assigns. This Agreement shall become
effective as to any Guarantor when a counterpart hereof executed on behalf of
such Guarantor shall have been delivered to the Collateral Agent, and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Guarantor and the Collateral Agent
and their respective successors and assigns, and shall inure to the benefit of
such Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the
right to assign its rights or obligations hereunder or any interest herein (and
any such attempted assignment shall be void). In the event that a
<PAGE> 4
4
Guarantor (a) is designated as an Unrestricted Subsidiary in accordance with
the terms of the Credit Agreement or (b) ceases to be a Subsidiary pursuant to
a transaction permitted under the Loan Documents, such Guarantor shall be
released from its obligations under this Agreement without further action. This
Agreement shall be construed as a separate agreement with respect to each
Guarantor and may be amended, modified, supplemented, waived or released with
respect to any Guarantor without the approval of any other Guarantor and
without affecting the obligations of any other Guarantor hereunder.
SECTION 12. WAIVERS; AMENDMENT. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors with respect to which such waiver, amendment or modification
relates and the Collateral Agent, subject to any consent required in accordance
with Section 9.02 of the Credit Agreement.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. NOTICES. All communications and notices hereunder shall be
in writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it in
care of the Borrower at the address set forth in the Credit Agreement.
SECTION 15. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants,
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Loan Document is
outstanding and unpaid and as long as the Commitments have not been terminated
or the L/C Exposure does not equal zero.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single
<PAGE> 5
5
contract, and shall become effective as provided in Section 11. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 17. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
SECTION 20. ADDITIONAL GUARANTORS. Pursuant to Section 5.12 of the
Credit Agreement, each Subsidiary Loan Party of the Borrower that was not in
existence or not a Subsidiary Loan Party on the date of the Credit Agreement
and each Unrestricted Subsidiary that is designated as a Restricted Subsidiary
is required to enter into this Agreement as a Guarantor upon becoming a
Subsidiary Loan Party. Upon execution and delivery after the date hereof by the
Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1,
such Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
<PAGE> 6
6
SECTION 21. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Secured Party is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other Indebtedness at any time owing by such
Secured Party to or for the credit or the account of any Guarantor against any
or all the obligations of such Guarantor now or hereafter existing under this
Agreement and the other Loan Documents held by such Secured Party, irrespective
of whether or not such Secured Party shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be
unmatured. The rights of each Secured Party under this Section 21 are in
<PAGE> 7
7
addition to other rights and remedies (including other rights of setoff) which
such Secured Party may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN MEDIA, INC.,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
EACH OF THE SUBSIDIARIES LISTED ON
SCHEDULE I HERETO,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK, as
Collateral Agent,
By: /s/ Marian Schulman
------------------------------------
Name: Marian Schulman
Title: Vice President
<PAGE> 8
8
Schedule I to the
Guarantee Agreement
GUARANTORS
American Media Marketing, Inc.
Biocide, Inc.
Country Weekly, Inc.
Distribution Services, Inc.
Fairview Printing, Inc.
Frontline Marketing, Inc.
Health Xtrak, Inc.
Marketing Services, Inc.
NDSI, Inc.
National Enquirer, Inc.
Retail Marketing Network Inc.
SOM Publishing, Inc.
Star Editorial, Inc.
Weekly World News, Inc.
<PAGE> 9
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. [ ] dated as of , to the
Guarantee Agreement dated as of May 7, 1999, among AMERICAN
MEDIA, INC., a Delaware corporation ("HOLDINGS"), each of the
subsidiaries listed on Schedule I thereto (each such subsidiary
individually, a "SUBSIDIARY" and, collectively, the
"SUBSIDIARIES"; and each such Subsidiary and Holdings,
individually, a "GUARANTOR" and, collectively, the "GUARANTORS"),
and THE CHASE MANHATTAN BANK, a New York banking corporation, as
collateral agent (the "COLLATERAL AGENT") for the Secured Parties
(as defined in the Security Agreement).
A. Reference is made to the Credit Agreement dated as of May 7, 1999 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among AMERICAN MEDIA OPERATIONS, INC., a Delaware corporation (the
"BORROWER"), Holdings, the lenders from time to time party thereto (the
"LENDERS") and The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan
Party of the Borrower that was not in existence or not a Subsidiary Loan Party
on the date of the Credit Agreement and each Unrestricted Subsidiary that is
designated as a Restricted Subsidiary is required to enter into the Guarantee
Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 20 of
the Guarantee Agreement provides that additional Subsidiaries of the Borrower
may become Guarantors under the Guarantee Agreement by execution and delivery
of an instrument in the form of this Supplement. The undersigned Subsidiary of
the Borrower (the "NEW GUARANTOR") is executing this Supplement in accordance
with the requirements of the Credit Agreement to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to make additional Loans and
the Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Guarantor thereunder are true and correct on and as
of the date hereof except to the extent a representation and warranty expressly
relates solely to a specific date in which case such representation and
warranty shall be true and correct on such date. Each reference to a
"Guarantor" in the Guarantee Agreement shall be deemed to include the New
Guarantor. The Guarantee Agreement is hereby incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
<PAGE> 10
2
transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the
Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its out-of-pocket expenses in connection with this Supplement, including the
fees, disbursements and other charges of counsel for the Collateral Agent.
<PAGE> 11
3
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year
first above written.
[NAME OF NEW GUARANTOR],
By:
------------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK, as Collateral
Agent,
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
INDEMNITY, SUBROGATION and
CONTRIBUTION AGREEMENT dated as of May 7,
1999, among AMERICAN MEDIA OPERATIONS,
INC., a Delaware corporation (the
"BORROWER"), each subsidiary of American
Media, Inc. listed on Schedule I hereto
(each a "SUBSIDIARY" or a "GUARANTOR") and
THE CHASE MANHATTAN BANK, a New York
banking corporation ("CHASE"), as
collateral agent (in such capacity, the
"COLLATERAL AGENT") for the Secured Parties
(as defined in the Security Agreement).
Reference is made to (a) the Credit Agreement dated as of May 7, 1999
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, American Media, Inc., the lenders from time to
time party thereto (the "LENDERS") and Chase, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), and (b) the Guarantee
Agreement dated as of May 7, 1999, among the Guarantors and the Collateral
Agent (the "GUARANTEE AGREEMENT"). Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The Guarantors have guaranteed the Obligations (as defined in
the Guarantee Agreement) pursuant to the Guarantee Agreement; the Guarantors
have granted Liens on and security interests in certain of their assets to
secure such guarantees. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit are conditioned on, among other things,
the execution and delivery by the Borrower and the Guarantors of an agreement
in the form hereof.
Accordingly, the Borrower, each Guarantor and the Collateral Agent
agree as follows:
SECTION 1. INDEMNITY AND SUBROGATION. In addition to all such rights
of indemnity and subrogation as the Guarantors may have under applicable law
(but subject to Section 3), the Borrower agrees that (a) in the event a payment
shall be made by any Guarantor under the Guarantee Agreement, the Borrower
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the Person to whom such payment
shall have been made to the extent of such payment and (b) in the event any
assets of any Guarantor shall be sold pursuant to any Security Document to
satisfy a claim of any Secured Party, the Borrower shall indemnify such
Guarantor in an amount equal to the greater of the book value or the fair
market value of the assets so sold.
SECTION 2. CONTRIBUTION AND SUBROGATION. Each Guarantor (a
"CONTRIBUTING GUARANTOR") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Guarantor under the Guarantee Agreement or
assets of any other Guarantor shall be sold pursuant to any Security Document
to satisfy a claim of any Secured Party and such other Guarantor (the "CLAIMING
GUARANTOR") shall not have been fully indemnified by the Borrower as provided
in Section 1, the Contributing Guarantor shall indemnify the Claiming
Guarantor in an amount equal to the amount of such payment or the greater of
the book value or the fair market value of such assets, as the case may be, in
each case multiplied by a fraction of which the numerator shall be the net
worth of the Contributing Guarantor on the date hereof and the denominator
shall be the aggregate net worth of all the Guarantors on the date hereof (or,
in the case of any Guarantor becoming a party hereto pursuant to Section 12,
the date of the Supplement hereto executed and delivered by such Guarantor).
Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant
to this Section 2 shall be subrogated to the rights of such Claiming Guarantor
under Section 1 to the extent of such payment.
<PAGE> 2
2
SECTION 3. SUBORDINATION. Notwithstanding any provision of this
Agreement to the contrary, all rights of each of the Guarantors under Sections
1 and 2 and all other rights of each of the Guarantors in respect of indemnity,
contribution or subrogation from any other Loan Party under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of all Obligations which are then due and payable whether at maturity, by
acceleration or otherwise. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 1 and 2 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its
obligations hereunder, and each Guarantor shall remain liable for the full
amount of the obligations of such Guarantor hereunder.
SECTION 4. TERMINATION. This Agreement shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, and so long as the L/C Exposure has not been
reduced to zero, the Issuing Bank is still obligated to issue Letters of Credit
under the Credit Agreement and any of the Commitments under the Credit
Agreement have not been terminated, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or any Guarantor upon the bankruptcy or reorganization of the Borrower, any
Guarantor or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. NO WAIVER; AMENDMENT. (a) No failure on the part of the
Collateral Agent or any Guarantor to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the
Collateral Agent or any Guarantor preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided
by law. None of the Collateral Agent and the Guarantors shall be deemed to have
waived any rights hereunder unless such waiver shall be in writing and signed
by such parties.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Borrower, the Guarantors and the Collateral Agent, subject to any consent
required in accordance with Section 9.02 of the Credit Agreement.
SECTION 7. NOTICES. All communications and notices hereunder shall be
in writing and given as provided in the Guarantee Agreement and addressed as
specified therein.
SECTION 8. BINDING AGREEMENT; ASSIGNMENTS. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the parties that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
and assigns. Neither the Borrower nor any Guarantor may assign or transfer any
of its rights or obligations hereunder (and any such attempted assignment or
transfer shall be void) without the consent required in accordance with Section
9.02 of the Credit Agreement. Notwithstanding the foregoing, at the time any
Guarantor is released from its obligations under the Guarantee Agreement in
accordance with such Guarantee Agreement and the Credit Agreement, such
Guarantor will cease to have any rights or obligations under this Agreement.
SECTION 9. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants and
agreements made by the Borrower and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with
this Agreement or the other Loan Documents shall be considered to have been
relied upon by the Collateral Agent, the other Secured Parties and each
Guarantor and shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit by the Issuing Bank and shall continue in
full force and effect as long as the principal of or any accrued interest on
any Loans or any other fee or amount payable under the
<PAGE> 3
3
Credit Agreement or this Agreement or under any of the other Loan Documents is
outstanding and unpaid and as long as the Commitments have not been terminated
or the L/C Exposure does not equal zero.
(b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as
such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10. COUNTERPARTS. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall be effective with
respect to any Guarantor when a counterpart bearing the signature of such
Guarantor shall have been delivered to the Collateral Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
SECTION 11. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 12. ADDITIONAL GUARANTORS. Pursuant to Section 5.12 of the
Credit Agreement, each Subsidiary Loan Party of the Borrower that was not in
existence or not a Subsidiary Loan Party on the date of the Credit Agreement
and each Unrestricted Subsidiary that is designated as a Restricted Subsidiary
is required to enter into the Guarantee Agreement as a Guarantor upon becoming
a Subsidiary Loan Party. Upon execution and delivery, after the date hereof, by
the Collateral Agent and such a Subsidiary of an instrument in the form of
Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder with the
same force and effect as if originally named as a Guarantor hereunder. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of any Guarantor
hereunder.
<PAGE> 4
4
The rights and obligations of each Guarantor hereunder shall remain in full
force and effect notwithstanding the addition of any new Guarantor as a party
to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date first appearing
above.
AMERICAN MEDIA OPERATIONS, INC.,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President
and Chief Financial Officer
EACH OF THE OTHER SUBSIDIARIES
LISTED ON SCHEDULE I HERETO, as a
Guarantor,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executivie Vice President
and Chief Financial Officer
THE CHASE MANHATTAN BANK, as
Collateral Agent,
By: /s/ Marian Schulman
------------------------------------
Name: Marian Schulman
Title: Vice President
<PAGE> 5
5
Schedule I to the
Indemnity, Subrogation and
Contribution Agreement
SUBSIDIARY OBLIGORS
American Media Marketing, Inc.
