UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended March 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________
Commission file number 33-97090
ACG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1395968
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
100 Winners Circle
Brentwood, Tennessee 37027
(615) 377-0377
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
AMERICAN COLOR GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
New York 16-1003976
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
100 Winners Circle
Brentwood, Tennessee 37027
(615) 377-0377
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Indicate by check mark whether the registrant (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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Aggregate market value of the voting and non-voting Common Stock of ACG
Holdings, Inc. held by non-affiliates: Not applicable.
ACG Holdings, Inc. has 134,812 shares outstanding of its Common Stock, $.01
Par Value, as of June 11, 1998 (all of which are privately owned and not
traded on a public market).
DOCUMENTS INCORPORATED BY REFERENCE
None
INDEX
Page
Referenced
Form 10-K
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 8
Item 3. Legal proceedings........................................... 8
Item 4. Submission of matters to a vote of security holders......... 9
PART II
Item 5. Market for registrant's common equity and related stockholder
matters..................................................... 10
Item 6. Selected financial data..................................... 11
Item 7. Management's discussion and analysis of financial condition
and results of operations................................... 15
Item 8. Financial statements and supplementary data................. 28
Item 9. Changes in and disagreements with accountants on accounting
and financial disclosure.................................... 60
PART III
Item 10. Directors and executive officers............................ 61
Item 11. Executive compensation...................................... 62
Item 12. Security ownership of certain beneficial owners and
management...................................................67
Item 13. Certain relationships and related transactions.............. 68
PART IV
Item 14. Exhibits, financial statement schedules and reports on
Form 8-K.................................................... 70
Signatures.................................................. 81
PART I
Special Note Regarding Forward Looking Statements
This Annual Report on Form 10-K (the "Report") contains forward-looking
statements within the meaning of Section 21E of the Securities Act of 1934.
Discussions containing such forward-looking statements may be found in Items 1,
3 and 7 hereof, as well as within this Report generally. In addition, when used
in this Report, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results in the future
could differ materially from those described in the forward-looking statements
as a result of many factors outside the control of ACG Holdings, Inc.
("Holdings") formerly Sullivan Communications, Inc. ("Communications"), together
with its wholly-owned subsidiary, American Color Graphics, Inc. ("Graphics")
formerly Sullivan Graphics, Inc., (collectively the "Company"), including
fluctuations in the cost of paper and other raw materials used by the Company,
changes in the advertising and printing markets, actions by the Company's
competitors particularly with respect to pricing, the financial condition of the
Company's customers, the financial condition and liquidity of the Company, the
general condition of the United States economy, demand for the Company's
products and services and the matters set forth in this Report generally.
Consequently, such forward-looking statements should be regarded solely as the
Company's current plans, estimates and beliefs. The Company does not
undertake and specifically declines any obligation to publicly release the
results of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 1. BUSINESS
General
The Company is a successor to a business that commenced operations in 1926, and
is one of the largest national diversified commercial printers in North America
with ten printing plants in eight states and Canada and fifteen prepress
facilities located throughout the United States. The Company operates primarily
in two business sectors of the commercial printing industry: printing (which
accounted for approximately 84% of total sales during the fiscal year ended
March 31, 1998 ("Fiscal Year 1998")) and digital imaging and prepress services
conducted through its American Color division (which accounted for approximately
16% of total sales in Fiscal Year 1998). The Company's printing business and
American Color division are both headquartered in Nashville, Tennessee.
Partnerships affiliated with Morgan Stanley Dean Witter & Co. currently own
61.4% of the outstanding common stock and 72.5% of the outstanding preferred
stock of Holdings.
On April 8, 1993 (the "Acquisition Date"), pursuant to an Agreement and
Plan of Merger dated March 12, 1993, as amended (the "Merger Agreement"),
between Communications and SGI Acquisition Corp. ("Acquisition Corp."),
Acquisition Corp. was merged with and into Communications (the "1993
Acquisition"). Acquisition Corp. was formed by The Morgan Stanley
Leveraged Equity Fund II, L.P. ("MSLEF II"), certain institutional
investors and certain members of management (the "Purchasing Group") for
the purpose of acquiring a majority interest in Communications.
Acquisition Corp. acquired a substantial and controlling majority interest
in Communications in exchange for $40 million in cash. In the 1993
Acquisition, Communications continued as the surviving corporation and the
separate corporate existence of Acquisition Corp. was terminated.
On August 15, 1995, the Company completed a merger transaction (the
"Shakopee Merger") with Shakopee Valley Printing, Inc. ("Shakopee").
Shakopee was formed to effect the purchase of certain assets and assumption
of certain liabilities of Shakopee Valley Printing, a division of Guy
Gannett Communications. On December 22, 1994, pursuant to an Agreement for
the Purchase of Assets between Guy Gannett Communications (the "Seller")
and Shakopee (the "Buyer"), the Seller agreed to sell (effective at the
close of business on December 22, 1994) certain assets and transfer certain
liabilities of Shakopee Valley Printing to the Buyer for a total purchase
price of approximately $42.6 million, primarily financed through the
issuance of 35,000 shares of common stock and bank borrowings. The 35,000
shares were purchased by Morgan Stanley Capital Partners III, L.P., Morgan
Stanley Capital Investors, L.P. and MSCP III 892 Investors, L.P.
(collectively, the "MSCP III Entities"), together with First Plaza Group
Trust and Leeway & Co. Each of the MSCP III Entities is affiliated with
Morgan Stanley Dean Witter & Co. In addition, the other stockholders of
Shakopee were also stockholders of the Company.
On March 11, 1996, Graphics sold its 51% interest in National Inserting
Systems, Inc. ("NIS"). The proceeds from the sale were used to repay
indebtedness under the Bank Credit Agreement (as defined below).
On March 12, 1996, Graphics acquired the assets of Gowe, Inc., a Medina,
Ohio regional printer of newspapers, T.V. books and retail advertising
inserts and catalogs (the "Medina Facility") for cash and assumption of
certain liabilities of Gowe, Inc. (the "Medina Acquisition").
During March 1996, the Company completed the construction and start-up of a
plant in Hanover, Pennsylvania ("Flexi-Tech"). Flexi-Tech is dedicated to
the production of commercial flexi books (a form of advertising inserts)
serving various segments of the retail advertising market and the
production of T.V. listing guides serving the newspaper market.
In February of the fiscal year ended March 31, 1997 ("Fiscal Year 1997"),
the Company made a strategic decision to shut down the operations of its
wholly-owned subsidiary Sullivan Media Corporation ("SMC"). SMC's shut
down was accounted for as a discontinued operation, and accordingly, SMC's
operations are segregated in the Company's consolidated financial
statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Discontinued Operations" and note 5 of
the Company's consolidated financial statements.
Market data used throughout this report was obtained from industry
publications and internal Company estimates. While the Company believes
such information is reliable, the accuracy of such information has not been
independently verified and cannot be guaranteed.
Printing
The Company's printing business, which accounted for approximately 84%, 86%
and 85% of the Company's sales in Fiscal Year 1998, Fiscal Year 1997 and
the fiscal year ending March 31, 1996 ("Fiscal Year 1996"), respectively,
produces retail advertising inserts, comics (newspaper Sunday comics, comic
insert advertising and comic books), and other publications.
Retail Advertising Inserts (80% of printing sales in Fiscal Year 1998 and
Fiscal Year 1997 and 75% in Fiscal Year 1996). The Company believes that
it is one of the largest printers of retail advertising inserts in the
United States. Retail advertising inserts are preprinted advertisements,
generally in color, that display products sold by a particular retailer or
manufacturer. Advertising inserts are used extensively by many different
retailers, including discount, department, supermarket, home center, drug
and automotive stores. Inserts are an important and cost effective means
of advertising for these merchants. Advertising inserts are primarily
distributed through insertion in newspapers but are also distributed by
direct mail or in-store by retailers. They generally advertise for a
specific, limited sale period. As a result, advertising inserts are both
time sensitive and seasonal. The Company prints advertising inserts for
approximately 300 retailers.
Comics (14% of printing sales in Fiscal Year 1998 and Fiscal Year 1997 and
16% in Fiscal Year 1996, include newspaper Sunday comics, comic insert
advertising and comic books). The Company believes that it is one of the
largest printers of comics in the United States. The Company prints Sunday
comics for over 300 newspapers in the United States and Canada and prints a
significant share of the annual comic book requirements of Marvel
Entertainment Group, Inc. ("Marvel").
Other Publications (6% of printing sales in Fiscal Year 1998 and Fiscal
Year 1997 and 9% in Fiscal Year 1996). The Company prints local
newspapers, T.V. guide listings and other publications.
In January 1998, the Company approved a plan for its printing division
which was designed to improve responsiveness to customer requirements,
increase asset utilization and reduce overhead costs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Restructuring Costs and Other Special Charges" and note 19 to the Company's
consolidated financial statements.
Printing Production
The Company's network of ten printing plants in the United States and
Canada is strategically positioned to service major metropolitan centers
and provide the Company with distribution efficiencies and shorter
turnaround times; two factors instrumental in continuing the Company's
success in servicing large national and regional accounts. There are three
printing processes used to produce advertising insert and newspaper
supplements: offset lithography (heatset and cold), rotogravure and
flexography. The Company principally uses heatset offset and flexographic
web printing equipment in its printing operations. The Company owns a
substantial majority of its printing equipment, which currently consists of
36 heatset offset presses, 5 coldset offset presses and 11 flexographic
presses. Most of the Company's advertising inserts and all of its other
publications and comic books are printed using the heatset offset process,
while some advertising inserts and substantially all of the Company's
newspaper Sunday comics and comic advertising inserts are printed using the
flexographic process.
In the offset process, images are distinguished chemically from non-image
areas of a metal plate and transferred from the plate to a rubber blanket
and then to the paper surface. The printed web goes through an oven which
dries the solvents from the ink, thereby setting the ink on the paper. In
the cold offset process, the ink solvents are absorbed into the paper.
Because heatset offset presses can print on a wide variety of papers and
produce sharper reproductions, the heatset offset process provides a more
colorful and attractive product than cold offset presses.
The flexographic process differs from offset printing in that it utilizes
flexible plates and rapid-drying, water-based (as opposed to solvent-based)
inks. The flexographic image area results from a raised surface on a
polymer plate which is transferred directly to the paper surface.
Flexography is used extensively in printing high quality consumer goods
packaging. The Company's flexographic printing generally provides vibrant
color reproduction at lower cost than heatset offset printing. The
strengths of flexography compared with the rotogravure and offset processes
are faster press set up times, brighter colors, reduced paper waste,
reduced energy use and maintenance costs, and environmental advantages due
to the use of water-based inks. Faster set up times make the process
suited to commercial customers with shorter runs and extensive regional
versioning.
In addition to advertising insert capacity, certain equipment parameters
are critical to competing in the advertising insert market, including cut-
off length, folding capabilities and in-line finishing. Cut-off length is
one of the determinants of the size of the printed page. Folding
capabilities for advertising inserts must include a wide variety of page
sizes, page counts and special paper folding effects. Finally, many
advertising inserts require gluing or stitching of the product, adding
cards, trimming and numbering. These production activities generally are
done in-line with the press to meet the expedited delivery schedules and
pricing required by many customers. The Company believes that its mix and
configuration of presses and press services allows for efficient tailoring
of printing services to customers' product needs.
Digital Imaging and Prepress Services
The Company's digital imaging and prepress services business is conducted
by its American Color division ("American Color") which accounted for
approximately 16%, 14% and 13% of the Company's Fiscal Year 1998, Fiscal
Year 1997 and Fiscal Year 1996 sales, respectively. The Company believes
American Color is one of the largest full-service providers of digital
imaging, prepress and color separation services in the United States and a
technological leader in its industry. American Color commenced operations
in 1975 and maintains 15 full service locations nationwide.
American Color assists its customers in the capture, manipulation,
transmission and distribution of images. The majority of its work leads to
the production of four-color separations in a format appropriate for use by
printers. In recent years, technological advances have made it possible to
replace largely manual and photography-based production methods with
computer-based, electronic means for producing four-color films faster and
at lower costs. American Color makes page changes, including typesetting,
and combines digital page layout information with electronically captured
and color-corrected four-color images. From these digital files, proofs,
final corrections and, finally, four-color films or digital output are
produced for each advertising or editorial page. The final four-color
films or digital output enable printers to prepare plates for each color
resulting in the appearance of full color in the printed page.
American Color's revenue from these traditional services is being
supplemented by new revenue sources from electronic prepress services such
as digital image storage, facilities management (operating digital imaging
and prepress service facilities at a customer location), computer-to-plate
services, creative services, consulting and training services and software
and data management. American Color has been a leader in implementing
these new technologies, enabling it to reduce unit costs and effectively
service the increasingly complex demands of its customers more quickly than
many of its competitors. American Color has also been one of the leaders
in the integration of electronic page make-up, microcomputer-based design
and layout, and digital cameras into prepress production.
The digital imaging and prepress services industry is highly fragmented,
primarily consisting of smaller local and regional companies, with only a
few national full-service digital imaging and prepress companies such as
American Color, none of which has a significant nationwide market share.
Many smaller digital imaging and prepress companies have left the industry
in recent years due to their inability to keep pace with technological
advances in the industry.
In April 1995, the Company implemented a plan for its American Color
division designed to improve productivity, increase customer service and
responsiveness, and provide increased growth in this business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Restructuring Costs and Other Special Charges" and note 19 to
the Company's consolidated financial statements.
Competitive Advantages and Strategy
Competitive Advantages. The Company believes that it has the following
competitive advantages in its printing and digital imaging and prepress
services businesses:
Modern Equipment. The Company believes that its web heatset
offset and flexographic web printing equipment is among the most advanced
in the industry and that the average age of its equipment is significantly
less than the majority of its regional competitors and is comparable to its
major national competitors. The Company is also committed to a
comprehensive, long-term maintenance program which enhances the reliability
and extends the life of its presses and other production equipment. It
also believes that its digital imaging and prepress equipment is
significantly more advanced than many of its smaller regional competitors,
many of whom have not incorporated digital prepress technologies to the
same extent as the Company, nor adopted an open systems environment which
allows greater flexibility and more efficient maintenance.
Strong Customer Base. The Company provides printing services to a
diverse base of customers, including approximately 300 retailers and over
300 newspapers in the United States and Canada. The customer base includes
a significant number of the major national retailers and larger newspaper
chains as well as numerous smaller regional retailers. The Company's
consistent focus on providing high quality printing products and strong
customer service at competitive prices has resulted in long-term
relationships with many of these customers. American Color's customer base
includes large and medium-sized customers in the retail, publishing and
catalog businesses, many of whom also have long-term relationships with the
Company. Although the digital imaging and prepress services business has
generally been on a spot bid basis in the past, the Company has been
successful in continuing to increase the proportion of its business under
long-term contracts.
Competitive Cost Structure. The Company has reduced the variable
and fixed costs of production at its printing facilities over the past
several years and believes it is well positioned to maintain its
competitive cost structure in the future due to economies of scale. The
Company has also reduced both labor and material costs (the principal
variable production costs) in its digital imaging and prepress services
business primarily through the adoption of new digital prepress production
methodologies.
Strong Management Team. Since the 1993 Acquisition, the Company
has strengthened its printing management group by hiring experienced
managers with a clear focus on growth and continued cost reduction,
resulting in an improved cost structure and a well-defined strategy for
future expansion. The Company also has strengthened its management group
in its digital imaging and prepress services business, filling a number of
senior, regional and plant management positions with individuals who the
Company believes will manage the digital imaging and prepress services
business for growth and profitability and will continue to upgrade its
capabilities.
National Presence. The Company's nine printing plants in the
United States and one plant in Canada provide the Company with distribution
efficiencies, strong customer service, flexibility and short turnaround
times, all of which are instrumental in the Company's continued success in
servicing its large national and regional retail accounts. The Company's
expanded sales and marketing groups provide greater customer coverage and
enable it to more successfully penetrate regional markets. The Company
believes that its 15 digital imaging and prepress facilities provide it
with contingency capabilities, increased capacity during peak periods,
access to top quality internal technical personnel throughout the country,
short turnaround time and other customer service advantages.
Strategy. The Company's objective is to increase shareholder value by
growing its revenues, increasing its market share and reducing costs. The
Company's strategy to achieve this objective is as follows:
Grow Unit Volume. Management believes that the Company's level of
national sales coverage, when coupled with its significant industry
experience and customer-focused sales force, will result in unit growth.
In an effort to stimulate unit volume growth, the Company has strengthened
its printing sales group. Unit volume growth is also expected to result
from continued capital expansion and selective printing acquisitions. In
addition, in its digital imaging and prepress services business, the
Company has expanded its sales force, strengthened training, more closely
focused its marketing efforts on new, larger customers and implemented a
revised incentive compensation program.
Continue to Improve Product Mix. The Company intends to increase
its share of the retail advertising insert market. In addition, the
Company expects to continue to adjust the mix of its customers and products
within the retail advertising insert market to those that are more
profitable and less seasonable and to maximize the use of the Company's
equipment. The Company is also continuing expansion of its printing
facilities' capabilities for in-plant prepress and postpress services. The
Company's digital imaging and prepress services business will continue to
focus on high value-added new business opportunities, particularly large-
scale projects that will best utilize the breadth of services and
technologies the Company has to offer. Additionally, the Company will
continue to pursue large facilities management opportunities as well as
national and large regional customers that require more sophisticated
levels of service and technologies.
Continue to Reduce Manufacturing Costs and Improve Quality. The
Company intends to further reduce its production costs at its printing
facilities through its Total Quality Management Process, an ongoing cost
reduction and continuous quality improvement process. Additionally, the
Company plans to continue to maximize scale advantages in the purchasing,
technology and engineering areas. The Company also intends to continue to
gain variable cost efficiencies in its digital imaging and prepress
services business by using its technical resources to improve digital
prepress workflows at its various facilities. The Company also believes it
will be able to reduce its per unit technical, sales and management costs
as its sales volumes increase in this business.
Continue to Make Opportunistic Acquisitions. An integral part of
the Company's long-term growth strategy includes a plan to selectively
assess and acquire other printing and digital imaging and prepress services
companies that the Company believes will enhance its leadership position in
these industries.
Customers and Distribution
Customers. The Company sells its printing products and services to a large
number of customers, primarily retailers and newspapers, and all of the
products are produced in accordance with customer specifications. The
Company performs a portion of its printing work, primarily the printing of
Sunday comics and comic books, under long-term contracts with its
customers. The contracts vary in length and many of the contracts
automatically extend for one year unless there has been notice to the
contrary from either of the contracting parties within a certain number of
days before the end of any term. For the balance of its printing work, the
Company obtains varying time commitments from its customers ranging from
job to job to annual allocations. Printing prices are generally fixed
during such commitments; however, the Company's standard terms of trade
call for the pass-through of changes in the cost of raw materials,
primarily paper and ink.
American Color's customers consist of retailers, magazine publishers,
newspaper publishers, printers, catalog sales organizations, consumer
products companies, advertising agencies and direct mail advertisers. Its
customers typically have a need for high levels of technical expertise,
short turnaround times and responsive customer service. In addition to its
historical regional customer base, American Color is increasingly focused
on larger, national accounts that have a need for a broad range of fully
integrated services and communication capabilities requiring leading edge
technology. This trend results in an increasing amount of contractual
business related to facilities management arrangements with customers. The
Company's contracts typically extend from three to five years in length.
The printing and American Color divisions have historically had certain
common customers and their ability to cross-market is an increasingly
valuable tool as computer-to-plate, regional versioning, electronic digital
imaging, facilities management and speed to market become more important to
their customers. This enables the Company to provide more comprehensive
solutions to customers' digital imaging and prepress and printing needs
No single customer accounted for sales in excess of 10% of the Company's
consolidated sales in Fiscal Year 1998. The Company's top ten customers
accounted for approximately 34% of consolidated sales in Fiscal Year 1998.
Distribution. The Company distributes its printing products primarily by
truck to customer designated locations, primarily newspapers. Costs of
distribution are generally paid by the customers, and most shipping is by
common carrier. American Color generally distributes its products via
electronic transmission, overnight express, or other methods of personal
delivery or by courier.
Competition
Commercial printing in the United States is a large, highly fragmented,
capital-intensive industry and the Company competes with numerous national,
regional and local printers. A trend of industry consolidation in recent
years can be attributed to (1) customer preferences for larger printers
with a greater range of services, (2) capital requirements and (3)
competitive pricing pressures.
The Company believes that competition in the printing business is based
primarily on quality and service at a competitive price. The advertising
insert business is a large, fragmented industry in which the Company
competes for national accounts with several large national printers,
several of whom are larger and better capitalized than the Company. In
addition, the Company also competes with numerous regional printers for the
printing of advertising inserts. Although the Company faces competition
principally from one other company (Big Flower Press Holdings, Inc.) in the
printing of Sunday newspaper comics in the United States, there are
numerous newspapers that print their own Sunday comics. The Company's
other publication business competes with many large national and regional
commercial printers.
American Color competes with numerous digital imaging and prepress service
firms on both a national and regional basis. The industry is highly
fragmented, primarily consisting of smaller local and regional companies,
with only a few national full-service digital imaging and prepress
companies such as American Color, none of which has a significant
nationwide market share. Many smaller digital imaging and prepress
companies have left the industry in recent years due to their inability to
keep pace with the technological advances required to service increasingly
complex customer demands. The Company believes that the digital imaging
and prepress services sector will continue to be subject to high levels of
ongoing technological change and the need for capital expenditures to keep
up with such change.
Raw Materials
The primary raw materials used in the Company's printing business are paper
and ink. The Company purchases substantially all of its ink and related
products under long-term ink supply contracts. Throughout the fiscal year
ended March 31, 1995 ("Fiscal Year 1995") and the majority of Fiscal Year
1996, the printing industry experienced substantial increases in the cost
of paper. In late Fiscal Year 1996 and throughout Fiscal Year 1997,
however, the overall cost of paper declined. During Fiscal Year 1998,
paper prices remained relatively stable. Management expects that, as a
result of the Company's strong relationships with key suppliers, its
material costs will remain competitive within the industry. In accordance
with industry practice, the Company generally passes through changes in the
cost of paper to its customers. The primary inputs in prepress services
processes are film and proofing materials.
In both of the Company's business sectors, there is an adequate supply of
the necessary materials available from multiple vendors. The Company is
not dependent on any single supplier and has had no significant problems in
the past obtaining necessary materials.
Seasonality
Some of the Company's printing and digital imaging and prepress services
business is seasonal in nature, particularly those revenues derived from
advertising inserts. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality."
Backlog
Because the Company's printing, digital imaging and prepress services
products are required to be delivered soon after final customer orders are
received, the Company does not experience any backlog of unfilled customer
orders.
Employees
As of May 31, 1998, the Company had a total of approximately 2,800
employees, of which approximately 200 employees are represented by a
collective bargaining agreement that will expire on December 31, 2001. The
Company considers its relations with its employees to be excellent.
Governmental and Environmental Regulations
The Company is subject to regulation under various federal, state and local
laws relating to employee safety and health, and to the generation,
storage, transportation, disposal and emission into the environment of
hazardous substances. The Company believes that it is in material
compliance with such laws and regulations. Although compliance with such
laws and regulations in the future is likely to entail additional capital
expenditures, the Company does not anticipate that such expenditures will
be material. See "Legal Proceedings - Environmental Matters."
ITEM 2. PROPERTIES
The Company operates in 25 locations in 16 states and Canada. The Company
owns seven printing plants in the United States and one in Canada and
leases two printing plants, one in California and one in Pennsylvania. The
American Color division of the Company has 15 production locations, all of
which are leased by American Color. The American Color division also
operates digital imaging and prepress facilities on the premises of several
of its customers ("facilities management"). In addition, the Company
maintains one small executive office and its Nashville headquarter
facility, both of which are leased. The Company believes that its plants
and facilities are adequately equipped and maintained for present and
planned operations.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in several legal actions arising
from its normal business activities. In the opinion of management, any
liability that may arise from such actions will not have a material adverse
effect on the financial condition or results of operations of the Company.
Environmental Matters
Graphics, together with over 300 other persons, has been designated by the
U.S. Environmental Protection Agency as a potentially responsible party (a
"PRP") under the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA," also known as "Superfund") at one Superfund site.
Although liability under CERCLA may be imposed on a joint and several basis
and the Company's ultimate liability is not precisely determinable, the
PRPs have agreed that Graphics' share of removal costs is approximately
0.46% and therefore Graphics believes that its share of the anticipated
remediation costs at such site will not be material to its business or
financial condition. Based upon an analysis of Graphics' volumetric share
of waste contributed to the site and the agreement among the PRPs, the
Company has a reserve of approximately $0.1 million in connection with this
liability on its consolidated balance sheet at March 31, 1998. The Company
believes this amount is adequate to cover such liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 16, 1998, a majority of the shareholders of Holdings approved a
recapitalization plan for Holdings (see note 14 to the Company's
consolidated financial statements) pursuant to Section 228 of the General
Corporation Law of the State of Delaware and the By-laws of Holdings. All
other shareholders were notified of the recapitalization plan.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
There is no established public market for the common stock of either
Holdings or Graphics.
Holders
As of June 11, 1998, there were approximately 96 shareholders of
Holdings' common stock. Holdings is the sole shareholder of
Graphics' common stock.
Dividends
There have been no cash dividends declared on any class of common
equity for the two most recent fiscal years. See restrictions on
Holdings' ability to pay dividends and Graphics' ability to
transfer funds to Holdings in note 1 to the Company's consolidated
financial statements.
Recent Sales of Unregistered Securities
During the fourth quarter of Fiscal Year 1998, certain officers of
the Company exercised options to purchase Holdings' Common Stock
for $0.01/share. The sold securities were exempt from
registration on the basis that all such officers are "accredited
investors" within the meaning of the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is selected financial data for and as of the fiscal years
ended March 31, 1994, 1995, 1996, 1997 and 1998. The balance sheet data as
of March 31, 1994, 1995, 1996, 1997 and 1998 and the statement of
operations data for the fiscal years ended March 31, 1994, 1995, 1996, 1997
and 1998 are derived from the audited consolidated financial statements for
such periods and at such dates. The selected financial data below also
reflects the Company's discontinued wholly-owned subsidiary, SMC and its
coupon free standing insert ("FSI") operation previously conducted by its
discontinued wholly-owned subsidiary SMI. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Discontinued
Operations" and note 5 of the Company's consolidated financial statements.
This data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Company's consolidated financial statements appearing elsewhere in this
annual report.
Selected Financial Data
ACG Holdings, Inc.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------------------------
1998 1997 1996 1995(a) 1994
----------------------------------------------------
Statement of Operations Data: (dollars in thousands)
<S> <C> <C> <C> <C> <C>
Sales $ 533,335 524,551 529,523 433,198 414,673
Cost of Sales 461,407 459,880 465,110 370,267 369,520
------- ------- ------- ------- -------
Gross Profit 71,928 64,671 64,413 62,931 45,153
Selling, general and administrative expenses (b) 54,227 51,418 44,164 41,792 39,343
Restructuring costs and other special charges (c) 5,598 2,881 7,533 -- --
Gain from curtailment and establishment of defined benefit
pension plans, net (d) -- -- -- (3,311) --
------- ------- ------- ------- -------
Operating income 12,103 10,372 12,716 24,450 5,810
Interest expense, net 38,813 36,132 32,425 25,334 23,737
Other expense (income) 412 245 1,722 985 2,369
Income tax expense 2,106 2,591 4,874 2,552 2,380
------- ------- ------- ------- -------
Loss from continuing operations before extraordinary items (29,228) (28,596) (26,305) (4,421) (22,676)
------- ------- ------- ------- -------
Discontinued operations: (e)
Loss from operations, net of tax -- (1,557) (1,364) (912) (23,272)
Estimated (loss) on shut down and gain on settlement, net of tax (667) (1,550) 2,868 18,495 (38,412)
Loss on early extinguishment of debt (f) -- -- (4,526) -- --
------- ------- ------- ------- -------
Net (loss) income $ (29,895) (31,703) (29,327) 13,162 (84,360)
======= ======= ======= ======= =======
Balance Sheet Data (at end of period):
Cash and cash equivalents $ 0 0 0 4,635 8,839
Working capital (deficit) 11,610 (8,598) 9,612 4,958 6,956
Total assets 329,958 333,975 351,181 328,368 305,521
Long-term debt and capitalized leases, including current installments (g) 319,657 312,309 297,617 258,201 250,439
Stockholders' deficit (106,085) (76,318) (44,396) (14,970) (45,485)
Other Data:
Net cash provided (used) by operating activities $ 18,625 24,313 (4,187) 30,510 (27,329)
Net cash used by investing activities (10,024) (10,997) (24,436) (17,580) (1,332)
Net cash (used) provided by financing activities (8,587) (13,312) 23,982 (17,527) 23,113
Capital expenditures (including lease obligations entered into) 23,713 37,767 28,022 20,415 15,722
EBITDA (h) $ 52,367 46,972 46,847 51,719 33,068
NOTES TO SELECTED FINANCIAL DATA
(a) On August 15, 1995, Shakopee was merged with and into Graphics (the
"Shakopee Merger"). The merger has been accounted for as a
combination of entities under common control (similar to a pooling-of-
interests), and accordingly, the consolidated financial statements
give retroactive effect to the Shakopee Merger and include the
combined operations of Holdings and Shakopee subsequent to December
22, 1994 (the date on which Shakopee became under common control with
the Company). Shakopee's financial results are not reflected in
periods prior to December 22, 1994 as these periods were prior to
common control ownership.
(b) Fiscal Year 1998 selling, general and administrative expenses include
(1) $1.5 million of non-recurring American Color charges associated
with the relocation of American Color's corporate office and various
severance related expenses, and (2) $0.6 million of non-cash charges
associated with an employee benefit program. Fiscal Year 1997
selling, general and administrative expense includes $2.5 million of
non-recurring employee termination expenses (including $1.9 million
related to the resignation of the Company's former Chief Executive
Officer - see note 21 to the Company's consolidated financial
statements).
(c) In January 1998, the Company approved a restructuring plan for its
printing division designed to improve responsiveness to customer
requirements, increase asset utilization and reduce overhead costs.
The Company recognized $3.9 million of costs under such plan in Fiscal
Year 1998.
In April 1995, the Company implemented a restructuring plan for its
American Color division which was designed to improve productivity,
increase customer service and responsiveness and provide increased
growth in the business. The Company recognized $0.9 million and $4.1
million of costs under such plan in Fiscal Year 1997 and Fiscal Year
1996, respectively.
In addition, the Company recorded $1.7 million, $1.9 million and $3.4
million of other special charges related to asset write-offs and
write-downs in its printing and American Color divisions in Fiscal
Year 1998, Fiscal Year 1997 and Fiscal Year 1996, respectively (see
note 19 to the Company's consolidated financial statements).
(d) In October 1994, the Company amended its defined benefit pension
plans, which resulted in the freezing of additional defined benefits
for future services under the plans effective January 1, 1995. The
Company recognized a curtailment gain of $3.7 million as a result of
freezing such benefits. Also in October 1994, the Board of Directors
approved a new Supplemental Executive Retirement Plan ("SERP"), which
is a defined benefit plan, for certain key executives. The Company
recognized a $0.4 million expense associated with the establishment of
the SERP.
(e) In February of Fiscal Year 1997, the Company made a strategic decision
to shut down the operation of its wholly-owned subsidiary SMC. SMC's
shut down has been accounted for as a discontinued operation, and
accordingly, SMC's operations are segregated in the Company's
consolidated financial statements. Sales, costs of sales and selling,
general and administrative expenses attributable to SMC for Fiscal
Years 1997, 1996 and 1995 have been reclassified to discontinued
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Discontinued Operations" and note
5 of the Company's consolidated financial statements.
On February 16, 1994, the Company assigned the coupon FSI contracts of
its subsidiary, Sullivan Marketing, Inc. ("SMI"), to News America
FSI, Inc. ("News America"). In June 1994, the Company recorded
income from the settlement of a lawsuit entitled Sullivan Marketing,
Inc. and Sullivan Graphics, Inc. v. Valassis Communications, Inc.,
News America FSI Inc. and David Brandon, (the "SMI Settlement") of
$18.5 million, net of taxes, and when coupled with settlement expenses
which had previously been accrued, the net cash proceeds resulting
from this settlement were approximately $16.7 million.
In Fiscal Year 1996, the Company recognized settlement of a complaint
naming SMI, News America and two packaged goods companies as
defendants (the "EPI lawsuit") and reversed certain accruals related
to the estimated loss on shut down of SMI. The resulting effect
reflected in the Fiscal Year 1996 consolidated statement of operations
was $2.9 million income in discontinued operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Discontinued Operations" and note 5 of the Company's
consolidated financial statements.
(f) As part of the Shakopee Merger and the refinancing transactions (the
"Refinancing"), collectively (the "Transactions"), the Company
recorded an extraordinary loss related to early extinguishment of debt
of $4.5 million, net of zero taxes. This extraordinary loss primarily
consisted of the early redemption premium on Graphics' 15% Senior
Subordinated Notes due 2000 (the "15% Notes") and the write-off of
deferred financing costs related to refinanced indebtedness partially
offset by the write-off of a bond premium associated with the 15%
Notes.
(g) The balance of long-term debt outstanding at March 31, 1995 and 1994
includes an additional $9.7 million and $11.3 million, respectively,
relating to a purchase accounting adjustment to the 15% Notes
resulting from the 1993 Acquisition. The principal amount payable at
maturity of the 15% Notes remained at $100 million. The 15% Notes
were redeemed in connection with the Refinancing.
(h) EBITDA is included in the Selected Financial Data because management
believes that investors regard EBITDA as a key measure of a leveraged
company's performance and ability to meet its future debt service
requirements. EBITDA is defined as earnings before net interest
expense, income tax expense, depreciation, amortization, other special
charges related to asset write-offs and write-downs, other income
(expense), discontinued operations and extraordinary items. EBITDA is
not a measure of financial performance under generally accepted
accounting principles and should not be considered an alternative to
net income (or any other measure of performance under generally
accepted accounting principles) as a measure of performance or to cash
flows from operating, investing or financing activities as an indicator
of cash flows or as a measure of liquidity. Certain covenants in the
Indenture dated as of August 15, 1995 (the "Indenture") and the
Company's Credit Agreement with BT Commercial Corporation (the "Bank
Credit Agreement") are based on EBITDA, subject to certain adjustments.
EBITDA includes (1) $1.5 million of non-recurring charges associated
with the relocation of American Color's corporate office and various
severance related expenses, and (2) $0.6 million of non-cash charges
associated with an employee benefit program in Fiscal Year 1998.
EBITDA includes $3.9 million in restructuring costs related to its
printing division in Fiscal Year 1998 and $0.9 million and $4.1
million of restructuring costs related to its American Color division
in Fiscal Year 1997 and Fiscal Year 1996, respectively (see note 19 to
the Company's consolidated financial statements).
EBITDA includes non-recurring employee termination expenses of $2.5
million in Fiscal Year 1997 (including $1.9 million related to the
resignation of the Company's former Chief Executive Officer - see note
21 to the Company's consolidated financial statements).
EBITDA in Fiscal Year 1995 includes a $3.3 million net gain related to
a change in the Company's defined benefit pension plans (as discussed
in note (d) above).
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
On August 15, 1995, Shakopee was merged with and into Graphics (the
"Shakopee Merger"). The merger has been accounted for as a combination of
entities under common control (similar to a pooling-of-interests), and
accordingly, the consolidated financial statements give retroactive effect
to the Shakopee Merger and include the combined operations of Holdings and
Shakopee subsequent to December 22, 1994 (the date on which Shakopee became
under common control with the Company).
On March 11, 1996, the Company sold its 51% interest in NIS for
approximately $2.5 million in cash and a note for approximately $0.2
million. This transaction resulted in a net gain on disposal of
approximately $1.3 million, which is classified as Other, net in the
consolidated statement of operations. The proceeds of the sale were used
to repay indebtedness under the Bank Credit Agreement.
On March 12, 1996, Graphics acquired the assets of Gowe, Inc., a Medina,
Ohio based regional printer of newspapers, T.V. books and retail
advertising inserts and catalogs (the "Medina Facility") for cash and
assumption of certain liabilities of Gowe, Inc. (the "Medina
Acquisition"). The Medina Acquisition was accounted for under the purchase
method of accounting applying the provisions of Accounting Principles Board
Opinion No. 16 ("APB 16"). The Medina Facility's results of operations are
included in the Company's consolidated financial statements subsequent to
March 11, 1996.
During March 1996, the Company completed the construction and start-up of
Flexi-Tech, a new plant in Hanover, Pennsylvania. Flexi-Tech is dedicated
to the production of commercial flexi books (a form of advertising inserts)
serving various segments of the retail advertising market and the
production of T.V. listing guides serving the newspaper market.
In Fiscal Year 1997, the Company began to present certain costs of its
American Color production facilities within cost of sales rather than as
selling, general and administrative expenses. This new presentation is
consistent with the Company's presentation of the printing sector's
financial information, and the Company believes that this is a more
accurate measure of the gross margin of the business. The financial
information for Fiscal Year 1996 has been reclassified to conform with this
presentation.
In February of Fiscal Year 1997, the Company made a strategic decision to
shut down the operations of its wholly-owned subsidiary SMC. SMC's shut
down has been accounted for as a discontinued operation, and accordingly,
SMC's operations are segregated in the Company's consolidated financial
statements. Sales, cost of sales and selling, general and administrative
expenses attributable to SMC for Fiscal Year 1996 have been reclassified to
discontinued operations.
Printing. In recent years, the Company has taken a number of steps which
have resulted in improved printing sector performance including the hiring
of several key managers in the manufacturing, purchasing, quality,
technical services, production planning and customer service departments
(see "EBITDA" below). Comprehensive quality improvement and cost reduction
programs have also been implemented for all the Company's printing
processes. As a result of these measures, the Company has been successful
in lowering its manufacturing costs within the printing sector, while
improving product quality.
Additionally, in order to grow sales and improve gross margins, the Company
increased the geographic and industry scope of its sales force and shifted
the mix of its business toward retail customers and away from the printing
of certain lower margin publications. The Shakopee Merger, Medina
Acquisition and Flexi-Tech operations (see "Business - Printing") are
consistent with the Company's overall strategy to continue to increase
profitability by growing its revenues, increasing its market share and
reducing costs.
Furthermore, management believes that continued strong demand for the
retail advertising insert product has resulted in less excess industry
capacity and therefore an improved supply/demand position within the
marketplace. This dynamic has resulted in a greater stabilization of
printing prices which in conjunction with the Company's cost reduction
programs has had favorable impact on printing gross profit levels.
Commercial Printing in the United States is highly competitive. The
significant capital required to keep pace with changing technology and
competitive pricing trends has led to a trend of industry consolidation in
recent years. In addition, customers' preference for larger printers, such
as the Company, with a wider variety of services, greater distribution
capabilities and more flexibility have also contributed to consolidation
within the industry. The industry is expected to remain competitive in the
near future and the Company's sales will continue to be subject to changes
in retailers' demands for printed products.
The cost of paper is a principal factor in the Company's overall pricing to
its customers. The level of paper costs also has a significant impact on
the Company's reported sales. Beginning in Fiscal Year 1994 and throughout
Fiscal Year 1995 and the majority of Fiscal Year 1996, the paper industry
experienced increased demand and high capacity utilization in various
grades of paper. This led to a global tightening of the paper supply, and
as a result, the printing industry experienced substantial increases in the
cost of paper. In late Fiscal Year 1996 and throughout Fiscal Year 1997,
the overall cost of paper declined. During Fiscal Year 1998, paper prices
remained relatively stable. In accordance with industry practice, the
Company generally passes through changes in the cost of paper to its
customers. Although the Company has been successful in passing through
paper price increases to its customers in the past, there can be no
assurances that the Company will be able to pass through future paper price
increases.
In January 1998, the Company approved a plan for its printing division
which was designed to improve responsiveness to customer requirements,
increase asset utilization and reduce overhead costs. The cost of this
plan was accounted for in accordance with the guidance set forth in
Emerging Issues Task Force Issue 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" ("EITF 94-3") (see
"Restructuring Costs and Other Special Charges" below).
American Color. The digital imaging and prepress services industry has
experienced significant technological advances as electronic digital
prepress systems have replaced the largely manual and photography-based
methods utilized in the past. This shift in technology (which improved
process efficiencies and decreased processing costs) produced increased
unit growth for American Color as the demand for color pages increased.
However, American Color's selling price levels per page have declined
because of greater efficiencies resulting from increased use of technology.
American Color's revenue from traditional services are now supplemented by
new revenue sources from electronic digital imaging and prepress services
such as digital image storage, facilities management, computer-to-plate
services, creative services, consulting and training services and software
and data-base management.
In April 1995, the Company implemented a plan for its American Color
division which was designed to improve productivity, increase customer
service and responsiveness, and provide increased growth in this business.
The cost of this plan was accounted for in accordance with the guidelines
set forth in EITF 94-3 (see "Restructuring Costs and Other Special Charges"
below).
The following table summarizes the Company's historical results of continuing
operations for Fiscal Year 1998, 1997 and 1996.
Fiscal Year Ended March 31,
-----------------------------------------------
1998 1997 1996
------------ ----------- -----------
(dollars in thousands)
Sales:
Printing $446,350 $449,924 $453,381
American Color 86,985 74,627 72,461
Other (a) -- -- 3,681
------- ------- -------
Total $533,335 $524,551 $529,523
======= ======= =======
Gross Profit:
Printing $51,278 $49,469 $49,015
American Color 20,628 15,133 13,687
Other (a) 22 69 1,711
------- ------- -------
Total $71,928 $64,671 $64,413
======= ======= =======
Gross Margin:
Printing 11.5% 11.0% 10.8%
American Color 23.7% 20.3% 18.9%
Total 13.5% 12.3% 12.2%
Operating Income (Loss):
Printing (b)(c) $22,612 $25,858 $28,239
American Color (b) (c) 2,509 (1,576) (3,975)
Other (a) (d) (13,018) (e) (13,910) (e) (11,548)
------- ------- -------
Total $12,103 $10,372 $12,716
======= ======= =======
(a) Other operations in Fiscal Year 1996 include revenues and expenses
associated with the Company's 51% owned subsidiary, NIS (sold on March
11, 1996, see note 4 to the Company's consolidated financial
statements).
(b) Printing operating income includes the impact of $1.7 million, $0.4
million and $2 million in Fiscal Year 1998, Fiscal Year 1997 and
Fiscal Year 1996, respectively, of other special charges related to
asset write-offs and write-downs. American Color's operating loss
includes the impact of $1.5 million and $1.4 million in Fiscal Year
1997 and Fiscal Year 1996, respectively, of other special charges
related to asset write-offs and write-downs (see note 19 to the
Company's consolidated financial statements).
(c) Printing operating income includes the impact of $3.9 million of
restructuring costs in Fiscal Year 1998. American Color's operating
income (loss) includes the impact of restructuring costs of $0.9
million and $4.1 million in Fiscal Year 1997 and Fiscal Year 1996,
respectively (see note 19 to the Company's consolidated financial
statements) and $1.5 million of non-recurring charges in Fiscal Year
1998 associated with the relocation of its corporate office and
various severance related expenses.
(d) Also includes corporate general and administrative expenses, and
amortization expense.
(e) Also reflects non-cash charges associated with an employee benefit
program of $0.6 million in Fiscal Year 1998 and non-recurring employee
termination expenses of $2.5 million in Fiscal Year 1997 (including $1.9
million related to the resignation of the Company's former Chief Executive
Officer-see note 21 to the Company's consolidated financial statements).
Historical Results of Operations
Fiscal Year 1998 vs. Fiscal Year 1997
The Company's sales increased 1.7% to $533.3 million in Fiscal Year 1998
from $524.6 million in Fiscal Year 1997. This increase includes an
increase in American Color sales of $12.4 million, or 16.6%, offset in part
by a decrease in printing sales of $3.5 million, or 0.8%. The Company's
gross profit increased to $71.9 million or 13.5% of sales in Fiscal Year
1998 from $64.7 million or 12.3% of sales in Fiscal Year 1997. The
Company's operating income increased to $12.1 million or 2.3% of sales in
Fiscal Year 1998 from $10.4 million or 2% of sales in Fiscal Year 1997.
See the discussion of these changes by sector below.
Printing
Sales. Printing sales decreased $3.5 million to $446.4 million in Fiscal
Year 1998 from $449.9 million in Fiscal Year 1997. This decrease is
primarily the result of an increase in sales to customers that supply their
own paper offset in part by an increase in production volume of
approximately 2.5%.
Gross Profit. Printing gross profit increased $1.8 million to $51.3
million in Fiscal Year 1998 from $49.5 million in Fiscal Year 1997.
Printing gross margin increased to 11.5% in Fiscal Year 1998 from 11.0% in
Fiscal Year 1997. The increase in gross profit includes reduced
manufacturing costs, improved mix and pricing, along with an increase in
production volume. These gains were partially offset by an increase in
depreciation and amortization expense. The increase in gross margin
includes the above mentioned factors and the impact of an increase in sales
to customers that supply their own paper.
Selling, General and Administrative Expenses. Printing selling, general
and administrative expenses remained relatively unchanged at $23.1 million,
or 5.2% of printing sales, in Fiscal Year 1998 compared to $23.1 million,
or 5.1% of printing sales, in Fiscal Year 1997.
Operating Income. As a result of the above factors and the incurrence of
both restructuring costs associated with the printing restructuring plan of
$3.9 million in Fiscal Year 1998 and other special charges related to asset
write-offs and write-downs of $1.7 million and $0.4 million in Fiscal Year
1998 and 1997, respectively (see "Restructuring Costs and Other Special
Charges" below), operating income from the printing business decreased to
$22.6 million in Fiscal Year 1998 from $25.9 million in Fiscal Year 1997.
American Color
Sales. American Color's sales increased $12.4 million, or 16.6%, to $87.0
million in Fiscal Year 1998 from $74.6 million in Fiscal Year 1997. The
increase in Fiscal Year 1998 was primarily the result of higher digital
imaging and prepress production volume due to American Color's
implementation of various digital prepress technologies, including
facilities management, packaging prepress, software and image management
services and increases in digital visual effects work.
Gross Profit. American Color's gross profit increased $5.5 million to
$20.6 million in Fiscal Year 1998 from $15.1 million in Fiscal Year 1997.
American Color's gross margin increased to 23.7% in Fiscal Year 1998 from
20.3% in Fiscal Year 1997. These improvements resulted from increased
volume (primarily from increased facilities management sales) and material
and payroll cost savings offset in part by costs associated with new
operations servicing the packaging industry.
Selling, General and Administrative Expenses. American Color's selling,
general and administrative expenses increased to $18.1 million, or 20.8% of
American Color's sales in Fiscal Year 1998 from $14.3 million, or 19.2% of
American Color's sales in Fiscal Year 1997. This increase includes
relocation costs related to the move of American Color's corporate office
from Phoenix to Nashville and various severance related expenses of $1.5
million in Fiscal Year 1998. In addition, the increase includes increased
sales and marketing expenses, including the costs of the new packaging
sales group.
Operating Income (Loss). As a result of the above factors and the
incurrence of both restructuring costs associated with the American Color
restructuring plan of $0.9 million in Fiscal Year 1997 and other special
charges related to asset write-offs and write-downs of $1.5 million in
Fiscal Year 1997 (see "Restructuring Costs and Other Special Charges"
below), operating income (loss) at American Color increased to income of
$2.5 million in Fiscal Year 1998 from a loss of $1.6 million in Fiscal Year
1997.
Fiscal Year 1997 vs. Fiscal Year 1996
The Company's sales decreased 0.9% to $524.6 million in Fiscal Year 1997
from $529.5 million in Fiscal Year 1996. This decrease includes a decrease
in printing sales of $3.5 million, or 0.8%, an increase in American Color
sales of $2.2 million, or 3% and a $3.7 million decrease in other sales.
The Company's gross profit increased to $64.7 million or 12.3% of sales in
Fiscal Year 1997 from $64.4 million or 12.2% of sales in Fiscal Year 1996.
The Company's operating income decreased to $10.4 million or 2% of sales in
Fiscal Year 1997 from $12.7 million or 2.4% of sales in Fiscal Year 1996.
See the discussion of these changes by sector below.
Printing
Sales. Printing sales decreased to $449.9 million in Fiscal Year 1997 from
$453.4 million in Fiscal Year 1996. This decrease includes a decrease in
paper prices and the effect of an increase in customer supplied paper.
These decreases were partially offset by $46.2 million of incremental sales
from the Medina Facility and Flexi-Tech and an increase in production
volume of approximately 3% (excluding the Medina Facility and Flexi-Tech).
Gross Profit. Printing gross profit increased $0.5 million, or 0.9%, to
$49.5 million in Fiscal Year 1997 from $49 million in Fiscal Year 1996.
Printing gross margin increased to 11% in Fiscal Year 1997 from 10.8% in
Fiscal Year 1996. The increase in gross profit primarily reflects
incremental gross profit from the Medina Facility and an increase in
production volume. In addition, the gross profit improvement includes
reduced variable production and certain other manufacturing costs due to
continued cost containment programs at the printing plants. These gains
were partially offset by an increase in depreciation expense, a reduction
in the price of scrap paper and incremental costs related to the start-up
of Flexi-Tech. The increase in gross margin as a percentage of sales is
due primarily to the impact of the above described items and the impact of
lower paper prices on sales in Fiscal Year 1997.
Selling, General and Administrative Expenses. Printing selling, general
and administrative expenses increased 23.2% to $23.1 million, or 5.1% of
printing sales, in Fiscal Year 1997 from $18.8 million, or 4.1% of printing
sales, in Fiscal Year 1996. The increase in Fiscal Year 1997 was primarily
the result of increased sales and marketing expenses and incremental
selling, general and administrative costs at the Medina Facility and Flexi-
Tech.
Operating Income. As a result of the above factors and the incurrence of
other special charges related to asset write-offs and write-downs of $0.4
million and $2 million in Fiscal Year 1997 and 1996, respectively (see
"Restructuring Costs and Other Special Charges" below), operating income
from the printing business decreased to $25.9 million in Fiscal Year 1997
from $28.2 million in Fiscal Year 1996.
American Color
Sales. American Color's sales increased 3% to $74.6 million in Fiscal Year
1997 from $72.5 million in Fiscal Year 1996. The increase in Fiscal Year
1997 was primarily the result of higher digital imaging and prepress
production volume due to American Color's implementation of various digital
prepress technologies, including facilities management and software and
image management services and increases in digital visual effects work
partially offset by lower equipment sales.
Gross Profit. American Color's gross profit increased $1.4 million to
$15.1 million in Fiscal Year 1997 from $13.7 million in Fiscal Year 1996.
American Color's gross margin was 20.3% in Fiscal Year 1997, up from 18.9%
in Fiscal Year 1996. These increases were primarily the result of
increased volume and material cost savings offset in part by increased
facilities management costs.
Selling, General and Administrative Expenses. American Color's selling,
general and administrative expenses increased 18% to $14.3 million or 19.2%
of American Color sales in Fiscal Year 1997 from $12.1 million or 16.7% of
American Color sales in Fiscal Year 1996, primarily as a result of the
addition of sales and marketing and administrative support personnel and
related expenses, including expenses related to its digital visual effects
group.
Operating Loss. As a result of the above factors and the incurrence of
both restructuring costs associated with the American Color restructuring
plan of $0.9 million in Fiscal Year 1997 and $4.1 million in Fiscal Year
1996 and other special charges related to asset write-offs and write-downs
of $1.5 million and $1.4 million in Fiscal Year 1997 and 1996, respectively
(see "Restructuring Costs and Other Special Charges" below), operating loss
at American Color decreased to $1.6 million in Fiscal Year 1997 from $4
million in Fiscal Year 1996.
Other Operations (Fiscal Year 1998 vs. Fiscal Year 1997 and Fiscal Year
1997 vs. Fiscal Year 1996)
Other operations primarily include corporate general and administrative
expenses, other expenses and amortization expense. Fiscal Year 1996 also
included revenues and expenses associated with the Company's 51% owned
subsidiary, NIS (sold on March 11, 1996). Amortization expenses for other
operations, including goodwill amortization (see below), were $8.6 million,
$8.4 million and $8.7 million in Fiscal Year 1998, 1997 and 1996,
respectively.
Operating losses from other operations decreased $0.9 million to a loss of
$13.0 million in Fiscal Year 1998 from a loss of $13.9 million in Fiscal
Year 1997. This decrease includes non-recurring employee termination
expenses of $2.5 million in Fiscal Year 1997 (including $1.9 million
related to the resignation of the Company's former Chief Executive Officer
- - see note 21 to the Company's consolidated financial statements) offset in
part by $0.6 million of non-cash expenses associated with an employee
benefit program in Fiscal Year 1998, a $0.2 million increase in
amortization expenses and increases in certain corporate general and
administrative expenses during Fiscal Year 1998.
Operating losses from other operations increased $2.4 million to a loss of
$13.9 million in Fiscal Year 1997 from a loss of $11.5 million in Fiscal
Year 1996. This increase primarily reflects non-recurring employee
termination expenses of $2.5 million in Fiscal Year 1997 (including $1.9
million related to the resignation of the Company's former Chief Executive
Officer - see note 21 to the Company's consolidated financial statements).
Goodwill Amortization
Amortization expense associated with goodwill was $8.5 million, $8.3
million and $8.6 million for Fiscal Year 1998, 1997 and 1996, respectively.
Restructuring Costs and Other Special Charges
Restructuring Costs:
Printing In January 1998, the Company approved a plan for its printing
division which was designed to improve responsiveness to customer
requirements, increase asset utilization and reduce overhead costs. The
cost of this plan is being accounted for in accordance with the guidance
set forth in EITF 94-3. The pretax costs of $3.9 million which were
incurred as a direct result of this plan (excluding other special charges
related to asset write-offs and write-downs - see below) includes $3.3
million of employee termination costs and $0.6 million of relocation and
other transition expenses. This restructuring charge was recorded in the
quarter ended March 31, 1998. The majority of these costs will be paid or
settled before March 31, 1999.
American Color In April 1995, the Company implemented a plan for its
American Color division which was designed to improve productivity,
increase customer service and responsiveness, and provide increased growth
in the digital imaging and prepress services business. The cost of this
plan was accounted for in accordance with the guidance set forth in EITF
94-3. The pretax costs of $5 million which were incurred as a part of this
plan (excluding other special charges related to asset write-offs and write
downs - see below) represent employee termination, goodwill write-down and
other related costs that were incurred as a direct result of the plan.
Approximately $0.9 million of restructuring costs primarily related to
relocation expenses were recognized in Fiscal Year 1997. In Fiscal Year
1996 the Company recognized $4.1 million of such restructuring charges,
which included $0.9 million of goodwill write-down related to certain
facilities that were either shut down or relocated in conjunction with the
American Color restructuring and $3.2 million primarily for severance and
other personnel related costs.
Other Special Charges:
During the quarter ended March 31, 1998, the Company recorded special
charges totaling $1.7 million to adjust the carrying values of idle,
disposed and under-performing assets of the Company's printing sector to
estimated fair values. The provision was based on a review of Company
long-lived assets in accordance with Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("FASB 121"). Fair value was
based on the Company's estimate of held and used and idle assets based on
current market conditions using the best information available.