Biocide, Inc.
Country Weekly, Inc.
Distribution Services, Inc.
Fairview Printing, Inc.
Frontline Marketing, Inc.
Health Xtra, Inc.
Marketing Services, Inc.
NDSI, Inc.
National Enquirer, Inc.
Retail Marketing Newwork Inc.
SOM Publishing, Inc.
Star Editorial, Inc.
Weekly World News, Inc.
<PAGE> 6
Annex 1 to the
Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the
Indemnity, Subrogation and Contribution Agreement dated as of
May 7, 1999 (as the same may be amended, supplemented or
otherwise modified from time to time, the "INDEMNITY,
SUBROGATION AND CONTRIBUTION AGREEMENT"), among AMERICAN MEDIA
OPERATIONS, INC., a Delaware corporation (the "BORROWER"), each
subsidiary of American Media, Inc. listed on Schedule I thereto
(each, a "SUBSIDIARY" or a "GUARANTOR"), and THE CHASE MANHATTAN
BANK, a New York banking corporation ("CHASE"), as collateral
agent (the "COLLATERAL AGENT") for the Secured Parties (as
defined in the Security Agreement).
A. Reference is made to (a) the Credit Agreement dated as of May 7, 1999
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, American Media, Inc., the lenders from time to
time party thereto (the "LENDERS") and Chase, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), and (b) the Guarantee
Agreement dated as of May 7, 1999, among the Guarantors and the Collateral
Agent (the "GUARANTEE AGREEMENT").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12
of the Credit Agreement, each Subsidiary Loan Party of the Borrower that was
not in existence or not a Subsidiary Loan Party on the date of the Credit
Agreement and each Unrestricted Subsidiary that is designated as a Restricted
Subsidiary is required to enter into the Indemnity, Subrogation and
Contribution Agreement as a Guarantor upon becoming a Subsidiary Loan Party.
Section 12 of the Indemnity, Subrogation and Contribution Agreement provides
that additional Subsidiaries of the Borrower may become Guarantors under the
Indemnity, Subrogation and Contribution Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary (the
"NEW GUARANTOR") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
additional Loans and the Issuing Bank to issue additional Letters of Credit and
as consideration for Loans previously made and Letters of Credit previously
issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation
and Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when
<PAGE> 7
2
taken together shall constitute a single contract. This Supplement shall become
effective when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Guarantor
and the Collateral Agent. Delivery of an executed signature page to this
Supplement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not
in any way be affected or impaired. The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[NAME OF NEW GUARANTOR],
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Collateral
Agent,
By:
------------------------------------
Name:
Title:
<PAGE> 8
3
Schedule I to Supplement No. [ ]
to the Indemnity, Subrogation and
Contribution Agreement
GUARANTOR
Name Address
<PAGE> 1
EXHIBIT 4.7
EXECUTION COPY
PLEDGE AGREEMENT dated as of
[DATE], 1999, among AMERICAN MEDIA
OPERATIONS, INC., a Delaware corporation
(the "BORROWER"), AMERICAN MEDIA, INC., a
Delaware corporation ("HOLDINGS"), each
subsidiary of Holdings listed on Schedule I
hereto (each such subsidiary individually a
"SUBSIDIARY PLEDGOR" and collectively, the
"SUBSIDIARY PLEDGORS"; the Borrower,
Holdings and the Subsidiary Pledgors are
referred to herein individually as a
"PLEDGOR" and collectively as the
"PLEDGORS") and THE CHASE MANHATTAN BANK, a
New York banking corporation ("CHASE"), as
collateral agent (in such capacity, the
"COLLATERAL AGENT ") for the Secured
Parties (as defined in the Security
Agreement).
Reference is made to (a) the Credit Agreement dated as of [DATE], 1999
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, Holdings, the lenders from time to time party
thereto (the "LENDERS") and Chase, as administrative agent for the Lenders (in
such capacity, the "ADMINISTRATIVE AGENT"), and (b) the Guarantee Agreement
dated as of [DATE], 1999 (as amended, supplemented or otherwise modified from
time to time, the "GUARANTEE AGREEMENT") among Holdings, the Subsidiary
Pledgors and the Collateral Agent. Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The Guarantors have agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The obligations
of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
are conditioned upon, among other things, the execution and delivery by the
Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and
punctual payment by the Borrower of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all obligations
of the Borrower or any other Loan Party, monetary or otherwise, under each
Hedging Agreement entered into with a counterparty that was a Lender (or an
Affiliate of a Lender) at the time such Hedging Agreement was entered into and
(d) the due and punctual payment and performance of all obligations in respect
of overdrafts and related liabilities owed to the Administrative Agent or any
of its Affiliates and arising from treasury, depositary and cash management
services in connection with any automated clearing house transfers of funds
(all the monetary and other obligations referred to in the preceding clauses
(a) through (d) being referred to collectively as the "OBLIGATIONS").
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
SECTION 1. PLEDGE. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto
the Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
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Secured Parties, a security interest in all of such Pledgor's right, title and
interest in, to and under (a) the Equity Interests owned by it which are listed
on Schedule II hereto and any Equity Interests obtained in the future by such
Pledgor and the certificates representing all such Equity Interests (the
"PLEDGED INTERESTS"); PROVIDED that the Pledged Interests shall not include
more than 65% of the issued and outstanding common stock of any Foreign
Subsidiary; (b)(i) the debt securities owned by it which are listed opposite
the name of such Pledgor on Schedule II hereto, (ii) any debt securities in the
future issued to such Pledgor and (iii) the promissory notes and any other
instruments evidencing such debt securities (the "PLEDGED DEBT SECURITIES");
(c) all other property that may be delivered to and held by the Collateral
Agent pursuant to the terms hereof; (d) subject to Section 5, all payments of
principal or interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed, in respect of, in
exchange for or upon the conversion of the securities referred to in clauses
(a) and (b) above; (e) subject to Section 5, all rights and privileges of such
Pledgor with respect to the securities and other property referred to in
clauses (a), (b), (c) and (d) above; and (f) all proceeds of any of the
foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "COLLATERAL"). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the "PLEDGED SECURITIES") shall be accompanied by
stock powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all other
property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Pledgor and such
other instruments or documents as the Collateral Agent may reasonably request.
Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule II and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; SUBJECT, HOWEVER, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. DELIVERY OF THE COLLATERAL. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any Person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
thereof.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Interests represent that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
Equity Interests of the issuer with respect thereto;
(b) except for the security interest granted hereunder, such Pledgor
(i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule II, (ii) holds the same free and clear of all Liens, (iii) will
make no assignment, pledge, hypothecation or transfer of, or create or
permit to exist any security interest in or other Lien on, the
Collateral, other than pursuant hereto, and (iv) subject to Section 5,
will cause any and all Collateral, whether for value paid by such Pledgor
or otherwise, to be forthwith deposited with the Collateral Agent and
pledged or assigned hereunder;
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(c) such Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement), however arising, of all Persons
whomsoever;
(d) no consent of any other Person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity
of the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to the Collateral
Agent in accordance with this Agreement, the Collateral Agent will have a
valid and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the
Obligations;
(f) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral
Agent in the Collateral as set forth herein;
(g) all of the Pledged Interests have been duly authorized and validly
issued and are fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged Interests
is accurate and complete in all material respects as of the date hereof;
and
(i) the pledge of the Pledged Interests pursuant to this Agreement
does not violate Regulation T, U or X of the Federal Reserve Board or any
successor thereto as of the date hereof.
SECTION 4. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of any notices
or other communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
SECTION 5. VOTING RIGHTS; DIVIDENDS AND INTEREST, ETC. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms
of this Agreement, the Credit Agreement and the other Loan Documents;
PROVIDED, HOWEVER, that such Pledgor will not be entitled to exercise any
such right if the result thereof could materially and adversely affect
the rights inuring to a holder of the Pledged Securities or the rights
and remedies of any of the Secured Parties under this Agreement or the
Credit Agreement or any other Loan Document or the ability of the Secured
Parties to exercise the same.
(ii) The Collateral Agent shall execute and deliver to each Pledgor,
or cause to be executed and delivered to each Pledgor, all such proxies,
powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant
to subparagraph (i) above and to receive the cash dividends it is
entitled to receive pursuant to subparagraph (iii) below.
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(iii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, interest and principal paid on the Pledged Securities to
the extent and only to the extent that such cash dividends, interest and
principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends, interest and principal, and
all dividends, interest and principal paid or payable in cash or
otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and
all other distributions (other than distributions referred to in the
preceding sentence) made on or in respect of the Pledged Securities,
whether paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital
stock of the issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption thereof, or as a
result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise, shall be and
become part of the Collateral, and, if received by any Pledgor, shall not
be commingled by such Pledgor with any of its other funds or property but
shall be held separate and apart therefrom, shall be held in trust for
the benefit of the Collateral Agent and shall be forthwith delivered to
the Collateral Agent in the same form as so received (with any necessary
endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to dividends, interest or principal that
such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above
shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority
to receive and retain such dividends, interest or principal. All dividends,
interest or principal received by the Pledgor contrary to the provisions of
this Section 5 shall be held in trust for the benefit of the Collateral Agent,
shall be segregated from other property or funds of such Pledgor and shall be
forthwith delivered to the Collateral Agent upon demand in the same form as so
received (with any necessary endorsement). Any and all money and other property
paid over to or received by the Collateral Agent pursuant to the provisions of
this paragraph (b) shall be retained by the Collateral Agent in an account to
be established by the Collateral Agent upon receipt of such money or other
property and shall be applied in accordance with the provisions of Section 7.
After all Events of Default have been cured or waived, the Collateral Agent
shall, within five Business Days after all such Events of Default have been
cured or waived, repay to each Pledgor all cash dividends, interest or
principal (without interest), that such Pledgor would otherwise be permitted to
retain pursuant to the terms of paragraph (a)(iii) above and which remain in
such account.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and consensual rights
and powers it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii)
of this Section 5, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent, which shall have the sole and exclusive right
and authority to exercise such voting and consensual rights and powers,
PROVIDED THAT, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and during
the continuance of an Event of Default to permit the Pledgors to exercise such
rights. After all Events of Default have been cured or waived, each Pledgor
will have the right to exercise the voting and consensual rights and powers
that it would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) above.
SECTION 6. REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Collateral Agent shall deem appropriate. The Collateral Agent
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent
and agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
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Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby
waive all rights of redemption, stay, valuation and appraisal any Pledgor now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York
or its equivalent in other jurisdictions) of the Collateral Agent's intention
to make any sale of such Pledgor's Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid in full by the purchaser or purchasers thereof, but the Collateral
Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
(or, to the extent permitted by applicable law, private) sale made pursuant to
this Section 6, any Secured Party may bid for or purchase, free from any right
of redemption, stay or appraisal on the part of any Pledgor (all said rights
being also hereby waived and released), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any
Obligation then due and payable to it from such Pledgor as a credit against the
purchase price, and it may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to such
Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof, (b) the
Collateral Agent shall be free to carry out such sale pursuant to such
agreement and (c) such Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Collateral Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in full. As
an alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any
sale pursuant to the provisions of this Section 6 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-504(3) of the
Uniform Commercial Code as in effect in the State of New York or its equivalent
in other jurisdictions.
SECTION 7. APPLICATION OF PROCEEDS OF SALE. The Collateral agent shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any
of the Obligations, including all court costs and the fees and expenses
of its agents and legal counsel, the repayment of all advances made by
the Collateral Agent hereunder or under any other Loan Document on behalf
of any Pledgor and any other costs or expenses incurred in connection
with the exercise of any right or remedy hereunder or under any other
Loan Document;
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SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the date
of any such distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. REIMBURSEMENT OF COLLATERAL AGENT. (a) Each Pledgor agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights
of the Collateral Agent hereunder or (iv) the failure by such Pledgor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.03 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties
hereto of their respective obligations thereunder or the consummation of the
other transactions contemplated thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnitee is a party thereto, PROVIDED that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or wilful misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Agreement or
any other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this Section
8 shall be payable on written demand therefor and shall bear interest at the
rate specified in Section 2.13(c) of the Credit Agreement.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Collateral Agent shall have the right, upon the occurrence
and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent's name or in the name of such
Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for
any and all moneys due or to become due under and by virtue of any Collateral,
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to endorse checks, drafts, orders and other instruments for the payment of
money payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto, and
to sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; PROVIDED, HOWEVER, that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or
any property covered thereby. The Collateral Agent and the other Secured
Parties shall be accountable only for amounts actually received as a result of
the exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees or agents shall be responsible to any Pledgor
for any act or failure to act hereunder, except for their own gross negligence
or wilful misconduct.