During Fiscal Year 1997 and Fiscal Year 1996, the Company recorded special
charges totaling $1.9 million and $3.4 million, respectively, for impaired
long-lived assets and to adjust the carrying values of idle, disposed and
under performing assets to estimated fair values. The provisions were
based on a review of long-lived assets in connection with the adoption of
FASB 121. Of the Fiscal Year 1997 total of long-lived assets that were
adjusted based on being idle, disposed of or under performing,
approximately $0.4 million and $1.5 million related to the printing and
American Color divisions, respectively. Fair value was based on the
Company's estimate of held and used and idle assets based on current market
conditions using the best information available. Approximately $2 million
of the Fiscal Year 1996 total related to the printing sectors long-lived
assets that were adjusted based on being idle, disposed of or under
performing. The remaining $1.4 million of the Fiscal Year 1996 total
related to the American Color division. The estimated undiscounted future
cash flows attributable to certain American Color division identifiable
long-lived assets held and used was less than their carrying value
principally as a result of high levels of ongoing technological change.
The methodology used to assess the recoverability of the American Color
division long-lived assets involved projecting aggregate cash flows. Based
on this evaluation, the Company determined in Fiscal Year 1996 that long-
lived assets with a carrying amount of $2.2 million were impaired and such
assets were then written down by $1.4 million to their fair value. Fair
value was based on Company estimates and appraisals.
These special charges are classified within restructuring costs and other
special charges in the consolidated statements of operations.
Interest Expense
Interest expense increased 7.3% to $39.0 million in Fiscal Year 1998 from
$36.3 million in Fiscal Year 1997. This increase includes the impact of
increased obligations under capital leases and incremental costs related to
the $25 million term loan facility entered into on June 30, 1997 (the "Term
Loan Facility") (see note 9 to the Company's consolidated financial
statements).
Interest expense increased 11% to $36.3 million in Fiscal Year 1997 from
$32.7 million in Fiscal Year 1996. This increase includes the impact of
increased average indebtedness levels including indebtedness related to the
Transactions and obligations under capital leases. The increased
indebtedness includes the additional indebtedness related to the Shakopee
Merger and indebtedness incurred to fund the fees and expenses associated
with the Refinancing (see notes 2 and 9 to the Company's consolidated
financial statements).
Nonrecurring Charges Related to Terminated Merger
The Company recognized $1.5 million of expenses related to a terminated
merger in Fiscal Year 1996.
Other Expense (Income) and Taxes
Other expenses net, increased to $0.4 million in Fiscal Year 1998 from $0.2
million in Fiscal Year 1997, which was relatively unchanged from Fiscal
Year 1996.
Income tax expense decreased to $2.1 million in Fiscal Year 1998 from $2.6
million in Fiscal Year 1997. This change is primarily due to smaller
amounts of taxable income in foreign jurisdictions and changes in the
deferred tax valuation allowance. During Fiscal Year 1998, the Company
increased its valuation allowance by $7.1 million to $37.2 million.
Income tax expense decreased to $2.6 million in Fiscal Year 1997 from $4.9
million in Fiscal Year 1996. This change is primarily due to smaller
amounts of taxable income in foreign jurisdictions, the Shakopee Merger and
the sale of NIS, partially offset by changes in the deferred tax valuation
allowance. During Fiscal Year 1997, the Company increased its valuation
allowance by $8.9 million to $30.1 million.
Discontinued Operations
SMC
The Company's Fiscal Year 1998 and Fiscal Year 1997 net loss includes the
estimated net loss on shut down of approximately $0.4 million and $1.5
million, respectively. See note 5 to the Company's consolidated financial
statements. The Company's net loss in Fiscal Year 1997 and Fiscal Year
1996 includes the loss from operations of its discontinued wholly-owned
subsidiary SMC of approximately $1.6 million and $1.4 million,
respectively.
SMI
In Fiscal Year 1998, the Company recorded an additional $0.3 million
estimated loss on shut down. In Fiscal Year 1996, the Company recognized
the settlement of the EPI lawsuit and reversed certain accruals related to
the estimated loss on shut down of SMI. The resulting effect reflected in
the Fiscal Year 1996 consolidated statement of operations was $2.9 million
income in discontinued operations.
Loss on Early Extinguishment of Debt, Net of Tax
As part of the Shakopee Merger and the Refinancing in Fiscal Year 1996 (see
notes 2 and 9 to the Company's consolidated financial statements), the
Company recorded an extraordinary loss related to early extinguishment of
debt of $4.5 million, net of zero taxes. This extraordinary loss primarily
consisted of the early redemption premium on the 15% Notes and the write-
off of deferred financing costs related to refinanced indebtedness
partially offset by the write-off of a bond premium associated with the 15%
Notes.
Net Loss
As a result of the factors discussed above, the Company's net loss
decreased to a loss of $29.9 million in Fiscal Year 1998 from a loss of
$31.7 million in Fiscal Year 1997. As discussed above, Fiscal Year 1998
includes $3.9 million of restructuring costs and $1.7 million of other
special charges related to asset write-offs and write-downs associated with
the Company's printing division. In addition, Fiscal Year 1998 includes
$1.5 million of non-recurring charges related to the relocation of American
Color's corporate office and various severance related expenses, non-cash
charges of $0.6 million associated with an employee benefit program and an
approximate $0.7 million loss from discontinued operations related to SMC
and SMI. The Company's net loss increased to a loss of $31.7 million in
Fiscal Year 1997 from a loss of $29.3 million in Fiscal Year 1996. Fiscal
Year 1997 includes $0.9 million of expense related to the American Color
restructuring, $1.9 million of other special charges related to asset
write-offs and write-downs, $2.5 million of non-recurring employee
termination expenses (including $1.9 million related to the resignation of
the Company's former Chief Executive Officer - see note 21 to the Company's
consolidated financial statements) and an approximate $3.1 million loss
from discontinued operations related to SMC. The Company's net loss in
Fiscal Year 1996 includes $4.1 million of expense related to the American
Color restructuring, $3.4 million of other special charges related to asset
write-offs and write-downs, a $1.5 million non-recurring expense associated
with a terminated merger, a $4.5 million extraordinary loss on early
extinguishment of debt and approximately $2.9 million of income and a $1.4
million loss from discontinued operations related to SMI and SMC,
respectively.
Liquidity and Capital Resources
On May 8, 1998, the Company refinanced all of its existing bank
indebtedness (see notes 9 and 23 to the Company's consolidated financial
statements). The primary objectives of the refinancing were to gain
greater financial and operating flexibility, reduce the Company's overall
cost of capital and provide greater opportunity for internal growth and
growth through acquisitions.
The 1998 refinancing transaction included the following (1) the Company
entered into a $145 million credit facility with Bankers Trust Company,
Morgan Stanley Senior Funding, Inc., General Electric Capital Corporation,
and a syndicate of lenders (the "Amended and Restated Credit Agreement")
providing for a $70 million revolving credit facility which is not subject
to a borrowing base limitation (the "New Revolving Credit Facility")
maturing on March 31, 2004, a $25 million amortizing term loan facility
maturing on March 31, 2004 (the "A Term Loan Facility") and a $50 million
amortizing term loan facility maturing on March 31, 2005 (the "B Term Loan
Facility"); (2) the repayment of all $57.0 million of indebtedness
outstanding under the existing Bank Credit Agreement (plus $0.4 million of
accrued interest to the date of repayment); (3) the repayment of all $25.0
million of indebtedness outstanding under the existing Term Loan Facility
(plus $0.6 million of accrued interest to the date of repayment) and (4)
the payment of approximately $2.2 million in fees and expenses associated
with the refinancing transaction.
The New Revolving Credit Facility provides for a maximum of $70 million
borrowing availability and includes a $40 million letter of credit sub-
limit. As of May 31, 1998, the Company had total borrowings and letters of
credit outstanding under the New Revolving Credit Facility of approximately
$33.3 million, and therefore, additional borrowing availability of
approximately $36.7 million.
At May 31, 1998, the $25 million of the A Term Loan Facility and $50
million of the B Term Loan Facility remained outstanding. Scheduled A Term
Loan Facility and B Term Loan Facility payments due over the remainder of
fiscal year ending March 31, 1999 ("Fiscal Year 1999") are $0 and $0.5
million, respectively. In addition, scheduled repayments of capital lease
obligations and other senior indebtedness during Fiscal Year 1999 are
approximately $7 million and $2.3 million, respectively.
In Fiscal Year 1998, cash flow from operations and proceeds from the Term
Loan Facility (see the consolidated statements of cash flows) were used to
reduce borrowings under the Revolving Credit Facility of $11.5 million and
to pay $19.8 million in scheduled principal payments on indebtedness
(including capital lease obligations). Additionally, these cash sources
were used to fund the Company's Fiscal Year 1998 cash capital expenditures
of $10.8 million and meet additional investing and financing needs of $1.5
million. The Company plans to continue its program of upgrading its
printing and prepress equipment and currently anticipates that cash capital
expenditures will approximate $8 million and equipment acquired under
capital leases will approximate $7 million during Fiscal Year 1999. The
Company had zero cash on hand at March 31, 1998 due to a requirement under
the Bank Credit Agreement that the Company's daily available funds be used
to reduce borrowings under the Revolving Credit Facility.
At March 31, 1998, the Company had total indebtedness outstanding of $319.7
million, including capital lease obligations. Of the total debt
outstanding at March 31, 1998, $65.2 million was outstanding under the Bank
Credit Agreement at a weighted average interest rate of 8.48% and $25
million was outstanding under the Term Loan Facility at a weighted average
interest rate of 10.63%. Indebtedness under the Amended and Restated
Credit Agreement (effective May 8, 1998) had interest at floating rates.
At March 31, 1998, the Company had indebtedness other than obligations
under the Bank Credit Agreement and Term Loan Facility of $229.5 million
(including $185 million of the Notes). The Company was in compliance with
all financial covenants set forth in the Bank Credit Agreement, as amended,
at March 31, 1998. The Company is currently in compliance with all
financial covenants set forth in the Amended and Restated Credit Agreement.
See notes 9 and 23 to the Company's consolidated financial statements.
A significant portion of Graphics long-term obligations, including
indebtedness under the Amended and Restated Credit Agreement, has been
fully and unconditionally guaranteed by Holdings. Holdings is subject to
certain restrictions under its guarantee of indebtedness under the Amended
and Restated Credit Agreement, including among other things, restrictions
on merges, acquisitions, incurrence of additional debt and payment of cash
dividends. See Notes 1 and 23 to the Company's consolidated financial
statements.
<TABLE>
<CAPTION>
EBITDA
Fiscal Year Ended March 31,
--------------------------------------------------
1998 1997 1996
-------- -------- --------
(dollars in thousands)
EBITDA:
<S> <C> <C> <C>
Printing (a) $ 46,838 $ 46,755 $ 46,597
American Color (a) 9,927 5,770 2,907
Other (b) (c) (4,398) (d) (5,553) (d) (2,657)
--------- --------- ---------
Total $ 52,367 $ 46,972 $ 46,847
========= ========= =========
EBITDA Margin:
Printing 10.5% 10.4% 10.3%
American Color 11.4% 7.7% 4.0%
Total 9.8% 9.0% 8.8%
(a) Printing EBITDA includes the impact of $3.9 million of restructuring
costs in Fiscal Year 1998. American Color EBITDA for Fiscal Year 1997
and 1996 includes the impact of restructuring costs of $0.9 million
and $4.1 million, respectively (see note 19 to the Company's
consolidated financial statements and discussion above) and $1.5
million of non-recurring charges in Fiscal Year 1998 associated with
the relocation of its corporate office and various severance related
expenses.
(b) Other operations in Fiscal Year 1996 include revenues and expenses
associated with the Company's 51% owned subsidiary, NIS (sold on March
11, 1996; see note 4 to the Company's consolidated financial
statements).
(c) Also includes corporate general and administrative expenses.
(d) Also reflects non-cash charges associated with an employee benefit
program of $0.6 million in Fiscal Year 1998 and non-recurring employee
termination expenses of $2.5 million in Fiscal Year 1997 (including
$1.9 million related to the resignation of the Company's former Chief
Executive Officer - see note 21 to the Company's consolidated
financial statements).
</TABLE>
EBITDA is presented and discussed because management believes that
investors regard EBITDA as a key measure of a leveraged company's
performance and ability to meet its future debt service requirements.
"EBITDA" is defined as earnings before net interest expense, income tax
expense (benefit), depreciation, amortization, other special charges
related to asset write-offs and write-downs, other income (expense),
discontinued operations and extraordinary items. "EBITDA Margin" is defined
as EBITDA as a percentage of net sales. EBITDA is not a measure of
financial performance under generally accepted accounting principles and
should not be considered an alternative to net income (or any other measure
of performance under generally accepted accounting principles) as a measure
of performance or to cash flows from operating, investing or financing
activities as an indicator of cash flows or as a measure of liquidity.
Certain covenants in the Indenture, the Bank Credit Agreement and the
Amended and Restated Credit Agreement are based on EBITDA, subject to
certain adjustments.
Printing. As a result of the reasons previously described under
"--Printing," (excluding changes in depreciation and amortization expense
and other special charges related to asset write-offs and write-downs),
printing EBITDA was $46.8 million in both Fiscal Year 1998 and Fiscal Year
1997 and printing EBITDA increased to $46.8 million in Fiscal Year 1997
from $46.6 million in Fiscal Year 1996, representing an increase of $0.2
million. Printing EBITDA Margin increased to 10.5% in Fiscal Year 1998
from 10.4% in Fiscal Year 1997 and printing EBITDA Margin increased to
10.4% in Fiscal Year 1997 from 10.3% in Fiscal Year 1996. Included in the
Fiscal Year 1998 EBITDA and EBITDA Margin is $3.9 million of restructuring
costs related to the printing restructuring plan (see discussion above).
American Color. As a result of the reasons previously described
under "--American Color," (excluding changes in depreciation and
amortization expense and other special charges related to asset write-offs
and write-downs), American Color EBITDA increased to $9.9 million in Fiscal
Year 1998 from $5.8 million in Fiscal Year 1997, representing an increase
of $4.1 million. EBITDA Margin increased to 11.4% in Fiscal Year 1998 from
7.7% in Fiscal Year 1997. American Color EBITDA increased to $5.8 million
in Fiscal Year 1997 from $2.9 million in Fiscal Year 1996, representing an
increase of $2.9 million. EBITDA Margin increased to 7.7% in Fiscal Year
1997 from 4% in Fiscal Year 1996. American Color EBITDA and EBITDA Margin
in Fiscal Year 1998 includes $1.5 million of non-recurring charges
associated with the relocation of its corporate office and various
severance related expenses. Included in the Fiscal Year 1997 and Fiscal
Year 1996 EBITDA and EBITDA Margin is the impact of restructuring costs of
$0.9 million and $4.1 million, respectively (see discussion above).
Other Operations. As a result of the reasons previously described
under "--Other Operations," (excluding changes in depreciation and
amortization expense), other operations negative EBITDA decreased to
negative EBITDA of $4.4 million in Fiscal Year 1998 from negative EBITDA of
$5.6 million in Fiscal Year 1997. EBITDA from other operations increased
to negative EBITDA of $5.6 million in Fiscal Year 1997 from negative EBITDA
of $2.7 million in Fiscal Year 1996. Negative EBITDA for Fiscal Year 1998
includes the impact of non-cash charges of $0.6 million associated with an
employee benefit program. Negative EBITDA for Fiscal Year 1997 includes
the impact of non-recurring employee termination expenses of $2.5 million
(including $1.9 million related to the resignation of the Company's former
Chief Executive Officer - see note 21 to the Company's consolidated
financial statements).
Amortization of Goodwill
The goodwill is amortized on a straight-line basis by business sector.
Goodwill amortization expense will be approximately $2.5 million in Fiscal
Year 1999.
Impact of Inflation
Generally, the Company believes it has been able to pass along increases in
its costs to its customers (primarily paper and ink) through increased
prices of its printed products. Throughout the majority of Fiscal Year
1996, the printing industry experienced substantial increases in the cost
of paper. In late Fiscal Year 1996 and throughout Fiscal Year 1997,
however, the overall cost of paper began to decline. During Fiscal Year
1998, paper prices remained relatively stable. Management expects that, as
a result of the Company's strong relationship with key suppliers, its
material costs will remain competitive within the industry.
Seasonality
Some of the Company's printing and digital imaging and prepress services
business is seasonal in nature, particularly those revenues derived from
advertising inserts. Generally, the Company's sales from advertising
inserts are highest during periods prior to the following advertising
periods: Spring advertising season (March 15 -- May 15); Back-to-School
(July 15 -- August 15); and Thanksgiving/Christmas (October 15 -- December
15). One of the reasons the Company chose to enter the comic book printing
market is that it is not subject to significant seasonal fluctuations.
Sales of newspaper Sunday comics are also not subject to significant
seasonal fluctuations. The Company's strategy has been and will continue
to include the mitigation of the seasonality of its printing business by
increasing its sales to customers whose own sales are less seasonal (i.e.,
food and drug companies).
Environmental
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations and which do not contribute to current
or future period revenue generation are expensed. Environmental
liabilities are recorded when assessments and/or remedial efforts are
probable and the related costs can be reasonably estimated.
The Company believes that environmental liabilities, currently and in the
prior periods discussed herein, are not material. The Company has recorded
an environmental reserve of approximately $0.1 million in connection with a
Superfund site in its consolidated statement of financial position at March
31, 1998 which the Company believes to be adequate. See "Legal Proceedings
- - Environmental Matters". The Company does not anticipate receiving
insurance proceeds related to this potential settlement. Management does
not expect that any identified matters, individually or in the aggregate,
will have a material adverse effect on the consolidated financial position
or results of operations of the Company.
Accounting
There are no pending accounting pronouncements that, when adopted, are
expected to have a material effect in the Company's results of operations
or its financial position.
Year 2000 Compliance
The Year 2000 issue is the result of certain computer programs being
written using two digits rather than four digits to define the applicable
year. Software that is not Year 2000 compliant recognizes a date using
"00" as the year 1900 rather than 2000, which could result in system
failures, miscalculations or temporary inability to engage in normal
business activity. The Company is currently working to resolve the
potential impact of this issue. The Company has determined that certain
software programs and computer hardware will need to be modified or
replaced. Although there can be no assurance, the Company believes such
modification or replacement will mitigate the potential impact of this
issue. The Company will utilize both internal and external resources to
accomplish this task. Based upon management's best estimate, the cost
associated with these modifications and/or replacement is not expected to
be material to the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
--------
The following consolidated financial statements of ACG Holdings, Inc.
are included in this report:
Report of Independent Auditors........................................... 29
Consolidated balance sheets - March 31, 1998 and 1997.................... 30
For the Years Ended March 31, 1998, 1997 and 1996:
Consolidated statements of operations.......................... 32
Consolidated statements of stockholders' deficit............... 33
Consolidated statements of cash flows.......................... 34
Notes to Consolidated Financial Statements............................... 36
The following consolidated financial statement schedules of ACG Holdings,
Inc. are included in Part IV, Item 14:
I. Condensed Financial Information of Registrant
Condensed Consolidated Financial Statements (parent
company only) for the years ended March 31, 1998, 1997,
and 1996, and as of March 31, 1998 and 1997
II. Valuation and qualifying accounts
All other schedules specified under Regulation S-X for ACG Holdings, Inc.
have been omitted because they are either not applicable, not required, or
because the information required is included in the financial statements or
notes thereto.
Report of Independent Auditors
The Board of Directors
ACG Holdings, Inc.
We have audited the accompanying consolidated balance sheets of ACG Holdings,
Inc. (formerly Sullivan Communications, Inc.) as of March 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for each of the three fiscal years in the period ended March 31,
1998. Our audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ACG
Holdings, Inc. at March 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the period
ended March 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 15 to the consolidated financial statements, in fiscal year
1998 the Company adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
ERNST & YOUNG LLP
Nashville, Tennessee
May 22, 1998
ACG HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par values)
<TABLE>
<CAPTION>
March 31,
--------------------------------------------
1998 1997
----------------- -----------------
Assets
Current assets:
<S> <C> <C>
Cash $ 0 0
Receivables:
Trade accounts, less allowance for doubtful accounts of
$2,112 and $5,879 at March 31, 1998 and 1997, respectively 63,185 53,510
Other 2,605 3,252
----------------- -----------------
Total receivables 65,790 56,762
Inventories 10,795 9,711
Prepaid expenses and other current assets 3,578 3,604
----------------- -----------------
Total current assets 80,163 70,077
Property, plant and equipment:
Land and improvements 3,148 3,278
Buildings and improvements 19,426 17,837
Machinery and equipment 178,713 175,196
Furniture and fixtures 5,379 3,625
Leased assets under capital leases 48,039 35,113
Equipment installations in process 1,612 3,118
----------------- -----------------
256,317 238,167
Less accumulated depreciation (96,684) (71,270)
----------------- -----------------
Net property, plant and equipment 159,633 166,897
Excess of cost over net assets acquired, less accumulated
amortization of $42,060 and $33,523 at March 31, 1998 and 1997, respectively 74,556 81,964
Other assets 15,606 15,037
----------------- -----------------
Total assets $ 329,958 333,975
================= =================
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par values)
<TABLE>
<CAPTION>
March 31,
--------------------------------------------
1998 1997
----------------- -----------------
Liabilities and Stockholders' Deficit
Current liabilities:
<S> <C> <C>
Current installments of long-term debt and capitalized leases $ 9,131 18,252
Trade accounts payable 27,381 29,364
Accrued expenses 31,539 30,037
Income taxes 502 1,022
------------------- ------------------
Total current liabilities 68,553 78,675
Long-term debt and capitalized leases, excluding current installments 310,526 294,057
Deferred income taxes 9,443 8,713
Other liabilities 47,521 28,848
------------------- ------------------
Total liabilities 436,043 410,293
Stockholders' deficit:
Common stock, voting, $.01 par value, 5,852,223 shares authorized,
134,812 shares issued and outstanding at March 31, 1998 and
123,889 shares issued and outstanding at March 31, 1997 1 1
Preferred Stock, $.01 par value, 5,750 shares authorized, 4,000 shares
Series A convertible preferred stock issued and outstanding at
March 31, 1997, $40,000,000 liquidation preference, 1,750 shares
Series B convertible preferred stock issued and outstanding at
March 31, 1997, $17,500,000 liquidation preference -- --
Preferred Stock, $.01 par value, 15,823 shares authorized, 3,631 shares
Series AA convertible preferred stock issued and outstanding at
March 31, 1998, $40,000,000 liquidation preference, 1,606 shares
Series BB convertible preferred stock issued and outstanding at March
31, 1998, $17,500,000 liquidation preference -- --
Additional paid-in capital 58,249 57,499
Accumulated deficit (162,250) (132,228)
Cumulative translation adjustment (2,000) (1,590)
Unfunded pension liability (85) --
------------------- ------------------
Total stockholders' deficit (106,085) (76,318)
------------------- ------------------
Commitments and contingencies
Total liabilities and stockholders' deficit $ 329,958 333,975
=================== ==================
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Sales $ 533,335 524,551 529,523
Cost of sales 461,407 459,880 465,110
--------- --------- ---------
Gross profit 71,928 64,671 64,413
Selling, general and administrative expenses 45,690 43,164 35,533
Amortization of goodwill 8,537 8,254 8,631
Restructuring costs and other special charges 5,598 2,881 7,533
--------- --------- ---------
Operating income 12,103 10,372 12,716
--------- --------- ---------
Other expense (income):
Interest expense 38,956 36,289 32,688
Interest income (143) (157) (263)
Nonrecurring charge related to terminated merger -- -- 1,534
Other, net 412 245 188
--------- --------- ---------
Total other expense 39,225 36,377 34,147
--------- --------- ---------
Loss from continuing operations before income
taxes and extraordinary item (27,122) (26,005) (21,431)
Income tax expense (2,106) (2,591) (4,874)
--------- --------- ---------
Loss from continuing operations before
extraordinary item (29,228) (28,596) (26,305)
Discontinued operations:
Loss from operations, net of tax -- (1,557) (1,364)
Estimated (loss) on shut down and gain
on SMI settlement, net of tax (667) (1,550) 2,868
--------- --------- ---------
Loss before extraordinary item (29,895) (31,703) (24,801)
Loss on early extinguishment of debt, net of tax -- -- (4,526)
--------- --------- ---------
Net loss $ (29,895) (31,703) (29,327)
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Consolidated Statements of Stockholders' Deficit
(In thousands)
<TABLE>
<CAPTION>
Series AA Series A
and BB and B
Voting Convertible Convertible Additional Cumulative Unfunded
common preferred preferred paid-in Accumulated translation Pension
stock stock stock capital deficit adjustment Liability Total
------ ----------- ----------- ---------- ----------- ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, April 1, 1995 $ 1 -- -- 57,499 (71,198) (1,272) -- (14,970)
Change in cumulative
translation adjustment -
exchange rate fluctuations -- -- -- -- -- (99) -- (99)
Net loss -- -- -- -- (29,327) -- -- (29,327)
------ ------ ------- ------ ------- ------ ------ -------
Balances, March 31, 1996 $ 1 -- -- 57,499 (100,525) (1,371) -- (44,396)
Change in cumulative
translation adjustment -
exchange rate fluctuations -- -- -- -- -- (219) -- (219)
Net loss -- -- -- -- (31,703) -- -- (31,703)
------ ------ ------- ------ ------- ------ ------ -------
Balances, March 31, 1997 $ 1 -- -- 57,499 (132,228) (1,590) -- (76,318)
Change in cumulative
translation adjustment -
exchange rate fluctuations -- -- -- -- -- (410) -- (410)
Treasury stock -- -- -- -- (127) -- -- (127)
Exercise of stock options -- -- -- 176 -- -- -- 176
Executive stock compensation -- -- -- 574 -- -- -- 574
Unfunded pension liability -- -- -- -- -- -- (85) (85)
Net loss -- -- -- -- (29,895) -- -- (29,895)
------ ------ ------- ------ ------- ------ ------ -------
Balances, March 31, 1998 $ 1 -- -- 58,249 (162,250) (2,000) (85) (106,085)
====== ====== ======= ====== ======= ====== ====== =======
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended March 31,
------------------------------------------------
1998 1997 1996
-------------- ------------ --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (29,895) (31,703) (29,327)
Adjustments to reconcile net loss to cash provided (used)
by operating activities:
Extraordinary item - non cash -- -- (1,912)
Other special charges - non cash 1,727 1,944 4,306
Depreciation 28,124 25,282 21,385
Depreciation and amortization related to SMC -- 251 932
Amortization of goodwill 8,537 8,254 8,631
Amortization of other assets 1,876 1,120 680
Amortization of deferred financing costs and bond premium 2,292 1,784 1,469
Gain on shut down of SMI, net of tax -- -- (1,480)
Loss on shut down 667 1,550 --
(Gain) loss on disposals of property, plant and equipment (37) 6 350
Deferred income tax expense 930 911 595
Changes in assets and liabilities, net of effects of shut down of SMI
and SMC and acquisition of the Medina Facility:
(Increase) decrease in receivables (9,079) 11,262 (12,870)
(Increase) decrease in inventories (1,122) 3,453 (1,744)
(Decrease) increase in trade accounts payable (1,887) (6,528) 11,571
Increase (decrease) in accrued expenses 1,172 1,226 981
(Decrease) increase in current income taxes payable (520) (193) 195
Increase (decrease) in other liabilities 18,588 3,106 (2,722)
Other (2,748) 2,588 (5,227)
------- ------- -------
Total adjustments 48,520 56,016 25,140
------- ------- -------
Net cash provided (used) by operating activities 18,625 24,313 (4,187)
------- ------- -------
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended March 31,
------------------------------------------------
1998 1997 1996
-------------- ------------ --------------
<S> <C> <C> <C>
Cash flows from investing activities:
Purchases of property, plant and equipment (10,826) (10,810) (20,276)
Proceeds from sales of property, plant and equipment 1,067 63 36
Medina acquisition -- -- (6,682)
Proceeds from sale of NIS -- -- 2,550
Other (265) (250) (64)
------- ------- -------
Net cash used by investing activities (10,024) (10,997) (24,436)
------- ------- -------
Cash flows from financing activities:
Debt:
Proceeds 25,000 1,162 280,451
Payments (24,899) (10,374) (242,970)
Increase in deferred financing costs (2,467) (827) (12,095)
Repayment of capital lease obligations (6,349) (3,212) (591)
Other 128 (61) (813)
------- ------- -------
Net cash (used) provided by financing activities (8,587) (13,312) 23,982
------- ------- -------
Effect of exchange rates on cash (14) (4) 6
------- ------- -------
Decrease in cash 0 0 (4,635)
Cash:
Beginning of period 0 0 4,635
------- ------- -------
End of period $ 0 0 0
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 35,931 34,284 30,581
Income taxes, net of refunds 1,751 1,863 3,964
Exchange rate adjustment to long-term debt (67) (61) 53
Non cash investing activities:
Lease obligations $ 12,887 26,957 7,746
See accompanying notes to consolidated financial statements.
</TABLE>
ACG HOLDINGS, INC.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
ACG Holdings, Inc. ("Holdings"), together with its wholly-owned
subsidiary, American Color Graphics, Inc. ("Graphics"),
(collectively the "Company"), was formed in April 1989 under the
name GBP Holdings, Inc. to effect the purchase of all the capital
stock of GBP Industries, Inc. from its stockholders in a
leveraged buyout transaction. In October 1989, GBP Holdings,
Inc. changed its name to Sullivan Holdings, Inc. and GBP
Industries, Inc. changed its name to Sullivan Graphics, Inc.
Effective June 1993, Sullivan Holdings, Inc. changed its name to
Sullivan Communications, Inc. Effective July 1997, Sullivan
Communications, Inc. changed its name to ACG Holdings, Inc. and
Sullivan Graphics, Inc. changed its name to American Color
Graphics, Inc.
On August 15, 1995, the Company completed a merger transaction
with Shakopee Valley Printing Inc. ("Shakopee") (the "Shakopee
Merger"). Shakopee was formed to effect the purchase of certain
assets and assumption of certain liabilities of Shakopee Valley
Printing, a Guy Gannett Communications division. On December 22,
1994, Morgan Stanley Capital Partners III, L.P., Morgan Stanley
Capital Investors, L.P., and MSCP III 892 Investors, L.P.
(collectively the "MSCP III Entities"), together with First Plaza
Group Trust and Leeway & Co. purchased 35,000 shares of common
stock of Shakopee. On December 22, 1994, pursuant to an
Agreement for the Purchase of Assets between Guy Gannett
Communications (the "Seller") and Shakopee (the "Buyer"), the
Seller agreed to sell (effective at the close of business on
December 22, 1994) certain assets and transfer certain
liabilities of Shakopee Valley Printing to the Buyer for a total
purchase price of approximately $42.6 million, primarily financed
through the issuance of 35,000 shares of Common Stock and bank
borrowings. Each of the MSCP III Entities is affiliated with
Morgan Stanley Dean Witter & Co., the parent company of the
general partner of the Company's majority stockholder. In
addition, the other stockholders of Shakopee were also
stockholders of the Company. See note 2 for a description of the
specific terms of the Shakopee Merger.
Holdings has no operations or significant assets other than its
investment in Graphics. Holdings is dependent upon distributions
from Graphics to fund its obligations. Under the terms of its
debt agreements at March 31, 1998, Graphics' ability to pay
dividends or lend to Holdings was either restricted or
prohibited, except that Graphics may pay specified amounts to
Holdings (i) to pay the repurchase price payable to any officer
or employee (or their estates) of Holdings, Graphics or any of
their respective subsidiaries in respect of their stock or
options to purchase stock in Holdings upon the death, disability
or termination of employment of such officers and employees (so
long as no default, or event of default, as defined, has occurred
under the terms of the Bank Credit Agreement and the Amended and
restated Credit Agreement, as defined below, and provided the
aggregate amount of all such repurchases does not exceed $2
million) and (ii) to fund the payment of Holdings' operating
expenses incurred in the ordinary course of business, other
corporate overhead costs and expenses (so long as the aggregate
amount of such payments does not exceed $250,000 in any fiscal
year) and Holdings' obligations pursuant to a tax sharing
agreement with Graphics. A significant portion of Graphics'
long-term obligations have been fully and unconditionally
guaranteed by Holdings.
The two business sectors of the commercial printing industry in
which the Company operates are (i) printing and (ii) digital
imaging and prepress services conducted by its American Color
division.
ACG HOLDINGS, INC.
Notes to Consolidated Financial Statements
Significant accounting policies are as follows:
(a) Basis of Presentation
The consolidated financial statements include the accounts
of Holdings and all greater than 50% - owned subsidiaries
which are consolidated under generally accepted accounting
principles.
All significant intercompany transactions and balances have
been eliminated in consolidation.
The Shakopee Merger has been accounted for as a combination
of entities under common control (similar to a pooling-of-
interests). The consolidated financial statements give
retroactive effect to the merger of the Company and Shakopee
and include the combined operations of the Company and
Shakopee for the fiscal year ended March 31, 1995. Shakopee
was not under common control until December 22, 1994, and,
accordingly, the consolidated financial statements reflect
Shakopee as under common control subsequent to such date.
Earnings per share data has not been provided since
Holdings' common stock is closely held.
(b) Revenue Recognition
In accordance with trade practices of the printing industry,
printing revenues are recognized upon the completion of
production. Shipment of printed material generally occurs
upon completion of this production process. Materials are
printed to unique customer specifications and are not
returnable. Credits relating to specification variances and
other customer adjustments are not significant.
(c) Inventories
Inventories are valued at the lower of first-in, first-out
("FIFO") cost or market (net realizable value) (see note
6).
(d) Property, Plant and Equipment
Property, plant and equipment is stated at cost.
Depreciation, which includes amortization of assets under
capital leases, is based on the straight-line method over
the estimated useful lives of the assets or the remaining
terms of the leases.
(e) Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired (or "goodwill")
is amortized on a straight-line basis over a range of 5 to
40 years for each of its principal business sectors. The
carrying value of goodwill is reviewed if facts and
circumstances suggest that it may be impaired. If this
review indicates that goodwill will not be recoverable, as
determined based on the estimated undiscounted future cash
flows of the assets acquired, the Company's carrying amount
of the goodwill is reduced by the estimated shortfall of
such cash flows. In addition, the Company assesses long-
lived assets for impairment under Financial Accounting
Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("FASB 121"). Under these rules, goodwill
associated with assets acquired in a purchase business
combination is included in impairment evaluations when
assets or circumstances exist that indicate the carrying
amount of these assets may not be recoverable.
(f) Other Assets
Financing costs related to the Bank Credit Agreement and
Term Loan Facility (as defined herein) are deferred and
amortized over the term of the respective agreements. Costs
related to the Notes (as defined herein) are deferred and
amortized over the ten-year term of the Notes.
The covenants not to compete are amortized over the three
and five year terms of the respective underlying agreements.
(g) Income Taxes
Income taxes have been provided using the liability method
in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").
(h) Foreign Currency Translation
The assets and liabilities of the Company's Canadian
facility, which include interdivisional balances, are
translated at year-end rates of exchange while revenue and
expense items are translated at average rates for the year.
Translation adjustments are recorded as a separate component
of stockholders' deficit. Since the transactions of the
Canadian facility are denominated in its functional currency
and the interdivision accounts are of a long-term investment
nature, no transaction adjustments are included in
operations.
(i) Reclassifications
Certain prior period amounts have been reclassified to
conform with the most recent period presentation.
(j) Environmental
Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past
operations, and which do not contribute to current or future
period revenue generation, are expensed. Environmental
liabilities are provided when assessments and/or remedial
efforts are probable and the related amounts can be
reasonably estimated.
(k) Fair Value of Financial Instruments
The Company discloses the estimated fair values of its
financial instruments together with the related carrying
amount. The Company is not a party to any financial
instruments with material off-balance-sheet risk.
(l) Concentration of Credit Risk
Financial instruments which subject the Company to credit
risk consist primarily of trade accounts receivable.
Concentration of credit risk with respect to trade accounts
receivable are generally diversified due to the large number
of entities comprising the Company's customer base and their
geographic dispersion. The Company performs ongoing credit
evaluations of its customers and maintains an allowance for
potential credit losses.
(m) Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
(n) Stock Based Compensation
Effective April 1, 1997 the Company changed its method of
accounting for stock based compensation plans from the
intrinsic value method of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") to the fair value method established by Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). Application of the
recognition provisions of SFAS 123 is prospective
(restatement of prior periods is prohibited). The Company
believes that including the fair value of compensation plans
in determining net income is consistent with accounting for
the cost of all other forms of compensation.
(2) The Shakopee Merger
On August 15, 1995, the Shakopee Merger was consummated and each
outstanding share of the Common Stock of Shakopee was converted
into one share of the New Common Stock of the Company and 1/20 of
one share of Series B Preferred Stock of the Company. Also on
August 15, 1995, concurrent with the Shakopee Merger, the Company
also refinanced its then existing indebtedness (the
"Refinancing") (see note 9).
The Shakopee Merger was accounted for under the purchase method
of accounting applying the provisions of Accounting Principles
Board Opinion No. 16 ("APB 16"). The purchase price of $42.6
million, was allocated to the tangible assets and identifiable
intangible assets and liabilities assumed based upon their
respective fair values. The resulting excess of cost over net
assets acquired was $12.2 million.
The Shakopee Merger has been accounted for as a combination of
entities under common control (similar to a pooling-of-
interests), and accordingly the consolidated financial statements
give retroactive effect to the Shakopee Merger and include the
combined operations of Holdings and Shakopee subsequent to
December 22, 1994.
(3) The Medina Acquisition
On March 12, 1996, Graphics acquired the assets of Gowe, Inc., a
Medina, Ohio based regional printer of newspapers, T.V. books and
retail advertising inserts and catalogs (the "Medina Facility"),
for cash and assumption of certain liabilities of Gowe, Inc.,
pursuant to an Asset Purchase Agreement, among Graphics, Gowe,
Inc. and ComCorp, Inc., the parent company of Gowe, Inc. (the
"Medina Acquisition"). The Medina Acquisition was accounted for
under the purchase method of accounting applying the provisions
of APB 16. The Medina Facility's results of operations are
included in the Company's consolidated financial statements
subsequent to March 11, 1996.
The Company's pro forma unaudited results of operations for the
fiscal year ended March 31, 1996 ("Fiscal Year 1996"), assuming
that the Medina Acquisition occurred as of April 1, 1995, were
$561.6 million in sales, a $25.9 million loss from continuing
operations before extraordinary item and a $28.9 million net
loss.
(4) Disposal of 51% Interest in National Inserting Systems, Inc.
On March 11, 1996, the Company sold its 51% interest in National
Inserting Systems, Inc. ("NIS") for approximately $2.5 million
in cash and a note for approximately $0.2 million under the terms
of a Stock Redemption Agreement between NIS and Graphics. This
transaction resulted in a net gain on disposal of approximately
$1.3 million, which is classified as other, net in the
consolidated statement of operations. The proceeds of the sale
were used to repay indebtedness under Graphics' Bank Credit
Agreement (as defined herein).
(5) Discontinued Operations
SMC
In February 1997, the Company made a strategic decision to shut
down the operations of its wholly-owned subsidiary Sullivan Media
Corporation ("SMC"). This resulted in an estimated net loss on
shut down of approximately $1.5 million, which is net of zero
income tax benefits. In the fiscal year ended March 31, 1998
("Fiscal Year 1998") the Company recorded an additional $0.4
million estimated net loss on shutdown.
The shut down of SMC has been accounted for as a discontinued
operation, and accordingly, its operating results are segregated
and reported as a discontinued operation in the accompanying
consolidated statements of operations. The assets of SMC and any
resulting gain or loss on the disposal of those assets, is
immaterial to the results of operations and financial position of
the Company.
The condensed consolidated statements of operations relating to
the discontinued SMC operation follows:
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Sales $ -- 9,786 6,819
Cost and expenses -- 11,343 8,183
------------------ ------------------ ------------------
Loss before income taxes -- (1,557) (1,364)
Income taxes -- -- --
------------------ ------------------ ------------------
Net loss $ -- (1,557) (1,364)
================== ================== ==================
</TABLE>
SMI
In Fiscal Year 1996, the Company recognized settlement of the EPI Group
Limited ("EPI") complaint naming Sullivan Marketing, Inc. ("SMI"), News
America FSI, Inc. ("News America") and two packaged goods companies as
defendants ("EPI Lawsuit") and reversed certain accruals related to the
estimated loss on shut down of SMI. The resulting effect reflected in the
Fiscal Year 1996 consolidated statement of operations was $2.9 million
income in discontinued operations. In Fiscal Year 1998, the Company
recorded an additional $0.3 million estimated net loss on shut down.
(6) Inventories
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------
1998 1997
--------------------- ---------------------
<S> <C> <C>
Paper $ 9,161 7,831
Ink 227 324
Supplies and other 1,407 1,556
-------------------- --------------------
Total $ 10,795 9,711
==================== ====================
In the third quarter of Fiscal Year 1996, the Company changed
to the FIFO method of accounting from the last-in, first-out
("LIFO") method of accounting as the principal method of
accounting for inventories. The change results in a balance
sheet which (1) reflects inventories at a value that more
closely represents current costs which the Company believes
are the primary concern of its constituents (bank lenders,
financial markets, customers, trade creditors, etc.) and (2)
enhances the comparability of the Company's financial
statements by changing to the predominant method used by key
competitors in the printing industry. The effect
(approximately $0.8 million) of the change for the six months
ended September 30, 1995 resulted in the retroactive
restatement of the first and second quarters of Fiscal Year
1996 of approximately $0.5 million and $0.3 million,
respectively, as a decrease of cost of sales and a decrease to
net loss.
(7) Other Assets
The components of other assets are as follows (in thousands):
March 31,
-------------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Deferred financing costs, less accumulated
amortization of $5,185 in 1998 and $2,893
in 1997 $ 10,104 9,996
Spare parts inventory, net of valuation allowance
of $100 in 1998 and 1997 1,852 1,699
Other 3,650 3,342
-------------- -------------
Total $ 15,606 15,037
============== =============
</TABLE>
(8) Accrued Expenses
The components of accrued expenses are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
---------------------------------------------
1998 1997
------------------ --------------------
<S> <C> <C>
Compensation and related taxes $ 10,004 9,206
Employee benefits 8,755 8,353
Interest 5,028 4,445
Accrued costs related to shut down of SMC 163 1,046
Other 7,589 6,987
------------------ --------------------
Total $ 31,539 30,037
================== ====================
</TABLE>
(9) Notes Payable, Long-term Debt and Capitalized Leases
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
---------------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Bank Credit Agreement:
Term Loan $ 35,979 47,088
Revolving Credit Facility Borrowings 29,257 40,710
------------------ --------------------
65,236 87,798
Term Loan Facility 25,000 --
12 3/4% Senior Subordinated Notes Due 2005 185,000 185,000
Capitalized leases 38,147 31,607
Other loans with varying maturities and
interest rates 6,274 7,904
------------------ --------------------
Total long-term debt 319,657 312,309
Less current installments 9,131 18,252
------------------ --------------------
Long-term debt and capitalized leases,
excluding current installments $ 310,526 294,057
================== ====================
</TABLE>
August 15, 1995 Refinancing
On August 15, 1995 the Company sold $185 million of 12 3/4% Senior
Subordinated Notes Due 2005 (the "Notes"). Concurrently with the closing
of the sale of the Notes, the Company entered into a series of
transactions, (the "Refinancing," and together with the Shakopee Merger,
the "Transactions") including the following: (i) the Company entered into
a Credit Agreement with BT Commercial Corporation ("BTCC") (the "BTCC
Agreement"), providing for a $75 million revolving credit facility maturing
in 2000 (the "Revolving Credit Facility") and a $60 million amortizing term
loan with a final maturity in 2000 (the "Term Loan"); (ii) the repayment
of all $126.5 million of indebtedness outstanding under Graphics' old bank
credit agreement (the "Old Bank Credit Agreement") (plus $2.3 million of
accrued interest to the date of repayment); (iii) the redemption of all
outstanding 15% Senior Subordinated Notes due 2000 ("the 15% Notes") at an
aggregate redemption price of $105.6 million (plus $1.8 million of accrued
interest to the redemption date); (iv) the repayment of all $24.6 million
of indebtedness, including the Shakopee bank credit agreement, assumed in
the Shakopee Merger (plus $0.1 million of accrued interest to the date of
repayment) and (v) the payment of approximately $11.8 million of fees and
expenses incurred in connection with the Transactions. As a result of the
Transactions, the Company recorded an extraordinary loss related to early
extinguishment of debt of $4.5 million, net of zero taxes. This
extraordinary loss consisted primarily of the early redemption premium on
the 15% Notes and the write-off of deferred financing costs related to
refinanced indebtedness partially offset by the write-off of a bond premium
associated with the 15% Notes.
The Notes bear interest at 12 3/4% and mature August 1, 2005. Interest on
the Notes is payable semi-annually on February 1 and August 1. The Notes
are redeemable at the option of Graphics in whole or in part after August
1, 2000 at 106.375% of the principal amount, declining to 100% of the
principal amount, plus accrued interest, on or after August 1, 2002. Upon
the occurrence of a change of control triggering event, as defined, each
holder of a Note will have the right to require Graphics to repurchase all
or any portion of such holder's Note at 101% of the principal amount
thereof, plus accrued interest. The Notes are subordinate to all existing
and future senior indebtedness, as defined, of Graphics, and are guaranteed
on a senior subordinated basis by Holdings.
The BTCC Agreement as amended (the "Bank Credit Agreement"), required the
Company to meet certain financial covenants which as of March 31, 1998 were
met. The Bank Credit Agreement required prepayments in certain
circumstances including: excess cash flows, proceeds from asset
dispositions totaling prescribed levels, and changes in ownership.
Borrowings under the Revolving Credit Facility were subject to a borrowing
base requirement including accounts receivable and inventory. Graphics had
outstanding borrowings under the Revolving Credit Facility of $29.3 million
at March 31, 1998.
Interest under the Bank Credit Agreement was floating based on prevailing
market rates . The weighted average rate on outstanding indebtedness under
the Bank Credit Agreement at March 31, 1998 was 8.48%.
Holdings guaranteed Graphics' indebtedness under the Bank Credit Agreement,
which guarantee was secured by a pledge of all of Graphics' and its
subsidiaries' stock. In addition, borrowings under the Bank Credit
Agreement were secured by substantially all of the assets of Graphics.
Holdings was restricted under its guarantee of indebtedness under the Bank
Credit Agreement from, among other things, entering into mergers,
acquisitions, incurring additional debt, or paying cash dividends.
June 30, 1997 Term Loan Facility
On June 30, 1997, the Company entered into a $25 million term loan facility
which included a $5 million participation by Morgan Stanley Senior Funding,
Inc., a related party, which matures on March 31, 2001 (the "Term Loan
Facility"). Net proceeds of approximately $23.5 million (after loan fees
and other transaction costs) were received and used to reduce outstanding
borrowings under the existing Revolving Credit Facility. Interest under
the Term Loan Facility was floating based upon existing market rates plus
agreed upon margin levels which escalated over the initial 24 months of the
facility. The obligations under this facility were guaranteed on the same
basis and by the same guarantors as the Company's Bank Credit Agreement
although such guarantees were secured by second priority security interests
in the tangible and intangible assets of the Company and such guarantors.
Covenants under this agreement were substantially similar to, but in
certain respects are more restrictive than, existing covenants under the
Senior Subordinated Notes Indenture. Morgan Stanley Senior Funding, Inc.
received transaction fees of approximately $0.3 million. In connection
with the Term Loan Facility, the Company obtained amendments to the Bank
Credit Agreement with respect to certain financial covenants and an
amendment that decreased the Borrowing Base through March 30, 1998.
May 8, 1998 Refinancing
On May 8, 1998, the Company refinanced all outstanding indebtedness under
the BTCC Agreement and the Term Loan Facility (see note 23 for a discussion
of the terms of this refinancing transaction).
The amortization for total long-term debt and capitalized leases at March
31, 1998 as adjusted to reflect the scheduled payments due under the terms
of the Company's senior debt structure as refinanced on May 8, 1998 (see
note 23), is shown below (in thousands):
<TABLE>
<CAPTION>
Long-Term Capitalized
Fiscal year Debt Leases
---------------------- --------------------- -----------------------
<C> <C> <C>
1999 $ 2,779 $ 9,728
2000 3,278 9,054
2001 7,152 7,527
2002 6,980 6,290
2003 7,835 5,709
Thereafter 253,486 13,077
--------------------- -----------------------
Total $ 281,510 51,385
=====================
Imputed interest (13,238)
-----------------------
Present value of minimum $
lease payments 38,147
=======================
</TABLE>
Capital leases have varying maturity dates and interest rates which
generally approximate 9%-10%. The Company estimates that the carrying
amounts of the Company's debt and other financial instruments approximate
their fair values at March 31, 1998 and 1997.
(10) Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts as
measured by tax laws and regulations. Significant components of
the Company's deferred tax liabilities and assets as of March 31,
1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
----------------------------------------------------
1998 1997
-------------------- ---------------------
<S> <C> <C>
Deferred tax liabilities:
Book over tax basis in fixed assets $ 31,466 31,402
Foreign taxes 3,701 2,505
Accumulated amortization 766 483
Other, net 4,594 4,459
-------------------- ---------------------
Total deferred tax liabilities 40,527 38,849
Deferred tax assets:
Bad debts 830 2,197
Accrued expenses and other liabilities 34,754 24,953
Accrued loss on discontinued operations 254 722
Net operating loss carryforwards 30,420 30,515
AMT credit carryforwards 1,262 1,262
Cumulative translation adjustment 786 625
-------------------- ---------------------
Total deferred tax assets 68,306 60,274
Valuation allowance for deferred tax assets 37,222 30,138
-------------------- ---------------------
Net deferred tax assets 31,084 30,136
-------------------- ---------------------
Net deferred tax liabilities $ 9,443 8,713
==================== =====================
</TABLE>
Management has evaluated the need for a valuation allowance and as such, a
valuation allowance of $37.2 million has been recorded . The valuation
allowance was increased by $7.1 million during the current fiscal year.
The components of income tax expense are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended March 31,
---------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- --------------------
<S> <C> <C>
Amount attributable to
continuing operations $ 2,106 2,591 4,874
Amount attributable to
discontinued operations -- -- 75
-------------------- -------------------- --------------------
Total expense $ 2,106 2,591 4,949
==================== ==================== ====================
</TABLE>
Income tax expense attributable to loss from continuing operations consists
of (in thousands):
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------------
1998 1997 1996
-------------------- ------------------- ------------------
<S> <C> <C>
Current
Federal $ -- -- 689
State 230 145 618
Foreign 946 1,535 3,047
-------------------- ------------------- ------------------
Total current 1,176 1,680 4,354
-------------------- ------------------- ------------------
Deferred
Federal (108) 354 513
State (157) 120 7
Foreign 1,195 437 --
-------------------- ------------------- ------------------
Total deferred 930 911 520
-------------------- ------------------- ------------------
Provision for income taxes $ 2,106 2,591 4,874
==================== =================== ==================
</TABLE>
The effective tax rates for Fiscal Year 1998, the fiscal year ending March
31, 1997 ("Fiscal Year 1997") and Fiscal Year 1996 were (7.8%), (10.0%),
and (22.7%), respectively. The difference between these effective rates
relating to continuing operations and the statutory federal income tax rate
is composed of the following items:
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------------------------------------------------
1998 1997 1996
------------------- -------------------- ------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, less
federal tax impact (0.2) (0.7) (1.9)
Foreign taxes, less Federal
tax impact (5.2) (5.0) (9.4)
Amortization (9.9) (11.9) (16.1)
Change in valuation
allowance (24.1) (28.3) (26.7)
Other, net (3.4) 0.9 (3.6)
------------------- -------------------- ------------------
Effective income tax rate (7.8)% (10.0)% (22.7)%
=================== ==================== ==================
</TABLE>
As of March 31, 1998, the Company had available net operating loss
carryforwards ("NOL's") for state purposes of $63.1 million which can be
used to offset future state taxable income. If these NOL's are not
utilized, they will begin to expire in 1999 and will be totally expired in
2013.
As of March 31, 1998, the Company had available NOL's for federal purposes
of $79.7 million which can be used to offset future federal taxable income.
If these NOL's are not utilized, they will begin to expire in 2006 and will
be totally expired in 2013.
The Company also had available an alternative minimum tax credit
carryforward of $1.3 million which can be used to offset future taxes in
years in which the alternative minimum tax does not apply. This credit can
be carried forward indefinitely.
The Company has alternative minimum tax NOL's in the amount of $60.3
million which will begin to expire in 2007 and will be completely expired
in 2013.
(11) Pension Plans
The Company sponsors defined benefit pension plans covering full-
time employees of the Company who had at least one year of
service at December 31, 1994. Benefits under these plans
generally are based upon the employee's years of service and, in
the case of salaried employees, compensation during the years
immediately preceding retirement. The Company's general funding
policy is to contribute amounts within the annually calculated
actuarial range allowable as a deduction for federal income tax
purposes. The plans' assets are maintained by trustees in
separately managed portfolios consisting primarily of equity
securities, bonds and guaranteed investment contracts.
In October 1994, the Board of Directors approved an amendment to
the Company's defined benefit pension plans which resulted in the
freezing of additional defined benefits for future services under
the plans effective January 1, 1995.
Total net periodic pension expense and its components for these
plans during the periods indicated is as follows (in thousands):
<TABLE>
<CAPTION>
Year ended March 31,
-----------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- ---------------------
<S> <C> <C> <C>
Service cost $ 499 446 318
Interest cost 3,533 3,546 3,428
Actual return on assets (6,046) (4,349) (6,404)
Net amortization and deferral 2,071 725 3,076
-------------------- -------------------- ---------------------
Total pension expense $ 57 368 418
==================== ==================== =====================
</TABLE>
Funded status of the four plans sponsored by the Company is as follows (in
thousands):
<TABLE>
<CAPTION>
March 31,
-----------------------------------------
1998 1997
-------------------- ------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested $ 52,759 47,756
Non-Vested 179 829
--------------- --------------
$ 52,938 48,585
=============== ==============
March 31,
-----------------------------------------
1998 1997
-------------------- ------------
Projected benefit obligations $ 52,938 48,585
Plan assets on deposit with trustees at fair value 45,306 41,436
--------------- --------------
Projected benefit obligations in excess of plan assets (7,632) (7,149)
Unrecognized:
Net gain (2,142) (3,146)
Prior Service Cost (627) (784)
--------------- --------------
Pension liability recognized in consolidated balance sheets $ (10,401) (11,079)
=============== ==============
</TABLE>
The above pension liability balance is recorded in the consolidated balance
sheets as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
--------------------------------------------------
1998 1997
---------------------- ---------------------
<S> <C> <C>
Accrued expenses - employee benefits $ 938 771
Other liabilities 9,463 10,308
---------------------- ---------------------
$ 10,401 11,079
====================== =====================
</TABLE>
The pension liability at March 31, 1998 and 1997 reflects the impact of
changes in certain assumptions effective during such times as follows:
<TABLE>
<CAPTION>
March 31,
---------------------------------------------------------------------
1998 1997 1996
--------------------- -------------------- --------------------
<S> <C> <C> <C>
Discount rate:
Pension expense 7.75% 7.50% 8.75%
Funded status 7.25% 7.75% 7.50%
Rate of increase in compensation levels N/A N/A N/A
</TABLE>
The expected long-term rate of return on plan assets was 9.25% in
the Fiscal Years 1998, 1997 and 1996.
(12) Other Postretirement Benefits
The Company provides certain other postretirement benefits for
employees, primarily life and health insurance. Full-time
employees who have attained age 55 and have at least five years
of service are entitled to postretirement health care and life
insurance coverage. Postretirement life insurance coverage is
provided at no cost to eligible retirees. Special cost sharing
arrangements for health care coverage are available to employees
whose age plus years of service at the date of retirement equals
or exceeds 85 ("Rule of 85"). Any eligible retiree not meeting
the Rule of 85 must pay 100% of the required health care
insurance premium.
Effective January 1, 1995, the Company amended the health care
plan changing the health care benefit for all employees retiring
on or after January 1, 2000. This amendment had the effect of
reducing the accumulated postretirement benefit obligation by
approximately $3 million. This reduction is reflected as
unrecognized prior service cost and is being amortized on a
straight line basis over 15.6 years, the average remaining years
of service to full eligibility of active plan participants at the
date of the amendment.
The following table sets forth the plan's funded status,
reconciled with amounts recognized in the Company's consolidated
balance sheets at March 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
March 31,
--------------------------------------------------
1998 1997
-------------------- ---------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 2,506 2,371
Active plan participants 1,260 1,022
-------------------- ---------------------
Total 3,766 3,393
Plan assets at fair value -- --
-------------------- ---------------------
Accumulated postretirement benefit obligation in
excess of plan assets 3,766 3,393
Unrecognized prior service cost 2,391 2,584
Unrecognized net gain 1,145 1,694
-------------------- ---------------------
Accrued postretirement benefit cost $ 7,302 7,671
==================== =====================
</TABLE>
The estimated current portion of the above accrued postretirement
benefit cost is $0.3 million and is included in accrued expenses
in the accompanying consolidated balance sheet at March 31, 1998.
The remaining $7.0 million is included in the other liabilities
section of the consolidated balance sheet.
Net periodic postretirement benefit cost for the periods
indicated included the following components (in thousands):
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- -------------------
<S> <C> <C> <C>
Service cost attributed to service during the period $ 46 40 35
Interest cost in accumulated postretirement benefit
obligation 266 250 317
Amortization of net gain from earlier periods (79) (92) (67)
Amortization of prior service cost (194) (194) (194)
-------------------- -------------------- -------------------
Net periodic postretirement benefit cost $ 39 4 91
==================== ==================== ===================
</TABLE>
The significant assumptions used in determining postretirement
benefit cost and the accumulated postretirement benefit
obligation were as follows:
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------------------------
1998 1997 1996
--------------------- -------------------- --------------------
<S> <C> <C> <C>
Discount rate - expense 7.75% 7.50% 8.75%
Discount rate - APBO 7.25% 7.75% 7.50%
</TABLE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation at March 31, 1998
was 9.95% gradually declining to 5.75% in the year 2005 and
forward. The effect of a one percentage point increase in the
assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation as of March 31,
1998 by approximately 8%, and the aggregate of the service and
interest cost components of net annual postretirement benefit
cost by approximately 8%.
Supplemental Executive Retirement Plan
In October 1994, the Board of Directors approved a new
Supplemental Executive Retirement Plan ("SERP"), which is a
defined benefit plan, for certain key executives. Such benefits
will be paid from the Company's assets. The unfunded accumulated
benefit obligation under this plan is approximately $2.1 million.
(13) 401(k) Defined Contribution Plan
Effective January 1, 1995, the Company amended its 401(k) defined
contribution plan. Eligible participants may contribute up to
15% of their annual compensation subject to maximum amounts
established by the Internal Revenue Service and receive a
matching employer contribution on amounts contributed. The
employer matching contribution is made bi-weekly and equals 2% of
annual compensation for all plan participants plus 50% of the
first 6% of annual compensation contributed to the plan by each
employee, subject to maximum amounts established by the Internal
Revenue Service. The Company's contribution under this Plan
amounted to $3.3 million during Fiscal Year 1998, $3.4 million
during Fiscal Year 1997 and $2.8 million during the Fiscal Year
1996.
(14) Capital Stock
Effective January 16, 1998, the Company amended and restated its
Certificate of Incorporation and approved a recapitalization plan
resulting in the conversion of Series A and Series B convertible
preferred stock (the "Previously Issued Preferred Stock") into
Series AA and Series BB convertible Preferred Stock collectively,
("Preferred Stock"). At March 31, 1998, capital stock consists
of Holdings Common Stock ("Common Stock") and Preferred Stock.
The Preferred Stock has rights on preferences substantially the
same as the Previously Issued Preferred Stock. Each share of
Common Stock is entitled to one vote on each matter common
shareholders are entitled to vote on. The Preferred Stock has no
voting rights. Dividends on the Common Stock and Preferred Stock
are discretionary by the Board of Directors. Upon the occurrence
of a Liquidation Event (as defined in the amended and restated
Certificate of Incorporation), all amounts available for payment
or distribution shall first be paid to holders of Series BB
preferred stock, then holders of Series AA preferred stock and
then to holders of Common Stock. Each share of the Preferred
Stock may be converted, at the option of the holder, into shares
of Common Stock using conversion ratios and subject to conditions
set forth in the Company's Certificate of Incorporation.
(15) Stock Option Plans
Effective April 1, 1997 the Company changed its method of
accounting for stock based compensation plans from the intrinsic
value method of APB 25 to the fair value method established by
SFAS 123. Application of the recognition provisions of SFAS 123
is prospective (restatement of prior periods is prohibited).
However, SFAS 123 pro forma information for prior years is
required. The effects of applying SFAS 123 for either
recognizing compensation expense or providing pro forma
disclosures are not likely to be representative of the effects on
future years.
Common Stock Option Plan
In 1993, the Company established the ACG Holdings, Inc. Common
Stock Option Plan. This plan, as amended, (the "1993 Common
Stock Option Plan") is administered by a committee of the Board
of Directors (the "Committee") and provides for granting up to
20,841 shares of Common Stock. On January 16, 1998, the Company
established another common stock option plan (the "1998 Common
Stock Option Plan"). This plan is administered by the Committee
and provides for granting up to 36,939 shares of Common Stock.
The 1993 Common Stock Option Plan and the 1998 Common Stock
Option Plan are collectively referred to as the "Common Stock
Option Plans". Stock options may be granted under the Common
Stock Option Plans to officers and other key employees of the
Company (the "Participants") at the exercise price per share of
Common Stock, as determined at the time of grant by the Committee
in its sole discretion. All options are 25% exercisable on the
first anniversary date of a grant and vest in additional 25%
increments on each of the next three anniversary dates of each
grant. All options expire 10 years from date of grant.
A summary of activity under the Common Stock Option Plans is as
follows:
Options
--------------
Outstanding at April 1, 1995 15,264
Granted 2,497
Exercised --
Canceled (1,262)
-------------
Outstanding at March 31, 1996 16,499
Granted 6,015
Exercised --
Canceled (3,108)
-------------
Outstanding at March 31, 1997 19,406
Granted 30,014
Exercised (11,774)
Canceled (105)
-------------
Outstanding at March 31, 1998 37,541
=============
During Fiscal Year 1998, certain common stock option agreements
were modified to reprice options previously granted with a $50
exercise price to a $.01 exercise price. Based upon the Board of
Directors determination, the new exercise price was not less than
the fair market value of such options. Additionally, the options
granted in Fiscal Year 1998 were with a $.01 exercise price. The
weighted average fair value of options granted at the grant date
was $0 for fiscal years ending March 31, 1998, 1997 and 1996. The
weighted average remaining contractual life of the options
outstanding at March 31, 1998, 1997 and 1996, is 8.5 years, 7.6
years and 7.9 years, respectively. Of the options outstanding;
1,147, 9,004 and 5,507 were exercisable at March 31, 1998, 1997
and 1996, respectively. A total of 8,466 shares of Holdings
Common Stock were reserved for issuance, but not granted under the
Common Stock Option Plans at March 31, 1998. The fair value for
these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average
assumptions for Fiscal Year 1998 and Fiscal Year 1997,
respectively: risk-free interest rates of 5.5% and 6.5%; no annual
dividend yield; volatility factors of 0; and an expected option
life of 5 years.
For the purposes of Fiscal Year 1997 and Fiscal Year 1996 SFAS 123
pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. Because
the fair value of the Company's options equals $0, earnings were
the same for Fiscal Year 1997 and Fiscal Year 1996 under both APB
25 and SFAS 123.
Preferred Stock Option Plan
In Fiscal Year 1998, the Company established the ACG Holdings,
Inc. Preferred Stock Option Plan (the "Preferred Stock Option
Plan"). This plan is administered by the Committee and provides
for granting up to 583 shares of Holdings Preferred Stock
("Preferred Stock"). Stock options may be granted under this
Preferred Stock Option Plan to officers and other key employees of
the Company at the exercise price per share of Preferred Stock, as
determined at the time of grant by the Committee in its sole
discretion. All options are fully vested and are 100% exercisable
at the date of grant. All options expire 10 years from date of
grant.
A summary of the Preferred Stock Option Plan is as follows:
Options
-------------
Outstanding at March 31, 1997 --
Granted 526
Exercised --
Canceled --
----------
Outstanding at March 31, 1998 526
==========
All options were granted with a $1,909 exercise price. The
weighted average fair value of options granted at the grant date
was $1,091 for Fiscal Year 1998. The weighted average remaining
contractual life of the options outstanding at March 31, 1998 is
9.8 years. The fair value for these options was estimated at the
date of grant using a Black- Scholes option pricing model with the
following weighted average assumptions for Fiscal Year 1998: risk
free interest rate of 5.5%; no annual dividend yield; volatility
factors of 0; and an expected option life of 2 years. All of the
options outstanding were exercisable at March 31, 1998. A total
of 57 shares of Holdings Preferred Stock were reserved for
issuance, but not granted under the Preferred Stock Option Plan at
March 31, 1998.
The Company recognized $0.6 million of related compensation expense
within Fiscal Year 1998 selling, general and administrative
expenses as a result of the SFAS 123 requirements.
(16) Commitments and Contingencies
The Company incurred rent expense for Fiscal Year 1998, Fiscal
Year 1997 and Fiscal Year 1996 of $6.4 million, $5.4 million and
$4.9 million, respectively, under various operating leases.
Future minimum rental commitments under existing operating lease
arrangements at March 31, 1998 are as follows (in thousands):
Fiscal Year
-----------
1999 $ 6,824
2000 6,152
2001 4,786
2002 2,667
2003 1,377
Thereafter 4,995
-----------------
Total $ 26,801
=================
The Company has employment agreements with two of its principal
officers and five other employees. Such agreements provide for
minimum salary levels as well as for incentive bonuses which are
payable if specified management goals are attained. The aggregate
commitment for future salaries at March 31, 1998, excluding
bonuses, was approximately $3.3 million.
On December 21, 1989, Graphics sold CPS, its ink manufacturing
operations and facilities. Graphics remains contingently liable
under $2.7 million of industrial revenue bonds assumed by CPS.
CPS assumed these liabilities and has agreed to indemnify Graphics
for any resulting obligation and has also provided an irrevocable
letter of credit in favor of the holders of such bonds.
Accordingly, management believes that any obligation of Graphics
under this contingency is unlikely.
Concurrent with the sale of its ink manufacturing facility,
Graphics entered into a long-term ink supply contract with CPS.
The supply contract requires Graphics to purchase a significant
portion of its ink requirements, within certain limitations and
minimums, from CPS. Graphics believes that prices for products
under this contract approximate market prices at the time of
purchase of such products.
In the quarter ending December 31, 1997, the Company entered into
multi-year contracts to purchase a portion of the Company's raw
materials to be used in its normal operations. In connection with
such purchase agreements, pricing for a portion of the Company's
raw materials is adjusted for certain movements in market prices,
changes in raw material costs and other specific price increases.
The Company is deferring certain contractual provisions over the
life of the contracts which are being recognized as the purchase
commitments are achieved. The amount deferred at March 31, 1998
is $19.2 million and is included within other liabilities in the
Company's consolidated balance sheet .
Graphics, together with over 300 other persons, has been
designated by the U.S. Environmental Protection Agency as a
potentially responsible party (a "PRP") under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA",
also known as "Superfund") at one Superfund site. Although
liability under CERCLA may be imposed on a joint and several basis
and the Company's ultimate liability is not precisely
determinable, the PRPs have agreed that Graphics' share of removal
costs is 0.46% and therefore Graphics believes that its share of
the anticipated remediation costs at such site will not be
material to its business or financial condition. Based upon an
analysis of Graphics' volumetric share of waste contributed to the
site and the agreement among the PRPs, the Company has a reserve
of approximately $0.1 million in connection with this liability on
its consolidated balance sheet at March 31, 1998. The Company
believes this amount is adequate to cover such liability.
The Company has been named as a defendant in several legal actions
arising from its normal business activities. In the opinion of
management, any liability that may arise from such actions will
not have a material adverse effect on the consolidated financial
statements of the Company.
(17) Significant Customers
No single customer represented 10% or more of total sales in the
fiscal year ended March 31, 1998 and 1997. Sales to Best Buy Co.
for Fiscal Year 1996 amounted to approximately 12.7% of the
Company's consolidated sales. Receivables outstanding from these
sales were approximately $5.9 million at March 31, 1996.
(18) Interim Financial Information (Unaudited)
Quarterly financial information follows (in thousands):
<TABLE>
<CAPTION>
(a)
SMC
Quarter as Discontinued Revised
Issued Operations Quarter
--------------- --------------- --------------
Fiscal Year 1998:
<S> <C> <C> <C>
Quarter Ended June 30, 1997:
Net Sales $ 126,128 -- 126,128
Gross Profit $ 17,028 -- 17,028
Net Loss $ (4,950) -- (4,950)
Quarter Ended September 30, 1997:
Net Sales 135,609 -- 135,609
Gross Profit 17,863 -- 17,863
Net Loss (6,404) -- (6,404)
Quarter Ended December 31, 1997:
Net Sales 145,748 -- 145,748
Gross Profit 20,370 -- 20,370
Net Loss (2,285) -- (2,285)
Quarter Ended March 31, 1998:
Net Sales 125,850 -- 125,850
Gross Profit 16,667 -- 16,667
Net Loss (16,256) -- (16,256)
Totals:
Net Sales $ 533,335 -- 533,335
Gross Profit $ 71,928 -- 71,928
Net Loss $ (29,895) -- (29,895)
Fiscal Year 1997:
Quarter Ended June 30, 1996:
Net Sales $ 139,704 (1,603) 138,101
Gross Profit $ 15,393 (624) 14,769
Net Loss $ (7,604) -- (7,604)
Quarter Ended September 30, 1996:
Net Sales 138,495 (2,705) 135,790
Gross Profit 17,490 (1,167) 16,323
Net Loss (7,548) -- (7,548)
Quarter Ended December 31, 1996:
Net Sales 136,472 (1,153) 135,319
Gross Profit 19,719 (159) 19,560
Net Income (4,339) -- (4,339)
Quarter Ended March 31, 1997:
Net Sales 119,666 (4,325) 115,341
Gross Profit 15,915 (1,896) 14,019
Net Loss (12,212) -- (12,212)
Totals:
Net Sales $ 534,337 (9,786) 524,551
Gross Profit $ 68,517 (3,846) 64,671
Net Loss $ (31,703) -- (31,703)
(a) In February 1997, the Company shut down the operations of its wholly-
owned subsidiary SMC. The resulting effect of this change is a
retroactive restatement of Fiscal Year 1997, reclassifying SMC's
results of operations to Discontinued Operations (see note 5).
</TABLE>
(19) Restructuring Costs and Other Special Charges
Restructuring Costs:
Printing In January 1998, the Company approved a plan for its
printing division which was designed to improve responsiveness to
customer requirements, increase asset utilization and reduce
overhead costs. The cost of this plan is being accounted for in
accordance with the guidance set forth in Emerging Issues Task
Force Issue 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)" ("EITF 94-
3"). The pretax costs of $3.9 million which were incurred as a
direct result of this plan (excluding other special charges
related to asset write-offs and write-downs - see below) includes
$3.3 million of employee termination costs and $0.6 million of
relocation and other transition expenses. This restructuring
charge was recorded in the quarter March 31, 1998. The majority
of these costs will be paid or settled before March 31, 1999.
American Color In April 1995, the Company implemented a plan for
its American Color division which was designed to improve
productivity, increase customer service and responsiveness, and
provide increased growth in the digital imaging and prepress
services business. The cost of this plan was accounted for in
accordance with the guidance set forth in EITF 94-3. The pretax
costs of $5 million which were incurred as a part of this plan
(excluding other special charges related to asset write-offs and
write-downs - see below) represent employee termination, goodwill
write-down and other related costs that were incurred as a direct
result of the plan. Approximately $0.9 million of restructuring
costs primarily related to relocation expenses were recognized in
Fiscal Year 1997. In Fiscal Year 1996 the Company recognized $4.1
million of such restructuring charges, which included $0.9 million
of goodwill write-down related to certain facilities that were
either shut down or relocated in conjunction with the American
Color restructuring and $3.2 million primarily for severance and
other personnel related costs.
Other Special Charges:
During the quarter ended March 31, 1998, the Company recorded
special charges totaling $1.7 million to adjust the carrying
values of idle, disposed and under-performing assets of the
Company's printing sector to estimated fair values. The provision
was based on a review of Company long-lived assets in accordance
with FASB 121. Fair value was based on the Company's estimate of
held and used and idle assets based on current market conditions
using the best information available.
During Fiscal Year 1997 and Fiscal Year 1996, the Company recorded
special charges totaling $1.9 million and $3.4 million,
respectively, for impaired long-lived assets and to adjust the
carrying values of idle, disposed and under performing assets to
estimated fair values. The provisions were based on a review of
long-lived assets in connection with the adoption of FASB 121. Of
the Fiscal Year 1997 total long-lived assets that were adjusted
based on being idle, disposed of or under performing,
approximately $0.4 million and $1.5 million related to the
printing and American Color sectors, respectively. Fair value was
based on the Company's estimate of held and used and idle assets
based on current market conditions using the best information
available. Approximately $2 million of the Fiscal Year 1996 total
related to the printing sector's long-lived assets, respectively
that were adjusted based on being idle, disposed of or under
performing. The remaining $1.4 million of the Fiscal Year 1996
total related to the American Color sector. The estimated
undiscounted future cash flows attributable to certain American
Color division identifiable long-lived assets held and used was
less than their carrying value principally as a result of high
levels of ongoing technological change. The methodology used to
assess the recoverability of the American Color sector long-lived
assets involved projecting aggregate cash flows. Based on this
evaluation, the Company determined in Fiscal Year 1996 that long-
lived assets with a carrying amount of $2.2 million were impaired
and such assets were then written down by $1.4 million to their
fair value. Fair value was based on Company estimates and
appraisals.
These special charges are classified within restructuring costs and
other special charges in the consolidated statements of
operations.
(20) Non-recurring Charge Related to Terminated Merger
The Company recognized $1.5 million of expenses related to a
terminated merger in Fiscal Year 1996.
(21) Non-recurring Charge Related to Resignation of Former Chief Executive
Officer
A non-recurring charge of $1.9 million relating to the resignation
of the Company's former Chief Executive Officer was recorded in
Fiscal Year 1997, and is classified as a selling, general and
administrative expense. Payments under the related agreement
continue through 2001, subject to certain requirements.
(22) Summarized Financial Information of American Color Graphics, Inc.
Summary financial information for Holdings' wholly-owned subsidiary,
American Color Graphics, Inc., is as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
------------------------------------------------
1998 1997
--------------------- ---------------------
<S> <C> <C>
Balance sheet data:
Current assets $ 80,163 70,077
Noncurrent assets 249,795 263,898
Current liabilities 69,176 78,675
Noncurrent liabilities 367,490 331,618
</TABLE>
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------------------------------------------
1998 1997 1996
--------------------- ------------------- ------------------
<S> <C> <C>
Statement of operations data:
Sales $ 533,335 524,551 529,523
Operating income 12,103 10,372 12,716
Net loss (29,895) (31,703) (29,327)
</TABLE>
(23) Subsequent Events
On May 8, 1998, the Company completed a refinancing transaction
which included the following: (1) the Company entered into a $145
million credit facility with Bankers Trust Company, Morgan Stanley
Senior Funding, Inc., General Electric Capital Corporation and a
syndicate of lenders (the "Amended and Restated Credit Agreement")
providing for a $70 million revolving credit facility which is not
subject to a borrowing base limitation (the "New Revolving Credit
Facility") maturing on March 31, 2004, a $25 million amortizing
term loan facility maturing on March 31, 2004 (the "A Term Loan
Facility") and a $50 million amortizing term loan facility
maturing on March 31, 2005 (the "B Term Loan Facility"); (2) the
repayment of all $57.0 million of indebtedness outstanding under
the existing Bank Credit Agreement ($65.2 million was outstanding
at March 31, 1998) (plus $0.4 million of accrued interest to the
date of repayment); (3) the repayment of all $25.0 million of
indebtedness outstanding under the existing Term Loan Facility
(plus $0.6 million of accrued interest to the date of repayment)
and (4) the payment of approximately $2.2 million in fees and
expenses associated with the refinancing transaction. In
addition, the Company will record an extraordinary loss related to
early extinguishment of debt of $4.0 million, net of taxes
associated with the write-off of refinanced indebtedness deferred
financing costs in the first quarter of the fiscal year ending
March 31, 1999.
Interest under the Amended and Restated Credit Agreement is
floating based upon existing market rates plus agreed upon margin
levels. In addition, the Company is obligated to pay specific
commitment and letter of credit fees. Such margin levels and fees
reduce over the term of the agreement subject to the achievement
of certain Leverage Ratio measures.
Borrowings under the Amended and Restated Credit Agreement are
secured by substantially all of the Company's assets. In
addition, Holdings has guaranteed the indebtedness under the
Amended and Restated Credit Agreement, which guarantee is secured
by a pledge of all of Graphics' and its subsidiaries' stock. The
new agreement (1) requires satisfaction of certain financial
covenants including Minimum Consolidated EBITDA, Consolidated
Interest Coverage Ratio and Leverage Ratio requirements, (2)
requires prepayments in certain circumstances including excess
cash flows, proceeds from asset dispositions in excess of
prescribed levels and certain capital structure transactions and
(3) contains various restrictions and limitations on the following
items: (a) the level of capital spending, (b) the incurrence of
additional indebtedness, (c) mergers, acquisitions, investments
and similar transactions and (d) dividends and other
distributions. In addition, the agreement includes various other
customary affirmative and negative covenants. Graphics' ability
to pay dividends or lend funds to Holdings is restricted
substantially to the same extent as under the Bank Credit
Agreement (see note 1 for a discussion of those restrictions).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information about each of the current
directors and executive officers of Holdings and Graphics (ages as of March
31, 1998). All directors hold office until their successors are duly
elected and qualified.
Name Age Position with Graphics and Holdings
---- --- -----------------------------------
Stephen M. Dyott 46 Chairman, President, Chief Executive
Officer and Director
Michael M. Janson 49 Director
Eric T. Fry 31 Director
Joseph M. Milano 45 Executive Vice President and Chief
Financial Officer
Malcolm J. Anderson 59 Executive Vice President Operations of
Graphics
Terrence M. Ray 45 President/Chief Operating Officer of
American Color
Timothy M. Davis 43 Senior Vice President-Administration,
Secretary and General Counsel
Patrick W. Kellick 40 Senior Vice President/Corporate
Controller and Assistant Secretary
Stephen M. Dyott - Chairman and Chief Executive Officer of Graphics and
Holdings since September 1996; President of Holdings since February 1995;
Director of Graphics and Holdings since September 1994; Chief Operating
Officer of Holdings from February 1995 to September 1996 and Chief
Operating Officer of Graphics from 1991 to September 1996; President of
Graphics since 1991; Vice President and General Manager - Flexible
Packaging, American National Can Company ("ANCC") from 1988 to 1991; Vice
President and General Manager - Tube Packaging, ANCC from 1985 to 1987.
Michael M. Janson - Director of Holdings and Graphics since February 1998;
Managing Director of the general partner of Morgan Stanley Capital Partners
("MSCP") and of Morgan Stanley Dean Witter & Co. ("MWD"); 1987 joined
Morgan Stanley & Co., Incorporated ("MS&Co."); 1997 joined the Private
Equity Group of MWD; Managing Director in MS&Co.'s High Yield Capital
Markets Department before joining the Private Equity Group; Director of
Jefferson Smurfit Corporation and Renaissance Media Group.
Eric T. Fry - Director of Graphics and Holdings since March 1996. Vice
President of the general partner of MSCP and MWD. Joined MS&Co. in 1989,
initially in the Mergers and Acquisitions Department and from 1991 to 1992
in the Private Equity Group. From 1992 to 1994 attended Harvard Business
School and received an MBA. Rejoined MS&Co.'s Private Equity Group in
1994. Director of Enterprise Reinsurance Holdings Corporation, Vanguard
Health Systems, Inc. and LifeTrust America, L.L.C.
Joseph M. Milano - Executive Vice President and Chief Financial Officer of
Holdings and Graphics from 1997 to 1998; Senior Vice President and Chief
Financial Officer of Holdings and Graphics from 1994 to 1997; Vice
President - Finance of Holdings and Graphics from 1992 to 1994; Vice
President and Chief Financial Officer, Farrel Corporation, 1989 to 1992;
Vice President and Chief Financial Officer, Electronic Mail Corporation of
America from 1984 to 1988.
Malcolm J. Anderson - Executive Vice President Operations of Graphics since
1996; Senior Vice President Operations of Graphics from 1993 to 1996;
President, Plastic Products Division of Kerr Group, Inc. from 1989 to 1993;
Vice President Manufacturing - Flexible Packing, American National Can
Company from 1982 to 1989; Vice President, Eastern Division General
Manager of Sinclair and Valentine Ink Company from 1980 to 1982.
Terrence M. Ray - President and Chief Operating Officer of American Color
since August 1996; Executive Vice President of American Color from March
1996 to July 1996; Executive Vice President of Wace USA, Inc. from April
1994 to February 1996; Group Vice President, Chicago Group of Wace USA,
Inc. from January 1992 to March 1994; Vice President, Secretary and Chief
Financial Officer of Wace USA, Inc., 1988 to 1992.
Timothy M. Davis - Senior Vice President - Administration, Secretary and
General Counsel of Holdings and Graphics since 1989; Assistant General
Counsel of MacMillan, Inc. and counsel to affiliates of Maxwell
Communication Corporation North America, January 1989 to June 1989.
Attorney in private practice from 1981 to 1989.
Patrick W. Kellick - Senior Vice President/Corporate Controller of
Holdings and Graphics from 1997 to 1998; Vice President/Corporate
Controller of Holdings and Graphics from 1989 to 1997; Corporate
Controller of Graphics since 1987, and Assistant Secretary of Holdings and
Graphics since 1995; various financial positions with Williams Precious
Metals (a division of Brush Wellman, Inc.) from 1984 to 1987, including CFO
from 1986 to 1987; Auditor with KPMG from 1979 to 1984.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents information concerning compensation paid for
services to Holdings and Graphics during the fiscal years ended March 31,
1998, 1997 and 1996 to the Chief Executive Officers and the four other most
highly compensated executive officers (the "Named Executive Officers") of
Holdings and/or Graphics.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------- ------------------------------------
Awards Payouts
----------------------- -----------
Securities
Other Under-
Annual Restricted lying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Period Salary Bonus sation Award(s) SAR's (#) Payouts sation
- --------------------------- ------------------ -------- -------- ------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen M. Dyott Fiscal Year 1998 $475,000 $525,000 -- -- 14,762 -- --
President, Chief Operating Fiscal Year 1997 $463,462 $350,000 -- -- 1,761 -- --
Officer & Director Fiscal Year 1996 $450,000 $250,000 -- -- 380 -- --
thru 09/96
Chairman, President and
Chief Executive Officer &
Director 09/96 forward
Joseph M. Milano Fiscal Year 1998 $275,000 $290,000 -- -- 7,381 -- --
Senior Vice President & Fiscal Year 1997 $260,097 $150,000 -- -- 760 -- --
Chief Financial Officer Fiscal Year 1996 $228,923 $125,000 -- -- 614 -- --
Malcolm J. Anderson Fiscal Year 1998 $230,000 $200,000 -- -- 1,809 -- --
Executive Vice President Fiscal Year 1997 $230,000 $105,000 -- -- 125 -- --
Operations Graphics Fiscal Year 1996 $212,693 $ 70,000 -- -- -- -- $38,504 (a)
Timothy M. Davis Fiscal Year 1998 $233,200 $160,000 -- -- 3,706 -- --
Senior Vice President Fiscal Year 1997 $220,562 $110,000 -- -- 290 -- --
Administration, Fiscal Year 1996 $209,923 $106,000 -- -- -- -- --
Secretary & General Counsel
Terrence M. Ray Fiscal Year 1998 $246,490 $ 35,000 -- -- 3,618 -- $50,000 (a)
President/Chief Fiscal Year 1997 $230,000 $ 50,000 -- -- 1,447 -- $14,550 (a)
Operating Officer Fiscal Year 1996 $ 20,962 $ 6,000 -- -- -- -- --
American Color
- -------------------------
(a) Represents relocation expense reimbursements.
</TABLE>
The following table presents information concerning the options granted to
the Named Executive Officers during the last fiscal year. All outstanding
options issued prior to April 8, 1993 were canceled in connection with the
1993 Acquisition.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ----------------------------------------------------------------------------------- -----------------------------
% of Total
Options/
Number of SAR's
Securities Granted to
Underlying Employees Exercise or
Options/SAR's in Fiscal Base Price Expiration 0%($) 5%($) 10%($)
Name Granted (#) Year 1998 ($/sh) Date (h) (h)* (h)*
- --------------------- ------------- ---------- ----------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Plan (a)
Stephen M. Dyott 14,470 (b) 32% .01 (b) -- -- --
Joseph M. Milano 7,235 (c) 16% .01 (c) -- -- --
Malcolm J. Anderson 1,809 (d) 4% .01 (d) -- -- --
Timothy M. Davis 3,618 (e) 8% .01 (e) -- -- --
Terrence M. Ray 3,618 (f) 8% .01 (f) -- -- --
* The Common Stock had no value at the date of grant and as such, the
potential realizable value is zero.
<CAPTION>
Preferred Plan (g)
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen M. Dyott 292 55% 1,908.76 01/19/2008 318,642 870,522 1,711,482
Joseph M. Milano 146 28% 1,908.76 01/19/2008 159,321 435,261 855,741
Timothy M. Davis 88 17% 1,908.76 01/19/2008 96,029 262,349 515,789
</TABLE>
- ------------
(a) All options will become 25 percent exercisable on the first
anniversary date from each option's respective date of grant and are
scheduled to vest in additional 25 percent increments on each of the
next three anniversary dates from each option's date of grant.
(b) 14,470 options consists of: 9,170 options granted 01/19/98 with an
expiration of 01/19/2008 and the following options granted with a $50
exercise price per option, repriced January 16, 1998 to a $.01 exercise
price per option: 1,761 options granted 10/01/96 with an expiration of
10/01/2006; 380 options granted 10/01/95 with an expiration of 10/01/2005;
859 options granted 09/01/94 with an expiration of 09/01/2004 and 2,300
options granted 04/01/93 with an expiration of 04/01/2003.
(c) 7,235 options consists of 5,071 options granted 01/19/98 with an
expiration of 01/19/2008 and the following options granted with a $50
exercise price per option, repriced January 16, 1998 to a $.01 exercise
price per option: 760 options granted 10/01/96 with an expiration of
10/01/2006; 614 options granted 10/01/95 with an expiration of
10/01/2005; 688 options granted 09/01/94 with an expiration of
09/01/2004 and 102 options granted 04/01/93 with an expiration of
04/01/2003.
(d) 1,809 options consists of: 1,158 options granted 01/19/98 with an
expiration of 01/19/2008 and the following options granted with a $50
exercise price per option, repriced January 16, 1998 to a $.01
exercise price per option: 125 options granted 10/01/96 with an
expiration of 10/01/2006 and 526 options granted 09/01/94 with an
expiration of 09/01/2004.
(e) 3,618 options consists of: 2,538 options granted 01/19/98 with an
expiration of 01/19/2008 and the following options granted with a $50
exercise price per option, repriced January 16, 1998 to a $.01 exercise
price per option: 290 options granted 10/01/96 with an expiration of
10/01/2006; 535 options granted 09/01/94 with an expiration of 09/01/2004
and 255 options granted 04/01/93 with an expiration of 04/01/2003.
(f) 3,618 options consists of: 2,171 options granted 01/19/98 with an
expiration of 01/19/2008 and the following options granted with a $50
exercise price per option, repriced January 16, 1998 to a $.01
exercise price per option: 1,447 options granted 10/01/96 with an
expiration of 10/01/2006.
(g) All options vested and were exercisable at the date of grant.
(h) The potential realizable value shown in the table is based on
hypothetical increases in the estimated fair market value of the
common and preferred stock of Holdings ("Holdings Common Stock") over
the terms of the options, assuming 0%, 5% and 10% growth in such fair
market value. These estimates of potential realizable value have been
prepared pursuant to the rules of the Commission and are not
necessarily indicative of the amount that would have been utilized
upon exercise of the options had such options remained outstanding.
The following table presents information concerning the fiscal year-end
value of unexercised stock options held by the Named Executive Officers.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Shares Acquired Value Options/SAR's at 3/31/98 SAR's at 3/31/98
on Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
--------------------- --------------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Common Plan (a)
Stephen M. Dyott 3,574.50 35.75 0 / 10,896 (a)
Joseph M. Milano 1,115.00 11.15 0 / 6,120 (a)
Malcolm J. Anderson 425.75 4.26 0 / 1,383 (a)
Timothy M. Davis 728.75 7.28 0 / 2,889 (a)
Terrence M. Ray 361.75 3.62 0 / 3,256 (a)
Preferred Plan (b)
Stephen M. Dyott -- -- 292 / 0 (b)
Joseph M. Milano -- -- 146 / 0 (b)
Timothy M. Davis -- -- 88 / 0 (b)
(a) Holdings Common Stock has not been registered or publicly traded and,
therefore a public market price of the stock is not available. At
March 31, 1998, the Company believes fair market value to be $0 per
share of Common Stock.
(b) Holdings Preferred Stock has not been registered or publicly traded
and, therefore a public market price of the stock is not available. At
March 31, 1998, the Company believes fair market value to be $3,000 per
share of Preferred Stock.
</TABLE>
Pension Plan
Graphics sponsors the American Color Graphics, Inc. Salaried Employees'
Pension Plan (the "Pension Plan"), a defined benefit pension plan covering
full-time salaried employees of Graphics who had at least one year of
service as of December 31, 1994. The basic benefit payable under the
Pension Plan is a five-year certain single life annuity equivalent to (a)
1% of a participant's "final average monthly compensation" plus (b) 0.6% of
a participant's "final average monthly compensation" in excess of 40% of
the monthly maximum Social Security wage base in the year of retirement
multiplied by years of credited service (not to exceed 30 years of
service). For purposes of the Pension Plan, "final average compensation"
(which, for the Named Executive Officers, is reflected in the salary and
bonus columns of the Summary Compensation Table) means the average of a
participant's five highest consecutive calendar years of total earnings
(which includes bonuses) from the last 10 years of service. The maximum
monthly benefit payable from the Pension Plan is $5,000.
The basic benefit under the Pension Plan is payable upon completion of five
years of vesting service and retirement on or after attaining age 65.
Participants may elect early retirement under the Pension Plan upon
completion of five years of vesting service and the attainment of age 55,
and receive the basic benefit reduced by 0.4167% for each month that the
benefit commencement date precedes the attainment of age 65. A deferred
vested benefit is available to those participants who separate from service
before retirement, provided the participant has at least five years of
vesting service.
In October 1994, the Board of Directors approved an amendment to the
Pension Plan which resulted in the freezing of additional defined benefits
for future services under such plan effective January 1, 1995 (see note 11
to the Company's consolidated financial statements).
At March 31, 1998, all of the Named Executive Officers with the exception
of Malcolm J. Anderson and Terrence M. Ray had vested in the pension
plan. At March 31, 1998, the Named Executive Officers had the following
amounts of credited service (original hire date through January 1, 1995)
and annual benefit payable upon retirement at age 65 under the Pension
Plan: Stephen M. Dyott (3 years, 3 months; $8,220), Joseph M. Milano (2
years, 7 months; $5,820), Malcolm J. Anderson (1 year, 3 months; $2,820),
and Timothy M. Davis (5 years, 5 months; $11,700).
Supplemental Executive Retirement Plan
In October 1994, the Board of Directors approved a new SERP, which is a
defined benefit plan, for the Named Executive Officers and certain other
key executives. The plan provides for a basic annual benefit payable upon
completion of five years vesting service (April 1, 1994 through March 31,
1999 for Messrs. Dyott, Milano, Anderson and Davis and April 1, 1996,
through March 31, 2001 for Mr. Ray) and retirement on or after attaining
age 65 or the present value of such benefit at an earlier date under
certain circumstances, if elected. The Named Executive Officers have the
following basic annual benefit payable under this plan at age 65:
Stephen M. Dyott $100,000
Joseph M. Milano $100,000
Malcolm J. Anderson $ 50,000
Timothy M. Davis $ 75,000
Terrence M. Ray $ 50,000
Such benefits will be paid from the Company's assets (see note 12 to the
Company's consolidated financial statements).
Compensation of Directors
Directors of Holdings and Graphics do not receive a salary or an annual
retainer for their services but are reimbursed for expenses incurred with
respect to such services.
Employment Agreements
In connection with the 1993 Acquisition, Graphics entered into a new
employment agreement with Stephen M. Dyott (the "New Employment
Agreement"). The New Employment Agreement for Mr. Dyott superseded
previous employment agreements.
The New Employment Agreement has been amended so that it has a term of four
years commencing as of the effective time Acquisition Corp. merged with and
into Holdings (the "Effective Time"). The term under the New Employment
Agreement is automatically extended at the end of the then current term for
one-year periods absent two year's notice of an intent not to renew. The
New Employment Agreement provides for the payment of an annual salary and
an annual bonus pursuant to a plan adopted following the 1993 Acquisition.
In addition, under the New Employment Agreement, Mr. Dyott is eligible to
receive all other employee benefits and perquisites made available to
Graphics' senior executives generally.
Under the New Employment Agreement, if the employee's employment is
terminated by Graphics "without cause" ("cause", as defined in the New
Employment Agreement, means a material breach by the employee of his
obligations under the New Employment Agreement; continued failure or
refusal of the employee to substantially perform his duties to Graphics; a
willful and material violation of Federal or state law applicable to
Graphics or the employee's conviction of a felony or perpetration of a
common law fraud; or other willful misconduct that is injurious to
Graphics) or by the employee for "good reason" (which, as defined in the
New Employment Agreement, means a decrease in base pay or a failure by
Graphics to pay material compensation due and payable; a material
diminution of the employee's responsibilities or title; a material change
in the employee's principal employment location; or a material breach by
Graphics of a material term of the New Employment Agreement), the employee
will be entitled to salary continuation payments (and certain other
benefits) through the greater of the remainder of the scheduled term and a
period of two years beginning on the date of termination. The New
Employment Agreement also provides for post-employment non-solicitation,
non-competition and confidentiality covenants.
Graphics entered into an employment agreement with Terrence M. Ray on
August 18, 1997, (the "Agreement"). The Agreement has a term of three
years commencing with the date of the Agreement and that term shall be
automatically extended for one year periods absent one year's notice of an
intent not to renew. The Agreement provides for the payment of an annual
salary and an annual bonus pursuant to an executive bonus plan adopted by
American Color. In addition, under the Agreement, Mr. Ray is eligible to
receive all other employee benefits and prerequisites made available to
Graphics' senior executives generally.
In addition, Graphics has entered into severance agreements with Joseph M.
Milano, Malcolm J. Anderson and Timothy M. Davis. These agreements
provide that if the employee's employment is terminated by Graphics
"without cause", as defined above, or by the employee for "good reason", as
defined above, the employee will be entitled to salary continuation
payments (and certain other benefits) for up to two years beginning on the
date of termination.
James T. Sullivan resigned as Chairman of the Board and Chief Executive
Officer and as a director and employee of Holdings effective as of
September 18, 1996 (the "Effective Date"). For the period commencing on
the Effective Date and ending on April 8, 1999, Mr. Sullivan will hold the
title of Vice Chairman of Holdings. Mr. Sullivan will receive salary
continuation payments at an annual rate of $0.6 million through April 8,
1999. For two years thereafter, Mr. Sullivan will be engaged as a
consultant to Holdings for which he will be paid an annual fee of $0.2
million. Under the terms of his resignation agreement, Mr. Sullivan will
be entitled, through April 8, 1999, to continue to participate in certain
employee benefit plans provided by Holdings to its employees generally.
Mr. Sullivan also received payment of his full supplemental retirement
benefit under the American Color Graphics, Inc. Supplement Executive
Retirement Plan. Mr. Sullivan's resignation agreement also contains
certain noncompetition and other restrictive covenants.
Compensation Committee Interlocks and Insider Participation
The Company has not maintained a formal compensation committee since the
1993 Acquisition. Mr. Dyott sets compensation in conjunction with the
Board of Directors.
Repriced Options
During 1998, certain common stock option agreements were modified to reprice
options previously granted with a $50 exercise price to a $.01 exercise price.
Based upon the Board of Directors determination, the new exercise price was
not less than the fair market value of such options. See note 15 to the
Company's consolidated financial Statements.
The following table presents information concerning all repricing of
options and SARs held by any executive officer during the last ten
completed fiscal years.
Ten Year Option / SAR Repricings
<TABLE>
<CAPTION>
Number of
Securities Market Length of
Underlying Price of Original Option
Options/ Stock at Exercise Term
SARs Time of Price at New Remaining at
Repriced or Repricing or Time of Exercise Date of
Amended Amendment Repricing Price Repricing or
Name Date (#) ($) ($) ($) Amendment
- --------------------- -------- ----------- ------------ --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Dyott 01/16/98 1,761 -- 50 .01 8 yrs. 6 mo.
Chairman, President, 01/16/98 380 -- 50 .01 7 yrs. 6 mo.
Chief Executive 01/16/98 859 -- 50 .01 6 yrs. 5 mo.
Officer and Director 01/16/98 2,300 -- 50 .01 5 yrs. 0 mo.
Joseph M. Milano 01/16/98 760 -- 50 .01 8 yrs. 6 mo.
Executive Vice 01/16/98 614 -- 50 .01 7 yrs. 6 mo.
President and Chief 01/16/98 688 -- 50 .01 6 yrs. 5 mo.
Financial Officer 01/16/98 102 -- 50 .01 5 yrs. 0 mo.
Malcolm J. Anderson 01/16/98 125 -- 50 .01 8 yrs. 6 mo.
Executive Vice 01/16/98 526 -- 50 .01 6 yrs. 5 mo.
President Operations
of Graphics
Timothy M. Davis 01/16/98 290 -- 50 .01 8 yrs. 6 mo.
Senior Vice 01/16/98 535 -- 50 .01 6 yrs. 5 mo.
President- 01/16/98 255 -- 50 .01 5 yrs. 0 mo.
Administration,
Secretary and
General Counsel
Terrence M. Ray 01/16/98 1,447 -- 50 .01 8 yrs. 6 mo.
President/Chief
Operating Officer
of American Color
Patrick W. Kellick 01/16/98 257 -- 50 .01 8 yrs. 6 mo.
Senior Vice 01/16/98 105 -- 50 .01 6 yrs. 5 mo.
President/Corporate
Controller and
Assistant Secretary
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 1998,
concerning the persons having beneficial ownership of more than five
percent of the capital stock of Holdings and the ownership thereof by each
director of Holdings and by all current officers of Holdings as a group.
Each holder below has sole voting power and sole investment power over the
shares designated below.
<TABLE>
<CAPTION>
Shares of Holdings Percent Shares of Holdings Percent
Name Common Stock of Class Preferred Stock of Class
- ---- ------------------ -------- ------------------ --------
<S> <C> <C> <C> <C>
The Morgan Stanley Leveraged Equity
Fund II, L.P.
1221 Ave. of the Americas
New York, NY 10020 59,450 44.1 2,727 52.0
MSCP Entities
1221 Ave. of the Americas
New York, NY 10020 23,333 17.3 1,070 20.4
First Plaza Group Trust
c/o Mellon Bank, N.A.
1 Mellon Bank Center
Pittsburgh, PA 15258 17,000 12.6 780 14.8
Leeway & Co.
c/o State Street
Master Trust Div. W6
One Enterprise Drive
North Quincy, MA 02171 10,667 7.9 489 9.3
Stephen M. Dyott 4,075 3.0 315 (1) 5.7 (1)
Michael M. Janson -- -- -- --
Eric T. Fry -- -- -- --
All current directors and
officers as a group 8,854 6.6 554 (2) 9.6 (2)
- ------------
(1) Includes 292 preferred stock options exercisable within 60 days.
(2) Includes 526 preferred stock options exercisable within 60 days.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The 1993 Acquisition
On the Acquisition Date, MSLEF II and the Purchasing Group invested $40
million in Holdings and acquired control of Holdings and Graphics.
Pursuant to the Merger Agreement, (i) MSLEF II and the Purchasing Group
made a $40 million equity investment in Holdings and acquired (a) 90% of
the outstanding Holdings Common Stock and (b) all the outstanding shares of
the preferred stock of Holdings (the "Holdings Preferred Stock"), with a
total preference of $40 million and which, under certain circumstances, is
convertible into shares of Holdings Common Stock; and (ii) Golder, Thoma,
& Cressey, an Illinois limited partnership ("GTC") and its affiliates
received 4,987 shares of Holdings Common Stock.
MSLEF II is an investment fund affiliated with MWD. MWD is a holding
company that, through its subsidiaries, is a major international financial
services firm. In addition, two of the current directors of Holdings are
employees of Morgan Stanley & Co. Incorporated, an affiliate of MSLEF II
and also a subsidiary of MWD. As a result of these relationships, MWD may
be deemed to control the management and policies of Graphics and Holdings.
In addition, MWD may be deemed to control matters requiring shareholders'
approval, including the election of all directors, the adoption of
amendments to the Certificates of Incorporation of Holdings and Graphics
and the approval of mergers and sales of all or substantially all of
Graphics' and Holdings' assets.
Management Equity Participation. In connection with the 1993 Acquisition,
certain members of the Company's management at that time, including James
T. Sullivan and Stephen M. Dyott (collectively, the "Management
Investors"), invested an aggregate of approximately $2.3 million in
Holdings and received an aggregate of 3,700 shares of Holdings Common Stock
and 185 shares of Holdings Preferred Stock.
Each Management Investor also entered into a Management Equity Agreement,
dated as of April 8, 1993, with Holdings (collectively, the "Management
Agreements"), pursuant to which, if a Management Investor's employment with
the Company terminates for any reason, Holdings has the right to repurchase
any of the shares of Holdings Common Stock and Holdings Preferred Stock
held by such Management Investor at a price per share equal to the
"Threshold Amount" (as defined in section 4.2(d)(ix) of Holdings'
Certificate of Incorporation) applicable to such shares at such time
divided by the number of shares of Holdings Preferred Stock outstanding at
such time. In the case of shares of Holdings Common Stock held by such
Management Investor, the repurchase price will be equal to fair market
value. The payment of the repurchase price may be deferred (with interest)
if the making of such payment would cause Holdings to violate any debt
covenant or provision of applicable law, or if the Board of Directors of
Holdings determines that Holdings is not financially capable of making such
payment.
Stockholders' Agreement. In connection with the 1993 Acquisition,
Holdings, MSLEF II, each of the members of the Purchasing Group, the GTC
Funds, certain other stockholders of Holdings who were stockholders of
Holdings immediately prior to the Merger Agreement (such stockholders,
together with the GTC Funds, being referred to as the "Existing Holders")
and GTC entered into a Stockholders' Agreement, dated as of April 8, 1993
(the "Stockholders' Agreement"). The Stockholders' Agreement includes
provisions requiring the delivery of certain shares of Holdings Common
Stock from the Purchasing Group to Holdings, depending upon the return
realized by the members of the Purchasing Group on their investment, and
thereafter from Holdings to the Existing Holders. Depending upon the
returns realized by the members of the Purchasing Group on their
investment, their interest in the Holdings Common Stock could be reduced
and the interest of the Existing Holders could be increased as set forth in
the Stockholders' Agreement.
Tax Sharing Agreement
Holdings and Graphics are parties to a tax sharing agreement effective July
27, 1989. Under the terms of the agreement, Graphics (whose income is
consolidated with that of Holdings for federal income tax purposes) is
liable to Holdings for amounts representing federal income taxes calculated
on a "stand-alone basis". Each year Graphics pays to Holdings the lesser
of (i) Graphics' federal tax liability computed on a stand-alone basis and
(ii) its allocable share of the federal tax liability of the consolidated
group. Accordingly, Holdings is not currently reimbursed for the separate
tax liability of Graphics to the extent Holdings' losses reduce
consolidated tax liability. Reimbursement for the use of such Holdings'
losses will occur when the losses may be used to offset Holdings' income
computed on a stand-alone basis. Graphics has also agreed to reimburse
Holdings in the event of any adjustment (including interest or penalties)
to consolidated income tax returns based upon Graphics' obligations with
respect thereto. No reimbursement obligation currently exists between
Graphics and Holdings. Also under the terms of the tax sharing agreement,
Holdings has agreed to reimburse Graphics for refundable federal income tax
equal to an amount which would be refundable to Graphics had Graphics filed
separate federal income tax returns for all years under the agreement.
Graphics and Holdings have also agreed to treat foreign, state and local
income and franchise taxes for which there is consolidated or combined
reporting in a manner consistent with the treatment of federal income taxes
as described above.
Shakopee Merger
In December 1994, Graphics and Shakopee entered into an agreement pursuant
to which they agreed in principle to the terms of the Shakopee Merger and
to negotiate definitive agreements with respect thereto. Prior to the
consummation of the Shakopee Merger, the MSCP III Entities owned a majority
of Shakopee's outstanding stock and the Company provided general
management, supervisory and administrative services to Shakopee, pursuant
to a management agreement entered into in December 1994, in exchange for an
annual service fee of $0.5 million. The Shakopee Merger was consummated
and the management agreement was terminated simultaneously with the
consummation of the offering of the Notes.
In 1998, the Company established the ACG Holdings, Inc. Preferred Stock Option
Plan (the "Preferred Stock Option Plan"). This plan is administered by the
Committee and provides for granting up to 583 shares of Holdings Preferred
Stock. Stock options may be granted under this Preferred Stock Option Plan
to officers and other key employees of the Company at the exercise price
per share of Preferred Stock, as determined at the time of grant by the
Committee in its sole discretion. All options are fully vested and are
100% exercisable at the date of grant. All options expire 10 years from
date of grant. In Fiscal Year 1998, the Company granted options to
purchase 526 shares of Preferred Stock to certain key executives, at an
exercise price of $1,909/share. See note 15 to the Company's consolidated
financial statements.
Other
MS&Co. acted as placement agent in connection with the original private
placement of the Notes and received a placement fee of $5.6 million in
connection therewith. MS&Co. is affiliated with entities that beneficially
own a substantial majority of the outstanding shares of capital stock of
Holdings. MS&Co. had a $5 million participation in the Term Loan Facility
and received fees of approximately $0.3 million in connection therewith.
In addition, Morgan Stanley Senior Funding, Inc. originally had a
participation of approximately $35 million in the Amended and Restated
Credit Agreement and received gross fees of approximately $0.5 million in
connection therewith. On June 8, 1998, Morgan Stanley Senior Funding Inc.
reduced its participation in such credit facility to $11.5 million.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Reports of Independent Auditors
1 and 2. Financial Statements: The following Consolidated
Financial Statements of Holdings are included in
Part II, Item 8:
Consolidated balance sheets - March 31, 1998 and 1997
For the Years Ended March 31, 1998, 1997 and 1996:
Consolidated statements of operations
Consolidated statements of stockholders' deficit
Consolidated statements of cash flows
Notes to Consolidated Financial Statements
Financial Statement Schedules: The following
financial statement schedules of Holdings
are filed as a part of this report.
Schedules Page No.
I. Condensed Financial Information of Registrant................. 73
Condensed Financial Statements (parent company only)
for the years ended March 31, 1998, 1997, and 1996
and as of March 31, 1998 and 1997
II. Valuation and qualifying accounts............................. 80
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be
set forth therein is included in the Consolidated Financial
Statements or notes thereto.
3. Exhibits: The exhibits listed on the accompanying Index to
Exhibits immediately following the financial statement schedules are
filed as part of, or incorporated by reference into, this report.
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation of Graphics, as amended to date*
3.2 By-laws of Graphics, as amended to date*
3.3 Restated Certificate of Incorporation of Holdings, as
amended to date
3.4 By-laws of Holdings, as amended to date*
4.1 Indenture (including the form of Note), dated as of
August 15, 1995, among Graphics, Holdings and
NationsBank of Georgia, National Association, as
Trustee**
10.0 Credit Agreement, dated as of August 15, 1995 and Amended
and Restated as of May 8, 1998, among Holdings, Graphics,
GE Capital Corporation as Documentation Agent, Morgan
Stanley Senior Funding, Inc. as Syndication Agent, Bankers
Trust Company as Administrative Agent and the parties
signatory thereto
10.0(a) June 8, 1998, First Amendment to Amended and Restated Credit
Agreement dated as of May 8, 1998, among Holdings, Graphics,
GE Capital Corporation as Documentation Agent, Morgan Stanley
Senior Funding, Inc. as Syndication Agent, Bankers Trust Company
as Administrative Agent and the parties signatory thereto
10.1 Credit Agreement, dated as of August 15, 1995, among Holdings,
Graphics, BT Commercial Corporation, as Agent, Bankers Trust
Company, as Issuing Bank, and the parties signatory thereto**
10.1(a) January 10, 1996, First Amendment to Credit Agreement,
dated as of August 15, 1995, among Holdings, Graphics, BT
Commercial Corporation, as Agent, Bankers Trust Company, as
Issuing Bank, and the parties signatory thereto***
10.1(b) March 6, 1996, Second Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto+++
10.1(c) June 6, 1996, Third Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto+++
10.1(d) August 13, 1996, Fourth Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto****
10.1(e) February 27, 1997, Fifth Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto++++
10.1(f) June 30, 1997, Sixth Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto
10.1(g) March 13, 1998, Seventh Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto
10.2 Agreement and Plan of Merger, dated as of August 14, 1995, among
Holdings, Graphics and Shakopee**
10.3 Resignation letter, dated as of September 18, 1996, between
Graphics and James T. Sullivan****
10.4(a) Employment Agreement, dated as of April 8, 1993, between
Graphics and Stephen M. Dyott*
10.4(b) Amendment to Employment Agreement, dated December 1, 1994,
between Graphics and Stephen M. Dyott++
10.4(c) Amendment to Employment Agreement, dated February 15, 1995,
between Graphics and Stephen M. Dyott++
10.4(d) Amendment to Employment Agreement, dated September 18, 1996,
between Graphics and Stephen M. Dyott****
10.5 Employment Agreement, dated as of August 18, 1997, between
Graphics and Terrence M. Ray
10.6 Severance Letter, dated April 8, 1993, between Graphics and
Joseph M. Milano+
10.6(a) October 12, 1995, Amendment to Severance Letter, dated
April 8, 1993, between Graphics and Joseph M. Milano***
10.7 Severance Letter, dated April 8, 1993, between Graphics and
Timothy M. Davis+
10.7(a) October 12, 1995, Amendment to Severance Letter, dated April 8,
1993, between Graphics and Timothy M. Davis***
10.8 Severance Letter dated September 8, 1995, between
Graphics and M.J. Anderson
10.9 Amended and Restated Stockholders' Agreement, dated as of
August 14, 1995, among Holdings, the Morgan Stanley Leveraged
Equity Fund II, L.P., Morgan Stanley Capital Partners III,
L.P. and the additional parties named therein**
10.9(a) Amendment No. 1, dated January 16, 1998, to Amended and Restated
Stockholders' Agreement dated as of August 14, 1995 among
Holdings, the Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Capital Partners III, L.P. and the additional
parties named therein
10.10 Purchase Agreement between Guy Gannett, Holdings and Shakopee,
dated November 23, 1994+
10.11 First Amendment Agreement, dated as of December 22, 1994,
between Guy Gannett, Holdings and Shakopee**
10.12 Second Amendment Agreement, dated as of March 27,
1995, between Guy Gannett, Holdings and Shakopee**
10.13 Stock Option Plan of Holdings++
10.14 Purchase Agreement between ComCorp, Inc., Graphics and Gowe
Inc., dated March 12, 1996+++
10.15 Term Loan Agreement, dated as of June 30, 1997, among Holdings,
Graphics, BT Commercial Corporation, as Agent, Bankers Trust
Company, as Issuing Bank, and the parties signatory thereto
10.16 Holdings Common Stock Option Plan
10.17 Holdings Preferred Stock Option Plan
21.1 List of Subsidiaries
27.0 Financial Data Schedule
* Incorporated by reference from Amendment No. 2 to Form S-1 filed on
October 4, 1993 - Registration number 33-65702.