SECTION 10. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Collateral Agent and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 9.02 of the Credit Agreement.
SECTION 11. SECURITIES ACT, ETC. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time
in effect being called the "FEDERAL SECURITIES LAWS") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Collateral Agent if the Collateral
Agent were to attempt to dispose of all or any part of the Pledged Securities,
and might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities could dispose of the same. Similarly,
there may be other legal restrictions or limitations affecting the Collateral
Agent in any attempt to dispose of all or part of the Pledged Securities under
applicable Blue Sky or other state securities laws or similar laws analogous in
purpose or effect. Each Pledgor recognizes that in light of such restrictions
and limitations the Collateral Agent may, with respect to any sale of the
Pledged Securities, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Securities for their own account, for
investment, and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges and agrees that in light of such restrictions and
limitations, the Collateral Agent, in its sole and absolute discretion, (a) may
proceed to make such a sale whether or not a registration statement for the
purpose of registering such Pledged Securities or part thereof shall have been
filed under the Federal Securities Laws and (b) may approach and negotiate with
a single potential purchaser to effect such sale. Each Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions.
In the event of any such sale, the Collateral Agent shall incur no
responsibility or liability for selling all or any part of the Pledged
Securities at a price that the Collateral Agent, in its sole and absolute
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discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid
or if more than a single purchaser were approached. The provisions of this
Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
SECTION 12. REGISTRATION, ETC. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default, if for any reason
the Collateral Agent desires to sell any of the Pledged Securities at a public
sale, it will, at any time and from time to time, upon the written request of
the Collateral Agent, use its best efforts to take or to cause the issuer of
such Pledged Securities to take such action and prepare, distribute and/or file
such documents, as are required or advisable in the reasonable opinion of
counsel for the Collateral Agent to permit the public sale of such Pledged
Securities. Each Pledgor further agrees to indemnify, defend and hold harmless
the Collateral Agent, each other Secured Party, any underwriter and their
respective officers, directors, affiliates and controlling Persons from and
against all loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of legal
counsel), and claims (including the costs of investigation) that they may incur
insofar as such loss, liability, expense or claim arises out of or is based
upon any alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto) or in any notification or
offering circular, or arises out of or is based upon any alleged omission to
state a material fact required to be stated therein or necessary to make the
statements in any thereof not misleading, except insofar as the same may have
been caused by any untrue statement or omission based upon information
furnished in writing to such Pledgor or the issuer of such Pledged Securities
by the Collateral Agent or any other Secured Party expressly for use therein.
Each Pledgor further agrees, upon such written request referred to above, to
use its best efforts to qualify, file or register, or cause the issuer of such
Pledged Securities to qualify, file or register, any of the Pledged Securities
under the Blue Sky or other securities laws of such states as may be requested
by the Collateral Agent and keep effective, or cause to be kept effective, all
such qualifications, filings or registrations. Each Pledgor will bear all costs
and expenses of carrying out its obligations under this Section 12. Each
Pledgor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 12 and that such failure would
not be adequately compensable in damages, and therefore agrees that its
agreements contained in this Section 12 may be specifically enforced.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. TERMINATION OR RELEASE. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full and the Lenders have no further commitment to lend
under the Credit Agreement, the L/C Exposure has been reduced to zero and the
Issuing Bank has no further obligation to issue Letters of Credit under the
Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any Person that is not a Pledgor,
or, upon the effectiveness of any written consent to the release of the
security interest granted hereby in any Collateral pursuant to Section 9.02 of
the Credit Agreement, the security interest in such Collateral shall be
automatically released.
<PAGE> 9
9
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at
such Pledgor's expense, all documents that such Pledgor shall reasonably
request to evidence such termination or release. Any execution and delivery of
documents pursuant to this Section 14 shall be without recourse to or warranty
by the Collateral Agent.
SECTION 15. NOTICES. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given
to it in care of the Borrower at the address set forth in the Credit Agreement.
SECTION 16. FURTHER ASSURANCES. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any
time reasonably request in connection with the administration and enforcement
of this Agreement or with respect to the Collateral or any part thereof or in
order better to assure and confirm unto the Collateral Agent its rights and
remedies hereunder.
SECTION 17. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any Pledgor that are
contained in this Agreement shall bind and inure to the benefit of its
successors and assigns. This Agreement shall become effective as to any Pledgor
when a counterpart hereof executed on behalf of such Pledgor shall have been
delivered to the Collateral Agent and a counterpart hereof shall have been
executed on behalf of the Collateral Agent, and thereafter shall be binding
upon such Pledgor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent
and the other Secured Parties, and their respective successors and assigns,
except that no Pledgor shall have the right to assign its rights hereunder or
any interest herein or in the Collateral (and any such attempted assignment
shall be void), except as expressly contemplated by this Agreement or the other
Loan Documents. In the event that a Pledgor (a) is designated as an
Unrestricted Subsidiary in accordance with the terms of the Credit Agreement or
(b) ceases to be a Subsidiary pursuant to a transaction permitted under the
Loan Documents, such Pledgor shall be released from its obligations under this
Agreement without further action. This Agreement shall be construed as a
separate agreement with respect to each Pledgor and may be amended, modified,
supplemented, waived or released with respect to any Pledgor without the
approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder.
SECTION 18. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as any Obligation remains unpaid and as long as the Commitments
have not been terminated or the L/C Exposure does not equal zero.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 10
10
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute a single contract, and shall become
effective as provided in Section 17. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 21. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
SECTION 22. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to
this Agreement or the other Loan Documents, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that, to the extent permitted by applicable law, all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against any Pledgor or
its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. ADDITIONAL PLEDGORS. Pursuant to Section 5.12 of the Credit
Agreement, each Subsidiary Loan Party that was not in existence or not a
Subsidiary Loan Party on the date of the Credit Agreement and each Unrestricted
Subsidiary that is designated as a Restricted Subsidiary is required to enter
in to this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary Loan
Party. Upon execution and delivery by the Collateral Agent and a Subsidiary of
an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary
Pledgor hereunder with the same force and effect as if originally named as a
Subsidiary Pledgor herein. The execution and delivery of such instrument shall
not require the consent of any Pledgor hereunder. The rights and obligations of
each Pledgor hereunder shall remain in full force and effect notwithstanding
the addition of any new Subsidiary Pledgor as a party to this Agreement.
<PAGE> 11
11
SECTION 25. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402
of the Uniform Commercial Code as in effect in the State of New York, each
Pledgor authorizes the Collateral Agent to file financing statements with
respect to the Collateral owned by it without the signature of such Pledgor in
such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral
Agent under this Agreement. A carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
<PAGE> 12
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN MEDIA OPERATIONS, INC.
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Executive Officer
AMERICAN MEDIA, INC.,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Executive Officer
EACH OF THE OTHER SUBSIDIARIES LISTED ON
SCHEDULE I HERETO,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Executive Officer
THE CHASE MANHATTAN BANK, as Collateral
Agent,
By: /s/ Marian Schulman
------------------------------------
Name: Marian Schulman
Title: Vice President
<PAGE> 13
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
American Media Marketing, Inc.
Biocide, Inc.
Country Weekly, Inc.
Distribution Services, Inc.
Fairview Printing, Inc.
Frontline Markerting, Inc.
Health Xtra, Inc.
Marketing Services, Inc.
NDSI, Inc.
National Enquirer, Inc.
Retail Marketing Network, Inc.
SOM Publishing, Inc.
Star Editorial, Inc.
Weekly World News, Inc.
<PAGE> 14
Schedule II to the
Pledge Agreement
CAPITAL STOCK OR OTHER EQUITY INTERESTS
<TABLE>
<CAPTION>
Stock
Outstanding % Certificate
Issuer Owner Stock Category Owned Number
------ ----- ----------- -------- ----- -----------
<S> <C> <C> <C> <C> <C>
American Media American Media 7,507.58 Common Stock 100% 3
Operations, Inc. Inc.
American Media American Media 100 Common Stock 100% 1
Marketing, Inc. Operations,Inc.
Biocide, Inc. American Media 80 Common Stock 80% 1
Operations, Inc.
Country Weekly, American Media 100 Common Stock 100% 2
Inc. Operations, Inc.
Distribution American Media 5 Common Stock 100% 3
Services, Inc. Operations, Inc.
Fairview Printing, American Media 150 Common Stock 100% 3
Inc. Operations, Inc.
Frontline Marketing American Media 800 Series A 80% A-1
Inc. Operations, Inc. Preferred Stock
Health Xtra, Inc. American Media 100 Common Stock 100% 1
Inc. Operations, Inc.
Marketing Distribution 100 Common Stock 100% 2
Services, Inc. Services, Inc.
NDSI, Inc. American Media 150 Common Stock 100% 3
Inc. Operations, Inc.
National Enquirer, American Media 958,911 Common Stock 100% 16
Inc. Operations, Inc.
Retail Marketing Distribution 801 Common Stock 100% 1
Network, Inc. Services, Inc.
SOM Publishing American Media 50,000 Common Stock 100% 1
Inc. Operations, Inc.
Star Editorial, Inc. American Media 10 Common Stock 100% 2
Operations, Inc.
Weekly World American Media 8 Common Stock 100% 5
News, Inc. Operations, Inc.
</TABLE>
Debt Securities
$ 98,000 Note due from Lili Mahlab to FrontLine Marketing, Inc. at 11.25%
due September 18, 1999.
$147,000 Note due from Jefferson Myers to FrontLine Marketing at 11.25%
due September 18, 1999.
<PAGE> 15
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the PLEDGE
AGREEMENT dated as of [DATE], 1999, among AMERICAN MEDIA
OPERATIONS, INC., a Delaware corporation (the "BORROWER"),
AMERICAN MEDIA, INC., a Delaware corporation ("HOLDINGS") and
each subsidiary listed on Schedule I thereto (each such
subsidiary individually a "SUBSIDIARY PLEDGOR" and collectively,
the "SUBSIDIARY PLEDGORS"; the Borrower, Holdings and the
Subsidiary Pledgors are referred to herein individually as a
"PLEDGOR" and collectively as the "PLEDGORS") and THE CHASE
MANHATTAN BANK, a New York banking corporation ("CHASE"), as
collateral agent (in such capacity, the "COLLATERAL AGENT") for
the Secured Parties (as defined in the Security Agreement )
A. Reference is made to (a) the Credit Agreement dated as of [DATE],
1999 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among the Borrower, Holdings, the lenders from time to
time party thereto (the "LENDERS") and Chase, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), and (b) the Guarantee
Agreement dated as of [DATE], 1999 (as amended, supplemented or otherwise
modified from time to time, the "GUARANTEE AGREEMENT") among Holdings, the
Subsidiary Pledgors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Pledge Agreement and the
Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan
Party that was not in existence or not a Subsidiary Loan Party on the date of
the Credit Agreement and each Unrestricted Subsidiary that is designated as a
Restricted Subsidiary is required to enter into the Pledge Agreement as a
Subsidiary Pledgor upon becoming a Subsidiary Loan Party. Section 24 of the
Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors
under the Pledge Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned Subsidiary (the "NEW PLEDGOR") is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to
induce the Lenders to make additional Loans and the Issuing Bank to issue
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as
follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the
New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement
with the same force and effect as if originally named therein as a Pledgor and
the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof except to the
extent a representation and warranty expressly relates solely to a specific
date in which case such representation and warranty shall be true and correct
on such date. In furtherance of the foregoing, the New Pledgor, as security for
the payment and performance in full of the Obligations (as defined in the
Pledge Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Pledgor's right, title and interest in and to the Collateral (as defined in the
Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor"
or a "Pledgor" in the Pledge Agreement shall be deemed to include the New
Pledgor. The Pledge Agreement is hereby incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
<PAGE> 16
2
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set
forth on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 15 of the Pledge Agreement. All
communications and notices hereunder to the New Pledgor shall be given to it in
care of the Borrower as set forth in the Credit Agreement.