+ Incorporated by reference from the Annual Report on Form 10-K for fiscal
year ended March 31, 1995 - Commission file number 33-31706-01.
** Incorporated by reference from Form S-4 filed on September 19, 1995 -
Registration number 33-97090.
++ Incorporated by reference from Amendment No. 2 to Form S-4 filed on
November 22, 1995 - Registration number 33-97090.
*** Incorporated by reference from the Quarterly Report on Form 10-Q for
the quarter ended December 31, 1995 - Commission file number 33-31706-
01.
+++ Incorporated by reference from the Annual Report on Form 10-K for
fiscal year ended March 31, 1996 - Commission file number 33-97090.
**** Incorporated by reference from the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 - Commission file number 33-
97090.
++++ Incorporated by reference from the Annual Report on Form 10-K for
fiscal year ended March 31, 1997 - Commission file number 33-97090.
(b) Reports on Form 8-K:
The following report on Form 8-K was filed during the fourth quarter of
Fiscal Year 1998:
1. Form 8-K filed with the Securities and Exchange Commission on
January 29, 1998 under Item 5 to announce the Company's EBITDA for the
three months ended December 31, 1997.
The Company did not file any other reports on Form 8-K during the three
months ended March 31, 1998.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACG HOLDINGS, INC.
Parent Company Only
Condensed Balance Sheets
(Dollars in thousands, except par values)
March 31,
---------------------------
1998 1997
---------- ----------
Assets
Current assets:
Receivable from subsidiary $ 359 128
---------- --------
Total assets $ 359 128
========= ========
See accompanying notes to condensed financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACG HOLDINGS, INC.
Parent Company Only
Condensed Balance Sheets
(Dollars in thousands, except par values)
<TABLE>
<CAPTION>
March 31,
-----------------------------------
1998 1997
---------------- ----------------
Liabilities and Stockholders' Deficit
<S> <C> <C>
Current liabilities:
Income taxes payable $ 53 128
--------------- ---------------
Total current liabilities 53 128
Liabilities of subsidiary in excess of assets 106,391 76,318
--------------- ---------------
Total liabilities 106,444 76,446
--------------- ---------------
Stockholders' deficit:
Common stock, voting, $.01 par value, 5,852,223 shares
authorized, 134,812 shares issued and outstanding at
March 31, 1998 and 123,889 shares issued and outstanding
at March 31, 1997 1 1
Preferred Stock, $.01 par value, 5,750 shares authorized,
4,000 shares Series A convertible preferred stock issued
and outstanding at March 31, 1997, $40,000,000 liquidation
preference, 1,750 shares Series B convertible preferred
stock issued and outstanding at March 31, 1997, $17,500,000
liquidation preference -- --
Preferred Stock, $.01 par value, 15,823 shares authorized, 3,631
shares series AA convertible preferred stock issued and
outstanding at March 31, 1998, $40,000,000 liquidation preference,
1,606 shares Series BB convertible preferred stock issued and
outstanding at March 31, 1998, $17,500,000 liquidation preference -- --
Additional paid-in capital 58,249 57,499
Accumulated deficit (162,250) (132,228)
Cumulative translation adjustment (2,000) (1,590)
Unfunded pension liability (85) --
--------------- ---------------
Total stockholders' deficit (106,085) (76,318)
--------------- ---------------
Commitments and contingencies
Total liabilities and stockholders' deficit $ 359 128
=============== ===============
</TABLE>
See accompanying notes to condensed financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACG HOLDINGS, INC.
Parent Company Only
Condensed Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------------
1998 1997 1996
---------------------- -------------------- --------------------
<S> <C> <C> <C>
Equity in loss of subsidiary $ (29,895) (31,703) (29,327)
---------------------- -------------------- --------------------
Net loss $ (29,895) (31,703) (29,327)
====================== ==================== ====================
</TABLE>
See accompanying notes to condensed financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACG HOLDINGS, INC.
Parent Company Only
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------------
1998 1997 1996
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities -- -- --
Cash flows from investing activities -- -- --
Cash flows from financing activities -- -- --
-------------------- ------------------- -------------------
Net change in cash -- -- --
==================== =================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACG HOLDINGS, INC.
Parent Company Only
Notes to Condensed Financial Statements
Description of ACG Holdings, Inc.
Sullivan Communications, Inc. ("Communications"), together with its
wholly-owned subsidiary, Sullivan Graphics, Inc., collectively the
("Company"), was formed in April 1989 under the name GBP Holdings, Inc. to
effect the purchase of all the capital stock of GBP Industries, Inc. from
its stockholders in a leveraged buyout transaction. In October 1989, GBP
Holdings, Inc. changed its name to Sullivan Holdings, Inc. and GBP
Industries, Inc. changed its name to Sullivan Graphics, Inc. Effective
June 1993, Sullivan Holdings, Inc. changed its name to Sullivan
Communications, Inc. Effective July 1997, Sullivan Communications, Inc.
changed its name to ACG Holdings, Inc. ("Holdings") and Sullivan Graphics,
Inc. changed its name to American Color Graphics, Inc. ("Graphics").
Holdings has no operations or significant assets other than its investment
in Graphics. Holdings is dependent upon distributions from Graphics to
fund its obligations. Under the terms of its debt agreements at March 31,
1998, Graphics' ability to pay dividends or lend to Holdings is either
restricted or prohibited, except that Graphics may pay specified amounts to
Holdings to fund the payment of Holdings' obligations pursuant to a tax
sharing agreement (see note 4).
On April 8, 1993 (the "Acquisition Date"), pursuant to an Agreement and
Plan of Merger dated as of March 12, 1993, as amended (the "Merger
Agreement"), between Holdings and SGI Acquisition Corp. ("Acquisition
Corp."), Acquisition Corp. was merged with and into Holdings (the
"Acquisition"). Acquisition Corp. was formed by The Morgan Stanley
Leveraged Equity Fund II, L.P., certain institutional investors and certain
members of management (the "Purchasing Group") for the purpose of acquiring
a majority interest in Holdings. Acquisition Corp. acquired a substantial
and controlling majority interest in Holdings in exchange for $40 million
in cash. In the Acquisition, Holdings continued as the surviving
corporation and the separate corporate existence of Acquisition Corp. was
terminated.
In connection with the Acquisition, the existing consulting agreement with
the managing general partner of Holdings' majority stockholder was
terminated and the related liabilities of Holdings were canceled. The
agreement required Holdings to make minimum annual payments of $1 million
for management advisory services subject to limitations in Graphics' debt
agreements. No amounts were paid during the periods presented in these
condensed financial statements.
1. Basis of Presentation
The accompanying condensed financial statements (parent company
only) include the accounts of Holdings and its investments in
Graphics accounted for in accordance with the equity method, and
do not present the financial statements of Holdings and its
subsidiary on a consolidated basis. These parent company only
financial statements should be read in conjunction with the
Company's consolidated financial statements. The Acquisition was
accounted for under the purchase method of accounting applying the
provisions of Accounting Principles Board Opinion No. 16 ("APB
16").
2. Guarantees
As set forth in the Company's consolidated financial statements, a
substantial portion of Graphics' long-term obligations have been
guaranteed by Holdings.
Holdings has guaranteed Graphics' indebtedness under the Bank
Credit Agreement, which guarantee is secured by a pledge of all of
Graphics' stock. Borrowings under the Bank Credit Agreement are
secured by substantially all assets of Graphics. Holdings is
restricted under its guarantee of the Bank Credit Agreement from,
among other things, entering into mergers, acquisitions, incurring
additional debt, or paying cash dividends.
On August 15, 1995, Graphics issued $185 million of Senior
Subordinated Notes (the "Notes") bearing interest at 12 3/4% and
maturing August 1, 2005. The Notes are guaranteed on a senior
subordinated basis by Holdings and are subordinate to all existing
and future senior indebtedness, as defined, of Graphics.
On May 8, 1998, the Company refinanced all outstanding indebtedness
under the Bank Credit Agreement and the Term Loan Facility (see
note 5 below for a discussion of the terms of this refinancing
transaction).
3. Dividends from Subsidiaries and Investees
No cash dividends were paid to Holdings from any consolidated
subsidiaries, unconsolidated subsidiaries or investees accounted
for by the equity method during the periods reflected in these
condensed financial statements.
4. Tax Sharing Agreement
Holdings and Graphics are parties to a tax sharing agreement
effective July 27, 1989. Under the terms of the agreement,
Graphics (whose income is consolidated with that of Holdings for
federal income tax purposes) is liable to Holdings for amounts
representing federal income taxes calculated on a "stand-alone
basis". Each year Graphics pays to Holdings the lesser of (i)
Graphics' federal tax liability computed on a stand-alone basis
and (ii) its allocable share of the federal tax liability of the
consolidated group. Accordingly, Holdings is not currently
reimbursed for the separate tax liability of Graphics to the
extent Holdings' losses reduce consolidated tax liability.
Reimbursement for the use of such Holdings' losses will occur when
the losses may be used to offset Holdings' income computed on a
stand-alone basis. Graphics has also agreed to reimburse Holdings
in the event of any adjustment (including interest or penalties)
to consolidated income tax returns based upon Graphics'
obligations with respect thereto. Also, under the terms of the
tax sharing agreement, Holdings has agreed to reimburse Graphics
for refundable federal income taxes equal to an amount which would
be refundable to Graphics had Graphics filed separate federal
income tax returns for all years under the agreement. Graphics
and Holdings have also agreed to treat foreign, state and local
income and franchise taxes for which there is consolidated or
combined reporting in a manner consistent with the treatment of
federal income taxes as described above.
5. Subsequent Events
On May 8, 1998, the Company completed a refinancing transaction
which included the following: (1) the Company entered into a $145
million credit facility with Bankers Trust Company, Morgan Stanley
Senior Funding, Inc., General Electric Capital Corporation and a
syndicate of lenders (the "Amended and Restated Credit Agreement")
providing for a $70 million revolving credit facility which is not
subject to a borrowing base limitation (the "New Revolving Credit
Facility") maturing on March 31, 2004, a $25 million amortizing
term loan facility maturing on March 31, 2004 (the "A Term Loan
Facility") and a $50 million amortizing term loan facility
maturing on March 31, 2005 (the "B Term Loan Facility"); (2) the
repayment of all $57.0 million of indebtedness outstanding under
the existing Bank Credit Agreement ($65.2 million was outstanding
at March 31, 1998) (plus $0.4 million of accrued interest to the
date of repayment); (3) the repayment of all $25.0 million of
indebtedness outstanding under the existing Term Loan Facility
(plus $0.6 million of accrued interest to the date of repayment)
and (4) the payment of approximately $2.2 million in fees and
expenses associated with the refinancing transaction. In
addition, the Company recorded an extraordinary loss related to
early extinguishment of debt of $4.0 million, net of taxes
associated with the write-off of refinanced indebtedness deferred
financing costs in the first quarter of the fiscal year ending
March 31, 1999.
Interest under the Amended and Restated Credit Agreement is
floating based upon existing market rates plus agreed upon margin
levels. In addition, the Company is obligated to pay specific
commitment and letter of credit fees. Such margin levels and fees
reduce over the term of the agreement subject to the achievement
of certain Leverage Ratio measures.
Borrowings under the Amended and Restated Credit Agreement are
secured by substantially all of the Company's assets. In
addition, Holdings has guaranteed the indebtedness under the
Amended and Restated Credit Agreement, which guarantee is secured
by a pledge of all of Graphics' and its subsidiaries' stock. The
new agreement (1) requires satisfaction of certain financial
covenants including Minimum Consolidated EBITDA, Consolidated
Interest Coverage Ratio and Leverage Ratio requirements, (2)
requires prepayments in certain circumstances including excess
cash flows, proceeds from asset dispositions in excess of
prescribed levels and certain capital structure transactions and
(3) contains various restrictions and limitations on the following
items: (a) the level of capital spending, (b) the incurrence of
additional indebtedness, (c) mergers, acquisitions, investments
and similar transactions and (d) dividends and other
distributions. In addition, the agreement includes various other
customary affirmative and negative covenants.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ACG HOLDINGS, INC.
<TABLE>
<CAPTION>
Balance
Balance at Additions at
Beginning of Charged to Other End of
Period Expense Write-offs Adjustments Period
------------ ---------- ---------- ----------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Fiscal Year ended March 31, 1998
Allowance for doubtful accounts $ 5,879 908 (4,675) -- $ 2,112
Reserve for inventory obsolescence -
spare parts $ 100 -- -- -- $ 100
Reserve for inventory obsolescence -
paper & ink $ 69 184 (47) (41) $ 165
Income tax valuation allowance $ 30,138 -- -- (a) 7,084 $37,222
Fiscal Year ended March 31, 1997
Allowance for doubtful accounts $ 4,830 4,847 (3,798) -- $ 5,879
Reserve for inventory obsolescence -
spare parts $ 100 -- -- -- $ 100
Reserve for inventory obsolescence -
paper & ink $ 611 318 (45) (815) $ 69
Income tax valuation allowance $ 21,210 -- -- (a) 8,928 $30,138
Fiscal Year ended March 31, 1996
Allowance for doubtful accounts $ 3,174 3,619 (1,963) -- $ 4,830
Reserve for inventory obsolescence -
spare parts $ 100 -- -- -- $ 100
Reserve for inventory obsolescence -
paper & ink $ 50 -- -- 561 $ 611
Income tax valuation allowance $ 13,808 -- -- (a) 7,402 $21,210
(a) The increase in the valuation allowance primarily relates to current
year losses for which no tax benefit has been recorded.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be
signed on their behalf by the undersigned thereunto duly authorized.
ACG Holdings, Inc.
American Color Graphics, Inc.
Date
----
/s/ Stephen M. Dyott June 29, 1998
------------------------------------- -------------
Stephen M. Dyott
Chairman, President and Chief Executive Officer
ACG Holdings, Inc.
Chairman, President and Chief Executive Officer
American Color Graphics, Inc.
Director of ACG Holdings, Inc. and American Color Graphics, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Joseph M. Milano
- ---------------------------- Executive Vice President June 29, 1998
(Joseph M. Milano) Chief Financial Officer -------------
/s/ Patrick W. Kellick
- ---------------------------- Senior Vice President June 29, 1998
(Patrick W. Kellick) Corporate Controller -------------
Assistant Secretary
(Principal Accounting Officer)
/s/ Michael M. Janson Director June 29, 1998
- ---------------------------- -------------
(Michael M. Janson)
/s/ Eric T. Fry Director June 29, 1998
- ---------------------------- -------------
(Eric T. Fry)
ACG HOLDINGS, INC.
Annual Report on Form 10-K
Fiscal Year Ended March 31, 1998
Index to Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation of Graphics, as amended to date*
3.2 By-laws of Graphics, as amended to date*
3.3 Restated Certificate of Incorporation of Holdings, as
amended to date
3.4 By-laws of Holdings, as amended to date*
4.1 Indenture (including the form of Note), dated as of
August 15, 1995, among Graphics, Holdings and
NationsBank of Georgia, National Association, as
Trustee**
10.0 Credit Agreement, dated as of August 15, 1995 and Amended
and Restated as of May 8, 1998, among Holdings, Graphics,
GE Capital Corporation as Documentation Agent, Morgan
Stanley Senior Funding, Inc. as Syndication Agent, Bankers
Trust Company as Administrative Agent and the parties
signatory thereto
10.0(a) June 8, 1998, First Amendment to Amended and Restated Credit
Agreement dated as of May 8, 1998, among Holdings, Graphics,
GE Capital Corporation as Documentation Agent, Morgan Stanley
Senior Funding, Inc. as Syndication Agent, Bankers Trust Company
as Administrative Agent and the parties signatory thereto
10.1 Credit Agreement, dated as of August 15, 1995, among Holdings,
Graphics, BT Commercial Corporation, as Agent, Bankers Trust
Company, as Issuing Bank, and the parties signatory thereto**
10.1(a) January 10, 1996, First Amendment to Credit Agreement,
dated as of August 15, 1995, among Holdings, Graphics, BT
Commercial Corporation, as Agent, Bankers Trust Company, as
Issuing Bank, and the parties signatory thereto***
10.1(b) March 6, 1996, Second Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto+++
10.1(c) June 6, 1996, Third Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto+++
10.1(d) August 13, 1996, Fourth Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto****
10.1(e) February 27, 1997, Fifth Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto++++
10.1(f) June 30, 1997, Sixth Amendment to Credit Agreement, dated as of
August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto
10.1(g) March 13, 1998, Seventh Amendment to Credit Agreement, dated as
of August 15, 1995, among Holdings, Graphics, BT Commercial
Corporation, as Agent, Bankers Trust Company, as Issuing
Bank, and the parties signatory thereto
10.2 Agreement and Plan of Merger, dated as of August 14, 1995, among
Holdings, Graphics and Shakopee**
10.3 Resignation letter, dated as of September 18, 1996, between
Graphics and James T. Sullivan****
10.4(a) Employment Agreement, dated as of April 8, 1993, between
Graphics and Stephen M. Dyott*
10.4(b) Amendment to Employment Agreement, dated December 1, 1994,
between Graphics and Stephen M. Dyott++
10.4(c) Amendment to Employment Agreement, dated February 15, 1995,
between Graphics and Stephen M. Dyott++
10.4(d) Amendment to Employment Agreement, dated September 18, 1996,
between Graphics and Stephen M. Dyott****
10.5 Employment Agreement, dated as of August 18, 1997, between
Graphics and Terrence M. Ray
10.6 Severance Letter, dated April 8, 1993, between Graphics and
Joseph M. Milano+
10.6(a) October 12, 1995, Amendment to Severance Letter, dated
April 8, 1993, between Graphics and Joseph M. Milano***
10.7 Severance Letter, dated April 8, 1993, between Graphics and
Timothy M. Davis+
10.7(a) October 12, 1995, Amendment to Severance Letter, dated April 8,
1993, between Graphics and Timothy M. Davis***
10.8 Severance Letter dated September 8, 1995, between
Graphics and M.J. Anderson
10.9 Amended and Restated Stockholders' Agreement, dated as of
August 14, 1995, among Holdings, the Morgan Stanley Leveraged
Equity Fund II, L.P., Morgan Stanley Capital Partners III,
L.P. and the additional parties named therein**
10.9(a) Amendment No. 1, dated January 16, 1998, to Amended and Restated
Stockholders' Agreement dated as of August 14, 1995 among
Holdings, the Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Capital Partners III, L.P. and the additional
parties named therein
10.10 Purchase Agreement between Guy Gannett, Holdings and Shakopee,
dated November 23, 1994+
10.11 First Amendment Agreement, dated as of December 22, 1994,
between Guy Gannett, Holdings and Shakopee**
10.12 Second Amendment Agreement, dated as of March 27,
1995, between Guy Gannett, Holdings and Shakopee**
10.13 Stock Option Plan of Holdings++
10.14 Purchase Agreement between ComCorp, Inc., Graphics and Gowe
Inc., dated March 12, 1996+++
10.15 Term Loan Agreement, dated as of June 30, 1997, among Holdings,
Graphics, BT Commercial Corporation, as Agent, Bankers Trust
Company, as Issuing Bank, and the parties signatory thereto
10.16 Holdings Common Stock Option Plan
10.17 Holdings Preferred Stock Option Plan
21.1 List of Subsidiaries
27.0 Financial Data Schedule
* Incorporated by reference from Amendment No. 2 to Form S-1 filed on
October 4, 1993 - Registration number 33-65702.
+ Incorporated by reference from the Annual Report on Form 10-K for fiscal
year ended March 31, 1995 - Commission file number 33-31706-01.
** Incorporated by reference from Form S-4 filed on September 19, 1995 -
Registration number 33-97090.
++ Incorporated by reference from Amendment No. 2 to Form S-4 filed on
November 22, 1995 - Registration number 33-97090.
*** Incorporated by reference from the Quarterly Report on Form 10-Q for
the quarter ended December 31, 1995 - Commission file number 33-31706-
01.
+++ Incorporated by reference from the Annual Report on Form 10-K for
fiscal year ended March 31, 1996 - Commission file number 33-97090.
**** Incorporated by reference from the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 - Commission file number 33-
97090.
++++ Incorporated by reference from the Annual Report on Form 10-K for
fiscal year ended March 31, 1997 - Commission file number 33-97090.
Exhibit 10.0
[Conformed Copy with Exhibits
E, F, and G Conformed as Executed]
==============================================================================
CREDIT AGREEMENT
among
ACG HOLDINGS, INC.,
AMERICAN COLOR GRAPHICS, INC.,
VARIOUS FINANCIAL INSTITUTIONS,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Documentation Agent,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Syndication Agent,
and
BANKERS TRUST COMPANY,
as Administrative Agent
-------------------------
Dated as of August 15, 1995
and
Amended and Restated as of May 8, 1998
-------------------------
==============================================================================
TABLE OF CONTENTS
Page
ARTICLE 1.
Definitions......................................................... 1
1.1 General Definitions...................................... 1
1.2 Accounting Terms and Determinations...................... 38
1.3 Other Defined Terms...................................... 39
ARTICLE 2.
Loans............................................................... 39
2.1 Term Loans............................................... 39
2.2 Revolving Loans.......................................... 40
2.3 Swingline Loans.......................................... 41
2.4 Borrowing Mechanics...................................... 42
2.5 Disbursement of Funds.................................... 44
2.6 Mandatory and Voluntary Payment; Mandatory and Voluntary
Voluntary Reduction of Commitments....................... 45
2.7 Payments................................................. 52
2.8 Sharing of Payments...................................... 53
ARTICLE 3.
Letters of Credit.................................................... 53
3.1 Issuance of Letters of Credit............................ 53
3.2 Terms of Letters of Credit............................... 54
3.3 Lenders' Participation................................... 54
3.4 Notice of Issuance, etc.................................. 55
3.5 Payment of Amount Drawn Under Letters of Credit.......... 55
3.6 Payment by Lenders....................................... 56
3.7 Nature of Issuing Bank's Duties.......................... 56
3.8 Obligations Absolute..................................... 57
3.9 Original Letters of Credit............................... 58
ARTICLE 4.
Interest, Fees and Expenses.......................................... 58
4.1 Interest on Eurodollar Rate Loans........................ 58
4.2 Interest on Base Rate Loans.............................. 59
4.3 Notice of Continuation and Notice of Conversion.......... 59
4.4 Interest and Letter of Credit Fees After Event of Default 61
4.5 Reimbursement of Expenses................................ 61
4.6 Unused Line Fee.......................................... 62
4.7 Letter of Credit Fee..................................... 62
4.8 Other Fees and Expenses.................................. 62
4.9 Calculations............................................. 63
4.10 Indemnification in Certain Events....................... 63
4.11 Net Payments............................................ 64
4.12 Affected Lenders........................................ 68
4.13 Change of Applicable Lending Office..................... 68
4.14 Limitation on Certain Additional Amounts................ 69
ARTICLE 5.
Conditions Precedent................................................. 69
5.1 Conditions to Restatement Effective Date................. 69
(a) Execution of Agreement; Notes....................... 69
(b) Officer's Certificate............................... 70
(c) Opinions of Counsel................................. 70
(d) Corporate Proceedings............................... 70
(e) Existing Term Loan Agreement........................ 71
(f) Approvals........................................... 71
(g) Litigation.......................................... 71
(h) Subsidiaries Guaranty............................... 71
(i) Pledge Agreement.................................... 72
(j) Security Agreement.................................. 72
(k) Mortgages Amendments; etc........................... 72
(l) Canadian Debenture and Canadian Pledge Agreement.... 73
(m) Insurance Policies.................................. 73
(n) Plans; Collective Bargaining Agreements; Existing
Indebtedness Agreements; Shareholders' Agreements;
Management Agreements; Employment Agreements; Tax
Sharing Agreements.................................. 74
(o) Balance Sheet....................................... 75
(p) Solvency Certificate................................ 76
(q) Payment of Fees..................................... 76
(r) Original Credit Agreement........................... 76
(s) Projections......................................... 77
5.2 Conditions to Each Loan and Letter of Credit............. 77
ARTICLE 6.
Representations and Warranties....................................... 78
6.1 Corporate Status......................................... 78
6.2 Corporate Power and Authority............................ 78
6.3 No Violation............................................. 78
6.4 Litigation............................................... 79
6.5 Use of Proceeds.......................................... 79
6.6 Governmental Approvals................................... 79
6.7 Investment Company Act................................... 79
6.8 Public Utility Holding Company Act....................... 79
6.9 True and Complete Disclosure............................. 80
6.10 Financial Condition; Financial Statements................ 80
6.11 Locations of Offices, Records and Inventory.............. 81
6.12 Senior Indebtedness, etc................................. 81
6.13 Security Interests....................................... 82
6.14 Tax Returns and Payments................................. 82
6.15 Compliance with ERISA.................................... 82
6.16 Subsidiaries............................................. 84
6.17 Patents, etc............................................. 84
6.18 Compliance with Statutes, etc............................ 84
6.19 Properties............................................... 85
6.20 Labor Relations; Collective Bargaining Agreements........ 85
6.21 Restrictions on Subsidiaries............................. 86
6.22 Material Contracts....................................... 86
ARTICLE 7.
Affirmative Covenants................................................ 86
7.1 Financial Information.................................... 86
7.2 Corporate Franchises..................................... 90
7.3 Compliance with Statutes, etc............................ 90
7.4 ERISA.................................................... 91
7.5 Good Repair.............................................. 92
7.6 Books and Records........................................ 92
7.7 Additional Security; Further Assurances; etc............. 93
7.8 Insurance; Casualty Loss................................. 94
7.9 Taxes.................................................... 94
7.10 End of Fiscal Years; Fiscal Quarters..................... 95
7.11 Real Estate Appraisals................................... 95
7.12 Corporate Separateness................................... 95
7.13 Permitted Transactions................................... 96
7.14 New Wholly-Owned Subsidiaries............................ 97
7.15 Foreign Subsidiaries Security............................ 97
ARTICLE 8.
Negative Covenants................................................... 99
8.1 Consolidation, Merger, Sale or Purchase of Assets, etc... 99
8.2 Liens....................................................101
8.3 Indebtedness.............................................103
8.4 Capital Expenditures.....................................104
8.5 Investments..............................................106
8.6 Dividends, etc...........................................108
8.7 Transactions with Affiliates.............................109
8.8 Changes in Business......................................109
8.9 Minimum Consolidated EBITDA..............................110
8.10 Consolidated Interest Coverage Ratio.....................110
8.11 Leverage Ratio...........................................111
8.12 Limitation on Voluntary Payments; Preferred Stock;
Amendments or Modifications of Certain Agreements; etc...112
8.13 Issuance of Subsidiary Stock.............................113
8.14 Limitation on Restrictions Affecting Subsidiaries........113
8.15 Additional Negative Pledges..............................114
8.16 Additional Designated Senior Indebtedness................114
8.17 Limitation on Subsidiaries and Joint Ventures;
Creation of New Subsidiaries and Joint Ventures..........114
ARTICLE 9.
Events of Default and Remedies.......................................115
9.1 Events of Default........................................115
(a) Payments.............................................115
(b) Representations, etc.................................115
(c) Covenants............................................115
(d) Default Under Other Agreements.......................115
(e) Bankruptcy, etc......................................116
(f) ERISA................................................116
(g) Collateral Documents.................................117
(h) Guaranty.............................................117
(i) Judgments............................................117
(j) Change of Control....................................117
ARTICLE 10.
The Agents...........................................................118
10.1 Appointment.............................................118
10.2 Delegation of Duties....................................119
10.3 Exculpatory Provisions..................................119
10.4 Reliance by Agents......................................120
10.5 Notice of Default.......................................120
10.6 Nonreliance on Agents and Other Lenders.................121
10.7 Indemnification.........................................121
10.8 Agents in Their Individual Capacities...................122
10.9 Holders.................................................122
10.10 Resignation of Agents...................................122
10.11 Collateral Matters......................................124
10.12 Delivery of Information.................................125
ARTICLE 11.
Miscellaneous........................................................126
11.1 Submission to Jurisdiction; Waivers.....................126
11.2 WAIVER OF JURY TRIAL....................................126
11.3 GOVERNING LAW...........................................127
11.4 Delays; Partial Exercise of Remedies....................127
11.5 Notices.................................................127
11.6 Benefit of Agreement....................................127
11.7 Confidentiality.........................................130
11.8 Indemnification.........................................130
11.9 Entire Agreement; Successors and Assigns................131
11.10 Amendment or Waiver.....................................132
11.11 Nonliability of Agents and Lenders......................133
11.12 Registry................................................133
11.13 Counterparts............................................133
11.14 Effectiveness...........................................134
11.15 Severability............................................134
11.16 Headings Descriptive....................................134
11.17 Maximum Rate............................................134
11.18 Right of Setoff.........................................135
11.19 Entire Agreement; Successors and Assigns................135
11.20 Additions of New Lenders; Conversion of Original Loans
of Continuing Lenders; Termination of Commitments of
Non-Continuing Lenders..................................135
11.21 Post-Closing Actions....................................137
ARTICLE 12.
Parent Guaranty......................................................138
12.1 The Parent Guaranty.....................................138
12.2 Bankruptcy..............................................139
12.3 Nature of Liability.....................................139
12.4 Independent Obligation..................................139
12.5 Authorization...........................................139
12.6 Reliance................................................140
12.7 Subordination...........................................141
12.8 Waiver..................................................141
12.9 Limitation on Enforcement...............................142
SCHEDULE I List of Lenders
SCHEDULE II Original Letters of Credit
SCHEDULE III Chief Executive Offices, Records Locations and Inventory and
Equipment Locations
SCHEDULE IV Transactions with Affiliates
SCHEDULE V Tax Matters
SCHEDULE VI Subsidiaries
SCHEDULE VII Real Properties
SCHEDULE VIII Collective Bargaining Agreements
SCHEDULE XI Insurance
SCHEDULE X Existing Liens
SCHEDULE XI Existing Indebtedness
SCHEDULE XII Existing Investments
EXHIBIT A-1 Form of A Term Note
EXHIBIT A-2 Form of B Term Note
EXHIBIT A-3 Form of Revolving Note
EXHIBIT A-4 Form of Swingline Note
EXHIBIT B-1 Form of Notice of Borrowing
EXHIBIT B-2 Form of Letter of Credit Request
EXHIBIT B-3 Form of Notice of Continuation
EXHIBIT B-4 Form of Notice of Conversion
EXHIBIT C-1 Form of Opinion of Davis Polk & Wardwell
EXHIBIT C-2 Form of Opinion of General Counsel of Holdings
EXHIBIT D Form of Officer's Certificate
EXHIBIT E Form of Subsidiaries Guaranty
EXHIBIT F Form of Pledge Agreement
EXHIBIT G Form of Security Agreement
EXHIBIT H-1 Form of Canadian Debenture
EXHIBIT H-2 Form of Canadian Pledge Agreement
EXHIBIT I Form of Compliance Certificate
EXHIBIT J Form of Collateral Access Agreement
EXHIBIT K Form of Assignment and Assumption Agreement
EXHIBIT L Form of Section 4.11(e) Certificate
CREDIT AGREEMENT, dated as of August 15, 1995 and amended and
restated as of May 8, 1998, among ACG HOLDINGS, INC., a Delaware corporation
("Holdings"), AMERICAN COLOR GRAPHICS, INC., a New York corporation (the
"Borrower"), each of those financial institutions listed from time to time on
Schedule I hereto (each, a "Lender" and, collectively, the "Lenders"), GENERAL
ELECTRIC CAPITAL CORPORATION, as Documentation Agent (in such capacity, the
"Documentation Agent"), MORGAN STANLEY SENIOR FUNDING, INC., as Syndication
Agent (in such capacity, the "Syndication Agent"), and BANKERS TRUST COMPANY,
as Administrative Agent (in such capacity, the "Administrative Agent", and
together with the Documentation Agent, the Syndication Agent, each an "Agent",
and collectively, the "Agents"). Capitalized terms used and not otherwise
defined herein have the respective meanings set forth in Section 1.1 hereof.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Original Lenders, BT
Commercial Corporation, as Agent, and Bankers Trust Company, as Issuing Bank,
are parties to a Credit Agreement, dated as of August 15, 1995 (as the same
has been amended, modified or supplemented to, but not including, the
Restatement Effective Date, the "Original Credit Agreement"); and
WHEREAS, the parties hereto wish to amend and restate the
Original Credit Agreement in the form of this Agreement to make available to the
Borrower the respective credit facilities provided for herein;
NOW, THEREFORE, the parties hereto agree that the Original Credit
Agreement shall be and hereby is amended and restated in its entirety as
follows:
ARTICLE 1.
Definitions
1.1 General Definitions. As used herein, the following terms
shall have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
A Term Loan Commitment of any Lender shall mean, at any time, the
amount set forth opposite such Lender's name on Schedule I, as such Schedule may
be time to time, under the heading "A Term Loan Commitment," as such amount may
be reduced from time to time pursuant to the terms of this Agreement at or prior
to such time.
A Term Loans shall have the meaning provided in Section 2.1(a).
A Term Loan Percentage of any Lender at any time shall mean a
fraction (expressed as a percentage) the numerator of which is the outstanding
principal amount of A Term Loans (or, if prior to the occurrence of the
Restatement Effective Date, the A Term Loan Commitment) of such Lender at such
time and the denominator of which is the then total outstanding principal amount
of the A Term Loans of all the Lenders (or if the determination is being made
prior to the occurrence of the Restatement Effective Date, the Total A Term Loan
Commitments, as then in effect).
A Term Note shall mean a promissory note of the Borrower
payable to the order of a Lender, in the form of Exhibit A-1, evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from the A
Term Loans made by such Lender or acquired by such Lender pursuant to Section
11.6.
A TL/RL Maturity Date shall mean March 31, 2004.
Accounts of any Person shall mean all of such Person's rights to
payment for goods sold or leased or services performed by such Person, whether
presently existing or hereafter arising, including, without limitation, rights
evidenced by accounts, instruments, notes, drafts, documents, chattel paper, and
all other forms of obligations owing to such Person arising out of the sale of
goods or the rendition of services by such Person, whether or not earned by
performance, and any and all credit insurance, letters of credit, guaranties and
other security therefor, as well as all merchandise returned to or reclaimed by
such Person, and such Person's books and records (except minute books) relating
to any of the foregoing.
Additional Security Documents has the meaning provided in
Section 7.7.
Adjusted Eurodollar Rate shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate obtained by dividing (i)
the Eurodollar Rate for such Interest Period by (ii) a percentage equal to 100%
minus the then stated maximum rate (stated as a decimal), as of the date of
determination, of all reserves, if any, required by the Board of Governors of
the Federal Reserve System to be maintained by a member bank of the Federal
Reserve System in New York City with deposits in excess of five billion dollars
against "Eurocurrency Liabilities" as specified in Regulation D (or against any
other category of liabilities specified in Regulation D which includes deposits
by reference to which the interest rate on Eurodollar Rate Loans is determined
or any category of extensions of credit or other assets specified in Regulation
D which includes loans by a non-United States office of any Lender to United
States residents).
Administrative Agent shall have the meaning provided in the
preamble to this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 10.10.
Affected Eurodollar Rate Loans shall have the meaning provided
in Section 2.6(m).
Affiliate shall mean, with respect to any Person, any entity
which directly or indirectly controls, is controlled by, or is under common
control with, such Person or any Subsidiary of such Person or any Person who
is a director or officer of such Person or any Subsidiary of such Person. For
purposes of this definition, "control" shall mean the possession, directly or
indirectly, of the power to (i) vote ten percent (10%) or more of the
securities having ordinary voting power for the election of directors of such
Person or (ii) direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract
or otherwise. Neither any Lender nor any person controlling any Lender nor
any of their respective Subsidiaries shall be treated as an Affiliate of the
Credit Parties or their respective Subsidiaries.
Agents shall have the meaning provided in the preamble to this
Agreement.
Agreement shall mean this Agreement, as the same may be
modified, amended, extended, restated, amended and restated or supplemented
from time to time.
Applicable Margin initially shall mean a percentage equal to
(i) in the case of A Term Loans and Revolving Loans maintained as (x) Base
Rate Loans, 1.25% and (y) Eurodollar Rate Loans, 2.50%, (ii) in the case of B
Term Loans maintained as (x) Base Rate Loans, 1.50% and (y) Eurodollar Rate
Loans, 2.75%, (iii) in the case of Swingline Loans, 1.25%, (iv) in the case of
the Unused Line Fee, 0.50% and (v) in the case of Letter of Credit Fees,
2.25%. From and after each day of delivery of any certificate delivered in
accordance with the following sentence indicating an entitlement to a
different Applicable Margin than that described in the immediately preceding
sentence (each, a "Start Date") to and including the applicable End Date
described below, the Applicable Margin shall be that set forth below opposite
the Leverage Ratio indicated as having been achieved in such certificate
delivered in accordance with the following sentence:
<TABLE>
<CAPTION> Base Rate
Margin for A
Term Loans,
Revolving
Eurodollar Margin for Eurodollar Loans and Base Rate
A Term Loans and Margin for B Swingline Margin for B Unused Line L/C Fee
Leverage Ratio Revolving Loans Term Loans Loans Term Loans Fee Percentage
- --------------------- --------------------- ------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Greater than or 2.250% 2.50% 1.00% 1.250% 0.500% 2.000%
equal to 4.5:1
but less than 5.0:1.0
Greater than or 2.000% 2.250% 0.750% 1.000% 0.500% 1.750%
equal to 4.0:1 but
less than 4.5:1
Greater than or 1.750% 2.000% 0.500% 0.750% 0.375% 1.500%
equal to 3.50:1 but
less than 4.0:1
Less than 3.5:1 1.500% 1.750% 0.250% 0.500% 0.375% 1.250%
</TABLE>
The Leverage Ratio shall be determined based on a certificate of an Authorized
Officer of the Borrower delivered to the Administrative Agent (with a copy to be
sent by the Borrower to each Lender) within 45 days of the last day of each
fiscal quarter of Holdings, which certificate shall set forth the calculation of
the Leverage Ratio as at the last day of the Test Period ended immediately prior
to the relevant Start Date and the Applicable Margins which shall be thereafter
applicable (until same are changed or cease to apply in accordance with the
following sentences); provided that at the time of the consummation of any
Permitted Transaction, an Authorized Officer of the Borrower shall deliver to
the Administrative Agent a certificate setting forth the calculation of the
Leverage Ratio on a Pro Forma Basis as of the last day of the last Calculation
Period ended prior to the date on which such Permitted Transaction is
consummated for which Financial Statements have been made available (or were
required to be made available) pursuant to Section 7.1(a) or (b), as the case
may be, and the date of such consummation shall be deemed to be a Start Date and
the Applicable Margins which shall be thereafter applicable (until same are
changed or cease to apply in accordance with the following sentences) shall be
based upon the Leverage Ratio as so calculated. The Applicable Margins so
determined shall apply, except as set forth in the succeeding sentence, from the
Start Date to the earlier of (x) the date on which the next certificate is
delivered to the Administrative Agent, (y) the date on which the next Permitted
Transaction is consummated or (z) the date which is 45 days following the last
day of the Test Period in which the previous Start Date occurred (the "End
Date"), at which time, if no certificate has been delivered to the
Administrative Agent indicating an entitlement to Applicable Margins other than
those described in the first sentence of this definition (and thus commencing a
new Start Date), the Applicable Margins shall be those described in the first
sentence of this definition. Notwithstanding anything to the contrary contained
above in this definition, the Applicable Margins shall be those described in the
first sentence of this definition at all times during which there shall exist a
Default or any Event of Default.
Applicable Prepayment Percentage shall mean initially 50%,
provided that at any time that the Applicable Margin for B Term Loans
maintained as Eurodollar Rate Loans is 1.750%, the Applicable Prepayment
Percentage shall instead be 0%.
Applicable Lending Office shall mean, with respect to each
Lender, such Lender's Eurodollar Lending Office (in the case of a Eurodollar
Rate Loan), and such Lender's Domestic Lending Office (in the case of a Base
Rate Loan).
Assignment and Assumption Agreement shall mean an assignment and
assumption agreement entered into by an assigning Lender and an assignee
Lender, and accepted by the Administrative Agent, in accordance with Section
11.6, substantially in the form of Exhibit K.
Auditors shall mean any "big-six" firm of independent public
accountants and any other nationally-recognized firm of independent public
accountants selected by Holdings or the Borrower and reasonably satisfactory
to the Agents.
Authorized Officer shall mean, with respect to (i) delivering
Notices of Borrowing, Notices of Conversion, Notices of Continuation, Letter
of Credit Requests and similar notices, and delivering financial information
and officer's certificates pursuant to this Agreement, the chief operating
officer, any treasurer or other financial officer of the Borrower or Holdings,
as the case may be, and (ii) any other matter in connection with this
Agreement or any other Credit Document, any officer (or a person or persons so
designated by any two officers) of Holdings or the Borrower, in each case to
the extent reasonably acceptable to the Administrative Agent.
Available Basket Amount shall mean, on any date of
determination, an amount equal to the sum of (i) $14,000,000 minus (ii) the
aggregate Permitted Transaction Costs of all Permitted Transactions effected
after the Restatement Effective Date, minus (iii) without duplication of any
amount included in Permitted Transaction Costs, the aggregate amount of
Indebtedness or other obligations (whether absolute, accrued, contingent or
otherwise and whether or not due) of any Joint Venture for which Holdings or
any of its Subsidiaries (other than the respective Joint Venture) is liable,
minus (iv) all payments made by Holdings or any of its Subsidiaries (other than
the respective Joint Venture) in respect of Indebtedness or other obligations
of the respective Joint Venture (including, without limitation, payments in
respect of obligations described in preceding clause (iii)), plus (v) the
amount of any increase to the Available Basket Amount made after the
Restatement Effective Date in accordance with the provisions of Section 8.5(d).
B Term Loan Commitment of any Lender shall mean, at any time,
the amount set forth opposite such Lender's name on Schedule I, as such
Schedule may be amended from time to time, under the heading "B Term Loan
Commitment," as such amount may be reduced from time to time pursuant to the
terms of this Agreement at or prior to such time.
B Term Loan Percentage of any Lender at any time shall mean a
fraction (expressed as a percentage) the numerator of which is the outstanding
principal amount of B Term Loans (or, if prior to the occurrence of the
Restatement Effective Date, the B Term Loan Commitment) of such Lender at such
time and the denominator of which is the then total outstanding principal
amount of the B Term Loans of all the Lenders (or if the determination is
being made prior to the occurrence of the Restatement Effective Date, the
Total B Term Loan Commitments, as then in effect).
B Term Loans shall have the meaning provided in Section 2.1(b).
B Term Note shall mean a promissory note of the Borrower
payable to the order of a Lender, in the form of Exhibit A-2, evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from the B
Term Loans made by such Lender or acquired by such Lender pursuant to Section
11.6.
B TL Maturity Date shall mean March 31, 2005.
Bankruptcy Code shall have the meaning provided in Section
9.1(e).
Base Rate shall mean, at any time, the highest of (i) the Prime
Lending Rate and (ii) 1/2 of 1% in excess of the overnight Federal Funds Rate
then in effect.
Base Rate Loan shall mean (i) each Swingline Loan and (ii) each
Loan bearing interest as provided in Section 4.2.
Borrower shall have the meaning provided in the preamble to this
Agreement.
Borrowing shall mean the borrowing of one Type of Loan of a
single Tranche from all the Lenders having Commitments of such Tranche (or
from the Swingline Bank, in the case of Swingline Loans) on a given date (or
resulting from Conversion or Continuance on such date), having, in the case of
Eurodollar Rate Loans, the same Interest Period.
BTCo shall mean Bankers Trust Company, in its individual
capacity.
BTCC shall mean BT Commercial Corporation, in its individual
capacity.
Business Day shall mean any day other than a Saturday, Sunday
or legal holiday on which commercial banks in New York, New York are
authorized to close. When used in connection with Eurodollar Rate Loans, this
definition will also exclude any day on which commercial banks are not open
for dealing in U.S. Dollar deposits in the New York interbank Eurodollar
market.
Calculation Period shall have the meaning provided in Section
7.13.
Canadian Debenture shall have the meaning provided in Section
5.1(l).
Canadian Pledge Agreement shall have the meaning provided in
Section 5.1(l).
Capital Expenditures shall mean, as applied to any Person for
any period, the aggregate of all expenditures (whether paid in cash or accrued
as liabilities (including Capitalized Lease Obligations)) made by such Person
and its Subsidiaries during such period that, in conformity with GAAP, are or
are required to be included in the property, plant or equipment reflected in
the consolidated balance sheet of such Person. For purposes of this
Agreement, if a Capital Expenditure is made to purchase an asset and the asset
is subsequently sold in a sale-leaseback transaction in accordance with
Section 8.1(d), and if Capitalized Lease Obligations arise pursuant to said
sale-leaseback transaction, the respective sale-leaseback transaction shall
not be deemed to constitute additional Capital Expenditures (including for
purposes of Section 8.4(a)), although the Indebtedness arising from the
respective Capitalized Lease Obligation shall be treated as such for purposes
of this Agreement and shall be required to be incurred in accordance with the
applicable requirements of this Agreement (including, without limitation,
Section 8.4(a)).
Capital Lease, as applied to any Person, shall mean any lease
of any property (whether real, personal or mixed) by that Person or any of its
Subsidiaries as lessee which, in conformity with GAAP, is accounted for as a
capital lease on the consolidated balance sheet of that Person.
Capitalized Lease Obligations shall mean the obligations under
Capital Leases of Holdings and its Subsidiaries in each case taken at the
amount thereof accounted for as liabilities in accordance with GAAP.
Cash Equivalents shall mean any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any
agency thereof, (ii) 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) any Lender or (B) a bank or trust company
which is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and which
Lender bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which 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) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a Lender or a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Borrower) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or "A" by Moody's.
Casualty Loss shall have the meaning provided in Section 7.8.
CERCLA shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601
et seq.
Change of Control shall mean the occurrence of any of the
following events: (i) a "Change of Control" (or any similar term) under and as
defined in the Senior Subordinated Notes, (ii) any Person, entity or "group" (as
such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934
as amended (the "Exchange Act")) other than the Permitted Holders shall become
the beneficial owner of shares representing 30% or more of any outstanding class
of capital stock having ordinary voting power in the election of directors of
Holdings, (iii) there shall occur during any period after the Original Effective
Date a change in the Board of Directors of Holdings pursuant to which the
individuals who constituted the Board of Directors of Holdings at the beginning
of such period (together with any other director whose election by the Board of
Directors of Holdings (or whose nomination by the Board of Directors for
election by the stockholders of Holdings) was approved by a vote of at least a
majority of the directors then in office who either were directors at the
beginning of such period or whose election was previously so approved by a duly
authorized committee of the Board of Directors (which committee was designated
by at least a majority of directors then in office who either were directors at
the beginning of such period or whose election was previously so approved))
cease to constitute a majority of the Directors of Holdings at the end of such
period or (iv) Holdings shall at any time cease to own 100% of the issued and
outstanding capital stock of the Borrower. Notwithstanding anything to the
contrary contained above, if any of the stockholders, who are not Permitted
Holders of Holdings, as determined on the Original Effective Date, or their
permitted transferees under the Shareholders' Agreement as furnished to the
Administrative Agent prior to the Original Effective Date, are deemed to
constitute a part of the same "group" (as such term is defined in the Exchange
Act) as the Permitted Holders, their inclusion in such "group" shall not cause a
Change of Control pursuant to clause (ii) of the immediately preceding sentence
unless (x) any such Person (and any of its Affiliates), other than a Permitted
Holder, would individually exceed the 30% threshold contained in said clause
(ii), (y) all such Persons (and any of their Affiliates), other than the
Permitted Holders, which are members of such "group" would exceed the threshold
contained in said clause (ii) if the percentage "30%" appearing therein were
changed to "40%" or (z) any such Persons are members of another such "group"
(which does not include the Permitted Holders) which exceeds the 30% threshold
contained in said clause (ii).
Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
Collateral shall mean all of the Collateral as defined in each
of the Collateral Documents.
Collateral Access Agreements shall mean any landlord waivers,
mortgagee waivers and access agreements, in each case substantially in the
form of Exhibit J with such changes thereto as are reasonably acceptable to
the Administrative Agent.
Collateral Agent shall mean BTCC acting as collateral agent
pursuant to the Collateral Documents.
Collateral Documents shall mean all contracts, instruments and
other documents now or hereafter executed and delivered in connection with
this Agreement, pursuant to which liens and security interests are granted to
the Collateral Agent in the Collateral for the benefit of the Lenders,
including, without limitation, the Pledge Agreement, the Security Agreement,
each Mortgage, the Canadian Debenture, the Canadian Pledge Agreement, each
Collateral Access Agreements and, after the execution and delivery thereof,
each Additional Security Document.
Collective Bargaining Agreements shall have the meaning
provided in Section 5.1(n).
Commitment of any Lender shall mean, at any time, the sum of
the A Term Loan Commitment of such Lender at such time, the B Term Commitment
of such Lender at such time and the Revolving Loan Commitment of such Lender
at such time.
Consolidated Cash Interest Expense for any period shall mean the
aggregate consolidated cash interest expense, net of cash interest income, of
Holdings and its Subsidiaries in respect of Indebtedness for such period
determined in accordance with GAAP, including in any event the cash interest
component of any Capitalized Lease Obligations.
Consolidated Debt shall mean, at any time, the sum of (without
duplication) (i) all Indebtedness of Holdings and its Subsidiaries as would be
required to be reflected on the liability side of a balance sheet of such
Person in accordance with GAAP as determined on a consolidated basis
(including unreimbursed drawings under letters of credit and performance, bid,
surety and other similar bonds but excluding any amount available to be drawn
on letters of credit and performance, bid, surety and other similar bonds to
the extent not drawn) and (ii) all Contingent Obligations of Holdings and its
Subsidiaries in respect of Indebtedness of other Persons (i.e., Persons other
than Holdings or any of its Subsidiaries) of the type referred to in preceding
clause (i) of this definition; provided that Consolidated Debt shall not
include (x) any Contingent Obligation arising under any guarantee in respect
of industrial revenue bonds assumed by the purchaser of the Borrower's ink
manufacturing operations and facilities which were sold in December 1989 if
and to the extent that payment under such industrial revenue bonds is
supported by an irrevocable letter of credit issued for the account of a
Person or Persons other than Holdings or any of its Subsidiaries and which
guarantee by its terms requires any beneficiary thereof to seek payment first
under the letter of credit before seeking payment under such guarantee and
(ii) indebtedness under an industrial revenue bond originally funded by a
Subsidiary of the Borrower to finance improvements at its facility in
Sylacauga, Alabama and assumed by the Borrower subsequent to such Subsidiary's
merger with and into the Borrower to the extent that the Borrower is both the
payor and the payee under such industrial revenue bonds.
Consolidated EBIT shall mean, for any period, the Consolidated
Net Income of Holdings and its Subsidiaries for such period, determined on a
consolidated basis, before Consolidated Interest Expense (to the extent
deducted in arriving at Consolidated Net Income) and provision for taxes based
on income or gains or losses from sales of assets other than inventory sold in
the ordinary course of business, in each case that were included in arriving
at Consolidated Net Income.
Consolidated EBITDA shall mean, for any period, Consolidated
EBIT, adjusted by (i) adding thereto without duplication (to the extent
deducted in arriving at Consolidated EBIT for such period) (a) amortization,
depreciation and similar non cash charges, plus (b) restructuring charges,
severance expenses and other non-recurring charges accrued during such period
and (ii) subtracting therefrom restructuring charges, severance expenses and
other non-recurring charges paid during such period whether or not such
charges and expenses were accrued during such period (provided such charges
and expenses are accrued after the Restatement Effective Date).
Consolidated Interest Coverage Ratio for any period shall mean
the ratio of Consolidated EBITDA for such period to Consolidated Interest
Expense for such period. All calculations of the Consolidated Interest
Coverage Ratio shall be made on a Pro Forma Basis.
Consolidated Interest Expense shall mean, for any period, the
total consolidated interest expense of Holdings and its Subsidiaries for such
period (calculated without regard to any limitations on the payment thereof)
plus, without duplication, that portion of Capitalized Lease Obligations of
Holdings and its Subsidiaries representing the interest factor for such
period, and capitalized interest expense, in each case net of the total
consolidated cash interest income of Holdings and its Subsidiaries for such
period, but excluding the amortization of any deferred financing costs.
Consolidated Net Income shall mean, for any period, the net
after tax income of Holdings and its Subsidiaries determined on a consolidated
basis, without giving effect to any extraordinary items which would otherwise
be reflected therein and any non-cash expenses incurred or payments made in
connection with the Transaction; provided that the following items shall be
excluded in computing Consolidated Net Income (without duplication): (i) the
net income or net losses of any Person in which any other Person or Persons
(other than the Borrower or any of its Wholly-Owned Subsidiaries) has an
equity interest or interests, (ii) the net income or net losses of any
Unrestricted Subsidiary, (iii) except for determinations expressly required to
be made on a Pro Forma Basis, the net income (or loss) of any Person accrued
prior to the date it becomes a Wholly-Owned Subsidiary or all or substantially
all of the property or assets of such Person are acquired by a Wholly-Owned
Subsidiary and (iv) the net income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Subsidiary of such net income is not at the time of such declaration or
payment permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary, except, in the case of clauses (i)
and (ii) above, to the extent of the amount of dividends and other
distributions actually paid to the Borrower or Wholly-Owned Subsidiaries by
such Person during such period.
Contingent Obligations shall mean as to any Person any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor, (c)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise to
assure or hold harmless the owner of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligations shall
not include (x) endorsements of instruments for deposit or collection in the
ordinary course of business or (y) guarantees made by a Person of the
obligations of a Wholly-Owned Subsidiary of such Person which do not constitute
Indebtedness of such Wholly-Owned Subsidiary and are incurred in the ordinary
course of business of such Wholly-Owned Subsidiary. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
Continuation and Continuance each shall refer to a continuation
of Loans pursuant to Section 4.3, provided that each such term shall not
constitute the making of a Loan for purposes of this Agreement.