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent
for its reasonable
<PAGE> 17
3
out-of-pocket expenses in connection with this Supplement, including the
reasonable fees, other charges and disbursements of counsel for the Collateral
Agent.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[NAME OF NEW PLEDGOR],
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Collateral
Agent,
By:
------------------------------------
Name:
Title:
<PAGE> 18
Schedule I to
Supplement No. [ ]
to the Pledge Agreement
PLEDGED SECURITIES OF THE NEW PLEDGOR
CAPITAL STOCK OR OTHER EQUITY INTERESTS
Number and Percentage
Class of Class of
Shares Shares
or Other or Other
Number of Registered Equity Equity
Issuer Certificate Owner Interests Interests
- ------ ----------- ---------- ----------- ----------
DEBT SECURITIES
Principal
Issuer Amount Date of Note Maturity Date
- ------ --------- ------------ -------------
<PAGE> 1
EXHIBIT 4.8
SECURITY AGREEMENT dated as of
May 7, 1999, among AMERICAN MEDIA
OPERATIONS, INC., a Delaware corporation
(the "BORROWER"), AMERICAN MEDIA, INC., a
Delaware corporation ("HOLDINGS"), each
subsidiary of Holdings listed on Schedule I
hereto (each such subsidiary individually a
"SUBSIDIARY" or a "GUARANTOR" and,
collectively, the "SUBSIDIARIES" or, with
Holdings, the "GUARANTORS"; the Guarantors
and the Borrower are referred to
collectively herein as the "GRANTORS") and
THE CHASE MANHATTAN BANK, a New York banking
corporation ("CHASE"), as collateral agent
(in such capacity, the "COLLATERAL AGENT")
for the Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of May 7, 1999
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, Holdings, the lenders from time to time party
thereto (the "LENDERS") and Chase, as administrative agent for the Lenders (in
such capacity, the "ADMINISTRATIVE AGENT") and (b) the Guarantee Agreement
dated as of May 7, 1999 (as amended, supplemented or otherwise modified from
time to time, the "GUARANTEE AGREEMENT"), among the Guarantors and the
Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to guarantee, among other
things, all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to secure (a) the
due and punctual payment by the Borrower of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all obligations
of the Borrower or any other Loan Party, monetary or otherwise, under each
Hedging Agreement entered into with a counterparty that was a Lender (or an
Affiliate of a Lender) at the time such Hedging Agreement was entered into and
(d) the due and punctual payment and performance of all obligations in respect
of overdrafts and related liabilities owed to the Administrative Agent or any
of its Affiliates and arising from treasury, depositary and cash management
services in connection with any automated clearing house transfers of funds
(all the monetary and other obligations described in the preceding clauses (a)
through (d) being collectively called the "OBLIGATIONS").
Accordingly, the Grantors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
<PAGE> 2
2
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITION OF TERMS USED HEREIN. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall
have the meanings set forth in the Credit Agreement.
SECTION 1.02. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein,
the following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.
"ACCOUNTS" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"ACCOUNTS RECEIVABLE" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities
and guarantees with respect thereto, including any rights to stoppage in
transit, replevin, reclamation and resales, and all related security interests,
liens and pledges, whether voluntary or involuntary, in each case whether now
existing or owned or hereafter arising or acquired.
"COLLATERAL" shall mean all (a) Accounts Receivable, (b) Documents,
(c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash
accounts, (g) Investment Property and (h) Proceeds.
"COMMODITY ACCOUNT" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"COMMODITY CONTRACT" shall mean a commodity futures contract, an
option on a commodity futures contract, a commodity option or any other
contract that, in each case, is (a) traded on or subject to the rules of a
board of trade that has been designated as a contract market for such a
contract pursuant to the federal commodities laws or (b) traded on a foreign
commodity board of trade, exchange or market, and is carried on the books of a
Commodity Intermediary for a Commodity Customer.
"COMMODITY CUSTOMER" shall mean a Person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"COMMODITY INTERMEDIARY" shall mean (a) a Person who is registered as
a futures commission merchant under the federal commodities laws or (b) a
Person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a contract
market pursuant to federal commodities laws.
"COPYRIGHT LICENSE" shall mean any written agreement, now or hereafter
in effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"COPYRIGHTS" shall mean all of the following: (a) all copyright rights
in any work subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, and (b) all
registrations and applications for registration of any such copyright in the
United States or any other country, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office, including those listed on Schedule II.
<PAGE> 3
3
"CREDIT AGREEMENT" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"DOCUMENTS" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.
"ENTITLEMENT HOLDER" shall mean a Person identified in the records of
a Securities Intermediary as the Person having a Security Entitlement against
the Securities Intermediary. If a Person acquires a Security Entitlement by
virtue of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such
Person is the Entitlement Holder.
"EQUIPMENT" shall mean all equipment, furniture and furnishings, and
all tangible personal property similar to any of the foregoing, including
tools, parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"FINANCIAL ASSET" shall mean (a) a Security, (b) an obligation of a
Person or a share, participation or other interest in a Person or in property
or an enterprise of a Person, which is, or is of a type, dealt with in or
traded on financial markets, or which is recognized in any area in which it is
issued or dealt in as a medium for investment or (c) any property that is held
by a Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"FIXTURES" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"GENERAL INTANGIBLES" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including corporate or other business records,
indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Hedging Agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor to secure payment by an Account Debtor of any
of the Accounts Receivable.
"INTELLECTUAL PROPERTY" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions, improvements
and accessions to, and books and records describing or used in connection with,
any of the foregoing.
"INVENTORY" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing
supplies and spare parts, and all such goods that have been returned to or
repossessed by or on behalf of any Grantor.
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"INVESTMENT PROPERTY" shall mean all Securities (whether certificated
or uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of any Grantor, whether now owned or hereafter
acquired by any Grantor.
"LICENSE" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof or entered into after the date hereof, which by
their terms prohibit assignment or a grant of a security interest by such
Grantor as licensee thereunder).
"OBLIGATIONS" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"PATENT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any
invention on which a Patent, now or hereafter owned by any Grantor or which any
Grantor otherwise has the right to license, is in existence, or granting to any
Grantor any right to make, use or sell any invention on which a Patent, now or
hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.
"PATENTS" shall mean all of the following: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and pending applications in
the United States Patent and Trademark Office or any similar offices in any
other country, including those listed on Schedule IV, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the right
to make, use and/or sell the inventions disclosed or claimed therein.
"PERFECTION CERTIFICATE" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Borrower.
"PROCEEDS" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession
of any Collateral and any payment received from any insurer or other Person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of any Grantor against any third
party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by any Grantor or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"SECURED PARTIES" shall mean (a) the Lenders, (b) the Issuing Bank,
(c) the Administrative Agent, (d) the Collateral Agent, (e) each counterparty
to a Hedging Agreement entered into with the Borrower or any Loan Party if such
counterparty was a Lender (or an Affiliate of a Lender) at the time the Hedging
Agreement was entered into, (f) the beneficiaries of each indemnification
obligation undertaken by any Grantor under any Loan Document and (g) the
successors and assigns of each of the foregoing.
"SECURITIES" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
<PAGE> 5
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in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of
shares, participations, interests or obligations and (c)(i) are, or are of a
type, dealt with or traded on securities exchanges or securities markets or
(ii) are a medium for investment and by their terms expressly provide that they
are a security governed by Article 8 of the Uniform Commercial Code.
"SECURITIES ACCOUNT" shall mean an account to which a Financial Asset
is or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"SECURITY ENTITLEMENTS" shall mean the rights and property interests
of an Entitlement Holder with respect to a Financial Asset.
"SECURITY INTEREST" shall have the meaning assigned to such term in
Section 2.01.
"SECURITY INTERMEDIARY" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"TRADEMARK LICENSE" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"TRADEMARKS" shall mean all of the following: (a) all trademarks,
service marks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all registration and recording applications filed in connection
therewith, including registrations and registration applications in the United
States Patent and Trademark Office, any State of the United States or any
similar offices in any other country or any political subdivision thereof, and
all extensions or renewals thereof, including those listed on Schedule V, (b)
all goodwill associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such goodwill.
SECTION 1.03. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
SECURITY INTEREST
SECTION 2.01. SECURITY INTEREST. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in, all of such Grantor's right, title and
interest in, to and under the Collateral (the "SECURITY INTEREST"). Without
limiting the foregoing, the Collateral Agent is hereby authorized to file one
or more financing statements (including fixture filings), continuation
statements, filings with the United States Patent and Trademark Office or
United States Copyright Office (or any successor office or any similar office
in any other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted
by each Grantor, without the signature of any Grantors, and naming any Grantor
or the Grantors as debtors and the Collateral Agent as secured party.
<PAGE> 6
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SECTION 2.02. NO ASSUMPTION OF LIABILITY. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any
other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:
SECTION 3.01. TITLE AND AUTHORITY. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant
to the Collateral Agent the Security Interest in such Collateral pursuant
hereto and to execute, deliver and perform its obligations in accordance with
the terms of this Agreement, without the consent or approval of any other
Person other than any consent or approval which has been obtained.
SECTION 3.02. FILINGS. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Collateral Agent for filing in each governmental,
municipal or other office specified in Schedule 6 to the Perfection
Certificate, which are all the filings, recordings and registrations (other
than filings required to be made in the United States Patent and Trademark
Office and the United States Copyright Office in order to perfect the Security
Interest in Collateral consisting of United States Patents, Trademarks and
Copyrights) that are necessary to publish notice of and protect the validity of
and to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law
with respect to the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Collateral Agent for recording by the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the
regulations thereunder, as applicable, and otherwise as may be required pursuant
to the laws of any other necessary jurisdiction, to protect the validity of and
to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral consisting of Patents, Trademarks and Copyrights in which a
security interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction (other than such actions as
are necessary to perfect the Security Interest with respect to any Collateral
consisting of Patents, Trademarks and Copyrights (or registration or application
for registration thereof) acquired or developed after the date hereof).
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SECTION 3.03. VALIDITY OF SECURITY INTEREST. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording
or registering a financing statement or analogous document in the United States
(or any political subdivision thereof) and its territories and possessions
pursuant to the Uniform Commercial Code or other applicable law in such
jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable. The Security Interest is
and shall be prior to any other Lien on any of the Collateral, other than
Permitted Encumbrances that have priority over the Security Interest by
operation of law.
SECTION 3.04. ABSENCE OF OTHER LIENS. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant
to Section 6.02 of the Credit Agreement.
ARTICLE IV
COVENANTS
SECTION 4.01. CHANGE OF NAME; LOCATION OF COLLATERAL; RECORDS; PLACE
OF BUSINESS. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral owned by it or any office or facility at which Collateral owned
by it is located (including the establishment of any such new office or
facility), (iii) in its identity or corporate structure or (iv) in its Federal
Taxpayer Identification Number. Each Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the Uniform Commercial Code or otherwise that are required in order for
the Collateral Agent to continue at all times following such change to have a
valid, legal and perfected first priority security interest in all the
Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Grantor is damaged or
destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect
to any part of the Collateral, and, at such time or times as the Collateral
Agent may reasonably request, promptly to prepare and deliver to the Collateral
Agent a duly certified schedule or schedules in form and detail satisfactory to
the Collateral Agent showing the identity, amount and location of any and all
Collateral.
SECTION 4.02. PROTECTION OF SECURITY. Each Grantor shall, at its own
cost and expense, take any and all actions necessary to defend title to the
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
not expressly permitted pursuant to Section 6.02 of the Credit Agreement.
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SECTION 4.03. FURTHER ASSURANCES. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; PROVIDED,
HOWEVER, that any Grantor shall have the right, exercisable within 10 days
after it has been notified by the Collateral Agent of the specific
identification of such Collateral, to advise the Collateral Agent in writing of
any inaccuracy of the representations and warranties made by such Grantor
hereunder with respect to such Collateral. Each Grantor agrees that it will use
its best efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Collateral within 30 days after the date it has been notified by the
Collateral Agent of the specific identification of such Collateral.
SECTION 4.04. INSPECTION AND VERIFICATION. The Collateral Agent and
such Persons as the Collateral Agent may reasonably designate shall have the
right, at the Grantors' own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantors' affairs with the officers of the Grantors and to verify under
reasonable procedures the validity, amount, quality, quantity, value, condition
and status of, or any other matter relating to, the Collateral, including, in
the case of Accounts or Collateral in the possession of any third person, by
contacting Account Debtors or the third person possessing such Collateral for
the purpose of making such a verification. The Collateral Agent shall have the
absolute right to share any information it gains from such inspection or
verification with any Secured Party.