Continuing Lender shall mean each Original Lender with a
Commitment under this Agreement (immediately upon giving effect to the
Restatement Effective Date).
Convert, Conversion and Converted each shall refer to a
conversion of Loans (other than Swingline Loans) of one Type (so long as of
the same Tranche) into Loans of another Type (of the same Tranche) pursuant to
Section 4.3, provided that each such term shall not constitute the making of a
Loan for purposes of this Agreement.
Converted B Term Loans shall have the meaning provided in
Section 2.1(b).
Covered Taxes shall have the meaning provided in Section
4.11(a).
Credit Documents shall mean, collectively, this Credit
Agreement, the Notes, the Letters of Credit, the Subsidiaries Guaranty and
each of the Collateral Documents, as the same may be modified, amended,
extended, restated or supplemented from time to time.
Credit Event shall mean the making of a Loan or the issuance of
a Letter of Credit.
Credit Parties shall mean, collectively, Holdings, the Borrower
and the Subsidiary Guarantors.
Default shall mean an event, condition or default which with
the giving of notice, the passage of time or both would be an Event of Default.
Defaulting Lender shall have the meaning provided in Section
2.5(a).
Dividend shall have the meaning given to such term in Section
8.6.
Documentation Agent shall have the meaning provided in the
preamble to this Agreement and shall include any successor to the
Documentation Agent appointed pursuant to Section 10.10.
DOL shall mean the United States Department of Labor and any
successor department or agency.
Dollar Equivalent shall mean on any date, with respect to any
currency other than Dollars, the amount of Dollars into which such currency
could be converted at the Exchange Rate on such date.
Dollars and the sign $ shall each mean freely transferable
lawful money of the United States.
Domestic Lending Office shall mean, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I, as such schedule may be amended from time to time.
Domestic Subsidiary shall mean each Subsidiary of Holdings
incorporated or organized in the United States, Canada or any State, province
or territory thereof.
Eligible Transferee shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in SEC
Regulation D).
Employment Agreements shall have the meaning provided in Section
5.1(n).
Environmental Claims shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by Holdings or any of its Subsidiaries solely in the ordinary
course of such Person's business or as required in connection with a financing
transaction and not in response to any third party action or request of any
kind) or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all Claims
by governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental
Law, and (b) any and all Claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation, specific
performance or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
Environmental Law shall mean any applicable Federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
guide, policy and rule of common law now or hereafter in effect and in each
case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300F et seq.; the Oil
Pollution Act of 1990, 33 U.S.C Section 2701 et seq. and any applicable
state, provincial and local or foreign counterparts, or equivalents or similar
statutes.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
ERISA Affiliate shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings, the Borrower or any Subsidiary of
Holdings or the Borrower would be deemed to be a "single employer" within the
meaning of Section 414(b) or (c) of the Code, and for the purpose of any
specific provision of this Agreement which expressly refers to Section 302 of
ERISA or Section 412, 4971 or 4977 of the Code, within the meaning of Section
414(b), (c), (m) or (o) of the Code.
Eurodollar Lending Office shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I, as such schedule may be amended from time to
time (or, if no such office is specified, its Domestic Lending Office), or
such other office or Affiliate of such Lender as such Lender may from time to
time specify to the Borrower and the Administrative Agent.
Eurodollar Rate shall mean, with respect to an Interest Period
for each Eurodollar Rate Loan comprising part of the same Borrowing, an
interest rate per annum equal to the average (rounded upward to the nearest
whole multiple of one-sixteenth (1/16) of one percent (1%) per annum, if such
rate is not such a multiple) of the offered quotation, if any, to first class
banks in the interbank Eurodollar market by BTCo for U.S. dollar deposits of
amounts in immediately available funds comparable to the principal amount of
the Eurodollar Rate Loan of BTCo for which the Eurodollar Rate is being
determined with maturities comparable to the Interest Period for which such
Eurodollar Rate will apply as of approximately 11:00 A.M. (New York time) two
(2) Business Days prior to the commencement of such Interest Period.
Eurodollar Rate Loan shall mean a Loan bearing interest as
provided in Section 4.1.
Event of Default shall have the meaning provided in Section
9.1.
Excess Cash Flow shall mean, without duplication, in respect of
any fiscal year of Holdings, Consolidated EBITDA in respect of such fiscal
year plus (i) the aggregate amount of proceeds received during such period
from the incurrence of Indebtedness (other than Revolving Loans and Swingline
Loans) or pursuant to sale-leaseback transactions pursuant to Section 8.1(d),
in each case except to the extent such Indebtedness or sale-leaseback
transaction is incurred to finance Capital Expenditures made in the same
fiscal year in which the Indebtedness is incurred or sale-leaseback
transaction is entered into, minus (ii) the sum of (a) the amount of Capital
Expenditures (to the extent not financed with Indebtedness or pursuant to
sale-leaseback transactions or made pursuant to Section 8.4(b)) made by
Holdings or any of its Subsidiaries during such fiscal year, (b) the aggregate
principal amount of permanent principal payments of Indebtedness for borrowed
money, and payments of the principal component of Capitalized Lease
Obligations, by Holdings or its Subsidiaries (other than (A) payments pursuant
to the Refinancing and (B) repayments of Loans, provided that repayments of
Loans shall be deducted in determining Excess Cash Flow if such repayments
were (1) required as a result of a Scheduled Repayment under Section 2.6(f) or
(2) made as a voluntary prepayment pursuant to Section 2.6(e)(but in the case
of a voluntary prepayment of Revolving Loans or Swingline Loans, only to the
extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitments)) on a consolidated basis during such fiscal year, (c)
Consolidated Cash Interest Expense paid during such fiscal year, (d) cash
payments of income taxes made by Holdings and its Subsidiaries during such
fiscal year, and (e) cash Investments made by the Borrower and its
Subsidiaries during the respective fiscal year (except to the extent the
Investment is made in the Borrower or any of its Subsidiaries) pursuant to
Section 8.5(k)
Excess Cash Payment Date shall mean the date occurring 90 days
after the last day of each fiscal year of the Borrower.
Excess Cash Payment Period shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
Exchange Rate shall mean, when converting any amount
denominated in a currency (the "First Currency") into another currency (the
"Second Currency"), the rate determined in good faith by the Administrative
Agent at the opening of business in New York, on the date as to which any
determination thereof is to be made, as the spot rate at which such First
Currency is offered for sale to the Agent against delivery of the Second
Currency by the Administrative Agent. If for any reason the Exchange Rate for
any currency cannot be calculated as provided above, the Administrative Agent
shall calculate the Exchange Rate on such basis as it deems fair and equitable.
Existing Indebtedness shall mean all Indebtedness of the
Borrower and its Subsidiaries outstanding prior to, and to remain outstanding
on and after, the Restatement Effective Date, and set forth on Schedule XI,
without giving effect to extensions or renewals thereto, except as expressly
provided therein.
Existing Indebtedness Agreements shall have the meaning
provided in Section 5.1(n).
Existing Mortgage Policies shall mean each mortgage insurance
policy issued with respect to an Existing Mortgage under the Original Credit
Agreement.
Existing Mortgaged Property shall mean all Real Property of the
Borrower and its Restricted Subsidiaries listed as such on Schedule VII (which
shall include all Real Property subject to any Existing Mortgage).
Existing Mortgages shall mean all Mortgages under, and as
defined in, the Original Credit Agreement, granted by the Credit Parties
pursuant to the Original Credit Agreement and which have not been released by
the lenders thereunder prior to the Restatement Effective Date.
Existing Term Loan Agreement shall mean the Term Loan Agreement,
dated as of June 30, 1997, among Holdings, the Borrower, various financial
institutions and Bankers Trust Company, as Administrative Agent, as in effect
on the Restatement Effective Date.
Expenses shall mean all present and future expenses incurred by
or on behalf of the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Collateral Agent in connection with this
Agreement, any other Credit Document or otherwise in its capacity as the
Administrative Agent, the Syndication Agent, the Documentation Agent or the
Collateral Agent, as the case may be, under this Agreement or any other Credit
Document, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to, the cost of record searches, the reasonable
fees and expenses of attorneys and paralegals, all costs and expenses incurred
by the Administrative Agent, the Syndication and the Collateral Agent in
opening bank accounts, depositing checks, receiving and transferring funds,
reasonable fees and expenses of accountants, appraisers or other consultants,
experts or advisors employed or retained by the Administrative Agent, the
Syndication Agent, the Documentation Agent or the Collateral Agent,
out-of-pocket syndication fees and expenses, fees and taxes relative to the
filing of financing statements, costs of preparing and recording any other
Collateral Documents, all expenses, costs and fees set forth in Article 4 of
this Agreement, all other fees and expenses required to be paid pursuant to
the Fee Letter and all reasonable fees and expenses incurred in connection with
releasing Collateral and the amendment or termination of any of the Credit
Documents.
Facing Fee shall have the meaning provided in Section 4.7(b).
Federal Funds Rate shall mean, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by it.
Fee Letter shall mean that certain letter, dated as of April
17, 1998, among BTCo, Morgan, Holdings and the Borrower providing for the
payment of certain fees in connection with this Agreement.
Fees shall mean, collectively, the Unused Line Fee, the Letter
of Credit Fees, the Facing Fees and the other fees provided for in the Fee
Letter.
Financial Statements shall mean the consolidated and, if
requested by the any Agent, consolidating balance sheet and statement of
operations and statement of cash flows and statements of changes in
shareholder's equity of each of (x) Holdings and (y) the Borrower, for the
period specified prepared in accordance with GAAP and consistent with prior
practices; provided, however, that so long as Holdings owns all the capital
stock of the Borrower, owns no other significant assets and owns no capital
stock of any other Subsidiary or Unrestricted Subsidiary, separate financial
statements for the Borrower shall not be required to be furnished pursuant to
Sections 7.1(a) and (b).
Foreign Lender shall mean any Lender organized under the laws
of a jurisdiction outside of the United States.
Foreign Pension Plan means any plan, fund (including, without
limitation, any superannuation fund) or other similar program or arrangement
established or maintained outside the United States of America by Holdings,
the Borrower or any one or more of their Subsidiaries primarily for the
benefit of employees of Holdings, the Borrower or such Subsidiaries
residing outside the United States of America, which plan, fund or other
similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon any
termination of employment, and which plan is not subject to ERISA or the
Code.
Foreign Subsidiary shall mean each Subsidiary of Holdings that
is not a Domestic Subsidiary.
GAAP shall mean generally accepted accounting principles in the
United States as in effect from time to time subject to Section 1.2.
Governing Documents shall mean, as to any Person, the
certificate or articles of incorporation and by-laws or other organizational
or governing documents of such Person.
Governmental Authority shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
Guaranteed Creditors shall mean and include the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent,
the Lenders and each party (other than any Credit Party) party to an Interest
Rate Agreement to the extent such party constitutes a Secured Creditor under
the Collateral Documents.
Guaranteed Obligations shall mean (i) the full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of the principal and interest (whether such interest is allowed as
a claim in a bankruptcy proceeding with respect to the Borrower or otherwise)
on each Note issued by the Borrower to each Lender, and Loans made, under this
Agreement and all reimbursement obligations with respect to Letters of Credit,
together with all the other obligations (including obligations which, but for
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities (including, without limitation, indemnities, fees and
interest thereon) of the Borrower to each Lender, the Administrative Agent,
the Syndication Agent, the Documentation Agent and the Collateral Agent now
existing or hereafter incurred under, arising out of or in connection with
this Agreement or any other Credit Document and the due performance and
compliance with all the terms, conditions and agreements contained in the
Credit Documents by the Borrower and (ii) the full and prompt payment when due
(whether by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of the Borrower or any of
its Subsidiaries owing under each Interest Rate Agreement entered into by the
Borrower or any of its Subsidiaries with any Lender or a syndicate of
financial institutions organized by BTCo or any affiliate of any Lender (even
if BTCo or such Lender subsequently ceases to be a Lender under this Agreement
for any reason) and any institution that participates in such Interest Rate
Agreement, and in each case their subsequent assigns, if any, whether now in
existence or hereafter arising, and the due performance and compliance with
all terms, conditions and agreements contained therein.
Guaranties shall mean the Parent Guaranty and the Subsidiaries
Guaranty.
Guarantors shall mean the Parent Guarantor and the Subsidiary
Guarantors.
Hazardous Materials shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contained dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any Environmental Law; and (c)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority.
Highest Lawful Rate shall mean, at any given time during which
any Obligations shall be outstanding hereunder, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received on the Obligations owing under this
Agreement, under the laws of the State of New York (or the law of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement and the other Credit Documents), or under
applicable federal laws which may presently or hereafter be in effect and
which allow a higher maximum nonusurious interest rate than under New York (or
such other jurisdiction's) law, in any case after taking into account, to the
extent permitted by applicable law, any and all relevant payments or charges
under this Agreement and any other Credit Documents executed in connection
herewith, and any available exemptions, exceptions and exclusions.
Holdings shall have the meaning provided in the preamble to this
Agreement.
Holdings Common Stock shall mean the common stock of Holdings,
$.01 par value per share.
Immaterial Subsidiaries at any time shall mean all Subsidiaries
of the Borrower which would otherwise be subject to Defaults or Events of
Default pursuant to any of Sections 9.1(d), (e) and/or (i), so long as, if all
of such Subsidiaries which would otherwise be subject to such Defaults or
Events of Default and their respective Subsidiaries were aggregated and
treated as one Subsidiary, such Subsidiary would not have consolidated total
assets in excess of 3% of the consolidated total assets of the Borrower and
its Subsidiaries as determined at the end of the last fiscal quarter for which
financial statements have been delivered pursuant to Section 7.1(a) or (b), as
the case may be.
Indebtedness of any Person shall mean without duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all obligations of
such Person under Interest Rate Agreements, (viii) all reimbursement or other
monetary obligations with respect to surety, performance and bid bonds, and
(ix) all Contingent Obligations of such Person; provided that Indebtedness
shall not include (A) trade payables and accrued expenses, in each case
arising in the ordinary course of business or (B) endorsements of instruments
for deposit or collection in the ordinary course of business.
Interest Period shall mean for any Eurodollar Rate Loan the
period commencing on the date of the Borrowing, Conversion or Continuance
thereof and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest Period
shall be one, two, three, six or (if available to all the Lenders with Loans
of the respective Tranche, as determined by such Lenders) twelve months, in
each case as the Borrower may, in an appropriate Notice of Borrowing, Notice
of Continuation or Notice of Conversion, select; provided, however, that the
(x) Borrower may not select any Interest Period for Revolving Loans maintained
as Eurodollar Rate Loans that ends after the A TL/RL Maturity Date and (y) the
Borrower shall not select any Interest Period in respect of Term Loans of any
Tranche which extends beyond the date upon which a Scheduled Repayment will be
required to be made if the aggregate principal amount of Term Loans of the
respective Tranche which have Interest Periods which will expire after such
date will be in excess of the aggregate principal amount of Term Loans of the
respective Tranche then outstanding less the aggregate amount of such required
repayment. Whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period shall
be extended to occur on the next succeeding Business Day; provided, however,
that if such extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day. Whenever any Interest
Period begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the
end of such Interest Period), such Interest Period shall end on the last
Business Day of the applicable calendar month.
Interest Rate Agreement shall mean any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which
Holdings or its Subsidiaries is a party or beneficiary.
Inventory of any Person shall mean all of the inventory owned
by such Person, including without limitation: (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials used or
consumed in such Person's business; (ii) all goods, wares and merchandise,
finished or unfinished, held for sale or lease or leased or furnished or to be
furnished under contracts of service; and (iii) all goods returned or
repossessed by such Person.
Investment shall have the meaning provided in Section 8.5.
Issuing Bank shall mean BTCo.
Issuing Bank Fees shall have the meaning provided in Section
4.7.
Joint Venture shall mean any Person, other than an individual
or a Wholly-Owned Subsidiary of Holdings or the Borrower, in which the
Borrower or a Subsidiary of the Borrower holds or acquires an ownership
interest (whether by way of capital stock, partnership or limited liability
company interest, or other evidence of ownership).
Lender shall have the meaning provided in the preamble to this
Agreement and shall, in the case of any extension of Swingline Loans, include
the Swingline Bank.
Lender Default shall mean any default by a Defaulting Lender
pursuant to Section 2.5(a).
Letter of Credit Fees shall have the meaning provided in
Section 4.7(a).
Letter of Credit Obligations shall mean, at any time, the sum
of (i) the aggregate undrawn amount of all Letters of Credit outstanding at
such time, plus (ii) the aggregate amount of all drawings under Letters of
Credit which have not been reimbursed by the Borrower (including through the
incurrence of Revolving Loans).
Letter of Credit Request shall have the meaning provided in
Section 3.4.
Letters of Credit shall mean all letters of credit (whether
documentary or stand-by and whether for the purchase of inventory, equipment
or otherwise) issued for the account of the Borrower pursuant to Article 3 of
this Agreement and all amendments, renewals, extensions or replacements
thereof.
Leverage Ratio shall mean on any date the ratio of (i)
Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test Period
most recently ended on or prior to such date. All calculations of the
Leverage Ratio shall be made on a Pro Forma Basis.
Lien(s) shall mean any lien, charge, pledge, security interest,
deed of trust, mortgage, other encumbrance or other arrangement having the
practical effect of the foregoing and shall include the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement.
Loan shall mean any advance or loan made by a Lender (including
the Swingline Bank) to, or for the benefit of, the Borrower pursuant to this
Agreement, whether Revolving Loans, Swingline Loans, A Term Loans or B Term
Loans and whether Eurodollar Rate Loans or Base Rate Loans.
Majority Lenders shall mean, with respect to any Tranche
hereunder, those Non-Defaulting Lenders which would constitute the Required
Lenders under, and as defined in, this Agreement if no Obligations in respect
of the other Tranches were outstanding hereunder and all Commitments with
respect to such other Tranches were terminated.
Management Agreements shall have the meaning provided in Section
5.1(n).
Mandatory Borrowings shall have the meaning provided in Section
2.3(c).
Margin Stock shall have the meaning provided in Regulation U.
Material Adverse Effect shall mean a material adverse effect on
(i) the business, prospects, operations, results of operations, assets,
liabilities or financial condition of Holdings and its Subsidiaries taken as a
whole, (ii) any Credit Party's (other than any Immaterial Subsidiary's)
ability to perform its material obligations under the Credit Documents to
which it is a party, or (iii) the material rights and remedies of the Agents,
the Collateral Agent, the Issuing Bank or the Lenders under any Credit
Document.
Material Contract shall mean any contract or other arrangement
(other than the Credit Documents), whether written or oral, to which Holdings
or its Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto may be reasonably
expected to have a Material Adverse Effect.
Maximum Swingline Amount shall mean $5,000,000.
Moody's shall mean Moody's Investors Services, Inc.
Morgan shall mean Morgan Stanley Senior Funding, Inc., in its
individual capacity.
Mortgage Amendments shall have the meaning provided in Section
5.1(k).
Mortgaged Properties shall mean the Existing Mortgaged
Properties and shall include any real property mortgaged pursuant to Section
7.7.
Mortgage Policies shall mean the Existing Mortgage Policies and
shall include any mortgage policy delivered pursuant to Section 7.7.
Mortgages shall mean each Existing Mortgage, as modified by the
relevant Mortgage Amendment, and shall include any mortgage or similar security
document delivered pursuant to Section 7.7.
Multiemployer Plan shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
MWD shall mean Morgan Stanley Dean Witter & Co., a Delaware
corporation.
Net Cash Proceeds shall mean for any event requiring a
reduction of the Total Revolving Loan Commitments and/or repayment of Term
Loans pursuant to Section 2.6, the gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note, receivable
or otherwise, but only as and when received) received from such event, net of
reasonable transaction costs (including, as applicable, any underwriting,
brokerage or other customary commissions and reasonable legal, advisory and
other fees and expenses associated therewith) received from any such event.
Net Sale Proceeds shall mean for any sale, lease, transfer or
other disposition of assets, the gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note, receivable
or otherwise, but only as and when received) received by Holdings, the
Borrower or any of their respective Wholly-Owned Subsidiaries from such sale,
lease, transfer or other disposition, net of reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and
expenses, including title and recording expenses and reasonable expenses
incurred for preparing such assets for sale, associated therewith) and
payments of unassumed liabilities relating to the assets sold at the time of,
or within 30 days after, the date of such sale, the amount of such gross cash
proceeds required to be used to repay any Indebtedness (other than
Indebtedness to the Lenders pursuant to this Agreement) which is secured by
the respective assets which were sold, and the estimated marginal increase in
income taxes which will be payable by Holdings' consolidated group with
respect to the fiscal year in which the sale occurs as a result of such sale;
but excluding any portion of any such gross cash proceeds which the Borrower
determines in good faith should be reserved for post-closing adjustments (to
the extent the Borrower delivers to the Lenders a certificate signed by an
authorized officer as to such determination), it being understood and agreed
that on the day that all such post-closing adjustments have been determined
(which shall not be later than six months following the date of the respective
asset sale), the amount (if any) by which the reserved amount in respect of
such sale or disposition exceeds the actual post-closing adjustments payable
by the Borrower or any of its Wholly-Owned Subsidiaries shall constitute Net
Sale Proceeds on such date).
New B Term Loans shall have the meaning provided in Section
2.1(b).
New Credit Party shall mean each Credit Party that was not a
Credit Party (as defined in the Original Credit Agreement) on the Original
Effective Date.
New Lender shall mean each Person listed on Schedule I that is
not a Continuing Lender.
Non-Continuing Lender shall have the meaning provided in Section
11.20.
Non-Defaulting Lender shall mean and include each Lender other
than a Defaulting Lender.
Notes shall mean, collectively, the A Term Notes, the B Term
Notes, the Revolving Notes and the Swingline Notes.
Notice of Borrowing shall have the meaning provided in Section
2.4 and shall include any deemed Notice of Borrowing pursuant to Section 3.5.
Notice of Continuation shall have the meaning provided in
Section 4.3.
Notice of Conversion shall have the meaning provided in Section
4.3.
Obligations shall mean, without duplication, the unpaid
principal of and interest on (including interest accruing on or after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Holdings, the Borrower or any
Subsidiary of the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Notes, any
reimbursement obligation or indemnity of Holdings, the Borrower or any
Subsidiary of the Borrower on account of Letters of Credit or any accommodation
extended with respect to applications for Letters of Credit, the Fees, the
Expenses and all other obligations and liabilities of Holdings, the Borrower
or any Subsidiary of the Borrower to the Agents, the Collateral Agent, the
Issuing Bank, the Swingline Bank or the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, the Notes, any other Credit Document and any other document made,
delivered or given in connection herewith or therewith.
Original Equipment Loans shall mean the "Equipment Loans"
under, and as defined in, the Original Credit Agreement.
Original Lender shall mean each Person which was a Lender
under, and as defined in, the Original Credit Agreement on the Restatement
Effective Date.
Original Credit Agreement shall have the meaning provided in
the first WHEREAS clause of this Agreement.
Original Effective Date shall mean the Closing Date under, and
as defined in, the Original Credit Agreement.
Original Letter of Credit shall have the meaning provided in
Section 3.9.
Original Loans shall mean, collectively, the Original Term
Loans, the Original Revolving Loans, the Original Equipment Loans and the
Agent Advances, under, and as defined in, the Original Credit Agreement.
Original Revolving Loans shall mean the "Revolving Loans"
under, and as defined in, the Original Credit Agreement.
Original Term Loans shall mean the "Term Loans" under, and as
defined in, the Original Credit Agreement.
Other Taxes shall have the meaning provided in Section 4.11(b).
Parent Guarantor shall mean Holdings in its capacity as the
guarantor under Article 12.
Parent Guaranty shall mean the guaranty provided by Holdings
pursuant to Article 12.
Payment Office shall mean 130 Liberty Street, New York, New York
10006 or any other office within the continental United States designated by
the Administrative Agent to the Borrower from time to time as the office for
payment of all amounts required to be paid by the Borrower or Holdings under
this Agreement.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA and any Person succeeding to the
functions thereof.
Percentage of any Lender at any time shall mean its Revolving
Loan Percentage, A Term Loan Percentage or B Term Loan Percentage, as the case
may be, at such time.
Permitted Acquired Debt shall mean Indebtedness of a Subsidiary
of the Borrower acquired after the Restatement Effective Date pursuant to a
Permitted Acquisition, to the extent such Indebtedness was outstanding prior
to the consummation of the Permitted Acquisition and remains outstanding as
Indebtedness of the respective Subsidiary after giving effect thereto,
provided that (i) such Indebtedness was not incurred in connection with or in
anticipation of such Permitted Acquisition or the respective Person becoming a
Subsidiary of the Borrower, (ii) such Indebtedness does not constitute
Indebtedness of Holdings, the Borrower or any of their Subsidiaries other than
the respective Subsidiary acquired pursuant to the respective Permitted
Acquisition and shall not be secured by any assets of any Person other than
assets of the Subsidiary so acquired serving as security therefor at the time
of the respective Permitted Acquisition and (iii) no Person other than the
respective Subsidiary shall have any liability (contingent or otherwise) with
respect to any such Indebtedness.
Permitted Acquisition shall mean the acquisition by the
Borrower or any of its Wholly-Owned Domestic Subsidiaries of assets
constituting a business, division or product line of any Person not already a
Subsidiary of the Borrower or any of its Wholly-Owned Subsidiaries or of 100%
of the capital stock or other equity interests of any such Person, which
Person shall, as a result of such acquisition, become a Domestic Subsidiary of
the Borrower or such Wholly-Owned Subsidiary, provided that (A) the
consideration paid by the Borrower or such Wholly-Owned Subsidiary consists
solely of cash (including proceeds of Revolving Loans), the issuance of
Holdings Common Stock, and the assumption/
acquisition of any Permitted Acquired Debt relating to such business,
division, product line or Person which is permitted to remain outstanding in
accordance with the requirements of Section 8.3, (B) in the case of the
acquisition of 100% of the capital stock or other equity interests of any
Person, such Person (the "Acquired Person") shall own no capital stock or
other equity interests of any other Person unless either (x) the Acquired
Person owns 100% of the capital stock or other equity interests of such other
Person or (y) if the Acquired Person owns capital stock or equity interests in
any other Person which is not a Wholly-Owned Subsidiary of the Acquired Person
(a "Non-Wholly Owned Entity"), both (1) the Acquired Person shall not have
been created or established in contemplation of, or for purposes of, the
respective Permitted Acquisition and (2) any Non-Wholly Owned Entity of the
Acquired Person shall have been non-wholly-owned prior to the date of the
respective Permitted Acquisition and not created or established in
contemplation thereof, (C) substantially all of the business, division or
product line acquired pursuant to the respective Permitted Acquisition, or the
business of the Person acquired pursuant to the respective Permitted
Acquisition and its Subsidiaries taken as a whole, is in the United States or
Canada, (D) the assets acquired, or the business of the Person whose stock is
acquired, shall be in a Related Business and (E) all requirements of Sections
7.13 and 8.1 applicable to Permitted Acquisitions are met with respect
thereto. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, an acquisition which does not otherwise meet
the requirements set forth above in the definition of "Permitted Acquisition"
shall constitute a Permitted Acquisition if, and to the extent, the Required
Lenders agree in writing that such acquisition shall constitute a Permitted
Acquisition for purposes of this Agreement.
Permitted Affiliate Transactions shall mean (i) reasonable and
customary fees, compensation and benefits paid to officers, directors,
employees or consultants of the Borrower or any of its Subsidiaries or their
respective Affiliates for services rendered to the Borrower or any such
Subsidiary in the ordinary course of business consistent with past practices;
(ii) transfers of goods and services by or among the Borrower and its
Subsidiaries in the ordinary course of business on fair and reasonable terms;
(iii) Dividends permitted under Section 8.6; (iv) transactions pursuant to the
Tax Sharing Agreement; (v) Investments permitted under Section 8.5; and (vi)
options to purchase common stock of Holdings granted to officers and directors
of Holdings and its Subsidiaries.
Permitted Encumbrance shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the Mortgage Policy
delivered with respect thereto, all of which exceptions must be acceptable to
the Administrative Agent in its reasonable discretion.
Permitted Holders shall mean the Morgan Stanley Leveraged
Equity Fund II, L.P., MWD, Morgan Stanley Capital Partners III, L.P., Morgan
Stanley Capital Investors, L.P., MSCP III 89 Investors, L.P., and any
Affiliate of MWD.
Permitted JV Investment shall mean an Investment by the
Borrower or a Wholly-Owned Domestic Subsidiary of the Borrower in any Person
not already a Subsidiary or Joint Venture of the Borrower, provided that (A)
the consideration used in connection therewith consists solely of cash
(including proceeds of Revolving Loans) and/or assets of the Borrower or such
Wholly-Owned Domestic Subsidiary, (B) the business of the Person in whom the
respective Investment is made shall be a Related Business and (C) all
requirements of Section 7.13 applicable to Permitted JV Investments are met
with respect thereto.
Permitted Liens shall mean any Liens permitted under Sections
8.2(c), (d), (e), (f), (g), (h), (i), (j), (k), (l) and (m) and, to the extent
such Liens may by operation of law take priority over a previously perfected
Lien, Sections 8.2(a), (b) and (l).
Permitted Materials shall have the meaning provided in Section
6.18.
Permitted Transaction shall mean any Permitted Acquisition and
any Permitted JV Investment.
Permitted Transaction Costs shall mean, with respect to any
Permitted Transaction, the sum of (i) the amount of cash to be paid as
consideration in respect thereof, (ii) the aggregate amount of fees and
expenses payable by Holdings, the Borrower or any of their respective
Subsidiaries in connection with the respective Permitted Transaction, (iii)
the aggregate principal amount of all Permitted Acquired Debt or other
Indebtedness incurred, acquired or assumed in connection with such Permitted
Transaction and (iv) in the case of a Permitted JV Investment, the fair market
value of all assets (if any) of the Borrower and its Subsidiaries contributed
to the respective Joint Venture (as determined in good faith by senior
management of the Borrower) in connection with such Permitted JV Investment,
in each case as such amounts are certified by the Borrower pursuant to Section
7.13 in connection with the respective Permitted Transaction.
Person shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (including any division,
agency or department thereof), and, as applicable, the successors, heirs and
assigns of each.
Plan shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which (i) is maintained or contributed to by
(or to which there is an obligation to contribute of), or (ii) at any time
during the five year period preceding (A) in the case of any Credit Event, the
date of such Credit Event or (B) in the case of any event or condition
described in Section 7.4 or 9.1(f), the date thereof, was maintained or
contributed to by (or to which there is or was an obligation to contribute
to), Holdings, the Borrower, a Subsidiary of Holdings or the Borrower or an
ERISA Affiliate.
Pledge Agreement shall have the meaning provided in Section
5.1(i).
Pledged Securities shall have the meaning provided in the Pledge
Agreement.
PPSA shall mean the Personal Property Security Act (Ontario).
Prime Lending Rate shall mean the rate which BTCo publicly
announces in New York City from time to time as its prime lending rate, as in
effect from time to time. The Prime Lending Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. BTCo may make commercial loans or other loans at rates of interest
at, above or below the Prime Lending Rate.
Pro Forma Basis shall mean, in connection with any calculation
of compliance with any financial covenant or financial term, the calculation
thereof after giving effect on a pro forma basis to (w) if the relevant period
to be tested includes any period occurring prior to the Restatement Effective
Date, the consummation of the Transaction as if the same had occurred on the
first day of such period, (x) the assumption, incurrence or issuance of any
Indebtedness (other than revolving Indebtedness, except to the extent same is
incurred to finance the Transaction, to refinance other outstanding
Indebtedness or to finance Permitted Transactions) after the first day of the
relevant Calculation Period as if such Indebtedness had been incurred (and the
proceeds thereof applied) on the first day of the relevant Calculation Period,
(y) the permanent repayment of any Indebtedness (other than revolving
Indebtedness) after the first day of the relevant Calculation Period as if
such Indebtedness had been retired or redeemed on the first day of the
relevant Calculation Period and (z) the Permitted Transaction, if any, then
being consummated as well as any other Permitted Transaction consummated after
the first day of the relevant Calculation Period and on or prior to the date
of the respective Permitted Transaction then being effected, with the
following rules to apply in connection therewith:
(i) all Indebtedness (x) (other than revolving Indebtedness,
except to the extent same is incurred to finance the Transaction, to
refinance other outstanding Indebtedness, or to finance Permitted
Transactions) assumed, incurred or issued after the first day of the
relevant Calculation Period (whether incurred to finance a Permitted
Transaction, to refinance Indebtedness or otherwise) shall be deemed
to have been incurred or issued (and the proceeds thereof applied) on
the first day of the respective Calculation Period and remain
outstanding through the date of determination (and thereafter in the
case of projections pursuant to Section 7.13(a)(iv)) and (y) (other
than revolving Indebtedness) permanently retired or redeemed after
the first day of the relevant Calculation Period shall be deemed to
have been retired or redeemed on the first day of the respective
Calculation Period and remain retired through the date of
determination (and thereafter in the case of projections pursuant to
Section 7.13(a)(iv));
(ii) all Indebtedness assumed to be outstanding pursuant to
preceding clause (i) shall be deemed to have borne interest at (x)
the rate applicable thereto, in the case of fixed rate indebtedness
or (y) the rates which would have been applicable thereto during the
respective period when same was deemed outstanding, in the case of
floating rate Indebtedness (although interest expense with respect to
any Indebtedness for periods while same was actually outstanding
during the respective period shall be calculated using the actual
rates applicable thereto while same was actually outstanding);
provided that for purposes of calculations pursuant to Section
7.13(a)(iv), all Indebtedness (whether actually outstanding or deemed
outstanding) bearing interest at a floating rate of interest shall be
tested on the basis of the rates applicable at the time the
determination is made pursuant to said provisions; and
(iii) in making any determination of Consolidated EBITDA, pro
forma effect shall be given to any Permitted Transaction consummated
after the first day of the respective period being tested, taking
into account cost savings and expenses which would otherwise be
accounted for as an adjustment pursuant to Article 11 of Regulation
S-X under the Securities Act, as if such cost savings and expenses
were realized on the first day of the relevant period.
Projections shall have the meaning provided in Section 5.1(s).
Public Equity Offering means an underwritten primary public
offering of common stock of Holdings pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
Qualified Preferred Stock shall mean any preferred stock of
Holdings, the express terms of which shall provide that dividends thereon
shall not be required to be paid at any time (and to the extent) that such
payment would be prohibited by the terms of this Agreement or any other
agreement of Holdings relating to outstanding Indebtedness and which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event (including any
Change of Control), cannot mature and is not mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, and is not redeemable, or required
to be repurchased, at the sole option of the holder thereof (including,
without limitation, upon the occurrence of a Change of Control), in whole or
in part, on or prior to the date occurring two years after the B TL Maturity
Date.
RCRA shall mean the Resources Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.
Real Property of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures,
including leaseholds.
Recovery Event shall mean the receipt by Holdings or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason
of theft, physical destruction or damage or any other similar event with
respect to any properties or assets of Holdings or any of its Subsidiaries,
(ii) by reason of any condemnation, taking, seizing or similar event with
respect to any properties or assets of Holdings or any of its Subsidiaries and
(iii) under any policy of insurance required to be maintained under Section
7.8.
Refinancing shall mean (i) the refinancing transactions
described in Section 5.1(e), (ii) the conversion of Original Loans pursuant to
Sections 2.1(b) and 2.2 and (iii) the repayment of Original Loans (including
Original Equipment Loans) pursuant to Section 5.1(r).
Refinancing Documents shall mean all documents executed and
delivered in connection with the Refinancing.
Register shall have the meaning provided in Section 11.12.
Regulation D shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
thereto.
Regulation U shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
thereto.
Related Businesses shall mean the businesses as conducted by the
Borrower and its Subsidiaries on the Original Effective Date, and any
businesses reasonably related, ancillary or complementary to the businesses in
which the Borrower and its Subsidiaries are engaged on the Original Effective
Date.
Reportable Event shall mean any of the events described in
Section 4043 of ERISA with respect to a Plan as to which the 30-day notice
requirement has not been waived by the PBGC.
Required Appraisal shall have the meaning provided in Section
7.11.
Required Lenders shall mean Non-Defaulting Lenders, the sum of
whose outstanding Term Loans and Revolving Loan Commitments (or after the
termination thereof, outstanding Revolving Loans and Revolving Loan Percentage
of outstanding Swingline Loans and outstanding Letter of Credit Obligations)
represent an amount greater than 50% of the sum of all outstanding Term Loans
of Non-Defaulting Lenders and the Total Revolving Loan Commitments (less the
Revolving Loan Commitments of Defaulting Lenders) (or after the termination
thereof, the sum of the then total outstanding Revolving Loans of
Non-Defaulting Lenders and their aggregate Revolving Loan Percentages of all
then outstanding Swingline Loans and outstanding Letter of Credit
Obligations); provided, however, that at any time when there exists more than
one Lender (for all purposes of this proviso, each Lender and any of its
Affiliates which is also a Lender shall be deemed to constitute a single
Lender) under this Agreement, and if a single Lender hereunder would
constitute the Required Lenders in accordance with the foregoing definition,
then the "Required Lenders" shall be required to include at least two Lenders.
Requirement of Law shall mean, as to any Person, the Governing
Documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
Restatement Effective Date shall have the meaning provided in
Section 11.14.
Retained Equity Amount shall mean initially zero, which amount
shall be (x) increased by the net cash proceeds from all sales or issuances of
equity by Holdings (but only to the extent such net cash proceeds are
contributed to the equity of the Borrower) after the Restatement Effective
Date (but excluding such net cash proceeds to the extent (i) same are required
to be used to repay principal of outstanding Term Loans as required by Section
2.6(g) or to repay principal of outstanding Revolving Loans pursuant to
Section 2.6(a) as a result of a mandatory reduction of Revolving Loan
Commitments pursuant to Section 2.6(g) or (ii) such proceeds were received
from one or more Public Equity Offerings and are used to repurchase, repay or
retire Senior Subordinated Notes) and (y) decreased, on the date each Capital
Expenditure or Investment is made pursuant to Section 8.4(b)(iii) or Section
8.5(m) by the amount of such Capital Expenditure or Investment.
Retained Excess Cash Flow Amount shall mean initially zero,
which amount shall be (x) increased on each Excess Cash Payment Date by the
amount of Excess Cash Flow for the respective Excess Cash Payment Period less
the aggregate amount of mandatory prepayments required to be made in respect
of such Excess Cash Flow pursuant to Section 2.6(h), provided that if Excess
Cash Flow for any such Excess Cash Payment Period is negative, the Retained
Excess Cash Flow Amount shall be reduced by the amount thereof, and (y)
decreased, on the date of each Capital Expenditure or Investment is made
pursuant to Section 8.4(b)(ii) or 8.5(l), by the amount of the respective such
Capital Expenditure or Investment.
Revolving Loan Commitment of any Lender, at any time, shall
mean the amount set forth opposite such Lender's name on Schedule I, as such
Schedule may be amended from time to time, under the heading "Revolving Loan
Commitment," as such amount may be reduced from time to time pursuant to the
terms of this Agreement at or prior to such time.
Revolving Loan Percentage of any Lender at any time shall mean a
fraction (expressed as a percentage) the numerator of which is the Revolving
Loan Commitment of such Lender at such time and the denominator of which is
the Total Revolving Loan Commitments at such time; provided that if the
Revolving Loan Percentage of any Lender is to be determined after the Total
Revolving Loan Commitments have been terminated, then the Revolving Loan
Percentages of the Lenders shall be determined by reference to the Revolving
Loan Commitment of such Lender and the Total Revolving Loan Commitments in
effect immediately prior (and without giving effect) to such termination.
Revolving Loans shall have the meaning provided in Section 2.2.
Revolving Note shall mean a promissory note of the Borrower
payable to the order of a Lender, in the form of Exhibit A-3, evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from the
Revolving Loans made by such Lender or acquired by such Lender pursuant to
Section 11.6.
S&P shall mean Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
Scheduled Repayment shall mean any Tranche A Term Loan Scheduled
Repayment and any Tranche B Term Loan Scheduled Repayment.
Second Tier Taxes shall have the meaning provided in Section
4.11(a).
Section 4.11(e) Certificate shall have the meaning provided in
Section 4.11(e).
Security Agreement shall have the meaning provided in Section
5.1(j).
Secured Creditors shall have the meaning provided in the
respective Collateral Documents.
Securities Act shall mean the Securities Act of 1933, as
amended.
Senior Subordinated Note Documents shall mean and include each
of the documents and other agreements entered into (including, without
limitation, the Senior Subordinated Notes and the Senior Subordinated Note
Indenture) relating to the issuance by the Borrower of the Senior Subordinated
Notes, as in effect on the Restatement Effective Date and as the same may be
entered into, modified, supplemented or amended from time to time to the
extent permitted pursuant to the terms hereof and thereof.
Senior Subordinated Note Indenture shall mean the Indenture,
dated as of August 15, 1995, entered into by and between the Borrower and
NationsBank of Georgia, National Association, as trustee thereunder, as in
effect on the Restatement Effective Date and as the same may be modified,
amended or supplemented from time to time to the extent permitted in
accordance with the terms hereof and thereof.
Senior Subordinated Notes shall mean the Borrower's 12-3/4%
Senior Subordinated Notes due 2005, as in effect on the Restatement Effective
Date and as the same may be modified, supplemented or amended from time to
time to the extent permitted pursuant to the terms hereof and thereof.
Shareholders' Agreements shall have the meaning provided in
Section 5.1(n).
Specified Default shall mean a Default under Section 9.1(a) or
(e).
Stated Amount of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
Subsidiaries Guaranty shall have the meaning provided in
Section 5.1(h).
Subsidiary shall mean as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Notwithstanding the
foregoing (and except for purposes of the definition of Unrestricted Subsidiary
contained herein and for purposes of Sections 6.14, 6.15, 7.1(a) and (b) and
7.10 hereof), an Unrestricted Subsidiary shall be deemed not to be a
Subsidiary of Holdings or any of its other Subsidiaries for purposes of this
Agreement. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower.
Subsidiary Guarantor shall have the meaning provided in Section
5.1(h); provided that, from and after the date that any Wholly-Owned
Subsidiary of the Borrower executes and delivers a counterpart of the
Subsidiaries Guaranty pursuant to the requirements of Section 7.14, such
Wholly-Owned Subsidiary shall also be a Subsidiary Guarantor.
Sullivan Media shall mean Sullivan Media Corporation, a Delaware
corporation which on the Restatement Effective Date is a Wholly-Owned
Subsidiary of the Borrower.
Supermajority A Term Lenders at any time shall mean those
Non-Defaulting Lenders whose outstanding A Term Loans constitute at least
66-2/3% of the outstanding A Term Loans of all Non-Defaulting Lenders at such
time.
Supermajority B Term Lenders at any time shall mean those
Non-Defaulting Lenders whose outstanding B Term Loans constitute at least
66-2/3% of the outstanding B Term Loans of all Non-Defaulting Lenders at such
time.
Swingline Bank shall mean BTCo, in its capacity as the lender of
Swingline Loans.
Swingline Expiry Date shall mean the date which is five
Business Days prior to the A TL/RL Maturity Date.
Swingline Loans shall have the meaning provided in Section 2.3.
Swingline Note shall mean a promissory note of the Borrower
payable to the order of the Swingline Bank, in the form of Exhibit A-4,
evidencing the aggregate Indebtedness of the Borrower to the Swingline Bank
resulting from the Swingline Loans made by the Swingline Bank.
Syndication Agent shall have the meaning provided in the
preamble to this Agreement and shall include any successor to the Syndication
Agent appointed pursuant to Section 10.10.
Syndication Date shall mean the earlier of (x) the date which
is 90 days after the Restatement Effective Date and (y) the date upon which
the Agents determined in their sole discretion (and notify the Borrower) that
the primary syndication (and the resulting addition of institutions as Lenders
pursuant to Section 11.6) has been completed, notice of which shall be
promptly given to the Borrower.
Tax Sharing Agreements shall have the meaning provided in
Section 5.1(n); provided that on and after the Restatement Effective Date
there shall be only one Tax Sharing Agreement in effect, which Tax Sharing
Agreement shall be in the form submitted to the Agents and the Lenders prior
to the Restatement Effective Date pursuant to Section 5.1(n) and found
acceptable to them, as such Tax Sharing Agreement shall be amended, modified
or supplemented after the Restatement Effective Date, but only with the
consent of the Required Lenders, and references in this Agreement to the "Tax
Sharing Agreement" shall be references to the Tax Sharing Agreement as
described in this proviso.
Taxes shall have the meaning provided in Section 4.11(a).
Test Period shall mean each period of four consecutive fiscal
quarters of Holdings then last ended, in each case taken as one accounting
period.
Total Commitments shall mean, at any time, the sum of (x) the
Total A Term Loan Commitments at such time, (y) the Total B Term Loan
Commitments at such time and (z) the Total Revolving Loan Commitments at such
time.
Total Revolving Loan Commitments shall mean, at any time, the
aggregate of the Revolving Loan Commitments of all the Lenders at such time.
Total A Term Loan Commitments shall mean, at any time, the
aggregate of the A Term Loan Commitments of all the Lenders at such time.
Total B Term Loan Commitments shall mean, at any time, the
aggregate of the B Term Loan Commitments of all the Lenders at such time.
Tranche shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being four separate Tranches,
i.e., A Term Loans, B Term Loans, Revolving Loans and Swingline Loans.
Tranche A Term Loan Scheduled Repayment shall have the meaning
provided in Section 2.6(f)(i).
Tranche B Term Loan Scheduled Repayment shall have the meaning
provided in Section 2.6(f)(ii).
Transaction shall mean, collectively, (i) the amendment and
restatement of the Original Credit Agreement in the form of this Agreement as
provided herein, (ii) the consummation of the Refinancing, (iii) the
incurrence of all Loans hereunder on the Restatement Effective Date and (iv)
the payment of fees and expenses in connection with the foregoing.
Transaction Documents shall mean, collectively, (i) the Credit
Documents and (ii) the Refinancing Documents.
Type shall mean, with respect to any Loan, whether such Loan is
a Eurodollar Rate Loan or a Base Rate Loan.
UCC shall mean the Uniform Commercial Code.
Unfunded Current Liability of any Plan shall mean the amount,
if any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year, exceeds the fair
market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 35, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
Unrestricted Subsidiary shall mean any Subsidiary of Holdings
or of another Unrestricted Subsidiary of Holdings that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by Holdings,
as provided below). Holdings may designate any Person to be an Unrestricted
Subsidiary if (a) on the date of such designation, no Default or Event of
Default is existing or will occur as a consequence thereof, (b) such
Subsidiary does not own any equity interests in, or hold any Lien on any
property of, Holdings, the Borrower or any other Subsidiary (excluding other
Unrestricted Subsidiaries) and (c) such Subsidiary shall have entered into a
counterpart of the Tax Sharing Agreement on a basis which is satisfactory to
the Administrative Agent. Each such designation shall be evidenced by filing
with the Administrative Agent a certified copy of the resolution giving effect
to such designation and an officers' certificate of an authorized officer
certifying that such designation complied with the foregoing conditions.
Unused Line Fee shall have the meaning provided in Section 4.6.
Unutilized Revolving Loan Commitment with respect to any
Lender, at any time, shall mean such Lender's Revolving Loan Commitment at
such time less the sum of (i) the aggregate outstanding principal amount of
Revolving Loans made by such Lender and (ii) such Lender's Revolving Loan
Percentage of the sum of (x) the total Letter of Credit Obligations
outstanding at such time and (y) the aggregate outstanding principal amount of
Swingline Loans at such time.
Wholly-Owned Domestic Subsidiary shall mean, as to any Person,
any Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
Wholly-Owned Foreign Subsidiary shall mean, as to any Person,
any Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
Wholly-Owned Subsidiary of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares, is
owned directly or indirectly by such Person or a Wholly-Owned Subsidiary
thereof.
1.2 Accounting Terms and Determinations. Unless otherwise
defined or specified herein all accounting terms used in this Agreement shall
be construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to the
Administrative Agent on or before the Restatement Effective Date. All
accounting determinations for purposes of determining compliance with the
financial covenants contained in Article 8, Excess Cash Flow and the
Applicable Margin, and all defined terms as used in said Article 8 and in the
definitions of Excess Cash Flow and Applicable Margin, shall be made
consistent with practices in effect as of the Restatement Effective Date and,
if applicable, in accordance with GAAP as in effect on the Restatement
Effective Date (or, if the Administrative Agent shall have given its prior
written approval thereto, such determinations may be made by the Borrower in
accordance with GAAP as in effect on the date for which the determinations of
such compliance shall be made), and applied on a basis consistent in all
material respects with the audited Financial Statements delivered to the
Administrative Agent on or before the Restatement Effective Date, except as
otherwise previously disclosed to the Administrative Agent. The Financial
Statements required to be delivered hereunder from and after the Restatement
Effective Date, and all financial records, shall be maintained in accordance
with GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements delivered to the Administrative Agent on or before the
Restatement Effective Date, the certificates required to be delivered pursuant
to Section 7.1 demonstrating compliance with the covenants contained herein
shall include (except as otherwise provided above) at the election of the
Borrower or upon the request of the Required Lenders, calculations setting
forth the adjustments necessary to demonstrate how the Borrower is in
compliance with the financial covenants based upon GAAP as in effect on the
Restatement Effective Date.
1.3 Other Defined Terms. Terms not otherwise defined herein
which are defined in the UCC as in effect in the State of New York shall have
the meanings given them in such UCC. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and references to Article, Section, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified.
ARTICLE 2.
Loans
2.1 Term Loans. (a) Subject to the terms and conditions set
forth in this Agreement, each Lender with an A Term Loan Commitment severally
agrees to make to the Borrower on the Restatement Effective Date a term loan
(each, a "A Term Loan" and, collectively, the "A Term Loans") in an amount
equal to the A Term Loan Commitment of such Lender as in effect on such date,
which A Term Loans may, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar Rate Loans
in accordance with the terms of this Agreement. Once repaid, A Term Loans
incurred hereunder may not be reborrowed. The Borrower hereby agrees to
execute and deliver to each Lender that makes an A Term Loan an A Term Note in
the form of Exhibit A-1 to evidence the A Term Loan made by such Lender.
(b) Subject to and upon the terms and conditions set forth
herein, each Lender with a B Term Loan Commitment severally agrees, (A) in the
case of each Continuing Lender to convert into term loans (the "Converted B
Term Loans") on the Restatement Effective Date, Original Term Loans made by
such Continuing Lender to the Borrower pursuant to the Original Credit
Agreement and outstanding on the Restatement Effective Date in an aggregate
principal amount equal to the lesser of (x) the aggregate principal amount of
such Original Term Loans made by such Continuing Lender and so outstanding and
(y) such Continuing Lender's B Term Loan Commitment as in effect on the
Restatement Effective Date and/or (B) to make on the Restatement Effective
Date a term loan or term loans (each, a "New B Term Loan" and, collectively,
the "New B Term Loans" and together with the Converted B Term Loans, the "B
Term Loans") to the Borrower, which B Term Loans (i) shall not exceed for any
Lender, in initial principal amount, that amount (which, in the case of each
Continuing Lender, shall include the principal amount of Converted B Term
Loans of such Lender) which equals the B Term Loan Commitment of such Lender
as in effect on the Restatement Effective Date and (ii) may, at the option of
the Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Rate Loans in accordance with the terms of this Agreement.
Once repaid, B Term Loans incurred hereunder may not be reborrowed. The
Borrower hereby agrees to execute and deliver to each Lender that makes a B
Term Loan a B Term Note in the form of Exhibit A-2 to evidence the B Term Loan
made by such Lender.
2.2 Revolving Loans. Subject to and upon the terms and
conditions herein set forth, each Lender with a Revolving Loan Commitment
severally agrees, (A) in the case of each Continuing Lender, to convert into
Revolving Loans, on the Restatement Effective Date, Original Revolving Loans
made by such Continuing Lender to the Borrower pursuant to the Original Credit
Agreement and outstanding on the Restatement Effective Date in an aggregate
principal amount equal to the lesser of (x) the aggregate principal amount of
such Original Revolving Loans made by such Continuing Lender and so
outstanding and (y) such Continuing Lender's Revolving Loan Commitment as in
effect on the Restatement Effective Date and/or (B) at any time and from time
to time on and after the Restatement Effective Date and prior to the A TL/RL
Maturity Date, to make a revolving loan or revolving loans (each a "Revolving
Loan" and, collectively, the "Revolving Loans") to the Borrower, which
Revolving Loans (i) shall not exceed for any Lender at any time outstanding
that aggregate principal amount which, when added to the product of (x) such
Lender's Revolving Loan Percentage and (y) the sum of (I) the aggregate amount
of all Letter of Credit Obligations outstanding at such time (exclusive of
Letter of Credit Obligations which are repaid with the proceeds of, and
simultaneously with the incurrence of, Revolving Loans or Swingline Loans) and
(II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, Revolving Loans) then outstanding, equals the Revolving
Loan Commitment of such Lender at such time and (ii) may, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Rate Loans in accordance with the terms of this Agreement.
The Borrower hereby agrees to execute and deliver to each Lender with a
Revolving Loan Commitment a Revolving Note in the form of Exhibit A-3 to
evidence the Revolving Loans made by such Lender.
2.3 Swingline Loans. (a) Subject to and upon the terms and
conditions set forth herein, the Swingline Bank agrees to make at any time and
from time to time after the Restatement Effective Date and prior to the
Swingline Expiry Date, a loan or loans (each, a "Swingline Loan," and
collectively, the "Swingline Loans") to the Borrower, which Swingline Loans
(i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed in
aggregate principal amount at any time outstanding, when combined with (x) the
aggregate principal amount of all Revolving Loans then outstanding and (y) the
amount of all Letter of Credit Obligations outstanding at such time, an amount
equal to the Total Revolving Loan Commitments at such time (after giving
effect to any reductions to the Total Revolving Loan Commitments on such date)
and (iv) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount.
(b) The Swingline Bank shall not be obligated to make any
Swingline Loans at a time when a Lender Default exists unless the Swingline
Bank has entered into arrangements satisfactory to it to eliminate the
Swingline Bank's risk with respect to the Lender which is subject of such
Lender Default, including by cash collateralizing such Lender's Revolving Loan
Percentage of the outstanding Swingline Loans. Notwithstanding anything to
the contrary contained in this Section 2.3, the Swingline Bank shall not make
any Swingline Loan after receiving a written notice from the Borrower or the
Required Lenders stating that a Default or an Event of Default exists and is
continuing until such time as the Swingline Bank shall have received written
notice of (i) rescission of all such notices from the party or parties
originally delivering such notice, (ii) the waiver of such Default or Event of
Default by the Required Lenders or (iii) the Administrative Agent in good faith
believes that such Default or Event of Default has ceased to exist.
(c) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Lenders that its outstanding Swingline Loans
shall be funded with a Borrowing of Revolving Loans (provided that such notice
shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 9.1(e) or upon the exercise of
any of the remedies provided in the last paragraph of Article 9), in which
case a Borrowing of Revolving Loans constituting Base Rate Loans (each such
Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding
Business Day from all Lenders with a Revolving Loan Commitment (without giving
effect to any terminations and/or reductions thereto pursuant to the last
paragraph of Article 9) pro rata on the basis of their respective Revolving
Loan Percentages (determined before giving effect to any termination of the
Revolving Loan Commitments pursuant to the last paragraph of Article 9) and
the proceeds thereof shall be paid directly to the Swingline Bank to repay the
Swingline Bank for such outstanding Swingline Loans. Each such Lender hereby
irrevocably agrees to make Revolving Loans upon one Business Day's notice
pursuant to each Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the date specified in writing by the
Swingline Bank notwithstanding (i) the amount of the Mandatory Borrowing may
not comply with the minimum amount for Borrowings otherwise required
hereunder, (ii) whether any of the conditions specified in Section 5 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
the date of such Mandatory Borrowing, and (v) the amount of the Total
Revolving Loan Commitments at such time. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower), then each
such Lender hereby agrees that it shall forthwith purchase (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from the Swingline Bank such participations in the outstanding
Swingline Loans as shall be necessary to cause such Lenders to share in such
Swingline Loans ratably based upon their respective Revolving Loan Percentages
(determined before giving effect to any termination of the Revolving Loan
Commitments pursuant to the last paragraph of Article 9); provided, that (x)
all interest payable on the Swingline Loans shall be for the account of the
Swingline Bank until the date as of which the respective participation is
required to be purchased and, to the extent attributable to the purchased
participation, shall be payable to the participant from and after such date
and (y) at the time any purchase of participations pursuant to this sentence
is actually made, the purchasing Lender shall be required to pay the Swingline
Bank interest on the principal amount of participation purchased for each day
from and including the day upon which the Mandatory Borrowing would otherwise
have occurred to but excluding the date of payment for such participation, at
the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans
hereunder for each day thereafter.
2.4 Borrowing Mechanics. (a) Except as provided in Section
2.4(b), Borrowings shall be made on notice from the Borrower to the
Administrative Agent, given not later than 10:00 A.M. (New York City time) on
the date on which the proposed Borrowing consisting of Base Rate Loans is
requested to be made and on the third Business Day prior to the date on which
any proposed Borrowing consisting of Eurodollar Rate Loans is requested to be
made.
(i) Each Notice of Borrowing shall be given by either
telephone, telecopy, telex, or cable, and, if by telephone, confirmed
in writing, substantially in the form of Exhibit B-1 (each a "Notice
of Borrowing"). Each Notice of Borrowing shall be irrevocable by and
binding on the Borrower.
(ii) In a Notice of Borrowing, the Borrower may request one or
more Borrowings on a single day. Each such Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Loans of
the same Type. The aggregate principal amount of each Borrowing of A
Term Loans and B Term Loans shall not be less than (x) if maintained
as Eurodollar Rate Loans, $5,000,000 and (y) if maintained as Base
Rate Loans, $1,000,000. The aggregate principal amount of each
Borrowing of Revolving Loans shall not be less than $1,000,000 if
maintained as Eurodollar Rate Loans. Mandatory Borrowings shall be
in the amounts required by Section 2.3(c). Unless otherwise
requested in the applicable Notice of Borrowing, all Loans shall be
Base Rate Loans. The right of the Borrower to choose Eurodollar Rate
Loans is subject to the provisions of Section 4.3(c).
(iii) Unless the Administrative Agent has determined that the
Syndication Date has occurred, (x) no more than three Borrowings of A
Term Loans to be maintained as Eurodollar Rate Loans may be incurred
prior to the 90th day after the Restatement Effective Date or, if
later, the last day of the Interest Period applicable to the third
Borrowing of Eurodollar Rate Loans referred to in the succeeding
parenthetical (each of which Borrowings of Eurodollar Rate Loans may
only have an Interest Period of one month, and the first of which
Borrowings may only be made on a single date, on or within 5 Business
Days after the Restatement Effective Date, the second of which
Borrowings may only be made on the last day of the Interest Period of
the first such Borrowing and the third of which Borrowings may only
be made on the last day of the Interest Period of the second such
Borrowing), (y) B Term Loans may be incurred and maintained as
Eurodollar Rate Loans prior to the 90th day after the Restatement
Effective Date, but only with one month Interest Periods that begin
and end on the same days as the beginning and end of Interest Periods
applicable to A Term Loans maintained as Eurodollar Rate Loans in
accordance with the requirements of preceding clause (x) and (z)
Revolving Loans may be incurred and maintained as Eurodollar Rate
Loans prior to the 90th day after the Restatement Effective Date, but
only with one month Interest Periods that begin and end on the same
days as the beginning and end of Interest Periods applicable to A
Term Loans maintained as Eurodollar Rate Loans in accordance with the
requirements of preceding clause (x).
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Bank not later than
1:00 p.m. (New York time) on the date that a Swingline Loan is to be made,
written notice (or telephonic notice confirmed in writing) of each Swingline
Loan to be made hereunder. Each such notice shall be irrevocable and specify
in each case (A) the date of Borrowing (which shall be a Business Day) and (B)
the aggregate principal amount of Swingline Loans to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 2.3(c), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as
set forth in Section 2.3(c).
(c) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Bank, as the case may be, may act
without liability upon the basis of telephonic notice of such Borrowing
believed by the Administrative Agent or the Swingline Bank, as the case may
be, in good faith to be from an Authorized Officer of the Borrower prior to
receipt of written confirmation. In each such case, the Borrower hereby waives
the right to dispute the Administrative Agent's and the Swingline Bank's
record of the terms of such telephonic notice of such Borrowing of Loans.
2.5 Disbursement of Funds. (a) The Administrative Agent
shall give to each Lender prompt notice of each Notice of Borrowing by
telecopy, telex or cable. No later than 12:00 Noon (New York City time) on
the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, no later than the close of business on the date specified
pursuant to Section 2.4(b)(i) or (y) in case of Mandatory Borrowings, not
later than 12:00 Noon (New York time) on the date specified in Section
2.3(c)), each Lender or the Swingline Lender, as the case may be, will make
available for the account of its Applicable Lending Office, to the
Administrative Agent at its Payment Office, in immediately available funds,
(w) in the case of a Borrowing of A Term Loans, such Lender's A Term Loan
Percentage of such Borrowing, (x) in the case of a Borrowing of B Term Loans,
such Lender's B Term Loan Percentage of such Borrowing, (y) in the case of a
Borrowing of Revolving Loans, such Lender's Revolving Loan Percentage of such
Borrowing and/or (z) in the case of a Borrowing of Swingline Loans, the full
amount of such Borrowing. All such amounts shall be made available in Dollars
at the Payment Office of the Administrative Agent, and the Administrative
Agent will make available to the Borrower at the Payment Office (or, in the
case of a Mandatory Borrowing, to the Swingline Lender), in Dollars and in
immediately available funds, the aggregate of the amounts so made available by
the Lenders. Unless the Administrative Agent shall have been notified by any
Lender prior to the date of such Borrowing that such Lender does not intend to
make available to the Administrative Agent its portion of such Borrowing to be
made on such date, the Administrative Agent may assume that such Lender will
make such amount available to the Administrative Agent at its Payment Office
on such date of Borrowing, and the Administrative Agent, in reliance upon such
assumption, may but shall not be obligated to make available the amount of the
Borrowing to be provided by such Lender. If any amount described in this
Section 2.5 is not made available to the Administrative Agent by a Lender
(such Lender being hereinafter referred to as a "Defaulting Lender") and the
Administrative Agent has made such amount available to the Borrower, the
Administrative Agent shall be entitled to recover such amount on demand from
such Defaulting Lender. If such Defaulting Lender does not pay such amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly notify the Borrower and the Borrower shall immediately
(but in any event no later than five Business Days after such demand) pay such
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover from such Defaulting Lender and the Borrower, (x) interest
on such amount in respect of each day from the date such corresponding amount
was made available by the Administrative Agent to the Borrower to the date
such amount is recovered by the Administrative Agent, at a rate per annum equal
to either (i) if paid by such Defaulting Lender, the overnight Federal Funds
Rate or (ii) if paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 4.1 or Section 4.2 hereof, plus (y) in
each case, an amount equal to any costs (including legal expenses) and losses
incurred as a result of the failure of such Defaulting Lender to provide such
amount as provided in this Agreement; provided, however, that the
Administrative Agent shall not be entitled to demand payment by the Borrower
of any amount under clause (y) above unless demand therefor has been made of
the Defaulting Lender and not paid within five Business Days of such demand.
Nothing herein shall be deemed to relieve any Lender from its duty to fulfill
its obligations hereunder or to prejudice any rights which the Borrower may
have against any Lender as a result of any default by such Lender hereunder,
including, without limitation, the right of the Borrower to seek reimbursement
from any Defaulting Lender for any amounts paid by the Borrower under clause
(y) above on account of such Defaulting Lender's default.
(b) The failure of any Lender to make the Loan to be made by
it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on the date of any Borrowing.
(c) Notwithstanding anything contained herein to the contrary,
so long as any Lender is a Defaulting Lender or has rejected its Commitment,
the Administrative Agent shall not be obligated to transfer to such Lender any
payments made by the Borrower to the Administrative Agent for the benefit of
such Lender, and such Lender shall not be entitled to the sharing of any
payments pursuant to Section 2.8. Amounts which would have been payable to
such Lender in the absence of the immediately preceding sentence shall instead
be paid to the Administrative Agent. The Administrative Agent may hold and,
in its discretion, re-lend to the Borrower the amount of all such payments
received by it for such Lender. This Section 2.5(c) shall remain effective
with respect to such Defaulting Lender until (x) the Obligations under this
Agreement shall have been paid in full to the Administrative Agent and/or the
Lenders other than the Defaulting Lender or (y) the Required Lenders, the
Administrative Agent and the Borrower shall have waived such Defaulting
Lender's default in writing. No Commitment of any Lender shall be increased
or otherwise affected, and performance by the Borrower shall not be excused,
by the operation of this Section 2.5(c).
2.6 Mandatory and Voluntary Payment; Mandatory and Voluntary
Reduction of Commitments. (a) On any day on which the sum of the aggregate
outstanding principal amount of the Revolving Loans, Swingline Loans and the
Letter of Credit Obligations, in each case as of such date, exceeds the Total
Revolving Loan Commitments as then in effect, the Borrower agrees to pay
principal of Swingline Loans and, after the Swingline Loans have been repaid
in full, Revolving Loans in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Swingline Loans and Revolving
Loans, the aggregate amount of the Letter of Credit Obligations exceeds the
Total Revolving Loan Commitments as then in effect, the Borrower agrees to pay
to the Administrative Agent at the Payment Office on such date an amount of
cash or Cash Equivalents equal to the amount of such excess (up to a maximum
amount equal to the outstanding Letter of Credit Obligations at such time),
such cash or Cash Equivalents to be held as security for all obligations of
the Borrower hereunder in a cash collateral account to be established by the
Administrative Agent.
(b) On the A TL/RL Maturity Date, the Total Revolving Loan
Commitments (and the Revolving Loan Commitment of each Lender with such a
Commitment) shall automatically reduce to zero and all outstanding Revolving
Loans shall be repaid in full.
(c) The Total Commitments (and the Commitments of each Lender)
shall terminate on May 15, 1998 and the Original Credit Agreement shall
continue in effect, unless the Restatement Effective Date shall have occurred
on or before such date.
(d) Each of the Total A Term Commitments and Total B Term
Commitments shall terminate in their entirety on the Restatement Effective
Date (after giving effect to the making of A Term Loans and B Term Loans on
such date).
(e) The Borrower shall have the right to prepay the Loans,
without premium or penalty, in whole or in part at any time and from time to
time on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent prior to 12:00 Noon (New York City time) (x) at least one
Business Day's prior written notice (or telephonic notice promptly confirmed
in writing) of its intent to prepay Base Rate Loans (or same day notice in the
case of Swingline Loans provided such notice is given prior to 1:00 P.M. (New
York time)) and (y) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay
Eurodollar Rate Loans, whether A Term Loans, B Term Loans, Revolving Loans or
Swingline Loans shall be prepaid, the amount of such prepayment and the Types
of Loans to be prepaid and, in the case of Eurodollar Rate Loans, the specific
Borrowing or Borrowings pursuant to which made, which notice the
Administrative Agent shall promptly transmit to each of the Lenders; (ii) each
partial prepayment shall be in an aggregate principal amount of at least (x)
in the case of Term Loans, $1,000,000, (y) in the case of Revolving Loans,
$500,000, and (z) in the case of Swingline Loans, $100,000; (iii) if any
partial prepayment of Eurodollar Rate Loans made pursuant to any Borrowing
shall reduce the outstanding Eurodollar Rate Loans made pursuant to such
Borrowing to an amount less than (1) in the case of A Term Loans or B Term
Loans, $5,000,000, and (2) in the case of Revolving Loans, $1,000,000, then
such Borrowing may not be continued as a Borrowing of Eurodollar Rate Loans
and any election of an Interest Period with respect thereto given by the
Borrower shall have no force or effect; (iv) prepayments of Eurodollar Rate
Loans made pursuant to this Section 2.6(e) may only be made on the last day of
an Interest Period applicable thereto; (v) each prepayment in respect of any
Loans made pursuant to a Borrowing shall be applied pro rata among the Lenders
which made such Loans; (vi) each voluntary prepayment of A Term Loans and B
Term Loans pursuant to this Section 2.6(e) shall be applied, initially, to
reduce the four Scheduled Repayments of the respective Tranche immediately
following the date of such prepayment in direct order of maturity and,
thereafter, to reduce the then remaining Scheduled Repayments of the
respective Tranche on a pro rata basis and (vii) each prepayment of Term Loans
pursuant to this Section 2.6(e) shall be applied to the A Term Loans and the B
Term Loans on a pro rata basis (based upon the then outstanding principal
amount of A Term Loans and B Term Loans).
(f) (i) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 2.6, on each date set forth
below, the Borrower shall be required to repay that principal amount of A Term
Loans, to the extent then outstanding, as is set forth opposite such date
(each such repayment, as the same may be reduced in amount from time to time
as provided in Sections 2.6(e) and 2.6(l), a "Tranche A Term Loan Scheduled
Repayment"):
<TABLE>
<S> <C>
Quarter Ending Installment Amount
-------------- ------------------
June 30, 1999 $500,000
September 30, 1999 $500,000
December 31, 1999 $500,000
March 31, 2000 $500,000
June 30, 2000 $1,437,500
September 30, 2000 $1,437,500
December 31, 2000 $1,437,500
March 31, 2001 $1,437,500
June 30, 2001 $1,437,500
September 30, 2001 $1,437,500
December 31, 2001 $1,437,500
March 31, 2002 $1,437,500
June 30, 2002 $1,437,500
September 30, 2002 $1,437,500
December 31, 2002 $1,437,500
March 31, 2003 $1,437,500
June 30, 2003 $1,437,500
September 30, 2003 $1,437,500
December 31, 2003 $1,437,500
A TL/RL Maturity Date $1,437,500
</TABLE>
(ii) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 2.6, on each date set forth below, the
Borrower shall be required to repay that principal amount of B Term Loans, to
the extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced in amount from time to time as provided in
Sections 2.6(e) and 2.6(l), a "Tranche B Term Loan Scheduled Repayment"):
<TABLE>
<CAPTION>
Quarter Ending Installment Amount
-------------- ------------------
<S> <C>
June 30, 1998 $125,000
September 30, 1998 $125,000
December 31, 1998 $125,000
March 31, 1999 $125,000
June 30, 1999 $125,000
September 30, 1999 $125,000
December 31, 1999 $125,000
March 31, 2000 $125,000
June 30, 2000 $125,000
September 30, 2000 $125,000
December 31, 2000 $125,000
March 31, 2001 $125,000
June 30, 2001 $125,000
September 30, 2001 $125,000
December 31, 2001 $125,000
March 31, 2002 $125,000
June 30, 2002 $125,000
September 30, 2002 $125,000
December 31, 2002 $125,000
March 31, 2003 $125,000
June 30, 2003 $5,937,500
September 30, 2003 $5,937,500
December 31, 2003 $5,937,500
March 31, 2004 $5,937,500
June 30, 2004 $5,937,500
September 30, 2004 $5,937,500
December 31, 2004 $5,937,500
B TL Maturity Date $5,937,500
</TABLE>
(g) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 2.6, on each date after the
Restatement Effective Date upon which Holdings, the Borrower or any of their
respective Subsidiaries receives any proceeds from any sale or issuance of its
equity (but excluding proceeds from sales and issuances of equity to Persons
who constituted (i) shareholders and optionholders of Holdings on the
Restatement Effective Date and their respective Affiliates or (ii) permitted
transferees under the Shareholders' Agreement of any such shareholders (other
than permitted transferees of the Permitted Holders, Leeway & Co. and First
Plaza Group Trust) (in each case unless the respective sale or issuance is
made pursuant to, or in connection with, a Public Equity Offering)), an amount
equal to the Applicable Prepayment Percentage of the cash proceeds of the
respective sale or issuance (net of all reasonable costs associated therewith,
including, without limitation, all due diligence costs and expenses paid for,
or reimbursed by, Holdings, the Borrower and/or any of their respective
Subsidiaries, underwriting or similar fees discounts and commissions,
attorneys' fees and expenses paid for, or reimbursed by, Holdings, the
Borrower and/or any of their respective Subsidiaries and other direct costs
associated therewith) shall be applied as a mandatory repayment or commitment
reduction in accordance with the requirements of Sections 2.6(l) and (m).
(h) In addition to the principal payments required under this
Section 2.6, on each Excess Cash Payment Date, an amount equal to the
Applicable Prepayment Percentage of Excess Cash Flow determined for the Excess
Cash Payment Period last ended shall be applied as a mandatory repayment or
commitment reduction in accordance with the requirements of Sections 2.6(l)
and (m).
(i) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 2.6, on each date after the
Restatement Effective Date upon which the Borrower or any of its Wholly-Owned
Subsidiaries receives proceeds from any sale of assets (including capital
stock and securities held thereby, but excluding (i) sales of Inventory in the
ordinary course of business, (ii) the sale or other disposition of obsolete
or uneconomic equipment in the ordinary course of business to the extent that
(x) no Specified Default or Event of Default is then in effect, (y) the
aggregate proceeds of all such sales or dispositions do not exceed $5,000,000
after the Restatement Effective Date and (z) the Borrower has delivered a
certificate to the Administrative Agent on or prior to such date stating that
it intends to reinvest such Net Sale Proceeds in replacement equipment within
270 days after the respective date of sale or disposition or, in lieu thereof,
commit to so invest such Net Sale Proceeds within 270 days after such date of
sale and actually expend the funds pursuant to such commitment within 365 days
after such date of sale or disposition, (iii) proceeds of sale-leaseback
transactions made in accordance with Section 8.1(d) and (iv) proceeds of sales
of assets pursuant to Sections 8.1(e) and (f), except to the extent required
to be applied pursuant to this Section 2.6(i) by virtue of the provisos
thereto), an amount equal to 100% of the Net Sale Proceeds therefrom shall be
applied as a mandatory repayment or commitment reduction in accordance with
the requirements of Sections 2.6(l) and (m); provided, however, that at any
time when the aggregate amount of Net Sale Proceeds (from one or more asset
sales) otherwise required to be applied pursuant to this Section 2.6(i) are
less than $100,000 then, at the option of the Borrower, such Net Sale Proceeds
shall not be required to be applied pursuant to this Section 2.6(i) until the
first date upon which the aggregate amount of Net Sale Proceeds (from one or
more asset sales) required to be applied pursuant to this Section 2.6(i) (but
not yet applied) equal or exceed $100,000. To the extent any Net Sale
Proceeds are not required to be applied pursuant to this Section 2.6(i) as a
result of clause (ii) contained in the parenthetical appearing in the first
sentence of this Section 2.6(i), then (x) on the 270th day after the date of
the respective sale or disposition, the Net Sale Proceeds of the respective
sale or disposition shall be applied as otherwise required by this Section
2.6(i) to the extent not actually used or committed to be used as contemplated
by said clause (ii) by such 270th day and (y) on the 365th day after the date
of the respective sale or disposition, any Net Sale Proceeds of the respective
sale or disposition shall be applied as otherwise required by this Section
2.6(i) to the extent same were committed to be used within 270 days after the
respective date of sale or other disposition but were not in fact used by such
365th day as contemplated by said clause (ii).
(j) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 2.6, on each date on or after
the Restatement Effective Date on which Holdings or any of its Subsidiaries
receives any cash proceeds from any incurrence of Indebtedness (other than
Indebtedness permitted to be incurred pursuant to Section 8.3 as in effect on
the Restatement Effective Date) by Holdings or any of its Subsidiaries, an
amount equal to 100% of the Net Cash Proceeds of the respective incurrence of
Indebtedness shall be applied as a mandatory repayment and/or commitment
reduction in accordance with the requirements of Sections 2.6(l) and (m).
(k) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 2.6, within 2 Business Days
following each date on or after the Restatement Effective Date on which
Holdings or any of its Subsidiaries receives any proceeds from any Recovery
Event (other than proceeds from Recovery Events in an amount less than
$1,000,000 per Recovery Event), an amount equal to 100% of the proceeds of
such Recovery Event (net of reasonable costs (including, without limitation,
legal costs and expenses) and taxes incurred in connection with such Recovery
Event and the amount of such proceeds required to be used to repay any
Indebtedness (other than Indebtedness of the Lenders pursuant to this
Agreement) which is secured by the respective assets subject to such Recovery
Event) shall be applied as a mandatory repayment and/or commitment reduction
in accordance with the requirements of Sections 2.6(l) and (m); provided that
so long as no Default or Event of Default then exists and such proceeds do not
exceed $20,000,000, such proceeds shall not be required to be so applied on
such date to the extent that an Authorized Officer of the Borrower has
delivered a certificate to the Administrative Agent on or prior to such date
stating that such proceeds shall be used or shall be committed to be used to
replace or restore any properties or assets in respect of which such proceeds
were paid within 270 days following the date of such Recovery Event (which
certificate shall set forth the estimates of the proceeds to be so expended),
and provided further, that if all or any portion of such proceeds not required
to be applied as a mandatory repayment and/or commitment reduction pursuant to
the preceding proviso are either (A) not so used or committed to be so used
within 270 days after the date of the respective Recovery Event or (B) if
committed to be used within 270 days after the date of receipt of such net
proceeds and not so used within 365 days after the date of respective Recovery
Event then, in either such case, such remaining portion not used or committed
to be used in the case of preceding clause (A) and not used in the case of
preceding clause (B) shall be applied on the date occurring 270 days after the
date of the respective Recovery Event in the case of clause (A) above or the
date occurring 365 days after the date of the respective Recovery Event in the
case of clause (B) above as a mandatory repayment and/or commitment reduction
in accordance with the requirements of Sections 2.6(l) and (m).
(l) Each amount required to be applied pursuant to Sections
2.6(g) through (k) in accordance with this Section 2.6(l) shall be applied (i)
first, to repay the outstanding principal amount of Term Loans, with each such
amount required to be applied to repay outstanding Term Loans to be applied
pro rata to each Tranche of Term Loans based upon the then remaining principal
amounts of the respective Tranches (with each Tranche of Term Loans to be
allocated that percentage of the amount to be applied as is equal to a
fraction (expressed as a percentage) the numerator of which is equal to the
then outstanding principal amount of such Tranche of Term Loans and the
denominator of which is equal to the then outstanding principal amount of all
Term Loans and (ii) second, to the extent in excess of the amounts required to
be applied pursuant to preceding clause (i), to reduce the Total Revolving
Loan Commitments (it being understood and agreed that (x) the amount of any
reduction to the Total Revolving Loan Commitments as provided in immediately
preceding clause (ii) shall be deemed to be an application of proceeds for
purposes of this Section 2.6(l) even though cash is not actually applied and
(y) any cash received by the Borrower or such Subsidiary will be retained by
such Person except to the extent that such cash is otherwise required to be
applied as provided in Section 2.5(a) as a result of any reduction to the
Total Revolving Loan Commitments). All repayments of outstanding Term Loans
pursuant to Sections 2.6(g) through (k) shall be applied to reduce the then
remaining Scheduled Repayments of the respective Tranche of Term Loans on a
pro rata basis (based upon the then remaining Scheduled Repayments of the
respective Tranche after giving effect to all prior reductions thereto).
(m) With respect to each mandatory repayment of Loans required
by this Section 2.6, the Borrower may designate the Types of Loans which are
to be repaid and, in the case of Eurodollar Rate Loans, the specific Borrowing
or Borrowings of the respective Tranche pursuant to which made; provided that:
(i) mandatory repayments of Eurodollar Rate Loans pursuant to this Section 2.6
may only be made on the last day of an Interest Period applicable thereto
unless all Eurodollar Rate Loans of the respective Tranche with Interest
Periods ending on such date of required repayment and all Base Rate Loans of
the respective Tranche have been paid in full; (ii) if any repayment of
Eurodollar Rate Loans made pursuant to a single Borrowing shall reduce the
outstanding Eurodollar Rate Loans made pursuant to such Borrowing to an amount
less than (x) in the case of A Term Loans and B Term Loans, $5,000,000, and
(y) in the case of Revolving Loans, $1,000,000, such Borrowing shall be
Converted at the end of the then current Interest Period into a Borrowing of
Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a
Borrowing shall be applied pro rata among the Lenders making such Loans.
Notwithstanding the foregoing provisions of this Section 2.6, if at any time
the mandatory prepayment of Term Loans pursuant to Sections 2.6(g) through (k)
above would result, after giving effect to the procedures set forth above, in
the Borrower incurring breakage costs as a result of Eurodollar Rate Loans
being prepaid other than on the last day of an Interest Period applicable
thereto (the "Affected Eurodollar Rate Loans"), then the Borrower may in its
sole discretion initially deposit a portion (up to 100%) of the amounts that
otherwise would have been paid in respect of the Affected Eurodollar Rate
Loans with the Administrative Agent (which deposit must be equal in amount to
the amount of Affected Eurodollar Rate Loans not immediately prepaid) to be
held as security for the obligations of the Borrower hereunder pursuant to a
cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent (which cash collateral agreement
shall permit the investment of funds subject thereto in Cash Equivalents
reasonably satisfactory to the Administrative Agent and the Borrower which
will mature on or prior to the date the funds held pursuant to the cash
collateral agreement are required to be applied pursuant to this sentence),
with such cash collateral to be directly applied upon the first occurrence (or
occurrences) thereafter of the last day of an Interest Period applicable to
the relevant Term Loans that are Eurodollar Rate Loans (or such earlier date
or dates as shall be requested by the Borrower), to repay an aggregate
principal amount of such Term Loans equal to the Affected Eurodollar Rate
Loans not initially repaid pursuant to this sentence. Notwithstanding
anything to the contrary contained in the immediately preceding sentence, all
amounts deposited as cash collateral pursuant to the immediately preceding
sentence shall be held for the sole benefit of the Lenders whose Term Loans
would otherwise have been immediately repaid with the amounts deposited and
upon the taking of any action by the Administrative Agent or the Lenders
pursuant to the remedial provisions of Section 9, any amounts held as cash
collateral pursuant to this Section 2.6(m) shall, subject to the requirements
of applicable law, be immediately applied to such Term Loans.
(n) The unutilized portion of the Total Revolving Loan
Commitments may be permanently reduced or terminated, in whole or in part,
from time to time by the Borrower upon at least 2 Business Days' prior written
notice to the Administrative Agent; provided that (i) each such reduction
(other than a termination in full of the Total Revolving Loan Commitments)
shall be in integral multiples of $1,000,000, (ii) each reduction to the Total
Revolving Loan Commitments pursuant to this Section 2.6(n) shall apply to
proportionately reduce the Revolving Loan Commitment of each Lender with such
a Commitment and (iii) the reduction to the Total Revolving Loan Commitments
shall in no case be in an amount which would cause the Revolving Loan
Commitment of any Lender to be reduced (as required by the preceding clause
(ii)) by an amount which exceeds the remainder of (x) the Unutilized Revolving
Loan Commitment of such Lender as in effect immediately before giving effect
to such reduction minus (y) such Lender's Revolving Loan Percentage of the
aggregate principal amount of Swingline Loans then outstanding.
(o) Each reduction to the Total A Term Loan Commitments, the
Total B Term Loan Commitments and the Total Revolving Loan Commitments
pursuant to this Section 2.6 shall be applied proportionately to reduce the A
Term Loan Commitment, the B Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Lender with such a Commitment.
(p) Notwithstanding anything to the contrary contained in this
Agreement, all then outstanding Swingline Loans shall be repaid in full on the
Swingline Expiry Date.
2.7 Payments. Except as otherwise specifically provided
herein, all payments under this Agreement or any Note shall be made to the
Administrative Agent for the account of the Lender or Lenders entitled thereto
not later than 1:00 P.M. (New York time) on the date when due and shall be
made in Dollars in immediately available funds at the Payment Office of the
Administrative Agent. Whenever any payment to be made hereunder or under any
Note shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable at the applicable
rate during such extension.
2.8 Sharing of Payments. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) on account of the Loans made by it or its participation
in Letters of Credit in excess of its relevant Percentage of payments on
account of the respective Loans or Letters of Credit obtained by all the
Lenders (other than any Lender that has waived its Percentage in writing), such
Lender shall forthwith purchase from the other Lenders such participation in
the Loans made by them or in their participation in Letters of Credit as shall
be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of
such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and each such Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect to the total amount
so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.8 may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation.
ARTICLE 3.
Letters of Credit
3.1 Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrower set forth herein, upon the request of the Borrower
pursuant to Section 3.4, the Issuing Bank shall issue Letters of Credit
hereunder for the Borrower's account, as more specifically described below.
The Issuing Bank shall not be obligated to issue any Letter of Credit for the
account of the Borrower if at the time of such requested issuance:
(a) The face amount of such requested Letter of Credits, when
added to the Letter of Credit Obligations then outstanding, would (i)
cause the Letter of Credit Obligations to exceed $40,000,000 or (ii)
when added to the aggregate principal amount of Revolving Loans then
outstanding and all Swingline Loans then outstanding, would exceed
the Total Revolving Loan Commitments then in effect;
(b) Any order, judgment or decree of any Governmental
Authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit or any
Requirement of Law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request the Issuing Bank to refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which
the Issuing Bank is not otherwise compensated) not in effect as of the
Restatement Effective Date, or any unreimbursed loss, cost or expense
which was not applicable, in effect or known to the Issuing Bank as
of the Restatement Effective Date and which the Issuing Bank deems in
good faith to be material to it; or
(c) A default of any Lender's obligations to fund under
Section 3.6 exists, or such Lender is a Defaulting Lender under
Section 2.5(a), unless the Administrative Agent and the Issuing Bank
have entered into satisfactory arrangements with the Borrower to
eliminate the Issuing Bank's risk with respect to such Lender,
including cash collateralization of such Lender's Revolving Loan
Percentage of the Letter of Credit Obligations.
3.2 Terms of Letters of Credit. The Letters of Credit shall
be in a form customarily issued by the Issuing Bank or in such other form as
has been approved by the Issuing Bank. At the time of issuance, the amount
and the terms and conditions of each Letter of Credit, and the form of any
drafts thereunder, shall be subject to approval by the Administrative Agent
and the Borrower. In no event may the term of any standby Letter of Credit
issued hereunder exceed 12 months (except that such Letters of Credit may
provide for annual extension) nor the term of any trade Letter of Credit
exceed 180 days, and, in any event, all standby Letters of Credit issued
hereunder shall expire no later than the date that is five Business Days prior
to the A TL/RL Maturity Date and all trade Letters of Credit issued hereunder
shall expire no later than the date occurring 30 days prior to the A TL/RL
Maturity Date. Unless otherwise agreed by the Issuing Bank, any Letter of
Credit containing an automatic extension provision shall also contain a
provision pursuant to which, notwithstanding any other provisions thereof, it
shall expire no later than the date that is five Business Days prior to the A
TL/RL Maturity Date (in the case of standby Letters of Credit) and the date
that is 30 days prior to the A TL/RL Maturity Date (in the case of trade
Letters of Credit). All Letters of Credit shall be denominated in Dollars and
shall be payable on a sight basis.
3.3 Lenders' Participation. Immediately upon the issuance or
amendment by the Issuing Bank of any Letter of Credit in accordance with the
procedures set forth in Section 3.1, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Bank,
without recourse or warranty, an undivided interest and participation to the
extent of such Lender's Revolving Loan Percentage of the liability with
respect to such Letter of Credit (including, without limitation, all
obligations of the Borrower with respect thereto, other than amounts owing to
the Issuing Bank consisting of Issuing Bank Fees) and any security therefor or
guaranty pertaining thereto.
3.4 Notice of Issuance, etc. (a) Whenever the Borrower
desires the issuance of a Letter of Credit, the Borrower shall deliver to the
Administrative Agent and the Issuing Bank a written notice no later than 1:00
P.M. (New York City time) at least three Business Days (or such shorter period
as may be agreed to by the Issuing Bank) in advance of the proposed date of
issuance of a letter of credit request in substantially the form attached as
Exhibit B-2 (a "Letter of Credit Request"). The transmittal by the Borrower of
each Letter of Credit Request shall be deemed to be a representation and
warranty by the Borrower that the Letter of Credit may be issued in accordance
with and will not violate any of the requirements of Section 3.1 or 5.2. A
Letter of Credit Request may be given in writing or by facsimile transmission
with prompt confirmation in writing.
(b) The Issuing Bank shall, promptly after each issuance of, or
amendment or modification to, a standby Letter of Credit give each Lender with
a Revolving Loan Commitment and the Borrower written notice of the issuance
of, or amendment or modification to, such standby Letter of Credit and, if
requested by any such Lender, a copy of such standby Letter of Credit and any
such amendment or modification thereto.
(c) The Issuing Bank shall within 10 days after the last Business
Day of each calendar month, deliver to each Lender with a Revolving Loan
Commitment a report setting forth for such preceding calendar month the
aggregate daily Stated Amount available to be drawn under all outstanding
trade Letters of Credit during such calendar month.
3.5 Payment of Amount Drawn Under Letters of Credit. In the
event of any drawing under any Letter of Credit by the beneficiary thereof,
the Issuing Bank shall promptly notify the Administrative Agent, which shall
promptly notify the Borrower of such drawing to the extent reasonably
practicable not later than 11:00 A.M. on the Business Day immediately prior to
the date on which the Issuing Bank intends to honor such drawing. The
Borrower shall give notice to be received by the Administrative Agent and the
Issuing Bank not later than 1:00 P.M. on the Business Day immediately prior to
the date of the respective drawing if it intends to reimburse the Issuing Bank
for the amount of such drawing with funds other than the proceeds of Revolving
Loans. Such notice from the Borrower shall be irrevocable and, if given, the
Borrower shall reimburse the Issuing Bank not later than the close of business
(New York City time) on the day on which such drawing is honored in an amount
in same day funds equal to the amount of such drawing. If the Administrative
Agent shall not have timely received such notice (i) the Borrower shall be
deemed to have timely given a Notice of Borrowing to the Administrative Agent
to incur Revolving Loans, which shall be made as Base Rate Loans, on the date
on which such drawing is honored in an amount equal to the amount of such
drawing and (ii) subject to satisfaction or waiver of the conditions specified
in Section 5.2 hereof and the other terms and conditions of Borrowings
contained herein, the Lenders shall, on the date of such drawing, make
Revolving Loans in the amount of such drawing, the proceeds of which shall be
applied directly by the Administrative Agent to reimburse the Issuing Bank for
the amount of such drawing or payment. If for any reason, proceeds of
Revolving Loans are not received by the Issuing Bank on such date in an amount
equal to the amount of such drawing, the Borrower shall be obligated to and
shall reimburse the Issuing Bank, on the Business Day immediately following
the date of such drawing, in an amount in same day funds equal to the excess
of the amount of such drawing over the amount of such Revolving Loans, if any,
which are so received, plus accrued interest on such amount at the rate set
forth in Section 4.2; provided, however, that any such payments shall not
prejudice any rights that the Borrower may have against any Lender as a result
of any default by such Lender in funding such Revolving Loans, as provided in
the final sentence of Section 2.5(a).
3.6 Payment by Lenders. (a) In the event that the Borrower
does not reimburse the Issuing Bank for the amount of any drawing pursuant to
Section 3.5 and the proceeds of Revolving Loans incurred for such purpose are
insufficient for such purpose, the Administrative Agent shall promptly notify
each Lender of the unreimbursed amount and of such Lender's respective
participation therein. Each Lender shall make available to the Issuing Bank
an amount equal to its respective participation in same day funds, at the
office of the Issuing Bank specified in such notice, not later than 1:00 P.M.
(New York City time) on the Business Day after the date notified by the
Administrative Agent. In the event that any Lender fails to make available to
the Issuing Bank the amount of such Lender's participation in such Letter of
Credit as provided in this Section 3.6, the Issuing Bank shall be entitled to
recover such amount on demand from such Lender, together with interest at the
Federal Funds Rate.
(b) The Administrative Agent or the Issuing Bank, as the case
may be, shall distribute to each Lender which has paid all amounts payable by
it under this Section 3.6 with respect to any Letter of Credit such Lender's
Revolving Loan Percentage of all payments subsequently received by the
Administrative Agent or the Issuing Bank, as the case may be, from the
Borrower in reimbursement of drawings honored under such Letter of Credit when
such payments are received.
3.7 Nature of Issuing Bank's Duties. In determining whether
to pay under any Letter of Credit, the Issuing Bank shall be responsible only
to determine that the documents and certificates required to be delivered
under that Letter of Credit have been delivered and that they substantially
comply on their face with the requirements of that Letter of Credit. As
between the Borrower, the Issuing Bank and each other Lender, the Borrower
assumes all risks of the acts and omissions of, or misuse of the Letter of
Credit issued by the Issuing Bank by, the respective beneficiaries of such
Letter of Credit. In furtherance and not in limitation of the foregoing,
neither the Issuing Bank nor any of the other Lenders shall be responsible (i)
for the form, validity, sufficiency, accuracy, genuineness or legal effects of
any document submitted by any party in connection with the application for and
issuance of or any drawing honored under such Letter of Credit even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged, (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign such
Letter of Credit, or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason,
(iii) for failure of the beneficiary of such Letter of Credit to comply fully
with conditions required in order to draw upon such Letter of Credit, (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy or otherwise, whether or
not they be in cipher, (v) for errors in interpretation of technical terms,
(vi) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit, or of the
proceeds thereof, (vii) for the misapplication by the beneficiary of such
Letter of Credit of the proceeds of any drawing honored under such Letter of
Credit, or (viii) for any consequences arising from actions or omissions taken
or omitted in good faith or from causes beyond the control of the Issuing Bank
or the other Lenders; provided, however that nothing in this sentence shall
relieve the Issuing Bank of liability for its own gross negligence or willful
misconduct.
3.8 Obligations Absolute. The obligations of the Borrower to
reimburse the Issuing Bank for drawings honored under a Letter of Credit
issued by it and the obligations of the Lenders under Section 3.6 shall be
unconditional and irrevocable and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances including, without
limitation, any of the following circumstances:
(a) any lack of validity or enforceability of this Agreement
or any Letter of Credit;
(b) the existence of any claim, set-off, defense or other
right which the Borrower or any Affiliate of the Borrower may have at
any time against a beneficiary or any transferee of any Letter of
Credit (or any Persons or entities for whom any such beneficiary or
transferee may be acting), the Issuing Bank, any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction, provided, however,
that nothing contained herein shall preclude the Borrower from
asserting any such claim, defense or counterclaim in a separate
judicial proceeding or by compulsory counterclaim;
(c) any draft, demand, certificate or any other documents
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(d) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents;
(e) payment by the Issuing Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not substantially comply with the terms of such
Letter of Credit;
(f) failure of any drawing under a Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds
of any drawing; or
(g) the fact that a Default or Event of Default shall have
occurred and be continuing;
provided, however, that the Borrower shall have no obligation to reimburse the
Issuing Bank and the Lenders shall have no obligation under Section 3.6 in the
event of the Issuing Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit
substantially comply with the terms of such Letter of Credit or with respect
to any other express obligation the Issuing Bank may have under this Agreement
in making any payment pursuant to any Letter of Credit.
3.9 Original Letters of Credit. Schedule II hereto contains a
description of all letters of credit issued pursuant to the Original Credit
Agreement and outstanding on the Restatement Effective Date. Each such letter
of credit, including any extension or renewal thereof (each, as amended from
time to time in accordance with the terms hereof and thereof, an "Original
Letter of Credit") shall constitute a "Letter of Credit" for all purposes of
this Agreement, issued, for purposes of Section 3.1, on the Restatement
Effective Date. BTCo shall constitute the "Issuing Bank" with respect to such
Letters of Credit for all purposes of this Agreement.
ARTICLE 4.
Interest, Fees and Expenses
4.1 Interest on Eurodollar Rate Loans. Subject to the
provisions of Section 4.4 hereof, interest on each Eurodollar Rate Loan shall
be payable in arrears on the last day of each Interest Period with respect
thereto (and, in the case of any Interest Period in excess of 3 months, on
each date which occurs at three-month intervals after the first day of the
respective Interest Period), on the date of any Conversion thereof (or portion
thereof) to a Base Rate Loan, upon any prepayment (on the amount prepaid) and
at maturity at an interest rate per annum equal during each Interest Period
for such Eurodollar Rate Loan to the Adjusted Eurodollar Rate in effect for
such Interest Period plus the Applicable Margin at such time. The
Administrative Agent upon determining the Adjusted Eurodollar Rate for any
Interest Period shall promptly notify the Borrower and the Lenders thereof.
Each determination by the Administrative Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
4.2 Interest on Base Rate Loans. Subject to the provisions of
Section 4.4 hereof, interest on Base Rate Loans shall be payable quarterly in
arrears on the second Business Day of each calendar quarter (which payment
shall be made of all interest accrued on Base Rate Loans during the
immediately preceding calendar quarter which has not yet been paid), upon any
prepayment (on the amount prepaid) and at maturity at an interest rate per
annum equal to the Base Rate as in effect from time to time plus the
Applicable Margin at such time. Each determination by the Administrative
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
4.3 Notice of Continuation and Notice of Conversion. (a)
With respect to any Borrowing consisting of Eurodollar Rate Loans, the
Borrower may, subject to the provisions of Section 4.3(c) and the condition
that no Default or Event of Default then exists, elect to maintain such
Borrowing or any portion thereof equal to at least (x) in the case of A Term
Loans and B Term Loans, $5,000,000, and (y) in the case of Revolving Loans,
$1,000,000, as Eurodollar Rate Loans by selecting a new Interest Period for
such Borrowing (or portion thereof), which new Interest Period shall commence
on the last day of the immediately preceding Interest Period. Each selection
of a new Interest Period (a "Continuation") shall be made by notice given not
later than 12:00 Noon (New York City time) on the third Business Day prior to
the date of any such Continuation, by the Borrower to the Administrative
Agent. Such notice (a "Notice of Continuation") shall be by telephone,
telecopy, telex or cable, confirmed immediately in writing if by telephone, in
substantially the form of Exhibit B-3, which shall be completed in such manner
as is necessary to comply with all limitations on Loans outstanding hereunder.
If the Borrower shall fail to, or does not have the right to, select a new
Interest Period for any Borrowing consisting of Eurodollar Rate Loans in
accordance with this Section 4.3(a), such Loans will automatically, on the
last day of the then existing Interest Period therefor, Convert into Base Rate
Loans. The Administrative Agent shall give each Lender prompt notice by
telephone or facsimile transmission of each Notice of Continuation.
(b) The Borrower may on any Business Day (provided that no
Default or Event of Default has occurred and is continuing), upon notice (each
such notice, a "Notice of Conversion") given to the Administrative Agent, and
subject to the provisions of Section 4.3(c), Convert the entire amount of or a
portion of Loans made pursuant to one or more Borrowings (so long as of the
same Tranche) of one Type of Loan into a Borrowing (of the same Tranche) of
another Type of Loan; provided, however, that any Conversion of any Eurodollar
Rate Loans into Base Rate Loans shall be made on, and only on, the last day
of an Interest Period for such Eurodollar Rate Loans. Each such Notice of
Conversion shall be given not later than 12:00 Noon (New York City time) on
the Business Day prior to the date of any proposed Conversion into Base Rate
Loans and on the third Business Day prior to the date of any proposed
Conversion into Eurodollar Rate Loans. Subject to the restrictions specified
above, each Notice of Conversion shall be by telephone, telecopy, telex or
cable, confirmed immediately in writing if by telephone, in substantially the
form of Exhibit B-4 in each case specifying (i) the requested date of such
Conversion, (ii) the Type of Loans to be Converted, (iii) the portion of such
Type of Loan to be Converted, (iv) the Type of Loan such Loans are to be
Converted into and (v) if such Conversion is into Eurodollar Rate Loans, the
duration of the Interest Period of such Loan. Each Conversion shall be in an
aggregate amount of not less than (i) in the case of A Term Loans and B Term
Loans, (x) $5,000,000 if to be Converted into Eurodollar Rate Loans and (y)
$1,000,000 if to be Converted into Base Rate Loans and (ii) in the case of
Revolving Loans, $1,000,000 if to be Converted into Eurodollar Rate Loans.
(c) Notwithstanding anything contained in Section 2.3 or
Sections 4.3 (a) and (b) above to the contrary,
(i) if the Administrative Agent is unable to determine the
Adjusted Eurodollar Rate for Eurodollar Rate Loans comprising any
requested Borrowing, Continuation or Conversion, the right of the
Borrower to select or maintain Eurodollar Rate Loans for such
Borrowing or any subsequent Borrowing shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist,
and each Loan comprising such Borrowing shall be made as, or
Converted into, a Base Rate Loan,
(ii) if the Required Lenders shall, at least one Business
Day before the date of any requested Borrowing, Continuation or
Conversion, notify the Administrative Agent that the Adjusted
Eurodollar Rate for Loans comprising such Borrowing will not
adequately reflect the cost to such Lenders of making or funding
their respective Loans for such Borrowing, the right of the
Borrower to select Eurodollar Rate Loans for such Borrowing shall
be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Loan comprising such
Borrowing shall be made as, or Converted into, a Base Rate Loan,
(iii) if at any time any Lender determines (which
determination shall, absent manifest error, be conclusive and
binding on all parties) that the making, continuation or
conversion of any Loan as a Eurodollar Rate Loan has become
unlawful or impermissible by reason of compliance by that Lender
with any law, governmental rule, regulation or order of any
Governmental Authority (whether or not having the force of law or
resulting in costs or penalties), then, and in any such event,
such Lender may give notice of that determination in writing, to
the Borrower and the Administrative Agent and the Administrative
Agent shall promptly transmit the notice to each other Lender.
Until such Lender gives notice otherwise, the right of the
Borrower to select Eurodollar Rate Loans from that Lender shall be
suspended and each Eurodollar Rate Loan outstanding from that
Lender shall automatically and immediately convert to a Base Rate
Loan, and
(iv) there shall not be at any one time more than six (6)
Interest Periods in effect with respect to Eurodollar Rate Loans.
(d) Each Notice of Continuation and Notice of Conversion shall
be irrevocable by and binding on the Borrower. In the case of any Borrowing,
Continuation or Conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be comprised of
Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill, on or before the date for such Borrowing, Continuation or Conversion
specified in such Notice of Borrowing, Notice of Continuation or Notice of
Conversion, the applicable conditions set forth in Article 5, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by such Lender to fund the Eurodollar Rate Loan to be
made by such Lender as part of such Borrowing, Continuation or Conversion.
(e) If any payment of principal of, or conversion or
continuation of, any Eurodollar Rate Loan is made other than on the last day
of the Interest Period for such Loan as a result of a payment, prepayment,
conversion or continuation of such Loan or acceleration of the maturity of the
Notes pursuant to Article 9 or for any other reason, the Borrower shall, upon
demand by any Lender (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Loan.
4.4 Interest and Letter of Credit Fees After Event of Default.
From the date of occurrence and during the continuance of any of the Events of
Default specified in Section 9.1(a) or (e), interest on the Loans and Letter
of Credit Fees shall each be payable on demand at a rate per annum equal to,
with respect to the Loans, the rate in effect under Section 4.2, plus two
percent (2.00%), and with respect to the Letter of Credit Fees, the rate in
effect under the first sentence of Section 4.7(a), plus two percent (2.00%).
Following the occurrence and during the continuance of any of the Events of
Default other than the Events of Default specified in Section 9.1(a) or (e),
and the delivery of notice from the Required Lenders to the Borrower of the
imposition of default interest rates, then, from the date of delivery of such
notice until such Event of Default is no longer continuing, interest on the
Loans and Letter of Credit Fees shall be payable on demand, at the rates
respectively set forth in the preceding sentence.
4.5 Reimbursement of Expenses. From and after the Restatement
Effective Date, the Borrower shall promptly reimburse each Agent and the
Collateral Agent for all Expenses of such Persons as the same are incurred by
such Persons and upon receipt of invoices therefor and, if requested by the
Borrower, such reasonable backup materials and information as the Borrower
shall reasonably request.
4.6 Unused Line Fee. The Borrower shall pay to the
Administrative Agent for the benefit of each of the Lenders with a Revolving
Loan Commitment (other than a Defaulting Lender for so long as such Lender is
a Defaulting Lender) a non-refundable fee (the "Unused Line Fee") equal to the
Applicable Margin calculated quarterly in arrears on the average Unutilized
Revolving Loan Commitment of such Lender at the close of business each day
during such fiscal quarter or occurring prior to the A TL/RL Maturity Date,
which fee shall (i) accrue from the Restatement Effective Date until the A
TL/RL Maturity Date and (ii) be due and payable quarterly in arrears on the
second Business Day of each calendar quarter (which payment shall be made of
all Unused Line Fee accrued during the immediately preceding calendar quarter
which has not yet been paid), and on the A TL/RL Maturity Date.
4.7 Letter of Credit Fee. (a) The Borrower shall pay to the
Administrative Agent for distribution to the Lenders with Revolving Loan
Commitments on the second Business Day of each calendar quarter (which payment
shall be made of all Letter of Credit Fee accrued during the immediately
preceding calendar quarter which has not yet been paid) a fee (the "Letter of
Credit Fee"), calculated on the amount of Letter of Credit Obligations from
time to time outstanding during the immediately preceding calendar quarter at
a rate per annum equal to the Applicable Margin as in effect from time to time
during such immediately preceding calendar quarter.
(b) The Borrower agrees to pay to the Issuing Bank, for its
own account, a facing fee in respect of each Letter of Credit issued hereunder
(the "Facing Fee"), for the period from and including the date of issuance of
such Letter of Credit to and including the termination of such Letter of
Credit, computed at a rate per annum equal to 1/4 of 1% on the daily Stated
Amount of such Letter of Credit; provided, that in no event shall the annual
Facing Fee with respect to any Letter of Credit be less than $500, it being
agreed that, on the date of issuance of any Letter of Credit and on each
anniversary thereof prior to the termination of such Letter of Credit, $500
will be paid toward the next year's Facing Fees for such Letter of Credit,
which amount shall be credited in direct order to the Facing Fees which would
otherwise be payable with respect to such Letter of Credit in the succeeding
annual period. Except as provided in the immediately preceding sentence,
accrued Facing Fees shall be due and payable quarterly in arrears on the
second Business Day of each calendar quarter and upon the termination of the
Total Revolving Loan Commitments or the first day thereafter upon which no
Letters of Credit remain outstanding.
(c) The Borrower shall also pay the customary charges, fees
and expenses of the Issuing Bank for the issuance, administration and
negotiation of each Letter of Credit (the "Issuing Bank Fees"). Each
determination by the Administrative Agent of Letter of Credit Fees and other
fees, charges and expenses under this Section shall be conclusive and binding
for all purposes, absent manifest error.
4.8 Other Fees and Expenses. The Borrower agrees to pay fees
to BTCo and Morgan in the amounts and at the times set forth in the Fee Letter
and shall be obligated to reimburse the Expenses of the Agents and the
Collateral Agent promptly upon demand.
4.9 Calculations. All calculations of (i) interest hereunder
and (ii) fees, including, without limitation, Unused Line Fees and Letter of
Credit Fees, shall be made by the Administrative Agent, on the basis of a year
of 360 days, in each case for the actual number of days elapsed (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent
of an interest rate or payment hereunder shall be conclusive and binding for
all purposes, absent manifest error. For the purposes soley of the Interest
Act (Canada), (i) whenever any interest or fee under this Agreement is
calculated using a rate based on a year of 360 days, such rate determined
pursuant to such calculation, when expressed as an annual rate, is equivalent
to (x) the applicable rate based on a year of 360 days, (y) multiplied by the
actual number of days in the calendar year in which the period for which such
interest or fee is payable (or compounded) ends and (z) divided by 360, (ii)
the principal of deemed reinvestment of interest does not apply to any
interest calculation under this Agreement, and (iii) the rates of interest
stipulated in this Agreement are intended to be nominal rates and not
effective rates or yields.
4.10 Indemnification in Certain Events. If either (i) any
change after the Restatement Effective Date in or in the interpretation of any
applicable law or governmental rule, regulation, order, guideline, directive
or request (whether or not having the force of law) is introduced or adopted,
including, without limitation, with respect to reserve requirements (except,
in the case of any such reserve requirements relating to any Eurodollar Rate
Loan, to the extent such reserves are reflected in the Eurodollar Rate for the
respective Interest Period relating thereto), applicable to Administrative
Agent, the Issuing Bank or any of the Lenders, or (ii) the Administrative
Agent, the Issuing Bank or any of the Lenders complies with any future or
changed (from that in effect on the Restatement Effective Date) guideline or
request from any central bank or other Governmental Authority or (iii) the
Administrative Agent, the Issuing Bank or any of the Lenders determines that
the adoption after the Restatement Effective Date of any applicable law, rule
or regulation regarding capital adequacy, or any change after the Restatement
Effective Date therein, or any change after the Restatement Effective Date in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof has or would have the effect described below (whether
directly on such Person or on a direct or indirect parent holding company
thereof), or any of the Administrative Agent, the Issuing Bank or any of the
Lenders (or any direct or indirect parent holding company thereof) complies
with any future request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, and in the case of any event set forth in this clause (iii), such
adoption, change or compliance has or would have the direct or indirect effect
of reducing the rate of return on any of the Administrative Agent's, the
Issuing Bank's or any Lender's (or its direct or indirect parent holding
company's) capital as a consequence of its obligations or Commitments
hereunder to a level below that which such Person (or its direct or indirect
parent holding company) could have achieved but for such adoption, change or
compliance (taking into consideration the Administrative Agent's, the Issuing
Bank's or such Lender's (or its parent holding company's) policies with
respect to capital adequacy) by an amount deemed by such Person to be
material, and any of the foregoing events described in clauses (i), (ii) or
(iii) increases the cost to the Administrative Agent, the Issuing Bank or any
of the Lenders of (A) funding or maintaining its Commitment or Obligations or
(B) issuing, making or maintaining any Letter of Credit or of purchasing or
maintaining any participation therein, or reduces the amount receivable in
respect thereof by the Administrative Agent, the Issuing Bank or any Lender,
then the Borrower shall within 10 days after demand by the Administrative
Agent, the Issuing Bank or the respective Lender, pay to the Administrative
Agent, for the account of the Administrative Agent, the Issuing Bank or the
respective Lender, such additional amounts as are sufficient to indemnify such
Persons against such increases in costs or reductions in amounts receivable.
A certificate as to the amount of such increased costs or reductions in
amounts receivable and setting forth in reasonable detail the calculation
thereof shall be submitted to the Borrower by the Administrative Agent, the
Issuing Bank or the applicable Lender, and shall be conclusive absent manifest
error.