SECTION 4.05. TAXES; ENCUMBRANCES. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay
for the maintenance and preservation of the Collateral, in each case to the
extent any Grantor fails to do so as required by the Credit Agreement or this
Agreement, and each Grantor jointly and severally agrees to reimburse the
Collateral Agent on demand for any payment made or any expense incurred by the
Collateral Agent pursuant to the foregoing authorization; PROVIDED, HOWEVER,
that nothing in this Section 4.06 shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Loan Documents.
SECTION 4.06. ASSIGNMENT OF SECURITY INTEREST. If at any time any
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of an Account, such Grantor
shall promptly assign such security interest to the Collateral Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other Person granting the security interest.
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SECTION 4.07. CONTINUING OBLIGATIONS OF THE GRANTORS. Each Grantor
shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.08. USE AND DISPOSITION OF COLLATERAL. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except
as expressly permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Collateral and
each Grantor shall remain at all times in possession of the Collateral owned by
it, except that (a) Inventory may be sold in the ordinary course of business
and (b) unless and until the Collateral Agent shall notify the Grantors that an
Event of Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease, assign,
transfer or otherwise dispose of any Collateral (which notice may be given by
telephone if promptly confirmed in writing), the Grantors may use and dispose
of the Collateral in any lawful manner not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document. Without
limiting the generality of the foregoing, each Grantor agrees that it shall not
permit any Inventory to be in the possession or control of any warehouseman,
bailee, agent or processor at any time unless such warehouseman, bailee, agent
or processor shall have been notified of the Security Interest and shall have
agreed in writing to hold the Inventory subject to the Security Interest and
the instructions of the Collateral Agent and to waive and release any Lien held
by it with respect to such Inventory, whether arising by operation of law or
otherwise.
SECTION 4.09. LIMITATION ON MODIFICATION OF ACCOUNTS. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.10. INSURANCE. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage
to the Inventory and Equipment in accordance with Section 5.07 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and
attorney-in-fact) for the purpose, during the continuance of an Event of
Default, of making, settling and adjusting claims in respect of Collateral
under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Event of
Default, in its sole discretion, obtain and maintain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
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SECTION 4.11. LEGEND. Upon the request of the Collateral Agent, each
Grantor shall legend, in form and manner satisfactory to the Collateral Agent,
its Accounts Receivable and its books, records and documents evidencing or
pertaining thereto with an appropriate reference to the fact that such Accounts
Receivable have been assigned to the Collateral Agent for the benefit of the
Secured Parties and that the Collateral Agent has a security interest therein.
SECTION 4.12. COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT
COLLATERAL. (a) Each Grantor agrees that it will not, nor will it permit any of
its licensees to, do any act, or omit to do any act, whereby any Patent which
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to mark any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such
Trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law and (iv) not knowingly use or knowingly permit the use of such
Trademark in violation of any third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary
and sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office
or any court or similar office of any country) regarding such Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the
same, or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark
or Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in
any other country or any political subdivision thereof, unless it promptly
informs the Collateral Agent, and, upon request of the Collateral Agent,
executes and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may request to evidence and perfect the Collateral
Agent's security interest in such Patent, Trademark or Copyright, and each
Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute
and file such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct
of any Grantor's business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment of
maintenance fees, and, if consistent with good business judgment, to initiate
opposition, interference and cancelation proceedings against third parties.
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(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or
approvals from the licensor of each Copyright License, Patent License or
Trademark License to effect the assignment of all of such Grantor's right,
title and interest thereunder to the Collateral Agent or its designee.
ARTICLE V
POWER OF ATTORNEY
Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact,
and in such capacity the Collateral Agent shall have the right, with power of
substitution for each Grantor and in each Grantor's name or otherwise, for the
use and benefit of the Collateral Agent and the Secured Parties, upon the
occurrence and during the continuance of an Event of Default (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to sign the
name of any Grantor on any invoice or bill of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or
defend any actions, suits or proceedings relating to all or any of the
Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to
carry out the purposes of this Agreement, as fully and completely as though the
Collateral Agent were the absolute owner of the Collateral for all purposes;
PROVIDED, HOWEVER, that nothing herein contained shall be construed as
requiring or obligating the Collateral Agent or any Secured Party to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent or any Secured Party, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or
any property covered thereby, and no action taken or omitted to be taken by the
Collateral Agent or any Secured Party with respect to the Collateral or any
part thereof shall give rise to any defense, counterclaim or offset in favor of
any Grantor or to any claim or action against the Collateral Agent or any
Secured Party. It is understood and agreed that the appointment of the
Collateral Agent as the agent and attorney-in-fact of the Grantors for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document with respect to the
Collateral or any part thereof or impose any obligation on the Collateral Agent
or any Secured Party to proceed in any particular manner with respect to the
Collateral or any part thereof, or in any way limit the exercise by the
Collateral Agent or any Secured Party of any other or further right which it
may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise.
<PAGE> 12
12
ARTICLE VI
REMEDIES
SECTION 6.01. REMEDIES UPON DEFAULT. Upon the occurrence and during
the continuance of an Event of Default, each Grantor agrees to deliver each
item of Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained), and (b) with or without legal process
and with or without prior notice or demand for performance, to take possession
of the Collateral and without liability for trespass to enter any premises
where the Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights afforded
to a secured party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by law) all rights of redemption, stay and
appraisal which such Grantor now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York
or its equivalent in other jurisdictions) of the Collateral Agent's intention
to make any sale of Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. At any public (or, to the
extent permitted by law, private) sale made pursuant to this Section, any
Secured Party may bid for or purchase, free (to the extent permitted by law)
from any right of redemption, stay, valuation or appraisal on the part of any
<PAGE> 13
13
Grantor (all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any Obligation then due and payable to
such Secured Party from any Grantor as a credit against the purchase price, and
such Secured Party may, upon compliance with the terms of sale, hold, retain
and dispose of such property without further accountability to any Grantor
therefor. For purposes hereof a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Collateral Agent
shall be free to carry out such sale pursuant to such agreement and no Grantor
shall be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court
or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
SECTION 6.02. APPLICATION OF PROCEEDS. The Collateral Agent shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Administrative Agent or the Collateral Agent (in its capacity as
such hereunder or under any other Loan Document) in connection with
such collection or sale or otherwise in connection with this Agreement
or any of the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all
advances made by the Collateral Agent hereunder or under any other
Loan Document on behalf of any Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy
hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the
amounts so applied to be distributed among the Secured Parties pro
rata in accordance with the amounts of the Obligations owed to them on
the date of any such distribution); and
THIRD, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such license
by the Collateral Agent shall be exercised, at the option of the Collateral
Agent, upon the occurrence and during the continuation of an Event of Default;
PROVIDED that any license, sub-license or other transaction entered into by the
Collateral Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
<PAGE> 14
14
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. NOTICES. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document,
any agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans and
the issuance of Letters of Credit by the Issuing Bank, and the execution and
delivery to the Lenders of any notes evidencing such Loans, regardless of any
investigation made by the Lenders or on their behalf, and shall continue in
full force and effect until this Agreement shall terminate.
SECTION 7.04. BINDING EFFECT; SEVERAL AGREEMENT. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their
respective successors and assigns, except that no Grantor shall have the right
to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement or the Credit Agreement.
This Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
SECTION 7.05. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 7.06. COLLATERAL AGENT'S FEES AND EXPENSES; INDEMNIFICATION.
(a) Each Grantor jointly and severally agrees to pay upon demand to the
Collateral Agent the amount of any and all reasonable expenses, including the
reasonable fees, disbursements and other charges of its counsel and of any
experts or agents, which the Collateral Agent may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from or other realization upon any of the Collateral,
<PAGE> 15
15
(iii) the exercise, enforcement or protection of any of the rights of the
Collateral Agent hereunder or (iv) the failure of any Grantor to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to indemnify
the Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of
counsel, incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of, the execution, delivery or performance of
this Agreement or any claim, litigation, investigation or proceeding relating
hereto or to the Collateral, whether or not any Indemnitee is a party thereto;
PROVIDED that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 7.06
shall be payable on written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. WAIVERS; AMENDMENT. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Administrative Agent and the Lenders under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or any other Loan Document or consent to any departure by any Grantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on any Grantor in any case shall entitle such Grantor or any other
Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor or Grantors with respect
to which such waiver, amendment or modification is to apply, subject to any
consent required in accordance with Section 9.02 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.
<PAGE> 16
16
SECTION 7.10. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section
7.04), and shall become effective as provided in Section 7.04. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 7.12. HEADINGS. Article and Section headings used herein are
for the purpose of reference only, are not part of this Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Collateral Agent, the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Grantor or its properties in the courts of any
jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 7.14. TERMINATION. This Agreement and the Security Interest
shall terminate when all the Obligations have been indefeasibly paid in full
and the Lenders have no further commitment to lend under the Credit Agreement,
the L/C Exposure has been reduced to zero and the Issuing Bank has no further
obligation to issue Letters of Credit under the Credit Agreement, at which time
the Collateral Agent shall execute and deliver to the Grantors, at the
Grantors' expense, all Uniform Commercial Code termination statements and
similar documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
<PAGE> 17
17
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent. A Grantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Grantor shall be automatically released in the event that (a) such Grantor is
designated as an Unrestricted Subsidiary in accordance with the terms of the
Credit Agreement or (b) such Grantor ceases to be a Subsidiary pursuant to a
transaction permitted under the Loan Documents.
SECTION 7.15. ADDITIONAL GRANTORS. Pursuant to Section 5.12 of the
Security Agreement, each Subsidiary Loan Party that was not in existence or not
a Subsidiary Loan Party on the date of the Credit Agreement and each
Unrestricted Subsidiary that is designated as a Restricted Subsidiary is
required to enter in to this Agreement as a Grantor upon becoming a Subsidiary
Loan Party. Upon execution and delivery by the Collateral Agent and a
Subsidiary of an instrument in the form of Annex 3 hereto, such Subsidiary
shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any such
instrument shall not require the consent of any Grantor hereunder. The rights
<PAGE> 18
18
and obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN MEDIA OPERATIONS, INC.
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
AMERICAN MEDIA, INC.,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
EACH OF THE OTHER GUARANTORS LISTED ON
SCHEDULE I HERETO,
By: /s/ Peter A. Nelson
------------------------------------
Name: Peter A. Nelson
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK, as Collateral
Agent,
By: /s/ Marian Schulman
------------------------------------
Name: Marian Schulman
Title: Vice President
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Subsidiary Name State of Incorporation
------------------------------- -------------------------
<S> <C> <C>
(1) National Enquirer, Inc. Florida
(2) Weekly World News, Inc. Florida
(3) Distribution Services, Inc. Delaware
(4) SOM Publishing, Inc. Florida
(5) NDSI, Inc. Delaware
(6) Star Editorial, Inc. Delaware
(7) Country Weekly, Inc. Delaware
(8) FrontLine Marketing, Inc. Delaware
</TABLE>
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN MEDIA OPERATIONS, INC. FOR FISCAL YEAR ENDED
MARCH 29, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-29-1999
<PERIOD-START> MAR-31-1998
<PERIOD-END> MAR-29-1999
<CASH> 3,823
<SECURITIES> 0
<RECEIVABLES> 7,977
<ALLOWANCES> 269
<INVENTORY> 9,830
<CURRENT-ASSETS> 24,280
<PP&E> 45,622
<DEPRECIATION> 18,762
<TOTAL-ASSETS> 616,838
<CURRENT-LIABILITIES> 99,406
<BONDS> 446,134
0
0
<COMMON> 2
<OTHER-SE> 60,196
<TOTAL-LIABILITY-AND-EQUITY> 616,838
<SALES> 293,459
<TOTAL-REVENUES> 293,459
<CGS> 228,060
<TOTAL-COSTS> 228,060
<OTHER-EXPENSES> (2,943)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,897
<INCOME-PRETAX> 21,445
<INCOME-TAX> 13,559
<INCOME-CONTINUING> 7,886
<DISCONTINUED> 0
<EXTRAORDINARY> (2,161)
<CHANGES> 0
<NET-INCOME> 5,725
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.1
EMPLOYMENT AGREEMENT
(DAVID J. PECKER)
EMPLOYMENT AGREEMENT (the "Agreement") dated February 16, 1999
by and between EMP Acquisition Corp., a Delaware corporation ("Newco") and David
J. Pecker (the "Executive").
WHEREAS, Newco and America Media, Inc. ("AMI") are entering
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Newco will merge with and into AMI (the "Merger"), with AMI constituting the
surviving corporation (such surviving corporation is hereinafter referred to as
the "Company");
WHEREAS, Newco desires that, upon the consummation of the
Merger, the Company employ Executive and to enter into an agreement embodying
the terms of such employment and Executive desires to accept such employment
with the Company and enter into such an agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
agree as follows:
1. EFFECTIVENESS/TERM OF EMPLOYMENT.
a. EFFECTIVENESS. Notwithstanding any other provision
of this Agreement, this Agreement shall become effective only upon the
consummation of the Merger and the occurrence of the Effective Time (as defined
in the Merger Agreement) (such date being hereinafter referred to as the
"Effective Date"), at which time, this Agreement shall constitute a binding
obligation of the Company as the surviving corporation in the Merger and all
references to Holding Company in the operative provisions of this Agreement
shall be deemed to be references to the Company. In the event the Merger
Agreement is terminated for any reason without the Effective Time having
occurred, this Agreement shall be terminated without further obligation or
liability of either party; PROVIDED that the obligations of EMP Group L.L.C., a
Delaware limited liability company ("Holding Company") under Section 4 shall
survive any such termination.
b. EMPLOYMENT TERM. Subject to the provisions of
Section 8 of this Agreement, Executive shall be employed by the Company for a
period commencing on the Effective Date and ending on the fifth anniversary of
the Effective Date (the "Employment Term") on the terms and subject to the
conditions set forth in this Agreement. Notwithstanding the preceding sentence,
commencing with the first day after the fifth anniversary of the Effective Date
and on each one year anniversary of such date thereafter (each an "Extension
Date"), the Employment Term shall be automatically extended for an additional
one-year period, unless the Company or Executive provides the other party hereto
60 days' prior written notice before the next Extension Date that the Employment
Term shall not be so extended. For the avoidance of doubt, the term "Employment
Term" shall include any extension that becomes applicable pursuant to the
preceding sentence.
<PAGE> 2
2
2. POSITION.
a. During the Employment Term, Executive shall serve
as the Company's Chairman, Chief Executive Officer and President. In such
position, Executive shall report to the Board of Directors of the Company (the
"Board") and shall have duties, responsibilities and authority commensurate with
his position as Chairman, Chief Executive Officer and President of the Company,
subject to reasonable and customary oversight and review by the Board; PROVIDED
that it is understood that:
(i) Executive will be responsible for the supervision of, and
the setting of compensation and employment and termination decisions
with respect to, employees of the Company; PROVIDED that, except as
otherwise expressly provided in this Section 2(a), any compensation and
employment and termination decisions with respect to the senior
executives identified on Schedule I hereto and with respect to any
other senior executives of the Company with reasonably comparable
positions, status or responsibilities (the "Senior Management Group")
shall be subject to the unanimous approval of the Compensation
Committee which shall be comprised of Executive and Austin Beutner (or
in the event of Mr. Beutner's death or incapacity, another
representative of Evercore Partners, Inc.); and
(ii) while the day-to-day ordinary course operations of the
Company will be managed by Executive without the requirement for
approval of the Board (x) the Board (in consultation with Executive)
shall establish the Company's overall strategic direction, business
plan and annual budget and (y) Board approval shall be required prior
to Executive's (A) changing the cover price of any magazine, (B) making
material changes to discounts or other pricing terms with wholesalers
or other distributors and (C) entering into of any contracts which are
material and out of the ordinary course of business.
Notwithstanding the provisions of clause (i) of this Section
2(a), Executive shall be permitted, in Executive's sole discretion and without
seeking approval of the Compensation Committee, to award any member(s) of the
Senior Management Group special bonuses not exceeding $100,000 in the aggregate
in any calendar year for all such members of the Senior Management Group;
PROVIDED, HOWEVER, that no more than $25,000 may be awarded to any single member
of the Senior Management Group in any calendar year (the "Special Bonuses");
PROVIDED, FURTHER, that the aggregate amount of any such Special Bonuses shall
reduce the Management Bonus Pool (as defined in Section 5(c)) with respect to
such calendar year.
b. During the Employment Term, Executive will devote
his full business time and best efforts to the performance of his duties
hereunder and will not engage in any other business, profession or occupation
for compensation or otherwise which would materially conflict with the rendition
of such services either directly or indirectly, without the prior written
consent of the Board; PROVIDED that nothing herein shall preclude Executive from
continuing to serve on the board of directors or trustees of any business
corporation or any
<PAGE> 3
3
charitable organization on which he currently serves and which is identified on
Exhibit A hereto or, subject to the prior approval of the Board (which approval
shall not be unreasonably withheld), from accepting appointment to any
additional directorships or trusteeships, provided in each case, and in the
aggregate, that such activities do not materially interfere with the performance
of Executive's duties hereunder or conflict with Section 9.
3. BASE SALARY. During the Employment Term, the Company shall
pay Executive a base salary (the "Base Salary") at the annual rate of
$1,500,000, payable in regular installments in accordance with the Company's
usual payment practices. Executive shall be entitled to such increases in his
Base Salary, if any, as may be determined from time to time in the sole
discretion of the Board.
4. MAKE-WHOLE BONUS PAYMENTS.
a. Subject to the provisions of this Section 4,
Executive shall be entitled to receive from Holding Company payments in the
amounts set forth on Schedule II hereto (the "Make-Whole Payments"). The
Make-Whole Payments will become payable only following the occurrence of
Executive's termination of employment with his current employer and only to the
extent not already paid by his current employer and will be made as follows: (i)
upon Executive's termination of employment with his current employer, an amount
sufficient on an after-tax basis to repay Executive's Advance (as defined on
Schedule II) and (ii) on April 15, 2000, the remaining portion of the Make-Whole
Payments (the "Remaining Portion"); PROVIDED that in the event the Merger
Agreement is terminated without the Effective Time having occurred and in
connection therewith (x) Holding Company or any members of Holding Company (or
any of their affiliates) receives payment of a break-up fee from AMI or (y)
Holding Company realizes any net profits prior to April 15, 2000 available for
distribution to its members from the purchase of stock pursuant to the Voting
Agreement dated February 15, 1999 between Newco and the Stockholders named
therein and the subsequent sale of such stock (the "Net Profits"), then in lieu
of payment of the Remaining Portion on April 15, 2000, Holding Company shall pay
Executive, out of the proceeds of such break-up fee or Net Profits, as
applicable, the discounted present value of the Remaining Portion (calculated as
of the date of such payment using a discount rate equal to the Reference Rate as
announced from time to time by the New York City branch of The Chase Manhattan
Bank or any successor thereto as of such date of payment).
b. Notwithstanding the provisions of Section 4(a):
(I) If (x) Executive's employment hereunder is
terminated prior to April 15, 2000 due to Executive's voluntarily resignation
without Good Reason pursuant to Section 8(a) or the Company's termination of
Executive's employment for Cause pursuant to Section 8(a), or (y) if Executive
fails to commence employment with the Company on the Effective Date, other than
due to his death or his physical or mental incapacity rising to the level of a
"Disability" as hereinafter defined, then any unpaid portion of the Make-Whole
Payments will be forfeited and Executive will promptly, but in any event within
30 days of such termination, repay to
<PAGE> 4
4
Holding Company any portion of the Make-Whole Payments previously paid pursuant
to Section 4(a) above; and
(II) If all or any portion of the Make-Whole Payments
become payable and the Merger Agreement is terminated for any reason without the
Effective Time having occurred, then Executive shall be required to make a good
faith effort to obtain employment commensurate with his skills and background
and Executive's entitlement to the Make-Whole Payments paid or payable pursuant
to Section 4(a) above will be mitigated, and reduced dollar for dollar, by the
present value of any compensation in excess of $1,500,000 per year earned by
Executive through December 31, 1999 (regardless of when actually paid and
whether paid in cash or other property) from any alternative employment or
consulting arrangement. Executive shall provide documentation satisfactory to
the Company of any such compensation. To the extent any portion of the
Make-Whole Payments is paid to Executive and is subsequently determined to have
been subject to mitigation, Executive shall promptly, but in any event within 30
days of such determination, refund such portion of the Make-Whole Payment to
Holding Company. For purposes of the calculation described in this clause (II),
the following amounts paid or provided in consideration of Executive's providing
employment or consulting services to another person or entity shall be deemed
earned through December 31, 1999:
(A) with respect to any options granted to Executive that vest
through December 31, 1999, the pro-rata portion of the Black-Scholes
value of such options, based on the portion of 1999 Executive is
actually employed or retained to provide such consulting services;
(B) with respect to any options granted to Executive in 1999
(or granted in subsequent years pursuant to an enforceable agreement
entered into in 1999, except to the extent such agreed upon future
grants are consistent with the new employer's or service recipient's
ordinary course option grants to other senior executives or consultants
for services rendered over a commensurate future period of service
after calendar year 1999) which vest after December 31, 1999, a
pro-rata portion of the Black-Scholes value of such options, based upon
the percentage of the period from the date of Executive's commencement
of such employment or provision of such consulting services to the
vesting date of such options that occurs during calendar year 1999
(e.g., if Executive commenced such employment on June 30, 1999 and
received options which vested on December 31, 2000, 33.3% of the
Black-Scholes value of the options would be taken into account).
(C) the pro-rata portion (as determined above) of any long
term bonus ultimately paid to Executive that is attributable to
employment or consulting services performed in 1999;
(D) any short term bonus that is attributable to employment in
1999; and
<PAGE> 5
5
(E) base salary earned through December 31, 1999. In no event
shall bona fide pension, welfare or fringe benefits be taken into
account for purposes of this calculation.
5. OTHER BONUS ARRANGEMENTS.
a. DEFERRED SALARY BONUS. Within 30 days following
the occurrence of the Effective Date, the Company shall pay Executive a one-time
deferred salary bonus in the amount equal to the PRODUCT obtained by multiplying
(x) $1,500,000 TIMES (y) the QUOTIENT obtained by dividing (A) the number of
days that occur between the effective date of Executive's termination of
employment with Hachette Filipacchi Magazines, Inc. and its affiliates and the
Effective Date BY (B) 365.
b. ONE-TIME SIGNING BONUS. No later than June 30,
1999, the Company shall pay Executive a special one time signing bonus in the
amount of $250,000.
c. BONUS POOL FOR OTHER EXECUTIVES. The Company shall
establish an annual bonus pool for Company employees (excluding Executive) of
$1,500,000 for 1999 and 1.5% of EBITDA for years thereafter (the "Management
Bonus Pool"), subject in each case, to reduction by the amount of any Special
Bonuses awarded with respect to the applicable year pursuant to Section 2(a).
Payment of any bonuses shall be contingent upon satisfaction of reasonable
performance goals established by the Board in consultation with Executive.
6. EMPLOYEE BENEFITS. During the Employment Term, Executive
shall be provided, in accordance with the terms of the Company's employee
benefit plans as in effect from time to time, customary health insurance and
short term and long term disability insurance, retirement benefits and fringe
benefits (collectively "Employee Benefits") on the same basis as those benefits
are generally made available to other senior executives of the Company,
including a customary long-term disability plan for senior executives. Executive
shall be provided with six weeks of paid vacation per year.
7. BUSINESS EXPENSES.
a. EXPENSES. During the Employment Term, reasonable
business expenses incurred by Executive in the performance of his duties
hereunder (including, without limitation, those expenses set forth on Schedule
III hereto) shall be reimbursed by the Company in accordance with Company
policies to be established by Executive, subject to approval by the Board.
b. SPECIFIC AGREEMENTS REGARDING EXPENSES. Without
limiting the generality of Section 7(a), Executive shall be entitled to (i)
reimbursement for business travel expenses (including first class travel), (ii)
reimbursement for the cost of cellular and home
<PAGE> 6
6
business telecommunication lines, (iii) use of a leased luxury car, including a
driver, (iv) reasonable tax and investment management services up to an annual
maximum of $30,000 for such services and (v) a tax gross-up payment with respect
to items in clauses (i) through (iv) above (and the items set forth on Schedule
III) to the extent necessary to offset any income taxes incurred by Executive
with respect to such items.
c. RELOCATION EXPENSES. If the Company and Executive
mutually agree that Executive relocate to Florida, the Company shall reimburse
Executive for all reasonable costs incurred in connection with the moving of his
household goods and possessions from Executive's existing home in Connecticut to
Florida, up to a maximum of $20,000.