4.11 Net Payments. (a) Except as provided in Section
4.11(e), any and all payments by the Borrower (or any other Credit Party on
its behalf) hereunder, under the Loans, under the Letters of Credit or under
the Guaranties to or for the benefit of any Lender, the Issuing Bank or any
Agent shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and penalties, interests and all other liabilities with respect thereto
("Taxes"), excluding, (i) in the case of each such Lender, the Issuing Bank or
each such Agent, taxes imposed on its net income (including, without
limitation, any taxes imposed on branch profits) and franchise taxes (that are
imposed on or computed by reference to net income) imposed on it by the
jurisdiction under the laws of which such Lender, the Issuing Bank or such
Agent is organized or any political subdivision thereof, and (ii) in the case
of each Lender, taxes imposed on its net income (including, without
limitation, any taxes imposed on branch profits), and franchise taxes imposed
on it, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof (all such nonexcluded Taxes being hereinafter
referred to as "Covered Taxes"). Except as provided in Section 4.11(e), if
the Borrower or any Credit Party shall be required by law to deduct any
Covered Taxes from or in respect of any sum payable hereunder, under any Loan,
under any Letter of Credit or under the Guaranties to or for the benefit of
any Lender, the Issuing Bank or any Agent, (A) the sum payable shall be
increased as may be necessary so that after making all required deductions of
Covered Taxes (including deductions of Covered Taxes applicable to additional
sums payable under this Section 4.11) such Lender, the Issuing Bank or such
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (B) the Borrower shall make such
deductions and (C) the Borrower shall pay the full amount so deducted to the
relevant taxation authority or other authority in accordance with applicable
law. If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse any Lender, the Issuing Bank or any
Agent, within thirty days of the date of the written request of such Lender,
the Issuing Bank or such Agent, as the case may be, for taxes imposed on or
measured by the net income or profits of such Lender, the Issuing Bank or such
Agent pursuant to the laws of the jurisdiction in which the principal office
or Applicable Lending Office of such Lender, the Issuing Bank or such Agent is
located or under the laws of any political subdivision or taxing authority of
any such jurisdiction in which the principal office or Applicable Lending
Office of such Lender, the Issuing Bank or such Agent is located and for any
withholding of income or similar taxes imposed by the United States as such
Lender, the Issuing Bank or such Agent shall determine are payable by, or
withheld from, such Lender, the Issuing Bank or such Agent in respect of such
amounts so paid to or on behalf of such Lender, the Issuing Bank or such Agent
pursuant to the preceding sentence and in respect of any amounts paid to or on
behalf of such Lender, the Issuing Bank or such Agent pursuant to this
sentence ("Second Tier Taxes"). The written request referred to in the
preceding sentence shall certify and set forth in reasonable detail the
calculation of the payment and specify the type of such Taxes. Any such
certificate submitted in good faith to the Borrower shall, absent manifest
error, be final, conclusive and binding on all parties; provided, however,
that notwithstanding any of the foregoing with respect to the above-referenced
calculations, none of the Lenders, the Issuing Bank or the Agents shall be
obligated to provide any information with respect to its assets, income or
operations other than assets, income or operations solely attributable to this
Agreement, any Loan, any Letter of Credit, or any Guaranty.
(b) In addition, the Borrower agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies
that arise at any time or from time to time (i) from any payment made under
any and all Credit Documents, (ii) from the transfer of the rights of any
Lender (other than a Defaulting Lender) under any Credit Documents to any
transferee pursuant to Section 4.12, or (iii) from the execution or delivery
by the Borrower of, or from the filing or recording or maintenance of, or
otherwise with respect to the exercise by any Agent or the Lenders of their
rights (subject to the provisions of Section 4.11(a), excluding transfers
pursuant to Section 11.6) under, any and all Credit Documents (hereinafter
referred to as "Other Taxes").
(c) Except as provided in Section 4.11(e), the Borrower shall
indemnify, to the extent not previously withheld and paid to the relevant
taxation authority or other authority in accordance with applicable law, each
Lender, the Issuing Bank and each Agent for the full amount of (i) Covered
Taxes imposed on or with respect to amounts payable hereunder, (ii) Other
Taxes, and (iii) any Second Tier Taxes (other than Covered Taxes imposed by
any jurisdiction on amounts payable under this Section 4.11) paid by such
Lender, the Issuing Bank or such Agent, as the case may be, and any liability
(including penalties, interest and expenses) arising solely therefrom or with
respect thereto. Payment of this indemnification shall be made within 30 days
from the date such Lender, the Issuing Bank or any Agent certifies and sets
forth in reasonable detail the calculation thereof as to the amount and type
of such Taxes. Any such certificate submitted by any Lender, the Issuing Bank
or any Agent in good faith to the Borrower shall, absent manifest error, be
final, conclusive and binding on all parties; provided, however, that
notwithstanding any of the foregoing with respect to the above-referenced
calculations, none of the Lenders, the Issuing Bank or the Agents shall be
obligated to provide any information with respect to its assets, income or
operations other than assets, income or operations solely attributable to this
Agreement, any Loan, any Letter of Credit, or any Guaranty.
(d) Within 30 days after having received a receipt of Covered
Taxes or Other Taxes, the Borrower will furnish to the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof.
(e) Each Foreign Lender agrees to deliver to each of the
Borrower and the Administrative Agent on or prior to the Restatement Effective
Date, or in the case of a Foreign Lender that is an assignee or transferee of
an interest under this Agreement pursuant to Section 4.12 or 11.6 (unless the
respective Foreign Lender was already a Lender hereunder immediately prior to
such assignment or transfer), on or prior to the date of such assignment or
transfer to such Foreign Lender, (i) two accurate and complete original signed
copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Foreign Lender's entitlement to a complete exemption from
United States withholding tax with respect to payments to be made under any
and all Credit Documents or (ii) if the Foreign Lender is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause
(i) above with respect to any payments of interest, (x) a certificate
substantially in the form of Exhibit L (any such certificate, a "Section
4.11(e) Certificate") and (y) two accurate and complete original signed copies
of Internal Revenue Service Form W-8 (or successor form) certifying to such
Foreign Lender's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under any and
all Credit Documents. In addition, each Foreign Lender agrees that from time
to time after the Restatement Effective Date, when a lapse in time or change
in circumstances renders the previous certification obsolete or inaccurate in
any material respect, it will deliver to the Borrower and the Administrative
Agent two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 4.11(e) Certificate, as
the case may be, and such other forms and statements as may be required in
order to confirm or establish the entitlement of such Foreign Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under any and all Credit Documents or it shall immediately
notify the Borrower and the Administrative Agent of its inability to deliver
any such Form or Certificate, in which case such Foreign Lender shall not be
required to deliver any such Form or Certificate pursuant to this Section
4.11(e). Notwithstanding anything to the contrary contained in Section
4.11(a) and (c), but subject to the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Foreign Lender
for U.S. Federal income tax purposes to the extent that such Foreign Lender
has not provided to the Borrower Internal Revenue Service Forms that establish
a complete exemption from such deduction or withholding and (y) the Borrower
shall not be obligated pursuant to Section 4.11(a) and (c) hereof to indemnify
or to gross-up payments to be made to a Foreign Lender in respect of income or
similar taxes imposed by the United States if (I) such Foreign Lender has not
provided to the Borrower the forms or statements required to be provided to
the Borrower pursuant to this Section 4.11(e) or (II) in the case of a
payment, other than interest, to a Foreign Lender described in clause (ii)
above, to the extent that such forms or statements do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 4.11
and except as set forth in Section 11.6(b), the Borrower agrees to pay
additional amounts and to indemnify each Lender, the Issuing Bank and each
Agent in the manner set forth in Section 4.11(a) and (c) (without regard to
the identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the
Restatement Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
(f) If any Taxes for which the Borrower would be required to
make payment under this Section 4.11 are imposed, the Lender, the Issuing Bank
or the Agent, as the case may be, shall use its reasonable best efforts to
avoid or reduce such Taxes by taking any appropriate action (including,
without limitation, assigning its rights hereunder to a related entity or a
different office) which would not in the sole opinion of such Lender, the
Issuing Bank or such Agent be otherwise disadvantageous to such Lender, the
Issuing Bank or such Agent, as the case may be.
(g) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 4.11 shall survive the payment in full of the
Obligations.
(h) If the Borrower pays any additional amount under this
Section 4.11 to a Lender and such Lender determines in its sole discretion
that it has actually received or realized in connection therewith any refund
or any reduction of, or credit against, its liabilities with respect to Taxes
in or with respect to the taxable year in which the additional amount is paid,
such Lender shall pay to the Borrower an amount that the Lender shall, in its
sole discretion, determine is equal to the net benefit, after tax, which was
obtained by the Lender in such year as a consequence of such refund, reduction
or credit.
(i) Notwithstanding any provision of this Agreement to the
contrary, Section 4.11 is the only provision of this Agreement that requires
the Borrower (or any Credit Party) to make any payment to a Lender, an Agent,
the Issuing Bank, or any of their successors and assigns, by reason of any Tax
imposed upon a Lender, an Agent, the Issuing Bank, or any of their successors
and assigns.
4.12 Affected Lenders. If any Lender is not required to make
Eurodollar Rate Loans as provided in Section 4.3(c)(iii) at a time when other
Lenders are not excused from making Eurodollar Rate Loans pursuant to said
provision, or if the Borrower is obligated to pay to any Lender any amount
under Sections 4.10 or 4.11 in excess of any such amounts payable to the other
Lenders or if any Lender is a Defaulting Lender and remains as such for five
Business Days following its receipt of written notice from the Administrative
Agent or the Borrower, the Borrower may, if no Event of Default then exists,
replace such Lender with another lender reasonably acceptable to the
Administrative Agent, and such Lender hereby agrees to be so replaced subject
to the following:
(a) The obligations of the Borrower hereunder to the Lender to
be replaced (including such increased or additional costs incurred
from the date of notice to the Borrower of such increase or
additional costs through the date such Lender is replaced hereunder)
shall be paid in full to the Administrative Agent for the account of
such Lender concurrently with such replacement;
(b) The replacement Lender shall be a bank or other financial
institution that is not subject to the increased costs or other
circumstances described above in this Section 4.12 which may have
effectuated the Borrower's election to replace any Lender hereunder,
and each such replacement Lender shall execute and deliver to the
Administrative Agent an Assignment and Assumption Agreement,
conforming to the provisions of Section 11.6, with a Commitment equal
to that of the Lender being replaced and shall make a Loan or Loans
in the aggregate principal amount equal to the aggregate outstanding
principal amount of the Loan or Loans of the Lender being replaced
(or Loans that should have been made but for a Defaulting Lender's
failure to lend);
(c) Upon such execution of such documents referred to in
clause (b) and repayment of the amounts referred to in clause (a),
the replacement Lender shall be a "Lender" with a Commitment as
specified hereinabove and the Lender being replaced shall cease to be
a "Lender" hereunder, except with respect to indemnification
provisions under this Agreement, which shall survive as to such
replaced Lender;
(d) The Administrative Agent shall reasonably cooperate in
effectuating the replacement of any Lender under this Section 4.12,
but at no time shall the Administrative Agent be obligated to
initiate any such replacement; and
(e) Any Lender replaced under this Section 4.12 shall be
replaced at the Borrower's sole cost and expense and at no cost or
expense to the Administrative Agent or any of the Lenders (other than
a Defaulting Lender).
4.13 Change of Applicable Lending Office. Each Lender agrees
that on the occurrence of any event giving rise to the operation of Sections
4.3(c)(iii), 4.10 or 4.11 with respect to such Lender, it will, if requested
by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans or Letters of Credit affected by such event; provided that such
designation is made on such terms that such Lender and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Sections. Nothing in this Section 4.13 shall affect or postpone any of the
obligations of the Borrower or the right of any Lender provided in Sections
4.3(c)(iii), 4.10 and 4.11.
4.14 Limitation on Certain Additional Amounts. Each Lender,
the Issuing Bank or each Agent, as the case may be, will notify the Borrower
and the Administrative Agent of any event occurring after the Restatement
Effective Date which will entitle such Lender, Issuing Bank or Agent to
payment pursuant to Section 4.10 or 4.11 as promptly as practicable after it
obtains knowledge thereof, specifying the event giving rise to such claim and
setting out in reasonable detail an estimate of the basis and computation of
such claim. Upon receipt of such notice, the Borrower shall compensate such
Lender, Issuing Bank or such Agent in accordance with Section 4.10 or 4.11, as
the case may be, from the date such costs are incurred (including, without
limitation, where such costs are retroactively applied); provided, however,
that, notwithstanding anything to the contrary contained in said Sections 4.10
and 4.11, the Borrower shall not be required to compensate a Lender, the
Issuing Bank or an Agent for cost incurred earlier than 150 days prior to the
date of the notice required to be delivered to the Borrower pursuant to this
Section 4.14.
ARTICLE 5.
Conditions Precedent
5.1 Conditions to Restatement Effective Date. The occurrence of
the Restatement Effective Date pursuant to Section 11.14, and the obligation of
each Lender to convert and/or make Loans hereunder, and the obligation of the
Issuing Bank to issue Letters of Credit hereunder, in each case on the
Restatement Effective Date, are subject at the time of the occurrence of the
Restatement Effective Date to the satisfaction of the following conditions:
(a) Execution of Agreement; Notes. On or prior to the
Restatement Effective Date, (i) this Agreement shall have been
executed and delivered as provided in Section 11.14 and (ii) there
shall have been delivered to (x) the Administrative Agent for the
account of each Lender the appropriate A Term Note, B Term Note and
Revolving Note and (y) the Swingline Bank, the Swingline Note, in
each case executed by the Borrower and in the amount, maturity and as
otherwise provided herein.
(b) Officer's Certificate. On the Restatement Effective Date,
the Administrative Agent shall have received a certificate dated such
date signed by an appropriate officer of the Borrower stating that
all of the applicable conditions set forth in Sections 5.1(e), (f),
(g) and (r) and 5.2 exist as of such date.
(c) Opinions of Counsel. On the Restatement Effective Date,
the Administrative Agent shall have received opinions, addressed to
the Agents, the Collateral Agent and each of the Lenders and dated
the Restatement Effective Date, (i) from Davis Polk & Wardwell,
special counsel to Holdings and the Borrower, which opinion shall
cover the matters contained in Exhibit C-1 and such other matters
incident to the transactions contemplated herein as the Agents may
reasonably request, (ii) from Timothy M. Davis, Esq., General Counsel
to Holdings and the Borrower, which opinion shall cover the matters
contained in Exhibit C-2 and such other matters incident to the
transactions contemplated herein as the Agents may reasonably request
and (iii) from local counsel (reasonably satisfactory to the Agents)
legal opinions each of which (x) shall be in form and substance
reasonably satisfactory to the Agents and (y) shall cover perfection
of the security interests granted pursuant to the Collateral
Documents and such other matters incident to the transactions
contemplated herein as the Agents may reasonably request.
(d) Corporate Proceedings. (i) On the Restatement Effective
Date, the Administrative Agent shall have received from the Borrower
and each New Credit Party a certificate, dated the Restatement
Effective Date, signed by the chairman, a vice-chairman, the
president or any vice-president of such New Credit Party and attested
to by the secretary or any assistant secretary of such New Credit
Party, in the form of Exhibit D with appropriate insertions, together
with copies of the Governing Documents of such New Credit Party and
the resolutions of such New Credit Party referred to in such
certificate and all of the foregoing (including each Governing
Documents) shall be reasonably satisfactory to the Agents.
(ii) On the Restatement Effective Date, the Administrative
Agent shall have received a certificate from each Credit Party (other
than the New Credit Parties) (x) certifying that there were no
changes, or providing the text of any changes, to the Governing
Documents of such Credit Party as delivered pursuant to Section
5.1(d) of the Original Credit Agreement, (y) to the effect that such
Credit Party is in good standing in its respective state of
organization and in those states where such Credit Party conducts
business and (z) providing the resolutions adopted by such Credit
Party with respect to the actions contemplated by this Agreement
(including, without limitation, with respect to the amendment and
restatement of this Agreement, and the obligations of such Credit
Party with respect to the increased extensions of credit pursuant
hereto), and all of the foregoing shall be acceptable to the Agents.
(iii) On the Restatement Effective Date, all corporate and
legal proceedings and all instruments and agreements in connection
with the transactions contemplated by this Agreement and the other
Transaction Documents shall be reasonably satisfactory in form and
substance to the Agents, and the Administrative Agent shall have
received all information and copies of all certificates, documents
and papers, including good standing certificates, bring-down
certificates and any other records of corporate proceedings and
governmental approvals, if any, which either Agent reasonably may
have requested in connection therewith, such documents and papers,
where appropriate, to be certified by proper corporate or
governmental authorities.
(e) Existing Term Loan Agreement. (i) On the Restatement
Effective Date and concurrently with the incurrence of any Loans, all
loans under the Existing Term Loan Agreement shall have been paid in
full, together with interest thereon, and all other amounts owing
pursuant to the Existing Term Loan Agreement shall have been paid in
full, and the Administrative Agent shall have received evidence in
form, scope and substance satisfactory to them that the matters set
forth in this Section 5.1(e) have been satisfied at such time.
(ii) On the Restatement Effective Date and concurrently with
the incurrence of any Loans, the creditors under the Existing Term
Loan Agreement shall have terminated and released all security
interests in and Liens on the capital stock of, and assets owned by,
Holdings, the Borrower, and their respective Subsidiaries, and the
Administrative Agent shall have received all such releases as may
have been requested by the Administrative Agent, which releases shall
be in form and substance satisfactory to the Administrative Agent.
(f) Approvals. On the Restatement Effective Date, all
necessary governmental and third party approvals in connection with
the Transaction shall have been obtained and remain in effect, and
evidence thereof shall have been provided to the Administrative
Agent, and all applicable waiting periods shall have expired without
any action being taken by any competent authority which restrains,
prevents or imposes, in the judgment of the Required Lenders or any
Agent, materially adverse conditions upon the consummation of the
Transaction.
(g) Litigation. On the Restatement Effective Date, there
shall be no actions, suits or proceedings pending or threatened (a)
with respect to this Agreement or any other Transaction Document or
(b) which any Agent or the Required Lenders shall determine is
reasonably likely to have a Material Adverse Effect.
(h) Subsidiaries Guaranty. On the Restatement Effective Date,
each of the Wholly-Owned Subsidiaries of the Borrower (each, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors") shall have duly authorized, executed and delivered an
Amended and Restated Subsidiaries Guaranty in the form of Exhibit E
(as modified, amended, restated or supplemented from time to time in
accordance with the terms thereof and hereof, the "Subsidiaries
Guaranty"), and the Subsidiaries Guaranty shall be in full force and
effect.
(i) Pledge Agreement. On the Restatement Effective Date,
Holdings, the Borrower and each Subsidiary Guarantor shall have duly
authorized, executed and delivered an Amended and Restated Pledge
Agreement in the form of Exhibit F (as modified, amended, restated or
supplemented from time to time in accordance with the terms thereof
and hereof, the "Pledge Agreement"), and shall have delivered to the
Collateral Agent, as pledgee thereunder, all of the Pledged
Securities referred to therein, endorsed in blank in the case of
promissory notes or accompanied by executed and undated stock powers
in the case of capital stock, and the Pledge Agreement shall be in
full force and effect.
(j) Security Agreement. On the Restatement Effective Date,
Holdings, the Borrower and each of the Subsidiary Guarantors shall
have duly authorized, executed and delivered an Amended and Restated
Security Agreement in the form of Exhibit G (as modified, amended,
restated or supplemented from time to time in accordance with the
terms thereof and hereof, the "Security Agreement") together with:
(A) executed copies of Financing Statements (Form UCC-1)
in appropriate form for filing under the UCC of each
jurisdiction as may be necessary to perfect the security
interests purported to be created by the Security Agreement;
(B) evidence of the completion of all other filings of,
or with respect to, the Security Agreement as may be necessary
or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the
Security Agreement; and
(C) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to
perfect and protect the security interests purported to be
created by the Security Agreement have been taken.
(k) Mortgages Amendments; etc. On the Restatement Effective
Date, the Collateral Agent shall have received:
(i) fully executed counterparts of amendments (the
"Mortgage Amendments"), in form and substance satisfactory to
the Agents and the Required Lenders, to each of the Existing
Mortgages, together with evidence that counterparts of each of
the Mortgage Amendments have been delivered to the title
company insuring the Lien of the Existing Mortgages for
recording in all places to the extent necessary or desirable,
in the judgment of the Collateral Agent, effectively to
maintain a valid and enforceable first priority mortgage lien
(subject to Permitted Encumbrances relating thereto) on the
Existing Mortgaged Properties in favor of the Collateral Agent
(or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors; and
(ii) endorsements reasonably satisfactory to the
Collateral Agent to each Existing Mortgage Policy assuring the
Collateral Agent that each Existing Mortgage is a valid and
enforceable first priority mortgage lien on the respective
Existing Mortgaged Properties, free and clear of all defects
and encumbrances except Permitted Encumbrances.
(l) Canadian Debenture and Canadian Pledge Agreement. On the
Restatement Effective Date, the Borrower shall have duly authorized,
executed and delivered to the Collateral Agent and there shall have
been registered against title to the real property therein described
(i) and Amended and Restated Debenture in the form of Exhibit H-1 (as
modified, amended, restated or supplemented from time to time in
accordance with the terms thereof and hereof, the "Canadian
Debenture"), together with:
(A) executed copies of financial statements in
appropriate form for filing under the PPSA of each jurisdiction
as may be necessary to perfect the security interests purported
to be created by the Canadian Debenture;
(B) evidence of the completion of all other filings of,
or with respect to, the Canadian Debenture as may be necessary
or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the
Canadian Debenture; and
(C) evidence that all other actions necessary or, in
the reasonable opinion of the Collateral Agent, desirable to
perfect and protect the security interests purported to be
created by the Canadian Debenture have been taken;
and (ii) an Amended and Restated Pledge Agreement in the form of
Exhibit H-2 (as modified, amended, restated or supplemented from time
to time in accordance with the terms thereof and hereof, the
"Canadian Pledge Agreement").
(m) Insurance Policies. On the Restatement Effective Date, the
Administrative Agent shall have received evidence (including, without
limitation, insurance certificates of insurance complying with the
requirements of Section 7.8 for the business and properties of the
Borrower), in form and substance satisfactory to the Agents.
(n) Plans; Collective Bargaining Agreements; Existing
Indebtedness Agreements; Shareholders' Agreements; Management
Agreements; Employment Agreements; Tax Sharing Agreements. (I) On
or prior to the Restatement Effective Date, there shall have been
delivered to the Administrative Agent true and correct copies,
certified as true and complete by an appropriate officer of the
Borrower of the following documents (in each case except to the
extent already delivered or made available for review by the
Administrative Agent on or prior to the Original Effective Date), in
each case as same will be in effect on the Restatement Effective Date
after the consummation of the Transaction:
(i) to the extent requested by the Agents prior to the
Restatement Effective Date, any Plans and for each such Plan
(i) that is a "single-employer plan" (as defined in Section
4001(a)(15) of ERISA), the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled
actuary and the Schedule B, "Actuarial Information" to the IRS
Form 5500 (Annual Report) most recently filed with the Internal
Revenue Service and (ii) that is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA), each of the documents
referred to in clause (i) either in the possession of Holdings,
the Borrower, any Subsidiary or any ERISA Affiliate or
reasonably available thereto from the sponsor or trustees of
such Plan, and any other plans or arrangements for the benefit
of employees or senior management of Holdings or the Borrower
and any profit sharing plans and deferral compensation plans of
Holdings or the Borrower (collectively, together with any
agreements, plans or arrangements referred to in Section
5.1(p)(i) of the Original Credit Agreement and any amendments
thereto referred to in Section 5.1(n)(II), the "Employee Benefit
Plans");
(ii) to the extent requested by the Agent prior to the
Restatement Effective Date, any collective bargaining
agreements or any other similar agreement or arrangements
covering the employees of Holdings, the Borrower or any of
their Subsidiaries (collectively, together with any agreements
referred to in Section 5.1(p)(ii) of the Original Credit
Agreement and any amendments thereto referred to in Section
5.1(n)(II), the "Collective Bargaining Agreements");
(iii) all agreements evidencing or relating to the
Existing Indebtedness (collectively, together with any
agreements referred to in Section 5.1(p)(iii) of the Original
Credit Agreement and any amendments thereto referred to in
Section 5.1(n)(II), the "Existing Indebtedness Agreements");
(iv) all agreements entered into by Holdings or any of
its Subsidiaries (x) governing the terms and relative rights of
its capital stock or (y) with any shareholders relating to such
entity with respect to their capital stock (collectively,
together with any agreements referred to in Section 5.1(p)(iv)
of the Original Credit Agreement and any amendments thereto
referred to in Section 5.1(n)(II), the "Shareholders'
Agreements");
(v) any material agreements (or the forms thereof) with
members of, or with respect to, the management of Holdings or
any of its Subsidiaries (collectively, together with any
agreements referred to in Section 5.1(p)(v) of the Original
Credit Agreement and any amendments thereto referred to in
Section 5.1(n)(II), the "Management Agreements");
(vi) any employment agreements (or the forms thereof
together with a list of employees who are parties to such
agreements) entered into by Holdings or any of its Subsidiaries
(collectively, together with any agreements referred to in
Section 5.1(p)(vi) of the Original Credit Agreement and any
amendments thereto referred to in Section 5.1(n)(II), the
"Employment Agreements"); and
(vii) any tax sharing, tax allocation and other similar
agreement entered into by Holdings or any Subsidiary of
Holdings (collectively, together with any agreements referred
to in Section 5.1(p)(vii) of the Original Credit Agreement and
any amendments thereto referred to in Section 5.1(n)(II), the
"Tax Sharing Agreements");
all of which Employee Benefit Plans, Collective Bargaining
Agreements, Existing Indebtedness Agreements, Shareholders'
Agreements, Management Agreements, Employment Agreements and Tax
Sharing Agreements shall be in the form delivered to counsel to the
Agents on or prior to the date hereof or otherwise in form and
substance reasonably satisfactory to the Agents and shall be in full
force and effect on the Restatement Effective Date.
(II) On or prior to the Restatement Effective Date, the
Administrative Agent shall have received (i) a certification from the
appropriate officer of the Borrower that all agreements and plans
referenced in Section 5.1(p) of the Original Credit Agreement,
previously delivered (or made available) to the Administrative Agent
by each Credit Party, remain in full force and effect (or specifying
which of such agreements and plans do not remain in full force and
effect) and (ii) any amendments to the agreements and plans referred
to in Section 5.1(p) of the Original Credit Agreement.
(o) Balance Sheet. On the Restatement Effective Date,
Holdings shall have delivered to the Agents the unaudited pro forma
consolidated balance sheet of Holdings and its Subsidiaries as at
March 31, 1998, after giving effect to the Transaction.
(p) Solvency Certificate. On the Restatement Effective Date,
the Lenders shall have received a solvency certificate from the Chief
Financial Officer of Holdings, certifying that, after giving effect
to the Transaction, Holdings and its Subsidiaries taken as a whole
and the Borrower and its Subsidiaries taken as a whole will not be
insolvent and will not be rendered insolvent by the indebtedness
incurred or guaranteed in connection therewith, will not be left with
unreasonably small capital with which to engage in its or their
businesses and will not have incurred debts beyond its or their
ability to pay such debts as they mature.
(q) Payment of Fees. On the Restatement Effective Date, all
costs, fees and expenses, and all other compensation contemplated by
this Agreement, due to the Agents and the Lenders (including, without
limitation, legal fees and expenses) shall have been paid to the
extent due.
(r) Original Credit Agreement. On the Restatement Effective
Date, (i) each Continuing Lender shall have converted its Original
Term Loans and Original Revolving Loans as contemplated by Sections
2.1(b) and 2.2, as the case may be, (ii) all Original Loans being
converted as described in preceding clause (i) which were outstanding
as Eurodollar Rate Loans shall, at the time of such conversion, be
converted into Base Rate Loans or borrowed as Eurodollar Rate Loans in
accordance with the requirements of Section 2.4(a)(iii), it being
understood and agreed that the Borrower shall (x) take such actions
as may be necessary to ensure that the Lenders participate in each
Borrowing of outstanding B Term Loans pro rata on the basis of their
respective B Term Loan Commitments (as in effect on the Restatement
Effective Date), (y) take such actions as may be necessary to ensure
that the Lenders participate in each Borrowing of outstanding
Revolving Loans pro rata on the basis of their respective Revolving
Loan Commitments (as in effect on the Restatement Effective Date) and
(z) pay breakage or similar costs in accordance with the provisions
of Section 4.10 of the Original Credit Agreement in connection
therewith, (iii) all Original Loans (except to the extent converted
pursuant to preceding clause (i)) shall be repaid in full on the
Restatement Effective Date and, if any Original Loans were at such
time maintained as Eurodollar Rate Loans, all breakage or similar
costs owing in connection therewith shall have been paid as
contemplated by Section 4.10 of the Original Credit Agreement, (iv)
each Original Lender and BTCC shall have received payment in full of
all amounts (including any accrued and unpaid interest and fees) then
due and owing to it under the Original Credit Agreement in respect of
its Original Loans being repaid, (v) all accrued interest on all
outstanding extensions of credit pursuant to the Original Credit
Agreement, and all regularly accruing fees pursuant to the Original
Credit Agreement, shall be repaid in full on, and through, the
Restatement Effective Date (whether or not same would otherwise be
then due and payable pursuant to the Original Credit Agreement) and
(vi) the Administrative Agent shall have received evidence in form,
scope and substance satisfactory to it that the matters set forth in
this Section 5.1(r) have been satisfied on such date.
(s) Projections. On the Restatement Effective Date, there
shall have been delivered to the Agents and the Lenders detailed
projected consolidated financial statements of Holdings and its
Subsidiaries after giving effect to the Transaction, for the period
from April 1, 1998 to March 31, 2005 (the "Projections"), which
Projections (x) shall reflect the forecasted financial conditions and
income and expenses of Holdings and its Subsidiaries after giving
effect to the Transaction and (y) shall be reasonably satisfactory to
the Agents.
5.2 Conditions to Each Loan and Letter of Credit. On the date
of the making of any Loan or the issuance of any Letter of Credit (including
any Credit Events occurring on the Restatement Effective Date but excluding
any Mandatory Borrowing), both immediately before and after giving effect
thereto and to the application of the proceeds therefrom, the following
statements shall be true and correct (and each delivery or deemed delivery of
each Notice of Borrowing and Letter of Credit Request, and the acceptance by
the Borrower of the proceeds of such Loans or issuance of such Letter of
Credit, shall constitute a representation and warranty by the Borrower that on
the date of such Loans or issuance of such Letter of Credit immediately before
and after giving effect thereto and to the application of the proceeds
therefrom, such statements are true):
(a) The representations and warranties contained in this
Agreement and in each other Credit Document shall be true and correct
in all material respects on and as of the date of such Loans or
issuance of such Letter of Credit as though made on and as of such
date, except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on
and as of such earlier date); and
(b) No event shall have occurred and be continuing, or would
result from such Loans or the issuance of any Letter of Credit or the
application of the proceeds thereof, which would constitute a Default
or an Event of Default.
The occurrence of the Restatement Effective Date and the
acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Lenders that
all of the applicable conditions specified above exist as of the date of such
Credit Event. All of the certificates, legal opinions and other documents and
papers referred to in this Section 5, unless otherwise specified, shall be
delivered to the Administrative Agent at its address specified in Section 11.5
hereof for the account of each of the Lenders and, except for the Notes, in
sufficient counterparts or copies for each of the Lenders and shall be in form
and substance as specified herein or otherwise satisfactory to the Agents.
ARTICLE 6.
Representations and Warranties
To induce the Lenders to enter into this Agreement and to make
Loans and issue and/or participate in the Letters of Credit provided for
herein, each of Holdings and the Borrower makes the following representations,
warranties and agreements, as to itself and as to each of its Subsidiaries,
with the Lenders, all of which shall survive the execution and delivery of
this Agreement, the making of the Loans and the issuance of the Letters of
Credit (with the occurrence of each Credit Event being deemed to constitute a
representation and warranty that the matters specified in this Article 6 are
true and correct in all material respects on and as of the date of each such
Credit Event, unless stated to relate to a specific earlier date):
6.1 Corporate Status. Each Credit Party (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate power and authority
to own its property and assets and to transact the business in which it is
engaged and presently proposes to engage and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified except where the failure to be so qualified,
when aggregated with all other such failures, would not reasonably be expected
to have a Material Adverse Effect.
6.2 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party
and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting the rights and remedies of creditors, (ii) federal
securities or other laws or regulations or public policy insofar as they may
restrict the enforceability of rights to indemnification and (iii) general
principles of equity (regardless of whether enforcement is sought in equity or
at law).
6.3 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will, after giving
effect to any waivers, conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Collateral
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of such Credit
Party or any of its Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, agreement or other instrument to which such Credit
Party or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject (including, without
limitation, the Senior Subordinated Note Documents) or (iii) will violate any
provision of the charter or By-Laws of Holdings, the Borrower or any of the
Borrower's Subsidiaries, except, in the case of clauses (i) and (ii) any
immaterial contravention, conflict, inconsistency, breach or default which is
not reasonably likely to adversely affect any Lender or have a Material
Adverse Effect.
6.4 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened with respect to
Holdings, the Borrower or any of the Borrower's Subsidiaries that, after
giving effect to expected insurance proceeds and indemnity payments, are
reasonably likely to have a Material Adverse Effect.
6.5 Use of Proceeds. (a) The proceeds of the Loans shall be
utilized (i) to effectuate the Refinancing, (ii) to pay certain fees and
expenses relating to the Transaction and (iii) for the ongoing working capital
needs and general corporate purposes of the Borrower and/or its Subsidiaries
(including to effect Permitted Acquisitions and Permitted JV Investments).
(b) No part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.6 Governmental Approvals. Except for the filing of the
Mortgage Amendments and continuation statements as required under the
Collateral Documents, no order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
foreign or domestic governmental or public body or authority, or any
subdivision thereof, is required to authorize or is required in connection
with (i) the execution, delivery and performance by each Credit Party of any
Credit Document or (ii) the legality, validity, binding effect or
enforceability of any Credit Document as against each Credit Party thereto.
6.7 Investment Company Act. None of Holdings, the Borrower or
any of the Borrower's Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
6.8 Public Utility Holding Company Act. None of Holdings, the
Borrower or any of the Borrower's Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
6.9 True and Complete Disclosure. (a) As supplemented to the
date hereof, all information (taken as a whole) (excluding (x) the Projections
furnished to the Lenders prior to the date hereof, which are covered below in
Section 6.9(b) and (y) the historical financial statements furnished to the
Lenders prior to the date hereof, which are covered below in Section 6.10(b))
furnished by or on behalf of Holdings or the Borrower in writing to any Agent
or any Lender for purposes of or in connection with this Agreement or the
Transaction does not, and all other such factual information (taken as a
whole) hereafter furnished by or on behalf of Holdings or the Borrower in
writing to any Agent or any Lender will be true and correct in all material
respects on the date as of which such information is dated or certified and
not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any material respect at such
time in light of the circumstances under which such information was provided.
(b) The Projections prepared by the Borrower prior to the date
hereof and furnished to the Lenders were prepared based on good faith
estimates and assumptions believed by the Borrower to be reasonable at the
time made, it being recognized by the Lenders that such projections as to
future events are not to be viewed as facts and necessarily were based upon
numerous assumptions with respect to industry performance, general business
and economic and competitive conditions and uncertainties, taxes and other
matters which are beyond the control of Holdings, the Borrower and the
Borrower's Subsidiaries, such that there can be no assurance that such
projections will be realized and actual results may differ from the projected
results.
(c) As of the Restatement Effective Date, there is no fact
known to any Credit Party (other than matters of general economic, political
or social nature) which materially and adversely affects the business,
property, assets, liabilities, financial condition or prospects of the
Borrower and its Subsidiaries taken as a whole which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Lenders for use in connection with the transactions contemplated hereby.
6.10 Financial Condition; Financial Statements. (a) On and as
of the Restatement Effective Date on a pro forma basis after giving effect to
the Transaction and all Indebtedness incurred, and to be incurred, and Liens
created and to be created, by each Credit Party in connection with this
Agreement, (w) the value of the assets of the Borrower, of the Borrower and
its Subsidiaries (on a consolidated basis) and Holdings and its Subsidiaries
(on a consolidated basis), at a fair valuation, would exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Borrower, of the
Borrower and its Subsidiaries (on a consolidated basis) and Holdings and its
Subsidiaries (on a consolidated basis), (x) the fair salable value of the
property of the Borrower, of the Borrower and its Subsidiaries (on a
consolidated basis) and Holdings and its Subsidiaries (on a consolidated
basis), will be greater than the amount that will be required to pay the
probable liability of the Borrower, of the Borrower and its Subsidiaries (on a
consolidated basis) and Holdings and its Subsidiaries (on a consolidated
basis), on their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured,
(y) the Borrower, the Borrower and its Subsidiaries (on a consolidated basis)
and Holdings and its Subsidiaries (on a consolidated basis), will be able to
pay their debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured, and (z) the Borrower,
the Borrower and its Subsidiaries (on a consolidated basis) and Holdings and
its Subsidiaries (on a consolidated basis), will not have unreasonably small
capital with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted following the
Restatement Effective Date.
(b) Holdings has furnished to the Lenders the following
financial statements, which have been prepared in accordance with GAAP
(except, in the case of the unaudited financial statements referred to below,
for the omission of footnotes and ordinary year end adjustments) consistently
applied throughout the periods involved: (i) Holdings' consolidated balance
sheet as of, and consolidated statements of operations, shareholders' equity
and cash flows for the fiscal year ended, March 31, 1997, audited by the
Auditors, and accompanied by an unqualified opinion in respect thereof, and
(ii) an unaudited consolidated balance sheet of Holdings as of, and unaudited
consolidated statements of operations, shareholders' equity and cash flows for
the nine-month period ending December 31, 1997. The financial statements
referred to in preceding clauses (i) and (ii) present fairly in all material
respects the respective consolidated financial condition of Holdings at the
dates of said financial statements and the results for the periods covered
thereby, subject, in the case of the unaudited financial statements, to normal
year-end adjustments. After giving effect to the Transaction, since March 31,
1997, there has occurred no Material Adverse Effect, and nothing has occurred
which is reasonably likely to result in a Material Adverse Effect.
6.11 Locations of Offices, Records and Inventory. The address
of the principal place of business and chief executive office of Holdings and
the Borrower as of the date hereof and as of the Restatement Effective Date is
set forth on Schedule III. The books and records of the Borrower, and all of
its chattel paper and records of Accounts, are maintained exclusively at the
locations listed on Schedule III. As of the date hereof and as of the
Restatement Effective Date, there is no jurisdiction in which the Borrower has
any chattel paper, records of Account and Inventory (except for Inventory in
transit) other than those jurisdictions identified on Schedule III. Schedule
III also contains a complete list of the legal names and addresses of each
facility or warehouse at which Inventory is stored as of the date hereof and
as of the Restatement Effective Date. None of the receipts received by the
Borrower from any warehouseman states that the goods covered thereby are to be
delivered to bearer or to the order of a named person other than the Borrower
or its Subsidiaries or to a named person and such named person's assigns.
6.12 Senior Indebtedness, etc. All Obligations pursuant to
this Agreement constitute "Senior Indebtedness" under, and as defined in, and
for all purposes of, the Senior Subordinated Notes Indenture. The Borrower
and its Restricted Subsidiaries have not more than $10.0 million of
outstanding Indebtedness under Section 4.03(b)(xiv) of the Senior Subordinated
Notes Indenture (other than Indebtedness pursuant to this Agreement). $15.0
million of Indebtedness pursuant to this Agreement is permitted under Section
4.03(b)(xiv) of the Senior Subordinated Notes Indenture.
6.13 Security Interests. On and after the Restatement
Effective Date, each of the Collateral Documents create, as security for the
Obligations, a valid and enforceable perfected security interest in and Lien
on all of the Collateral, superior to and prior to the rights of all third
persons and subject to no other Liens, other than (i) Permitted Liens and (ii)
as otherwise permitted under the Collateral Documents. At all times on or
after the Restatement Effective Date, the respective grantor under each
Collateral Document shall have good and marketable title to all the Collateral
subject thereto free and clear of all Liens other than Liens permitted under
Section 8.2. No filings or recordings are required in order to perfect the
security interests created under any Collateral Document except for filings or
recordings made as required in connection with any such Collateral Document.
6.14 Tax Returns and Payments. Each of Holdings, the Borrower
and each of their respective Subsidiaries has timely filed or caused to be
timely filed with the appropriate taxing authority, all material returns and
other material statements, forms and reports for taxes required to be filed by
or with respect to the income, properties or operations of Holdings, the
Borrower and/or any of their respective Subsidiaries. Such returns accurately
reflect all liability for material taxes of Holdings, the Borrower and their
respective Subsidiaries for the periods covered thereby. Each of Holdings,
the Borrower and their respective Subsidiaries has paid all material taxes
payable by it other than taxes which are not yet due and payable, and other
than those contested in good faith and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
Except as provided in Schedule V, there is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
Holdings or the Borrower, threatened by any authority regarding any taxes
relating to Holdings, the Borrower or any of their respective Subsidiaries.
Except as provided in Schedule V, as of the Restatement Effective Date, none
of Holdings, the Borrower or any of their respective Subsidiaries has entered
into an agreement or waiver or been requested to enter into an agreement or
waiver extending any statute of limitations relating to the payment or
collection of material taxes of Holdings, the Borrower or any of their
respective Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of Holdings, the Borrower or any of
their respective Subsidiaries not to be subject to the normally applicable
statute of limitations. None of Holdings, the Borrower or any of their
respective Subsidiaries have provided, with respect to themselves or property
held by them, any consent under Section 341 of the Code. None of Holdings,
the Borrower or any of their respective Subsidiaries has incurred, or will
incur, any material tax liability with respect to the Transaction and the
other transactions contemplated hereby.
6.15 Compliance with ERISA. (a) Except to the extent that
all events and obligations described in the following clauses of this Section
6.15 and then in existence would not, in the aggregate, be reasonably likely
to have a Material Adverse Effect; each Plan (other than a Multiemployer Plan)
is in substantial compliance with ERISA and the Code; to the knowledge of
Holdings, the Borrower, any Subsidiary of Holdings, or any ERISA Affiliate,
each Multiemployer Plan is in substantial compliance with ERISA and the Code;
no Reportable Event has occurred with respect to a Plan (other than a
Multiemployer Plan); no Multiemployer Plan is insolvent (as defined in Section
4245 of ERISA) or in reorganization (as defined in Section 4241 of ERISA); no
Plan (other than a Multiemployer Plan) has an Unfunded Current Liability; no
Plan (other than a Multiemployer Plan) has an accumulated or waived funding
deficiency or has applied for an extension of any amortization period within
the meaning of Section 412 of the Code or Section 302 of ERISA; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor the Borrower nor any
Subsidiary of Holdings nor any ERISA Affiliate has incurred any liability
which as of the date hereof has not been fully satisfied, to or on account of
a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the
Code or expects to incur any liability under any of the foregoing Sections with
respect to any Plan; no proceedings have been instituted to terminate or
appoint a trustee to administer any Plan; no condition exists which presents a
material risk to Holdings, the Borrower or any Subsidiary of Holdings or any
ERISA Affiliate of incurring a liability to or on account of a Plan pursuant
to the foregoing provisions of ERISA and the Code; using actuarial assumptions
and computation methods consistent with Part 1 of subtitle E of Title IV of
ERISA, there would be no liabilities of Holdings, the Borrower, any
Subsidiaries and any ERISA Affiliates to all Plans which are multiemployer
plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of the most recent Credit Event, which would
result in a Material Adverse Effect; no lien imposed under the Code or ERISA
on the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate
exists or is likely to arise on account of any Plan; and Holdings and its
Subsidiaries do not maintain or contribute to any employee welfare benefit
plan (as defined in Section 3(1) of ERISA) which provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which could reasonably be expected to
have a Material Adverse Effect. With respect to Plans that are Multiemployer
Plans the representations and warranties in this Section 6.15, other than any
made with respect to liability under Section 4201 or 4204 of ERISA, are made
to the knowledge of the Borrower.
(b) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. Neither Holdings, nor the Borrower nor any of their Subsidiaries
has incurred any obligation in connection with the termination of or withdrawal
from any Foreign Pension Plan. No Foreign Pension Plan has any unfunded
liabilities, either on a "going concern" or on a "winding up" basis and
determined in accordance with all applicable laws and actuarial practices and
using actuarial assumptions and methods that are reasonable in the
circumstances. No event has occurred or will occur and no condition exists or
will exist with respect to any Foreign Pension Plan that has resulted or could
reasonably be expected to result in any Foreign Pension Plan having its
registration revoked or being wound up (in whole or in part) or refused for
the purposes of any applicable pension benefits or tax laws or being placed
under the administration of any relevant pension benefits regulatory authority
or being required to pay any taxes or penalties under any applicable pension
benefits or tax laws.
6.16 Subsidiaries. Schedule VI hereto lists each Subsidiary
of the Borrower, and the direct and indirect ownership interest of the
Borrower therein, in each case existing on the Restatement Effective Date.
Holdings is the record and beneficial owner of 100% of the capital stock of
the Borrower. On the Restatement Effective Date, the only material asset of
Holdings is the capital stock of the Borrower owned by it, and on such date
Holdings owns no other capital stock of any other Person.
6.17 Patents, etc. Holdings and each of its Subsidiaries have
obtained all material patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as presently
conducted and as proposed to be conducted except where a failure to do so
could not reasonably be expected to have a Material Adverse Effect.
6.18 Compliance with Statutes, etc. (a) Each of Holdings,
the Borrower and the Borrower's Subsidiaries is in compliance with all
applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property,
except such noncompliances as are not likely to, in the aggregate, have a
Material Adverse Effect.
(b) Each of Holdings, the Borrower and the Borrower's
Subsidiaries is in compliance with all applicable Environmental Laws governing
its business for which failure to comply is likely to have a Material Adverse
Effect, and none of Holdings, the Borrower or any of the Borrower's
Subsidiaries is liable for any material penalties, fines or forfeitures for
failure to comply with any of the foregoing in the manner set forth above.
All licenses, permits, registrations or approvals required for the business of
Holdings, the Borrower and each of the Borrower's Subsidiaries, as conducted
as of the Restatement Effective Date, under any Environmental Law have been
secured and each of Holdings, the Borrower and the Borrower's Subsidiaries is
in material compliance therewith, except such licenses, permits, registrations
or approvals the failure to secure or to comply therewith is not likely to
have a Material Adverse Effect. None of Holdings, the Borrower or any of the
Borrower's Subsidiaries is in any respect in noncompliance with, breach of or
default under any applicable writ, order, judgment, injunction, or decree to
which any of Holdings, the Borrower or such Subsidiary is a party or which
would affect the ability of Holdings, the Borrower or such Subsidiary to
operate its business or other Real Property and no event has occurred and is
continuing which, with the passage of time or the giving of notice or both,
would be reasonably likely to constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliances, breaches or
defaults as are not likely to, in the aggregate, have a Material Adverse
Effect. There are as of the Restatement Effective Date no Environmental
Claims pending or, to the best knowledge of the Borrower, threatened, which
(a) question the validity, term or entitlement of Holdings, the Borrower or
any of the Borrower's Subsidiaries for any permit, license, order or
registration required for the operation of any facility which Holdings, the
Borrower or any of the Borrower's Subsidiaries currently operates and (b)
wherein an unfavorable decision, ruling or finding would be reasonably likely
to have a Material Adverse Effect. To the best knowledge of the Borrower,
there are no facts, circumstances, conditions or occurrences on any Real
Property of Holdings, the Borrower or any of the Borrower's Subsidiaries or on
any property adjoining or adjacent to any such Real Property, that are
reasonably expected (i) to form the basis of an Environmental Claim against
Holdings, the Borrower any of the Borrower's Subsidiaries or any Real Property
of Holdings, the Borrower or any of the Borrower's Subsidiaries, or (ii) to
cause such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually or in the aggregate are not likely to have a
Material Adverse Effect.
(c) Hazardous Materials have not at any time been (i)
generated, used, treated or stored on, or transported to or from, by Holdings,
the Borrower or any of the Borrower's Subsidiaries, any Real Property of
Holdings, the Borrower or any of the Borrower's Subsidiaries, except Hazardous
Materials generated, used, treated or stored on, or transported to or from,
any Real Property of Holdings, the Borrower or any of the Borrower's
Subsidiaries in the ordinary course of business and in compliance with
Environmental Laws ("Permitted Materials") or (ii) released or disposed of
(not including the sale of Inventory) on any such Real Property in violation
of any Environmental Laws or in any quantity or amount which would require any
clean-up, removal, treatment or remediation, in each case where such
occurrence or event is likely to have a Material Adverse Effect.
6.19 Properties. Holdings and each of its Subsidiaries has
good title to all material properties owned by it free and clear of all Liens,
other than as permitted by Section 8.2. Schedule VII contains a true and
complete list of each Real Property owned, if any, and each Real Property
leased by Holdings, the Borrower or any of the Borrower's Subsidiaries on the
Restatement Effective Date and the type of interest therein held by Holdings,
the Borrower or the respective such Subsidiary.
6.20 Labor Relations; Collective Bargaining Agreements. (a)
Set forth on Schedule VIII hereto is a list (including dates of termination)
of all collective bargaining or similar agreements between or applicable to
Holdings or any of its Subsidiaries and any union, labor organization or other
bargaining agent in respect of the employees of Holdings and/or any of its
Subsidiaries on the Restatement Effective Date.
(b) Neither Holdings nor any of its Subsidiaries is engaged in
any unfair labor practice that is reasonably likely to have a Material Adverse
Effect. There is (i) no significant unfair labor practice complaint pending
against Holdings, the Borrower or any of the Borrower's Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, before the
National Labor Relations Board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is pending on the Restatement Effective Date against Holdings, the
Borrower or any of the Borrower's Subsidiaries or, to the best knowledge of
the Borrower, threatened against any of them, (ii) no significant strike,
labor dispute, slowdown or stoppage is pending against Holdings, the Borrower
or any of the Borrower's Subsidiaries or, to the best knowledge of the
Borrower, threatened against Holdings, the Borrower or any of the Borrower's
Subsidiaries, except (with respect to any matter specified in clause (i) and
(ii) above, either individually or in the aggregate) such as is not reasonably
likely to have a Material Adverse Effect.
6.21 Restrictions on Subsidiaries. Except for restrictions
contained in the Credit Documents, the Senior Subordinated Note Documents and
in agreements with respect to the Existing Indebtedness, as of the Restatement
Effective Date there are no contractual or consensual restrictions on the
Borrower or any of its Wholly-Owned Subsidiaries which prohibit or otherwise
restrict (i) the transfer of cash or other assets (x) between the Borrower and
any of its Wholly-Owned Subsidiaries or (y) between any Subsidiaries of the
Borrower or (ii) the ability of the Borrower or any of its Wholly-Owned
Subsidiaries to grant security interests to the Lenders in the Collateral.
6.22 Material Contracts. Neither the Borrower nor any of its
Subsidiaries is in breach of or in default under any Material Contract.
ARTICLE 7.