8. TERMINATION. Notwithstanding any other provision of this
Agreement, Executive's entitlement to compensation and benefits following the
termination of Executive's employment with the Company for any reason shall be
limited to that set forth in this Section 8 as follows:
a. BY THE COMPANY FOR CAUSE OR BY EXECUTIVE
RESIGNATION WITHOUT GOOD REASON.
(i) The Employment Term and Executive's employment
hereunder may be terminated by the Company for Cause (as defined below) or by
Executive's resignation without Good Reason (as defined in Section 8(c));
PROVIDED that Executive will be required to give the Company at least 30 days
advance written notice of a resignation without Good Reason.
(ii) For purposes of this Agreement, "Cause" shall
mean (i) Executive's conviction of, or plea of guilty or NOLO CONTENDERE to, any
felony which materially adversely affects the Company, (ii) Executive's wilful
or gross misconduct in the performance of duties owed to the Company that is
intended to materially adversely affect the Company or that Executive knew or
should have known would have such effect or (iii) Executive's wilful refusal or
wilful failure to substantially perform Executive's essential duties to the
Company (other than due to Executive's illness); PROVIDED that prior to any
termination pursuant to this clause (iii), (A) the Company must provide
Executive with written notice specifically identifying the reasons the Company
believes this clause (iii) is applicable and (B) Executive must have continued
to wilfully refuse or wilfully fail to perform such essential duties for a 30
day period following receipt of such notice; and PROVIDED further that it is
understood this clause (iii) shall not permit the Company to terminate
Executive's employment for Cause because of dissatisfaction with the quality of
services provided by, or disagreement with the actions taken by, Executive in
the good faith performance of Executive's duties to the Company. Any act or
inaction believed in good faith by Executive to be in the best interests of the
Company shall not be considered "wilful" for purposes of this Agreement.
(iii) If Executive's employment is terminated by the
Company for Cause,
<PAGE> 7
7
or if Executive resigns without Good Reason, Executive shall be entitled to
receive (x) the Base Salary through the date of termination and (y) such
Employee Benefits, if any, as to which Executive may be entitled under the
employee benefit plans of the Company. Following such termination of Executive's
employment by the Company for Cause or resignation by Executive without Good
Reason, except as set forth in this Section 8(a), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
b. DISABILITY OR DEATH.
(i) The Employment Term and Executive's employment
hereunder shall terminate upon his death and if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of 180 consecutive
days or for an aggregate of 270 days in any 720 consecutive days period to
perform his duties (such incapacity is hereinafter referred to as "Disability").
Any question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive shall be final and
conclusive for all purposes of the Agreement.
(ii) Upon termination of Executive's employment
hereunder for either Disability or death, Executive or his estate (as the case
may be) shall be entitled to receive (x) the Base Salary through the date of
termination, (y) any unpaid portion of the Make-Whole Payments to the extent
expressly provided pursuant to Section 4 and (z) such Employee Benefits, if any,
as to which he may be entitled under the employee benefit plans and arrangements
of the Company. Following such termination of Executive's employment due to
death or Disability, except as set forth in this Section 8(b), Executive shall
have no further rights to any compensation or any other benefits under this
Agreement.
c. BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY
EXECUTIVE FOR GOOD REASON.
(i) The Employment Term and Executive's employment
hereunder may be terminated by the Company without Cause or by Executive's
resignation for Good Reason.
(ii) For purposes of this Agreement, "Good Reason"
shall mean any of the following actions that is not cured within 30 days of
written notice by Executive to the Company that specifies the grounds for Good
Reason:
(A) the assignment of any duties materially
inconsistent with Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by this Agreement or any other action by the Company which
<PAGE> 8
8
results in a substantial diminution in such position, authority, duties or
responsibilities;
(B) any reduction in the Base Salary or the Employee
Benefits guaranteed pursuant to Section 6;
(C) the Company's requiring Executive to be based at
any office or location other than one in South Florida, Fairfield County,
Connecticut or the New York metropolitan area;
(D) any failure by the Company to have any successor
to the Company assume this Agreement by operation of law or otherwise; or
(E) the Company's failure to make available the
minimum amount of the Management Bonus Pool as set forth in Section 5, subject
to meeting the applicable performance goals associated therewith.
(iii) If Executive's employment is terminated by the
Company without Cause (other than by reason of death or Disability) or if
Executive resigns for Good Reason, Executive shall be entitled to receive:
(A) Until the later of (x) twelve (12) months
following such termination and (y) the scheduled expiration of the Employment
Term (determined without regard to Executive's termination of employment but
excluding any further extensions of the Employment Term) (I) continued payment
of the Base Salary; and (II) continued health, life insurance and disability
benefits;
(B) Immediate vesting of all nonvested plan benefits
(or a cash payment in lieu thereof), including immediate vesting/exercisability
of any stock options and other equity-based compensation of the Company;
(C) Outplacement services for twelve (12) months
following such termination; and
(D) In the event of a Change of Control (as defined
below), a golden parachute excise tax gross-up payment (the "Parachute
Gross-Up"), if applicable (i.e, the payment of an amount, on an after-tax basis,
necessary to make Executive whole for any excise taxes incurred by Executive
pursuant to Section 4999 of the Internal Revenue Code in connection with such
Change of Control), up to a maximum of $4,800,000, it being agreed that the
calculation and payment of the Parachute Gross-Up shall be subject to the
provisions of Exhibit B hereto;
<PAGE> 9
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(E) Any unpaid portion of the Make-Whole Payments to
the extent expressly provided pursuant to Section 4; and
(F) such Employee Benefits, if any, as to which
Executive may be entitled under the employee benefit plans and arrangements of
the Company.
Upon termination of Executive's employment by the
Company without Cause (other than by reason of Executive's death or Disability)
or by Executive's resignation for Good Reason, except as set forth in this
Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
(iv) "Change of Control" shall mean any transaction
or series of transactions described in Section 280G(b)(2)(A)(i) of the Code or
any successor provision thereto, or the applicable final, temporary or proposed
regulations thereunder.
d. EXPIRATION OF EMPLOYMENT TERM.
(i) ELECTION NOT TO EXTEND THE EMPLOYMENT TERM. In
the event either party elects not to extend the Employment Term pursuant to
Section 1, unless Executive's employment is earlier terminated pursuant to
paragraphs (a), (b) or (c) of this Section 8, Executive's termination of
employment hereunder (whether or not Executive continues as an employee of the
Company thereafter) shall be deemed to occur on the close of business on the day
immediately preceding the next scheduled Extension Date and Executive shall be
entitled to receive (x) the Base Salary through the date of such termination
hereunder and (y) such Employee Benefits, if any, as to which he may be entitled
under the employee benefit plans and arrangements of the Company. Following such
termination of Executive's employment hereunder as a result of either party's
election not to extend the Employment Term, except as set forth in this Section
8(d)(i), Executive shall have no further rights to any compensation or any other
benefits under this Agreement.
(ii) CONTINUED EMPLOYMENT BEYOND THE EXPIRATION OF
THE EMPLOYMENT TERM. Unless the parties otherwise agree in writing, continuation
of Executive's employment with the Company beyond the expiration of the
Employment Term shall be deemed an employment at will and shall not be deemed to
extend any of the provisions of this Agreement and Executive's employment may
thereafter be terminated at will by either Executive or the Company; PROVIDED
that the provisions of Sections 9, 10 and 11 of this Agreement shall survive any
termination of this Agreement or Executive's termination of employment
hereunder.
e. NOTICE OF TERMINATION. Any purported termination
of employment by the Company or by Executive (other than due to Executive's
death) shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 12(h) hereof. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall
<PAGE> 10
10
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
9. NON-COMPETITION; NON-SOLICITATION. Executive acknowledges
and recognizes the highly competitive nature of the businesses of the Company
and its affiliates and accordingly agrees as follows:
a. During the Employment Term and for a period of
twelve (12) months following Executive's termination of employment with the
Company for any reason or, if Executive fails to commence employment with the
Company on the Effective Date, other than due to his death or physical or mental
incapacity rising to the level of a Disability, for a period of twelve (12)
months following the Effective Time, Executive will not directly or indirectly
(i) engage in any publishing venture that directly competes with the DSI
business of the Company or one or more of the properties or magazines of the
Company, (ii) enter into the employ of, or render any services to, any person
engaged in any publishing venture that directly competes with the DSI business
of the Company or one or more of the properties or magazines of the Company,
(iii) acquire a financial or equity interest, or otherwise become actively
involved with, any person engaged in any publishing venture that directly
competes with the DSI business of the Company or one or more of the properties
or magazines of the Company directly, or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant, (iv)
interfere with business relationships between the Company and customers or
suppliers of the Company or solicit, induce or entice any customers or suppliers
of the Company to do business with any entity that competes with the DSI
business of the Company or one or more of the properties or magazines of the
Company; or (v) solicit, induce or entice any employee of the Company to leave
his or her employment or hire any such employee who has left the employment of
the Company within twelve (12) months after the date of his or her termination
of employment.
b. Notwithstanding anything to the contrary in this
Agreement, the Executive may, directly or indirectly own, solely as an
investment, securities of any person engaged in the business of the Company or
its affiliates which are publicly traded on a national or regional stock
exchange or on the over-the-counter market if the Executive (i) is not a
controlling person of, or a member of a group which controls, such person and
(ii) does not, directly or indirectly, own 5% or more of any class of securities
of such person.
c. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in this
Section 9 to be reasonable, if a final judicial determination is made by a court
of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive,
the provisions of this Agreement shall not be rendered void but shall be deemed
<PAGE> 11
11
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
10. CONFIDENTIALITY. Except as required by law, Executive will
not at any time (whether during or after his employment with the Company)
disclose or use for his own benefit or purposes or the benefit or purposes of
any other person, firm, partnership, joint venture, association, corporation or
other business organization, entity or enterprise other than the Company and any
of its subsidiaries or affiliates, any trade secrets, information, data, or
other confidential information relating to customers, development programs,
costs, marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company, PROVIDED that the foregoing shall not apply to information which
is not unique to the Company or which is generally known to the industry or the
public other than as a result of Executive's breach of this covenant. Executive
agrees that upon termination of his employment with the Company for any reason,
he will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in any
way relating to the business of the Company and its affiliates, except that he
may retain personal notes, notebooks and diaries that do not contain
confidential information of the type described in the preceding sentence.
Executive further agrees that he will not retain or use for his account at any
time any trade names, trademark or other proprietary business designation used
or owned in connection with the business of the Company or its affiliates.
11. SPECIFIC PERFORMANCE. Executive acknowledges and agrees
that the Company's remedies at law for a breach or threatened breach of any of
the provisions of Section 9 or Section 10 would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach (other than any immaterial breach or immaterial threatened
breach of Section 10), in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to cease making any payments or providing
any benefit otherwise required by this Agreement and obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
12. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof.
b. ENTIRE AGREEMENT/AMENDMENTS. This Agreement
contains
<PAGE> 12
12
the entire understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This
Agreement may not be altered, modified, or amended except by written instrument
signed by the parties hereto.
c. NO WAIVER. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
d. SEVERABILITY. In the event that any one or more
of the provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
e. ASSIGNMENT. This Agreement shall not be assignable
by Executive. This Agreement shall be assigned by Holding Company to the Company
as contemplated by Section 1 and may be assigned by the Company to a company
which is a successor in interest to substantially all of the business operations
of the Company. Any assignment by the Company shall become effective when the
Company notifies the Executive of such assignment or at such later date as may
be specified in such notice. Upon such assignment, the rights and obligations of
the Company hereunder shall become the rights and obligations of such successor
company, PROVIDED that any assignee expressly assumes the obligations, rights
and privileges of this Agreement.
f. NO MITIGATION. Except as otherwise expressly
provided in this Agreement, Executive shall not be required to mitigate the
amount of any payment provided for pursuant to this Agreement by seeking other
employment or otherwise.
g. SUCCESSORS; BINDING AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees.
h. NOTICE. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the execution page of this Agreement,
PROVIDED that all notices to the Company shall be directed to the attention of
its General Counsel, with a copy to Evercore Partners, Inc., 65 E. 55th Street,
New York, New York 10022; Attention: Austin Beutner, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.
<PAGE> 13
13
i. WITHHOLDING TAXES. The Company may withhold from
any amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or regulation.
j. LEGAL FEES. The Company shall reimburse Executive
for the reasonable fees of legal counsel in connection with the negotiation and
preparation of this Agreement, up to a maximum of $175,000. In addition, the
Company will reimburse Executive for all reasonable costs, including reasonable
attorneys' fees, incurred by Executive in any action to enforce Executive's
rights under this Agreement if Executive substantially prevails in such action.
<PAGE> 14
14
k. COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/s/ David J. Pecker
---------------------------------
David J. Pecker
Address:
<PAGE> 15
15
EMP ACQUISITION CORP.
By: /s/ Austin Beutner
-----------------------------
Name: Austin Beutner
Title: President
Address:
<PAGE> 16
16
Confirming its obligations under Section 4
of the Agreement:
EMP GROUP L.L.C.
By: EVERCORE CAPITAL PARTNERS L.P.,
Authorized Person
By: EVERCORE PARTNERS L.L.C.,
member
By: /s/ Austin Beutner
-----------------------------------------------
Name: Austin Beutner
Title: Managing Member
<PAGE> 17
17
SCHEDULE I
(SENIOR EXECUTIVES)
1. Editor in Chief - National Enquirer
2. Editor in Chief - Star
3. VP Publisher - National Enquirer
4. VP Publisher - Star
5. Executive VP Finance and Administration
6. VP Marketing
7. CEO - Distribution Services Inc.
8. President/COO - Distribution Services Inc.
9. Executive VP CFO
10. SVP Manufacturing
<PAGE> 18
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SCHEDULE II
(MAKE-WHOLE PAYMENT)
LTIP: $3,033,000
Advance: The amount required to be paid by Executive to Hachette Filipacchi
Magazines, Inc. pursuant to the Promissory Note dated July 18,
1996 in the principal amount of $1,500,000 by and between
Executive and Hachette Filipacchi Magazines, Inc. after taking
into account any bonuses payable pursuant to Section 4(m) of
Executive's current employment agreement, but not to exceed
$1,156,985.35, plus stated interest accruing thereafter
pursuant to the Promissory Note through the date of repayment.
<PAGE> 19
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SCHEDULE III
(EXPENSES)
The following items shall be reimbursable under the expense
reimbursement policy of the Company:
11. Charter flights when suitable commercial flight arrangements are
impracticable or would materially impair Executive's ability to
accomplish the Company's business objectives, it being understood that
use of such charter flights, if any, will be out of the ordinary course
of business.
12. Reasonable gifts presented by Executive to clients and Company
employees.
13. Dues and membership fees for a country club of Executive's choosing in
the New York metropolitan area or Florida.
14. Business-related flights to London or Paris may be made on the
Concorde.
15. In the event Executive and the Company agree that Executive shall
permanently relocate to Florida, then:
(x) until the earlier of (i) 6 months following such
determination and (ii) Executive's moving into a new permanent
residence in Florida (whether purchased or rented) (the "New
Residence"), the Company shall pay Executive $10,000 per month
as a supplemental living allowance; and
(y) The Company shall reimburse Executive for (i)
reasonable costs incurred with the moving of his household
goods and possessions from Executive's existing home in
Florida to the New Residence, (ii) customary broker's fees
incurred in connection with the sale of Executive's existing
Florida residence and (iii) in the event Executive moves into
the New Residence prior to selling his existing Florida
residence, continued payment of (or recommencement of payment
of, as applicable) the supplemental living allowance described
in clause (x) until the earlier of (A) the sale of Executive's
existing residence in Florida and (B) 1 year from the date
Executive moves into the New Residence.
16. Up to 17 round trip flights per year for Executive's spouse between New
York and Florida and all other flights for Executive's spouse travel if
Executive reasonably determines that his spouse's presence on the trip
promotes a business interest of the Company.
<PAGE> 20
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17. Until such time, if ever, that the Company and Executive agree that
Executive shall permanently relocate to Florida, to the extent
Executive travels to Florida to conduct the Company's business, for
each night that Executive is required to stay overnight in order to
conduct the Company's business and for which Executive elects to stay
in Executive's existing Florida residence rather than stay in a hotel,
the Company shall pay Executive a per diem allowance of $300.
<PAGE> 21
21
EXHIBIT A
(OTHER ACTIVITIES)
The French Institute
Candies, Inc. (Pending)
VF Corporation (Pending)
DEA Foundation
New York Benevolence Association
New York Police Museum
Madison Square Boys and Girls Club
Hachette Filipacchi, Inc.
<PAGE> 22
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EXHIBIT B
(PARACHUTE GROSS-UP)
In the event the provisions of Section 8(c)(iii)(D) of the
employment agreement to which this Exhibit B is a part shall become applicable,
then the following provisions shall apply:
(a) If it shall be determined that any amount, right or
benefit paid, distributed or treated as paid or distributed by the Company or
any of its affiliates (including Evercore Capital Partners, L.P. and its
affiliates) to or for Executive's benefit (other than any amounts payable
pursuant to this Exhibit B) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), or
any interest or penalties are incurred by Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties,
collectively, the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount equal to the lesser of
(i) $4,800,000 and (ii) the amount necessary such that after payment by
Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this Exhibit
B, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's independent auditors (the
"Auditor"). The Auditor shall provide detailed supporting calculations to both
the Company and Executive within 15 business days of the receipt of notice from
Executive or the Company that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Auditor shall be paid
by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit B,
shall be paid by the Company to Executive (or to the Internal Revenue Service or
other applicable taxing authority on Executive's behalf) within 5 days of the
receipt of the Auditor's determination. All determinations made by the Auditor
shall be binding upon the Company and Executive; PROVIDED that following any
payment of a Gross-Up Payment to Executive (or to the Internal Revenue Service
or other applicable taxing authority on Executive's behalf), the Company may
require Executive to sue for a refund of all or any portion of the Excise Taxes
paid on Executive's behalf, in which event the provisions of paragraph (c) below
shall apply. As a result of uncertainty regarding the application of Section
4999 of the Code hereunder, it is possible that the Internal Revenue Service may
assert that Excise Taxes are due that were not included in the Auditor's
calculation of the Gross-Up Payments (an "Underpayment"). In the event that the
Company exhausts its remedies pursuant to this Exhibit B and Executive
thereafter is required to make a payment of any Excise Tax, the Auditor shall
determine the amount of the Underpayment that has occurred
<PAGE> 23
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and any additional Gross-Up Payments that are due as a result thereof shall be
promptly paid by the Company to Executive (or to the Internal Revenue Service or
other applicable taxing authority on Executive's behalf).
(c) Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after Executive receives
written notification of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30 day period
following the date on which it gives such notice to the Company )(or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall: (i) give the Company all information reasonably requested by the Company
relating to such claim; (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and ceasing all
efforts to contest such claim; (iii) cooperate with the Company in good faith in
order to effectively contest such claim; and (iv) permit the Company to
participate in any proceeding relating to such claim; PROVIDED, HOWEVER, that
the Company shall bear and pay directly all reasonable costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expense. Without limiting the foregoing provisions of this Exhibit B, the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine and direct; PROVIDED, HOWEVER
that if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Executive,
on an interest-free basis, and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for Executive's taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to
<PAGE> 24
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settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the Executive's receipt of an amount advanced by
the Company pursuant to this Exhibit B, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the Executive's
receipt of an amount advanced by the Company pursuant to this Exhibit B, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after the Company's receipt of notice of such determination, then
such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
<PAGE> 1
EXHIBIT 99.2
EMP Group L.L.C.
April 13, 1999
Mr. David J. Pecker
c/o Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attn: Scott Price, Esq.
Dear David:
Reference is made to the employment agreement dated February
16, 1999 between EMP Acquisition Corp. (the "Holding Company") and you (the
"Employment Agreement"). Capitalized terms used herein without definition have
the meanings specified in the Employment Agreement.
Pursuant to Section 4(a)(i) of the Employment Agreement, on
March 31, 1999 (the "Scheduled Payment Date") EMP Group L.L.C. (the "Holding
Company") became obligated to pay you a portion of the Make-Whole Payments in
an amount sufficient on an after-tax basis to repay your loan from Hachette
Filipachhi Magazines, Inc. (the "Hachette Loan"), after taking into account
certain bonuses payable pursuant to your employment agreement with Hachette
Filipachhi Magazines, Inc. (the "Loan Make-Whole Payment Amount").
The parties hereby acknowledge that, as of the Scheduled
Payment Date, and as of the date hereof, the parties were and remain unable to
reach a mutually satisfactory agreement as to the calculation of the Loan
Make-Whole Payment Amount, relating principally to the proper calculation of
your potential tax liability. Nevertheless, in order to enable you to repay the
Hachette Loan when due, on March 31, 1999 the Holding Company loaned you, as an
advance (the "Advance") the aggregate amount of $1,217,524.63 (representing
your repayment obligation under the Hachette Loan of $1,177,292.59 plus your
capital contribution obligation to the Holding Company of $40,232.05 relating
to the ultimate funding of the Loan Make-Whole Payment Amount). The Advance
will be mandatorily repayable by you to the Holding Company, together with
accrued interest thereon, upon the earliest to occur of (a) the parties mutual
satisfactory agreement as to the calculation of the Loan Make-Whole Payment
Amount, (b) the Effective Date and (c) April 15, 2000 (the "Advance Repayment
Date"); PROVIDED THAT in the case of clauses (b) and (c), the Holding Company
will determine the Loan Make-Whole Payment Amount.
The Advance shall bear interest at the rate of 4.67% per
annum, compounded annually, from the Scheduled Payment Date to the Advance
Repayment Date.
<PAGE> 2
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Upon, and subject to, your repayment to the Holding Company
of the Advance on the Advance Repayment Date, the Holding Company or the
Company will pay you the Loan Make-Whole Payment Amount as contemplated by, and
subject to the terms of, the Employment Agreement (specifically including any
refund obligations with respect thereto thereunder), together with interest
thereon from the Scheduled Payment Date to the Advance Repayment Date at the
rate of 4.67% per annum, less any applicable withholding taxes.
You agree that, except for the Holding Company's or the
Company's obligation to satisfy any applicable withholding requirements with
respect to the payment to you of the Loan Make-Whole Payment Amount upon your
repayment of the Advance on the Advance Repayment Date (and any withholding
requirements with respect to any future payment of any additional portion of
the Make-Whole Payments), you shall be solely responsible for the payment of
any federal, state or local income or payroll taxes (including any imputed
income taxes) associated with the payment of the Loan Payment Amount or the
Advance hereunder and the remaining Make-Whole Payments, generally, and shall
indemnify and hold the Holding Company, the Company and their affiliates, and
each of their respective officers, directors and employees harmless from any
liability (including, without limitation, interest and penalties) arising from
the failure to withhold from such amounts prior to the Advance Repayment Date
and for any failure resulting from the Holding Company's or the Company's
reliance on your representative's calculation of your tax liability relating
thereto.
You agree that the provisions of this letter agreement will
constitute complete satisfaction of the Holding Company's and the Company's
obligations to you with respect to the Loan Payment Amount but shall not affect
the Holding Company's or the Company's obligations, or rights, with respect to
the payment or refund of any other portion of the Make-Whole Payments.
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof and may be signed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
<PAGE> 3
3
Please indicate your agreement to the foregoing by executing
a copy of this letter agreement where indicated below.
EMP GROUP L.L.C.
By: EVERCORE CAPITAL PARTNERS L.P.,
Authorized Person
By: EVERCORE PARTNERS L.L.C.,
its general partner
By: /s/ Austin M. Beutner
----------------------------------
Name: Austin M. Beutner
Title: Member
EMP ACQUISITION CORP.
By: /s/ Austin M. Beutner
----------------------------------
Name: Austin M. Beutner
Title: President
Agreed to and acknowledged as of the
date first above written:
/s/ David J. Pecker
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David J. Pecker