Affirmative Covenants
Holdings and the Borrower hereby covenant and agree that on the
Restatement Effective Date and thereafter, for so long as this Agreement is in
effect and until the Total Commitments have terminated, no Letters of Credit
or Notes are outstanding and the Term Loans, Revolving Loans, Swingline Loans
and Letter of Credit Obligations, together with interest, Fees, Expenses and
all other Obligations (other than any indemnities described in Section 11.8
hereof which are not then due and payable) incurred hereunder, are paid in
full:
7.1 Financial Information. Holdings and the Borrower shall
furnish to, or cause to be furnished to, the Lenders the following information
within the following time periods:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Holdings or the Borrower, as the case
may be, (i) audited Financial Statements as of the close of the
fiscal year and for the fiscal year, together with a comparison to
the Financial Statements for the prior year, in each case accompanied
by (A) report thereon of the Auditors unqualified as to scope, which
report shall state that such consolidated financial statements fairly
present the consolidated financial position of Holdings or the
Borrower, as the case may be, and each of its consolidated
Subsidiaries as at the date indicated and the results of their
operations and cash flow for the periods indicated in conformity with
GAAP (except as otherwise stated therein) and that the examination by
the Auditors has been made in accordance with generally accepted
auditing standards and (B) a written statement signed by the Auditors
stating that in the course of the regular audit of the business of
Holdings and the Borrower, which audit was conducted by the Auditors
in accordance with generally accepted auditing standards, the Auditors
have not obtained any knowledge of the existence of any Default or
Event of Default under any provision of Sections 8.4, 8.9, 8.10 and
8.11 of this Agreement, or, if such Auditors shall have obtained from
such examination any such knowledge, they shall disclose in such
written statement the existence of the Default or Event of Default
and the nature thereof, it being understood that such Auditors shall
not be required hereunder to perform any special audit procedures and
shall have no liability, directly or indirectly, to anyone for
failure to obtain knowledge of any such Default or Event of Default
and (ii) a compliance certificate substantially in the form of
Exhibit I along with a schedule in form reasonably satisfactory to the
Administrative Agent of the calculations used in determining, as of
the end of such fiscal year, whether the Borrower was in compliance
with Section 2.6(i) and the covenants set forth in Articles 7 and 8
of this Agreement for such year, the Leverage Ratio, the amount of
Excess Cash Flow for such fiscal year, the Retained Excess Cash Flow
Amount, Retained Equity Amount and the Available Basket Amount on the
date of such certificate. To the extent that Holdings' or the
Borrower's, as the case may be, annual report on Form 10-K contains
any of the foregoing items, the Lenders will accept such Form 10-K in
lieu of such items required to be furnished by Holdings or the
Borrower, as the case may be;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of Holdings or the Borrower, as the
case may be, (except the last fiscal quarter of any fiscal year), (i)
Financial Statements as at the end of such period and for the fiscal
year to date, together with a comparison to the Financial Statements
for the same periods in the prior year, all in reasonable detail and
duly certified (subject to the addition of footnotes and audit and
normal year-end adjustments) by the chief executive officer, chief
financial officer or vice president - corporate controller of
Holdings or the Borrower, as the case may be, as having been prepared
substantially in accordance with GAAP and (ii) a compliance
certificate substantially in the form of Exhibit I along with a
schedule in form reasonably satisfactory to the Administrative Agent
of the calculations used in determining, as of the end of such fiscal
quarter, whether the Borrower was in compliance with Section 2.6(i)
and the covenants set forth in Articles 7 and 8 of this Agreement for
such quarter, the Leverage Ratio, the Retained Excess Cash Flow
Amount, the Retained Equity Amount and the Available Basket Amount on
the date of such certificate. To the extent that Holdings' or the
Borrower's, as the case may be, quarterly report on Form 10-Q
contains any of the foregoing items, the Lenders will accept such
Form 10-Q in lieu of such items required to be furnished by Holdings
or the Borrower, as the case may be;
(c) as soon as available and in any event within 30 days after
the end of each month (except the last month of any fiscal quarter,
with respect to which such reports shall be delivered within 45 days
after the end of the month), a consolidated and consolidating balance
sheet for each of Holdings and the Borrower (provided that, so long
as Holdings owns all the capital stock of the Borrower, owns no other
significant assets and owns no capital stock of any other Subsidiary
or Unrestricted Subsidiary, separate financial statements for the
Borrower shall not be required pursuant to this clause (c)) as at the
end of such month and for the fiscal year to date and its
consolidated statements of operations and cash flows for such month
and for the fiscal year to date, together with a comparison to the
balance sheet, statement of operations and statement of cash flows
for the same periods in the prior year, all in reasonable detail and
duly certified (subject to the addition of footnotes and audit and
normal year-end adjustments) by the chief executive officer, chief
financial officer or vice president -corporate controller of Holdings
or the Borrower, as the case may be, as having been prepared
substantially in accordance with GAAP;
(d)(i) not later than 45 days after the end of each fiscal
year, monthly projections of the financial condition and results of
operations of Holdings and its Subsidiaries, and the Borrower and its
Subsidiaries (provided, however, so long as Holdings owns all the
capital stock of the Borrower, owns no other significant assets and
owns no capital stock of any other Subsidiary or Unrestricted
Subsidiary, separate projections for the Borrower and its
Subsidiaries shall not be required to be furnished pursuant to this
clause (d)) for the following fiscal year and (ii) not later than 180
days after the end of each fiscal year, annual projections for the
Persons described in preceding clause (d)(i) for each subsequent
fiscal year through and including the fiscal year in which the B TL
Maturity Date occurs, including, but not limited to, a projected
consolidated balance sheet and projected consolidated statements of
operations and cash flows, for such fiscal years;
(e) promptly and in any event within five Business Days after
becoming aware of the occurrence of a Default or Event of Default, a
certificate of the chief executive officer or chief financial officer
of the Borrower specifying the nature thereof and the Borrower's
proposed response thereto, each in reasonable detail;
(f) within 30 days after the end of each month (except the
last month of any fiscal quarter, with respect to which such reports
shall be delivered within 45 days after the end of the month), a
comparison of actual results of operations, cash flow and capital
expenditures for Holdings and its Subsidiaries, and for the Borrower
and its Subsidiaries if the Borrower is furnishing separate monthly
financial statements pursuant to Section 7.1(c) at such time, for
such month and for the period from the beginning of the current
fiscal year through the end of such month (i) with amounts projected
for such month and for the period from the beginning of the current
fiscal year through the end of such month pursuant to Section
7.1(d)(i) above and (ii) with actual results of operations, cash flow
and capital expenditures for Holdings and its Subsidiaries, or the
Borrower and its Subsidiaries, as the case may be, for the same
periods of the prior fiscal year;
(g) promptly upon the earlier of the mailing or filing
thereof, copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual
reports, quarterly reports, registration statements and any other
filings or other communications made by the either of the Borrower or
Holdings to holders of its publicly traded securities, to the holders
of its Senior Subordinated Notes or the Securities Exchange
Commission from time to time pursuant to the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended;
(h) promptly and in any event after becoming aware of the
occurrence of any of the following events:
(i) any Material Contract of the Borrower or any of its
Subsidiaries is terminated or amended or any new Material
Contract is entered into which is reasonably likely to have a
Material Adverse Effect (in which event the Borrower shall
provide the Administrative Agent with a copy of such Material
Contract); or
(ii) any of the material terms (other than price) upon
which material suppliers of the Borrower or any of its
Subsidiaries do business with the Borrower or such Subsidiary
are changed or amended the results of which are reasonably
likely to have a Material Adverse Effect; or
(iii) any order, judgment or decree in excess of $100,000
(after reasonably expected insurance and indemnity recovery)
shall have been entered against Holdings, the Borrower or any
of its Subsidiaries or any of their respective properties or
assets; or
(iv) any notification of violation of any Requirement of
Law shall have been received by Holdings, the Borrower or any
of its Subsidiaries from any Governmental Authority the results
of which are reasonably likely to have a Material Adverse
Effect;
(i) promptly and in any event within five Business Days after
the receipt thereof, copies of any "management letter" or similar
letter received by Holdings, the Borrower or the board of directors
(or committee thereof) of either such Person from its Auditors; and
(j) from time to time, such further information regarding the
Collateral, business affairs and financial condition of Holdings, the
Borrower and/or each of the Borrower's Subsidiaries as the
Administrative Agent may reasonably request.
7.2 Corporate Franchises. Holdings will, and will cause each
of its Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, material rights and
authority to do business, provided that any transaction permitted by Section
8.1 will not constitute a breach of this Section 7.2, and provided further,
that Holdings shall not be required to preserve, with respect to itself, any
material right or authority to do business and with respect to any of its
Subsidiaries, any such existence, material right or authority to do business
if Holdings shall reasonably determine that such preservation is no longer
desirable in the ordinary course of business, and the loss thereof shall not
be reasonably likely to have a Material Adverse Effect.
7.3 Compliance with Statutes, etc. (a) Holdings and the
Borrower will, and will cause each of their respective Subsidiaries to, comply
with all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable Environmental Laws) other than those the non-compliance
with which (individually or in the aggregate) would not have a Material
Adverse Effect. Neither Holdings nor any of its Subsidiaries will generate,
use, treat, store, release or dispose of, or permit the generation, use,
treatment, storage, release or disposal of Hazardous Materials on any of its
Real Property, or transport or permit the transportation of Hazardous
Materials to or from any such Real Property, except for quantities used or
stored at such Real Properties in material compliance with all applicable
Environmental Laws and required in connection with the normal operation, use
and maintenance of such Real Property or the operation of the business of the
Borrower and its Subsidiaries. If required to do so under any applicable
Environmental Law, the Borrower agrees to undertake, and agrees to cause each
of its Subsidiaries to undertake, any cleanup, removal, remedial or other
action necessary to remove and clean up any Hazardous Materials from any Real
Property in accordance with the requirements of all such applicable
Environmental Laws and in accordance with orders and directives of all
governmental authorities; provided that neither Holdings nor any of its
Subsidiaries shall be required to take any such action where same is being
contested by appropriate legal proceedings in good faith by Holdings or such
Subsidiary.
(b) At the request of the Administrative Agent or the Required
Lenders at any time and from time to time, but in any event no more frequently
than once a year, the Borrower will provide, at the Borrower's sole cost and
expense, an environmental site assessment report concerning any Real Property
of the Borrower or any of its Subsidiaries, prepared by an environmental
consulting firm reasonably acceptable to the Administrative Agent, indicating
the presence or release of Hazardous Materials and the potential cost of any
removal or remedial action in connection with any Hazardous Materials on such
Real Property; provided, however, no such request may be made unless the
Administrative Agent or the Required Lenders reasonably believe that (i) the
Borrower or any of its Subsidiaries is in material noncompliance with any
Environmental Law with respect to such Real Property and such noncompliance is
reasonably likely to result in a liability of the Borrower in excess of
$500,000 (after expected insurance and indemnity recovery) or (ii) an Event of
Default is in existence. If the Borrower fails to provide the same after sixty
(60) days' written notice, the Administrative Agent may order the same, and
the Borrower shall grant and does hereby grant, to the Administrative Agent
and the Lenders and their agents access to such Real Property at all
reasonable times and without unreasonably interfering with the Borrower's
operations and specifically grant the Administrative Agent and the Lenders an
irrevocable nonexclusive license, subject to the rights of tenants, to
undertake such an assessment all at the Borrower's sole expense.
7.4 ERISA. As soon as possible and, in any event, within
fifteen (15) days after Holdings, the Borrower or any of the Borrower's
Subsidiaries or any ERISA Affiliate knows or has reason to know of the
occurrence of any of the following events relating to a Plan, the Borrower
will deliver to each of the Lenders a certificate of the chief financial
officer of the Borrower setting forth details as to such occurrence and the
action, if any, that Holdings, the Borrower, such Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required
to be given to or filed with or by Holdings, the Borrower, such Subsidiary,
the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator
with respect thereto: that a Reportable Event has occurred (other than with
respect to a Plan which is a Multiemployer Plan) which could reasonably be
expected to result in material liability of Holdings, the Borrower, any of the
Borrower's Subsidiaries or any ERISA Affiliate; that, with respect to a Plan,
an accumulated funding deficiency has been incurred or an application will be
or has been made to the Secretary of the Treasury for a waiver or modification
of the minimum funding standard (including any required installment payments)
or an extension of any amortization period under Section 412 of the Code or
Section 302 of ERISA with respect to a Plan; that a contribution required to
be made to a Plan or Foreign Pension Plan by Holdings, the Borrower, any of
the Borrower's Subsidiaries or any ERISA Affiliate has not been timely made;
that a Plan has been or is reasonably expected to be terminated; that a Plan
that is a Multiemployer Plan has been or is reasonably expected to be
reorganized, partitioned or declared insolvent under Title IV of ERISA; that a
Plan, which is not a Multiemployer Plan, has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings may be or have
been instituted to terminate a Plan; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution of
Holdings, the Borrower, any of the Borrower's Subsidiaries or any ERISA
Affiliate to a Plan; or that Holdings, any Subsidiary or any ERISA Affiliate
will or is reasonably expected to incur any material liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or
4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA; or that
Holdings, the Borrower or any Subsidiary may incur any material liability
pursuant to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) that provides benefits to retired employees or other former employees
(other than as required by Section 601 of ERISA) or any employee pension
benefit plan (as defined in Section 3(2) of ERISA) as a result of the adoption
or amendment of any such plan. Upon the request of the Agent, Holdings will
deliver to each of the Lenders a complete copy of the annual report (Form
5500) of each Plan required to be filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Lenders pursuant to
the first sentence hereof, copies of any material notices received by
Holdings, the Borrower, any Subsidiary of Holdings or the Borrower or any
ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be
delivered to the Lenders no later than 15 Business Days after the date such
notice has been received by Holdings, the Borrower or such Subsidiary or the
ERISA Affiliate, as applicable.
7.5 Good Repair. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in
good repair, working order and condition, normal wear and tear excepted.
7.6 Books and Records. Holdings agrees to maintain, and to
cause each of its Subsidiaries to maintain, books and records pertaining to
the Collateral in such detail, form and scope as is consistent with good
business practice, and agrees that such books and records will reflect the
Lenders' interest in its Accounts. Holdings and the Borrower agree that the
Collateral Agent or its agents may enter upon the premises of Holdings or any
of its Subsidiaries at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at any time at
all during the continuance of an Event of Default, for the purposes of (i)
inspecting the Collateral, (ii) inspecting and/or copying (at the Borrower's
expense) any and all records pertaining thereto and (iii) discussing the
affairs, finances and business of Holdings and the Borrower with any officers,
employees and directors of Holdings and the Borrower or with the Auditors (it
being understood that the Borrower shall be entitled to have a representative
present at any such discussions). The Borrower shall give the Collateral
Agent fifteen days prior written notice of any change in the location of any
facility owned or leased by the Borrower or any of its Subsidiaries where
Collateral is located or in the location of its chief executive office or
place of business from the locations specified in Schedule III, and to execute
in advance of such change, cause to be filed and/or delivered to the
Collateral Agent any financing statements, Collateral Access Agreements or
other documents required by the Administrative Agent, all in form and
substance reasonably satisfactory to the Administrative Agent. The Borrower
agrees to advise the Administrative Agent promptly, in sufficient detail, of
any substantial change relating to the type, quantity or quality of the
Collateral, or any event (other than a change in price) which is reasonably
likely to have an adverse effect on the value of the Collateral or on the
security interests granted to the Lenders therein.
7.7 Additional Security; Further Assurances; etc. (a) (i)
Each of Holdings and Borrower will, and will cause each of its Wholly-Owned
Domestic Subsidiaries (and subject to Section 7.15, each of its Wholly-Owned
Foreign Subsidiaries) to, grant to the Collateral Agent, for the benefit of
the Lenders and the other Secured Creditors described in the Collateral
Documents, security interests and mortgages in such assets and properties of
Holdings, the Borrower or such Wholly-Owned Subsidiary as are not covered by
the original Collateral Documents or as may be requested from time to time by
the Required Lenders (the "Additional Security Documents"). Such security
interests and mortgages shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Required Lenders and shall (except
as otherwise consented to by the Required Lenders) constitute valid and
enforceable perfected security interests superior to and prior to the rights
of all third Persons and subject to no other Liens, except such Liens as are
permitted by Section 8.2. The Additional Security Documents or other
instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect,
preserve and protect the Liens, in favor of the Collateral Agent for the
benefit of the Lenders and the other respective Secured Creditors, required to
be granted pursuant to the Additional Security Documents and all taxes, fees
and other charges payable in connection therewith shall have been paid in
full. Notwithstanding the foregoing, this Section 7.7(a) shall not apply to
any operating lease which by its term prevents the respective lessee from
granting a security interest therein, provided that Holdings, the Borrower or
the respective Wholly-Owned Subsidiary shall use reasonable good faith efforts
(x) at the time it enters into any such lease, to have any such restrictive
terms eliminated and (y) if it is unsuccessful, upon any subsequent request of
the Required Lenders to negotiate the removal or waiver of any such provision;
provided, however, that Holdings, the Borrower or such Wholly-Owned
Subsidiary, as the case may be, shall not be required to pay any consideration
(other than de minimis amounts) or incur any material obligation or relinquish
any material right in connection with the elimination, removal or waiver of
any such restriction.
(b) Holdings and the Borrower shall, and shall cause each of
their respective Subsidiaries to, defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
Holdings and the Borrower shall, and shall cause their respective Subsidiaries
to, comply with the requirements of all state, provincial and federal laws in
order to grant to the Lenders valid and perfected first priority security
interests in the Collateral, subject only to Permitted Liens. The Collateral
Agent is hereby authorized by Holdings and the Borrower to file any UCC
financing statements covering the Collateral whether or not the signature of
Holdings or the Borrower appears thereon. Holdings and the Borrower shall do
whatever the Collateral Agent may reasonably request, from time to time, to
effect the purposes of this Agreement and the other Credit Documents,
including without limitation, filing notices of liens, UCC financing statements
and amendments, renewals and continuations thereof; cooperating with the
Collateral Agent's representatives; keeping stock records; obtaining waivers
from landlords and mortgagees and from warehousemen and their landlords and
mortgagees (provided that Holdings or the Borrower, as the case may be, shall
not be required to pay any consideration (other than de minimis amounts) or
incur any material obligation or relinquish any material right in connection
with any such waiver); and, paying claims which might, if unpaid, become a
Lien on the Collateral other than a Permitted Lien. Furthermore, the Borrower
shall cause to be delivered to the Collateral Agent such opinions of counsel,
title insurance and other related documents as may be reasonably requested by
the Collateral Agent to assure itself that this Section 7.7 has been complied
with.
(c) Each of Holdings and the Borrower agrees that each action
required by this Section 7.7 shall be completed as soon as possible, but in
no event later than 60 days after such action is requested to be taken by the
Administrative Agent, the Collateral Agent or the Required Lenders.
7.8 Insurance; Casualty Loss. Schedule IX hereto sets forth a
true and complete listing of all insurance maintained by Holdings and each of
its Subsidiaries as of the Restatement Effective Date. Holdings agrees to
maintain, and to cause each of its Subsidiaries to maintain, public liability
insurance, third party property damage insurance and replacement value (or
such higher coverage as Holdings may obtain) insurance on the Collateral under
such policies of insurance, with such insurance companies, in such amounts and
covering such risks in at least such amounts and against at least such risks as
are described on Schedule IX, or as are at all times satisfactory to the
Collateral Agent in its commercially reasonable judgment. All policies
covering the Collateral are to name the Collateral Agent as an additional
insured and the Collateral Agent as loss payee in case of loss, as its
interests may appear, and are to contain such other provisions as the
Collateral Agent may reasonably require to fully protect the Lenders' interest
in the Collateral and to any payments to be made under such policies. The
Borrower shall provide written notice to the Administrative Agent of the
occurrence of any of the following events within ten Business Days after the
occurrence of such event: any Collateral is (i) damaged or destroyed, or
suffers any other loss, or (ii) condemned, confiscated or otherwise taken, in
whole or in part, or the use thereof is otherwise diminished so as to render
impracticable or unreasonable the use of such Collateral or to materially
diminish its marketability, and in either case the amount of the damage,
destruction, loss or diminution in value is in excess of $1,000,000
(collectively, a "Casualty Loss"). The Borrower and/or its respective
Subsidiary shall diligently file and prosecute their claim or claims for any
award or payment in connection with a Casualty Loss.
7.9 Taxes. Holdings and the Borrower will, and will cause
each of their respective Subsidiaries to, pay and discharge all material
income and other material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, or payable by it pursuant to the Tax Sharing Agreements,
prior to the date on which penalties or interest attach thereto; provided, that
neither Holdings nor any of its Subsidiaries shall be required to pay any such
tax, assessment, charge or levy which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves (in the good faith
judgment of the management of such Person) with respect thereto in accordance
with GAAP. In no event shall the Borrower and its Subsidiaries make payments
with respect to Federal income taxes computed on a consolidated, combined or
unitary basis which exceed the relevant amounts required to be paid by them
pursuant to the Tax Sharing Agreement as furnished to the Administrative Agent
prior to the Restatement Effective Date.
7.10 End of Fiscal Years; Fiscal Quarters. Holdings will, for
financial reporting purposes, cause its, and each of its Wholly-Owned
Subsidiaries', (x) fiscal years to end on March 31 of each year and (y) fiscal
quarters to end on June 30, September 30, December 31 and March 31 of each
year.
7.11 Real Estate Appraisals. In the event that the
Administrative Agent or the Required Lenders at any time after the Restatement
Effective Date determine in its or their good faith discretion (as a result of
events or circumstances affecting the Administrative Agent or the Required
Lenders after the Restatement Effective Date) that real estate appraisals
satisfying the requirements set forth in 12 C.F.R., Part 34-Subpart C, or any
successor or similar statute, rule, regulation, guideline or order (any such
appraisal a "Required Appraisal") are or were required to be obtained, or
should be obtained, in connection with any Mortgaged Property or Mortgaged
Properties, then, within 120 days after receiving written notice thereof from
the Administrative Agent or the Required Lenders, as the case may be, such
Required Appraisals shall be delivered, at the expense of the Borrower, to the
Administrative Agent, which Required Appraisals, and the respective appraiser,
shall be satisfactory to the Administrative Agent.
7.12 Corporate Separateness. Holdings shall take, and shall
cause each of its Subsidiaries and Unrestricted Subsidiaries to take, all
actions as is necessary to keep the operations of Holdings, the Borrower and
the Borrower's Subsidiaries separate and apart from those of any Unrestricted
Subsidiaries, including, without limitation, ensuring that all customary
formalities regarding their respective corporate existence, including holding
regular board of directors' and shareholders' meetings and maintenance of
corporate offices and records, are followed. None of Holdings, the Borrower
nor any of the Borrower's Subsidiaries shall make any payment to a creditor of
any Unrestricted Subsidiary in respect of any liability of any Unrestricted
Subsidiary. All financial statements provided to creditors shall clearly
evidence the corporate separateness of Holdings, the Borrower and the
Borrower's Subsidiaries from any Unrestricted Subsidiaries, and Holdings, the
Borrower and the Borrower's Subsidiaries shall maintain their own respective
payroll (if any) and separate books of account and bank accounts from
Unrestricted Subsidiaries. Each Unrestricted Subsidiary shall pay its
respective liabilities, including all administrative expenses, from its own
separate assets, and assets of Holdings, the Borrower and the Borrower's
Subsidiaries shall at all times be separately identified and segregated from
the assets of Unrestricted Subsidiaries. Finally, none of Holdings, the
Borrower nor any of the Borrower's Subsidiaries nor any Unrestricted
Subsidiaries shall take any action, or conduct its affairs in a manner which
is likely to result in the corporate existence of any Unrestricted Subsidiary
being ignored, or in the assets and liabilities of any Unrestricted Subsidiary
being substantively consolidated with those of Holdings, the Borrower or any
of the Borrower's Subsidiaries in a bankruptcy, reorganization or other
insolvency proceeding.
7.13 Permitted Transactions. (a) Subject to the provisions of
this Section 7.13 and Sections 8.1(i) and 8.5(d) and the requirements contained
in the definition of Permitted Acquisition or Permitted JV Investment (as
applicable), the Borrower may from time to time effect Permitted Transactions,
so long as (in each case except to the extent the Required Lenders otherwise
specifically agree in writing in the case of a specific Permitted Transaction):
(i) no Default or Event of Default shall be in existence at the time of the
consummation of the proposed Permitted Transaction or immediately after giving
effect thereto; (ii) the Borrower shall have given the Administrative Agent and
the Lenders at least 5 Business Days' prior written notice of such Permitted
Transaction; (iii) calculations are made by the Borrower of compliance with the
covenants contained in Sections 8.9, 8.10 and 8.11 for the period of four
consecutive fiscal quarters (taken as one accounting period) most recently ended
prior to the date of such Permitted Transaction (each, a "Calculation Period"),
on a Pro Forma Basis as if the respective Permitted Transaction (as well as all
other Permitted Transactions theretofore consummated after the first day of such
Calculation Period) had occurred on the first day of such Calculation Period,
and such recalculations shall show that such financial covenants would have been
complied with if the Permitted Transaction had occurred on the first day of such
Calculation Period (for this purpose, if the first day of the respective
Calculation Period occurs prior to the Restatement Effective Date, calculated as
if the covenants contained in said Sections 8.9, 8.10 and 8.11 had been
applicable from the first day of the Calculation Period); (iv) based on good
faith projections prepared by the Borrower for the period from the date of the
consummation of the Permitted Transaction to the date which is one year
thereafter, the level of financial performance measured by the covenants set
forth in Sections 8.9, 8.10 and 8.11 shall be better than or equal to such level
as would be required to provide that no Default or Event of Default would exist
under the financial covenants contained in Sections 8.9, 8.10 and 8.11 of this
Agreement as compliance with such covenants would be required through the date
which is one year from the date of the consummation of the respective Permitted
Transaction; (v) all representations and warranties contained herein and in the
other Credit Documents shall be true and correct in all material respects with
the same effect as though such representations and warranties had been made on
and as of the date of such Permitted Transaction (both before and after giving
effect thereto), unless stated to relate to a specific earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date; (vi) the Borrower provides to the
Administrative Agent and the Lenders as soon as available but not later than 5
Business Days after the execution thereof, a copy of any executed purchase
agreement or similar agreement with respect to such Permitted Transaction; (vii)
the Borrower certifies, and the Administrative Agent shall have been satisfied
in its reasonable discretion, that the proposed Permitted Transaction could not
reasonably be expected to result in materially increased tax (other than taxes
on future net income), ERISA, environmental or other contingent liabilities with
respect to Holdings and its Subsidiaries; (viii) calculations are made by the
Borrower of the Permitted Transaction Cost of the respective Permitted
Transaction and of compliance with the Available Basket Amount then in effect
and (ix) the Borrower shall have delivered to the Administrative Agent an
officer's certificate executed by an Authorized Officer of the Borrower,
certifying to the best of his knowledge, compliance with the requirements of
preceding clauses (i) through (v), inclusive, and clauses (vii) and (viii) and
containing the calculations required by the preceding clauses (iii), (iv), (vii)
and (viii).
(b) At the time of each Permitted Transaction involving the
creation or acquisition of a Subsidiary, or the acquisition of capital stock
or other equity interests of any Person, the capital stock or other equity
interests thereof created or acquired in connection with such Permitted
Transaction shall be pledged for the benefit of the Secured Creditors pursuant
to (and to the extent required by) the Pledge Agreement.
(c) Holdings shall cause each Subsidiary which is formed to
effect, or is acquired pursuant to, a Permitted Transaction to comply with,
and to execute and deliver, all of the documentation required by, Sections
7.7, 7.14 and 8.17, to the satisfaction of the Administrative Agent.
(d) The consummation of each Permitted Transaction shall be
deemed to be a representation and warranty by Holdings and the Borrower that
the certifications by the Borrower (or by one or more of its Authorized
Officers) pursuant to Section 7.13(a) are true and correct and that all
conditions thereto have been satisfied and that same is permitted in
accordance with the terms of this Agreement, which representation and warranty
shall be deemed to be a representation and warranty for all purposes hereunder,
including, without limitation, Sections 6 and 9.
7.14 New Wholly-Owned Subsidiaries. To the extent the
Borrower creates or acquires any Wholly-Owned Subsidiary after the Restatement
Effective Date in accordance with the other provisions of this Agreement, each
such Wholly-Owned Subsidiary (other than a Foreign Subsidiary, except to the
extent otherwise required pursuant to Section 7.15), shall be required to
become a party to the Subsidiaries Guaranty by executing a counterpart thereof
or enter into an amendment thereto satisfactory to the Administrative Agent
and, if requested by the Administrative Agent or the Required Lenders, shall
be required to enter into the Collateral Documents entered into by the entities
which were Subsidiary Guarantors on the Restatement Effective Date, in each
case by entering into counterparts thereof or amendments thereto, in form and
substance reasonably satisfactory to the extent requested by the
Administrative Agent and the Collateral Agent. In connection with the
foregoing to the extent requested by the Administrative Agent or the
Collateral Agent, each such new Wholly-Owned Subsidiary shall be required to
cause to be delivered such relevant documentation (including opinions of
counsel) of the type described in Section 5.1 as such new Subsidiary would
have had delivered if it were a New Credit Party on the Restatement Effective
Date.
7.15 Foreign Subsidiaries Security. If following a change in
the relevant sections of the Code or the regulations, rules, rulings, notices
or other official pronouncements issued or promulgated thereunder, counsel for
the Borrower acceptable to the Administrative Agent and the Required Lenders
does not within 30 days after a request from the Administrative Agent or the
Required Lenders deliver evidence, in form and substance mutually satisfactory
to the Administrative Agent and the Borrower, with respect to any Foreign
Subsidiary which has not already had all of its equity interests pledged
pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of
the total combined voting power of all equity interests of such Foreign
Subsidiary entitled to vote, and (y) of any promissory note issued by such
Foreign Subsidiary to Holdings or any of its Wholly-Owned Domestic
Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement, (iii) the
entering into by such Foreign Subsidiary of a pledge agreement in
substantially the form of the Pledge Agreement and (iv) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiaries Guaranty, in any such case would cause the undistributed earnings
of such Foreign Subsidiary as determined for Federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary's United States parent
for Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding equity interests or any promissory notes so issued by
such Foreign Subsidiary, in each case not theretofore pledged pursuant to the
Pledge Agreement shall be pledged to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Pledge Agreement (or another pledge
agreement in substantially similar form, if needed), and in the case of a
failure to deliver the evidence described in clause (ii) or (iii) above, such
Foreign Subsidiary shall execute and deliver the Security Agreement (or
another security agreement in substantially similar form, if needed) or the
Pledge Agreement (or another pledge agreement in substantially similar form,
if needed), granting the Secured Creditors a security interest in all of such
Foreign Subsidiary's assets or the equity interests and promissory notes owned
by such Foreign Subsidiary, as the case may be, and securing the Obligations
of the Borrower under the Credit Documents and under any Interest Rate
Agreement and, in the event the Subsidiaries Guaranty shall have been executed
by such Foreign Subsidiary, the obligations of such Foreign Subsidiary
thereunder, and in the case of a failure to deliver the evidence described in
clause (iv) above, such Foreign Subsidiary shall execute and deliver the
Subsidiaries Guaranty (or another guaranty in substantially similar form, if
needed), guaranteeing the Obligations of the Borrower under the Credit
Documents and under any Interest Rate Agreement, in each case to the extent
that the entering into such Security Agreement, Pledge Agreement or
Subsidiaries Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 7.15 to
be in form and substance reasonably satisfactory to the Administrative Agent
and the Required Lenders.
ARTICLE 8.
Negative Covenants
Holdings and the Borrower hereby covenant and agree that
(although, notwithstanding anything to the contrary contained in this Article
8, the consummation of the Transaction shall be permitted in accordance with
the respective documentation delivered to the Administrative Agent on or prior
to the Restatement Effective Date pursuant to Section 5.1) as of the
Restatement Effective Date, and thereafter, for so long as this Agreement is
in effect and until the Total Commitments have terminated, no Letter of Credit
or Notes are outstanding and the Term Loans, Revolving Loans, Swingline Loans
and Letter of Credit Obligations, together with interest, Fees, Expenses and
all other Obligations (other than any indemnities described in Section 11.8
hereof which are not then due and payable) incurred hereunder, are paid in
full:
8.1 Consolidation, Merger, Sale or Purchase of Assets, etc.
Holdings and the Borrower will not, and will not permit any of their
respective Subsidiaries to, wind up, liquidate or dissolve its affairs, or
enter into any transaction of merger or consolidation, sell or otherwise
dispose of all or any part of its property or assets (other than inventory,
obsolete equipment, excess equipment no longer needed in the conduct of
business or equipment being replaced with other equipment, in each case in the
ordinary course of business) or purchase, lease or otherwise acquire (in one
transaction or a series of related transactions) all or any part of the
property or assets of any Person (other than (i) to replace obsolete property
or assets or other equipment disposed of in compliance with this Section 8.1
and (ii) purchases, leases or other acquisitions of goods, inventory and
equipment, and operating leases of property, in each case, in the ordinary
course of business) or agree to do any of the foregoing at any future time,
except that the following shall also be permitted:
(a) Capital Expenditures to the extent within the limitations
set forth in Section 8.4;
(b) the investments, acquisitions and transfers or
dispositions of properties permitted pursuant to Section 8.5;
(c) any Wholly-Owned Subsidiary of the Borrower may be merged
or consolidated with or into, or be liquidated into, the Borrower or
any other Wholly-Owned Subsidiary of the Borrower (so long as the
Borrower or any other Wholly-Owned Subsidiary of the Borrower is the
surviving corporation), or all or any part of the business,
properties and assets of the Borrower or any Wholly-Owned Subsidiary
may be conveyed, leased, sold or transferred to the Borrower or any
Subsidiary Guarantor;
(d) to finance the acquisition of new equipment purchased
pursuant to Section 8.4(a), the Borrower or the respective Subsidiary
which acquired same may, within 180 days after the date of the
acceptance of the respective equipment, enter into a sale-leaseback
transaction with respect thereto on arms'-length terms, so long as
(x) the Borrower or the respective Subsidiary which enters into such
sale-leaseback transaction receives cash in an amount not less than
95% of the cost of the respective equipment subject to the
sale-leaseback transaction and (y) the entering into of the
respective sale-leaseback transaction does not violate the
requirements of the proviso to Section 8.4(a);
(e) the Borrower and its Subsidiaries may enter into sales
(but not pursuant to sale-leaseback transactions, which shall only be
entered into in accordance with preceding clause (d)) of their
respective properties or assets in exchange for consideration
equivalent to the fair market value of all such properties or assets
so sold; provided that (i) the aggregate amount of disposition
proceeds from all such sales of properties or assets shall not exceed
$2,500,000 in any fiscal year of the Borrower, (ii) the consideration
received in exchange for any sale pursuant to this clause (e) shall
be required to include cash in an amount not less than 80% of the
fair market value of the properties or assets being sold and (iii) to
the extent the aggregate Net Sale Proceeds from all sales pursuant to
this clause (e) and following clause (f) in any fiscal year of the
Borrower exceed $500,000, such excess Net Sale Proceeds shall be
applied in accordance with the requirements of Section 2.6(i);
(f) the Borrower may, at any time when no Default or Event of
Default is in existence (or will exist after giving effect thereto),
sell 100% of its direct and indirect equity interests in Sullivan
Media in exchange for consideration equivalent to the fair market
value of the equity interests so sold; provided that (i) the
consideration received in exchange for any sale pursuant to this
clause (f) shall be required to include cash in an amount not less
than 80% of the fair market value of the equity interests so sold and
(ii) to the extent the aggregate Net Sale Proceeds from all sales
pursuant to this clause (f) and preceding clause (e) in any fiscal
year of the Borrower exceed $500,000, such excess Net Sale Proceeds
shall be applied in accordance with the requirements of Section
2.6(i);
(g) the Borrower may permit the U.S. Postal Service to occupy
part of its property in the manner consistent with past practices of
the Borrower;
(h) Holdings may sell or otherwise dispose of its interests in
any Unrestricted Subsidiary, so long as none of Holdings, the
Borrower or any of the Borrower's Subsidiaries provides any
indemnities in respect of any such sale or disposition; and
(i) the Borrower and its Wholly-Owned Domestic Subsidiaries
may make Permitted Acquisitions on any date in an amount not to
exceed the Available Basket Amount on such date (after giving effect
to all prior and contemporaneous adjustments thereto, except as a
result of such Permitted Acquisition), so long as such Permitted
Acquisitions are effected in accordance with the relevant
requirements of Section 7.13 and the component definitions as used
therein.
Notwithstanding anything to the contrary contained above, in no event shall
Holdings or the Borrower sell or otherwise dispose of any of their interests
in any Subsidiary, except as provided in clause (c) or in a sale otherwise
permitted above so long as, in connection with such sale, 100% of the capital
stock of the respective Subsidiary owned by Holdings, the Borrower and its
other Subsidiaries is sold. To the extent the Required Lenders waive the
provisions of this Section 8.1 with respect to the sale of any Collateral, or
any Collateral is sold as permitted by this Section 8.1, such Collateral in
each case shall be sold free and clear of the Liens in favor of the Lenders
created by the Collateral Documents and the Collateral Agent shall take such
actions as it deems appropriate in connection therewith or may be reasonably
requested by the Borrower to evidence such Lien release, in each case at the
Borrower's expense.
8.2 Liens. Holdings and the Borrower will not, and will not
permit any of their respective Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon or with respect to (i) the capital stock of the
Borrower or (ii) any property or assets of any kind (real or personal,
tangible or intangible) of Holdings, the Borrower or any of their respective
Subsidiaries, whether now owned or hereafter acquired, or sell any such
property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable or notes with recourse to Holdings, the Borrower or any of their
respective Subsidiaries) or assign any right to receive income, or file or
permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except:
(a) Liens for taxes not yet due and payable or Liens for taxes
being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of Holdings or any
of its Subsidiaries imposed by law or which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, Liens in favor of
customs and revenue authorities to secure payment of customs duties
in connection with the importation of goods, and other similar Liens
arising in the ordinary course of business, and (x) which, if any
such property or asset is material, do not in the aggregate
materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of
Holdings or such Subsidiary or (y) which are being contested in good
faith by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the property or asset subject
to such Lien;
(c) Liens created by or pursuant to this Agreement or the
other Credit Documents;
(d) Liens existing on the Original Effective Date and listed
on Schedule X hereto without giving effect to any subsequent
extensions, renewals or replacements thereof; provided that, with
respect to any Lien listed on Schedule X hereto, if there is
indicated on said Schedule X a date for the required removal or
termination of such Lien, such Lien shall cease to be permitted on
the respective date so indicated;
(e) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (x) in connection
with liability insurance, workers' compensation, unemployment
insurance and other types of social security, or (y) to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of
business, in an aggregate amount (in the case of this clause (y)) not
to exceed $2,000,000 at any time outstanding (but excluding that
portion of any such bonds or other obligations described in this
clause (y) to the extent same are supported at such time by an
outstanding Letter of Credit);
(f) leases or subleases granted to third Persons not
interfering with the ordinary course of business of Borrower or any
of its Subsidiaries;
(g) Permitted Encumbrances;
(h) Liens which may be deemed to exist as a result of
sale-leaseback transactions permitted under Section 8.1(d), so long
as such Liens extend only to the property or assets so sold pursuant
to the respective sale-leaseback transaction;
(i) Liens (x) arising pursuant to purchase money mortgages
securing Indebtedness representing the purchase price (or financing
of the purchase price within 180 days after the respective purchase)
of property or other assets acquired by the Borrower (by purchase,
construction or otherwise), provided that (i) any such Liens attach
only to the assets so purchased, (ii) the Indebtedness secured by any
such Lien does not exceed 100% of the purchase price of the assets
being purchased and (iii) the Indebtedness secured thereby or any
refinancing thereof is permitted by Section 8.3(b); (y) created
pursuant to Capital Leases permitted pursuant to Section 8.3(b),
provided that (i) such Liens serve only to secure the payment of
Indebtedness arising under such Capitalized Lease Obligations and (y)
the Lien encumbering the asset giving rise to the Capitalized Lease
Obligation does not encumber any other asset of Holdings or any of
its Subsidiaries; or (z) on property or assets acquired pursuant to a
Permitted Transaction, or on property or assets of a Subsidiary of
the Borrower in existence at the time such Subsidiary is acquired
pursuant to a Permitted Transaction; provided that (i) any such Liens
were not created at the time of or in contemplation of the Permitted
Transaction, (ii) any such Lien does not attach to any other asset of
Holdings or any of its Subsidiaries and (iii) the Indebtedness
secured thereby is permitted by Section 8.3(i);
(j) any attachment or judgment Lien arising from a judgment
not giving rise to a Default or an Event of Default so long as such
Lien, if encumbering Collateral, has not attached to such Collateral
for more than 45 days and so long as no enforcement actions have
begun with respect to such Collateral;
(k) easements, rights-of-way, restrictions, encroachments,
licenses, zoning restrictions, and other similar charges or
encumbrances, in each case not interfering in any material respect
with the business of the Borrower and its Subsidiaries;
(l) non-consensual Liens which may arise or be created under
ERISA and under Environmental Laws that are being contested in good
faith and as to which adequate reserves have been established to the
extent required by GAAP and secure obligations that are not
reasonably likely to have a Material Adverse Effect, and which are
not reasonably likely to adversely affect the Collateral Agent's
rights with respect to the Collateral or the value thereof;
(m) Liens arising from (x) operating leases and the
precautionary UCC financing statement filings in respect thereof and
(y) equipment borrowed (but not in connection with, or as part of,
the financing thereof) from time to time in the ordinary course of
business and consistent with past practices and the precautionary UCC
financing statement filings in respect thereof; and
(n) Liens not encumbering Collateral, other than those Liens
described above, with respect to obligations not in excess of
$1,000,000 in the aggregate.
8.3 Indebtedness. Holdings and the Borrower will not, and
will not permit any of their respective Subsidiaries to, contract, create,
incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Capitalized Lease Obligations and purchase money
Indebtedness of the Borrower secured by Liens permitted by Section
8.2(i)(x) shall be permitted to be incurred and remain outstanding,
so long as the respective Capitalized Lease Obligations (including
Indebtedness evidenced by Capitalized Lease Obligations arising from
sale-leaseback transactions permitted under 8.1(d)) or purchase money
Indebtedness was incurred to finance Capital Expenditures made
pursuant to, and in accordance with the terms of, Section 8.4(a);
(c) Existing Indebtedness;
(d) Indebtedness under Interest Rate Agreements (x) entered
into with respect to Indebtedness outstanding under this Agreement or
(y) providing protection against fluctuations in currency values in
connection with the Borrower's or any of its Subsidiaries' operations
so long as the entering into of such Interest Rate Agreement is a
bona fide hedging activity (and not for speculative purposes) and in
the ordinary course of business;
(e) Indebtedness of the Borrower (and the senior subordinated
guaranty thereof by Holdings) evidenced by the Senior Subordinated
Notes in aggregate principal amount not to exceed $185,000,000, less
the amount of all principal repayments thereof effected after the
Original Effective Date (including as permitted by Section 8.12);
(f) Indebtedness of the Borrower or any of its Subsidiaries
owing to the Borrower or any of its Subsidiaries, in each case to the
extent making such loan was permitted in Section 8.5;
(g) Indebtedness of the Borrower or any of its Wholly-Owned
Subsidiaries evidenced by guarantees, performance bonds and surety
bonds incurred in the ordinary course of business for purposes of
insuring the performance of the Borrower or such Wholly-Owned
Subsidiary in an aggregate principal amount not to exceed at any time
outstanding $2,000,000 plus the amount thereof, if any, supported at
such time by outstanding Letters of Credit;
(h) drafts payable for payroll and ordinary expense items; and
(i) Indebtedness (including Permitted Acquired Debt) of the
Borrower or any of its Subsidiaries, other than Indebtedness
permitted under clauses (a) through (h) above, in an aggregate
principal amount not to exceed $5,000,000 at any time outstanding.
In addition to the foregoing, Holdings shall not permit any Unrestricted
Subsidiary to incur any Indebtedness or any other obligation having any
element of recourse to Holdings or any of its Subsidiaries or to any of its
assets or property.
8.4 Capital Expenditures. Holdings will not, and will not
permit any of its Subsidiaries to, make Capital Expenditures except that the
Borrower and its Subsidiaries shall be permitted to make Capital Expenditures
in compliance with this Section 8.4 (and notwithstanding anything to the
contrary contained elsewhere in this Agreement, Capital Expenditures pursuant
to Section 8.4(a) shall be measured from the first day of the fiscal year
ended March 31, 1999, even though a portion of such fiscal year has occurred
prior to the Restatement Effective Date):
(a) Capital Expenditures shall be permitted to be made by the
Borrower and its Subsidiaries, with respect to each period listed
below, in an aggregate amount not in excess of the corresponding
amount set forth below opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal year ending
March 31, 1999 $25,000,000
Fiscal year ending
March 31, 2000 $25,000,000
Fiscal year ending
March 31, 2001 $30,000,000
Fiscal year ending
March 31, 2002 $30,000,000
Each fiscal year
thereafter $35,000,000
</TABLE>
provided, however, that to the extent the maximum amount of Capital
Expenditures permitted to be made in any period listed above pursuant
to this clause (a), without giving effect to this proviso, exceeds
the aggregate amount actually made during such period, Capital
Expenditures (in addition to those listed above for such subsequent
period) may be made in the immediately subsequent period in the
amount of such excess; and
(b) In addition to Capital Expenditures permitted pursuant to
preceding clause (a), the Borrower and its Subsidiaries shall be
permitted to make Capital Expenditures (i) with the proceeds received
by the Borrower or any of its Subsidiaries from any Recovery Event to
replace or restore any properties or assets in respect of which such
proceeds were paid, in each case to the extent such proceeds are not
required to be applied pursuant to Section 2.6(k), provided that any
proceeds that are so used to make Capital Expenditures pursuant to
this clause (i) are, to the extent required by Section 2.6(k), used
within the period of time as is set forth in the respective officer's
certificate delivered pursuant to such Section 2.6(k), (ii) on any
date, so long as no Default or Event of Default then exists or would
exist after giving effect thereto and so long as the amount of the
respective Capital Expenditure does not exceed the Retained Excess
Cash Flow Amount on such date (before giving effect to any reduction
thereto as a result of the respective Capital Expenditure), (iii) on
any date, so long as no Default or Event of Default then exists or
would exist after giving effect thereto and so long as the amount of
the respective Capital Expenditure does not exceed the Retained
Equity Amount on such date (before giving effect to any reduction
thereto as a result of the respective Capital Expenditure) and (iv)
constituting Permitted Transactions effected in accordance with the
requirements of Sections 7.13, 8.1(i) and 8.5(d), as applicable.
8.5 Investments. Holdings and the Borrower will not, and will
not permit any of their respective Subsidiaries to, directly or indirectly,
lend money or credit or make advances to any Person, or purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any other Person, or purchase or own a futures
contract or otherwise become liable for the purchase or sale of any currency,
commodities or raw materials at a future date in the nature of a futures
contract, or acquire or hold any cash or Cash Equivalents (collectively,
"Investments"), or permit any investment to remain outstanding, or agree or
commit to make any Investment, except:
(a) the Borrower or any of its Subsidiaries may acquire and
hold receivables owing to it, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
the customary trade terms of the Borrower or such applicable
Subsidiary, as the case may be, and the Borrower and its Subsidiaries
may make and own Investments received in connection with the
bankruptcy or reorganization of suppliers and customers and in
settlements of delinquent obligations of and other disputes with,
customers and suppliers arising in the ordinary course of business;
(b) loans and advances to employees, officers and directors in
an aggregate principal amount not to exceed $2,500,000 at any time
outstanding shall be permitted;
(c) Investments existing on the Restatement Effective Date and
listed on Schedule XII hereto, without giving effect to any additions
thereto or replacements thereof, shall be permitted;
(d) the Borrower and its Wholly-Owned Domestic Subsidiaries
shall be permitted to make Permitted JV Investments on any date in an
amount not to exceed the Available Basket Amount on such date (after
giving effect to all prior and contemporaneous adjustments thereto,
except as a result of such Investment), it being understood and
agreed that to the extent the Borrower or one or more other Credit
Parties (after the respective Investment has been made) receives a
cash return from the respective Joint Venture of amounts previously
invested pursuant to this clause (d) (which cash return may be made
by way of repayment of principal in the case of loans and cash equity
returns (whether as a distribution, dividend or redemption) in the
case of equity investments), then the amount of such return of
investment shall, upon the Administrative Agent's receipt of a
certification of the amount of the return of investment from an
Authorized Officer, apply to increase the Available Basket Amount,
provided that the aggregate amount of increases to the Available
Basket Amount described above shall not exceed the amount of returned
investment and, in no event, shall the amount of the increases made
to the Available Basket Amount in respect of any Investment exceed
the amount previously invested pursuant to this clause (d);
(e) Holdings may make Investments in Unrestricted
Subsidiaries, so long as no portion of the amount used to make any
such Investment are received by it from the Borrower or any of the
Borrower's Subsidiaries;
(f) Investments in cash and Cash Equivalents shall be
permitted; provided that the aggregate amount of cash and Cash
Equivalents permitted to be held by Holdings and its Subsidiaries
shall not exceed $500,000 (exclusive of cash in accounts maintained
by the Borrower in Canada for the Borrower's Canadian printing plant
operations, so long as the aggregate amount of cash on deposit therein
at no time exceeds $1,000,000 (taking the Dollar Equivalent of
amounts expressed in Canadian dollars) for any period of three
consecutive Business Days during which Revolving Loans and/or
Swingline Loans are outstanding;
(g) Investments by the Borrower and/or its Subsidiaries
permitted under Section 8.1 and Capital Expenditures permitted under
Section 8.4 shall be permitted;
(h) non-cash consideration received by the Borrower or any of
its Subsidiaries in connection with any asset sale to the extent
permitted by Section 8.1;
(i) Investments which may be deemed to exist as a result of
the entering into of Interest Rate Agreements to the extent permitted
by Section 8.3(d);
(j) the Borrower and its Subsidiaries may purchase raw
materials in the ordinary course of business and consistent with past
practices (including pursuant to forward purchase agreements so long
as reasonably related to the Borrower's or its respective
Subsidiary's anticipated needs for such raw material in its production
process, and so long as such forward purchase agreements are not
speculative in nature and do not extend for a period longer than 180
days after the entering thereof);
(k) additional Investments may be made by the Borrower and its
Wholly-Owned Subsidiaries so long as the aggregate amount of
Investments made pursuant to this clause (k) after the Restatement
Effective Date does not exceed $1,000,000;
(l) additional Investments may be made by the Borrower or its
Wholly-Owned Subsidiaries, so long as the amount thereof does not
exceed the Retained Excess Cash Flow Amount at the time the
respective Investment is made (before giving effect to any reduction
thereto as a result of the making of the respective Investment); and
(m) additional Investments may be made by the Borrower or its
Wholly-Owned Subsidiaries at any time, so long as the amount thereof
does not exceed the Retained Equity Amount at the time the respective
Investment is made (before giving effect to the reduction thereto as
a result of the making of the respective Investment).
Notwithstanding anything to the contrary contained above, no Investment shall
be made pursuant to any of clauses (d), (k), (l) or (m) of this Section 8.5 at
any time when a Default or Event or Default is in existence or would exist
after giving effect thereto.
8.6 Dividends, etc. Holdings and the Borrower will not, and
will not permit any of their respective Subsidiaries to, declare or pay any
dividends (other than dividends payable solely in capital stock of the Person
paying such dividend) or return any capital to, its stockholders or authorize
or make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire,
directly or indirectly, for a consideration (other than consideration in the
form of capital stock of the Person paying the Dividend), any shares of any
class of its capital stock now or hereafter outstanding (or any warrants for
or options or stock appreciation rights in respect of any of such shares), or
set aside any funds for any of the foregoing purposes and Holdings will not
permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock of Holdings or the
Borrower now or hereafter outstanding (or any warrants for or options or stock
appreciation rights issued by such Person in respect of any such shares) (all
of the foregoing "Dividends"), except that:
(a) any Subsidiary of the Borrower may pay dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower which owns
any equity interests in the respective such Subsidiary;
(b) any Subsidiary of the Borrower which is not a Wholly-Owned
Subsidiary may pay dividends to its shareholders generally, so long
as the Borrower and/or any other Subsidiary of the Borrower which
owns equity interests in such Subsidiary receives at least its
proportionate share (based upon its respective equity interests) of
any dividend so paid;
(c) the Borrower may pay cash Dividends to Holdings in an
amount necessary and to the extent immediately used by Holdings to
(i) pay accrued fees and expenses arising from the Transaction, (ii)
pay taxes payable by Holdings (whether for itself alone or for itself
and its Subsidiaries), in each case to the extent then due and
payable and to the extent not otherwise paid by the Borrower pursuant
to the Tax Sharing Agreement, provided that in no event shall the
amount of payments made by the Borrower and its Subsidiaries pursuant
to the Tax Sharing Agreement (including for this purpose all payments
made pursuant to preceding clause (ii)) exceed the amounts required
to be paid by the Borrower pursuant to the Tax Sharing Agreement as
in effect on the Restatement Effective Date and without giving any
effect to any modifications thereto without the consent of the
Required Lenders, (iii) pay its operating expenses incurred in the
ordinary course of business and other corporate overhead costs and
expenses, including costs and expenses in connection with ongoing
reporting and related requirements, so long as the aggregate amount
of such payments does not exceed $250,000 in any fiscal year, and (iv)
so long as no Default or Event of Default then exists, pay the
repurchase price payable to any officer or employee (or their
estates) of Holdings, the Borrower or any of their respective
Subsidiaries, in respect of their stock or options to purchase stock
in Holdings, upon death, disability or termination of employment of
such officers and employees, provided, however, that the aggregate
amount of all such repurchases after the Restatement Effective Date
shall not exceed $2,000,000.
8.7 Transactions with Affiliates. Holdings will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions involving payments or property with a value in excess of
$100,000, whether or not in the ordinary course of business, with any
Affiliate other than (i) Permitted Affiliate Transactions, (ii) fees and
expenses set forth in Schedule IV, (iii) amounts payable under the contractual
agreements listed in Schedule IV, as in effect as of the date of this
Agreement, copies of which have been delivered to the Administrative Agent,
(iv) employment agreements entered into in the ordinary course of business,
(v) the payment of fees to any Person for financial, consulting or investment
banking services (including, without limitation, any underwriting discounts
and commissions and placement agent fees, but excluding management fees)
performed in the ordinary course of such Person's business, provided that the
amount of any such fees for any such service provided shall not exceed the
usual and customary fees of such Person for similar services rendered to third
parties, and (vi) any other transaction or series of transactions the terms
and conditions of which are substantially as favorable (or more favorable) to
Holdings or such Subsidiary as would be obtainable by Holdings or such
Subsidiary at the time in a comparable arm's-length transaction with a Person
other than an Affiliate. Except as expressly described on Schedule IV, (x) no
management or similar fees shall be payable by Holdings, the Borrower or the
respective Subsidiaries to any Person (other than to the Borrower) and (y) in
no event shall the Borrower and its Subsidiaries make payments in respect of
taxes computed on a consolidated, combined or unitary basis payable by the
Holdings' combined or affiliated group (within the meaning of Section 1504 of
the Code or comparable provision of state or local law) in excess of those
required to be paid pursuant to the Tax Sharing Agreement.
8.8 Changes in Business. (a) None of the Borrower or any of
its Subsidiaries will engage in any business other than Related Businesses.
(b) Holdings shall not engage in any business other than its
ownership of the capital stock of the Borrower and any Unrestricted
Subsidiaries established or acquired by it after the Restatement Effective
Date, provided that any Unrestricted Subsidiaries of Holdings shall be engaged
solely in Related Businesses. Holdings shall have no significant assets other
than its ownership interests as described in the immediately preceding sentence
and shall act as a holding company which shall not directly engage in any
business.
8.9 Minimum Consolidated EBITDA. Holdings will not permit
Consolidated EBITDA for any Test Period ended on a date set forth below, to be
less than the amount specified opposite such date below:
<TABLE>
<CAPTION>
Test Period Ended Minimum EBITDA
- ----------------- --------------
<S> <C>
June 30, 1998 $ 50,000,000
September 30, 1998 $ 50,000,000
December 31, 1998 $ 50,000,000
March 31, 1999 $ 52,500,000
June 30, 1999 $ 52,500,000
September 30, 1999 $ 52,500,000
December 31, 1999 $ 52,500,000
March 31, 2000 $ 55,000,000
June 30, 2000 $ 55,000,000
September 30, 2000 $ 57,500,000
December 31, 2000 $ 57,500,000
March 31, 2001 $ 57,500,000
June 30, 2001 $ 57,500,000
September 30, 2001 $ 60,000,000
December 31, 2001 $ 60,000,000
March 31, 2002 $ 60,000,000
June 30, 2002 $ 62,500,000
September 30, 2002 $ 62,500,000
December 31, 2002 $ 65,000,000
March 31, 2003 $ 65,000,000
June 30, 2003 $ 67,500,000
September 30, 2003 $ 67,500,000
December 31, 2003 $ 70,000,000
March 31, 2004 $ 70,000,000
June 30, 2004 $ 72,500,000
September 30, 2004 $ 72,500,000
December 31, 2004 $ 75,000,000
March 31, 2005 $ 75,000,000
</TABLE>
8.10 Consolidated Interest Coverage Ratio. Holdings will not
permit the Consolidated Interest Coverage Ratio for any Test Period ended on a
date set forth below to be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Test Period Ended Ratio
- ----------------- -----
<S> <C>
June 30, 1998 1.40:1.0
September 30, 1998 1.40:1.0
December 31, 1998 1.40:1.0
March 31, 1999 1.45:1.0
June 30, 1999 1.45:1.0
September 30, 1999 1.50:1.0
December 31, 1999 1.50:1.0
March 31, 2000 1.55:1.0
June 30, 2000 1.55:1.0
September 30, 2000 1.65:1.0
December 31, 2000 1.65:1.0
March 31, 2001 1.70:1.0
June 30, 2001 1.70:1.0
September 30, 2001 1.75:1.0
December 31, 2001 1.75:1.0
March 31, 2002 1.85:1.0
June 30, 2002 1.85:1.0
September 30, 2002 1.90:1.0
December 31, 2002 1.90:1.0
March 31, 2003 2.00:1.0
June 30, 2003 2.00:1.0
September 30, 2003 2.00:1.0
December 31, 2003 2.00:1.0
March 31, 2004 2.00:1.0
June 30, 2004 2.00:1.0
September 30, 2004 2.00:1.0
December 31, 2004 2.00:1.0
March 31, 2005 2.00:1.0
</TABLE>
Notwithstanding anything to the contrary contained above or elsewhere in this
Agreement, all calculations of compliance with this Section 8.10 shall be made
on a Pro Forma Basis.
8.11 Leverage Ratio. Holdings shall not permit the Leverage
Ratio on the last day of any fiscal quarter specified below to exceed the
respective ratio set forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Test Period Ended Ratio
- ----------------- -----
<S> <C>
June 30, 1998 6.000:1.0
September 30, 1998 6.000:1.0
December 31, 1998 6.000:1.0
March 31, 1999 5.875:1.0
June 30, 1999 5.875:1.0
September 30, 1999 5.750:1.0
December 31, 1999 5.750:1.0
March 31, 2000 5.625:1.0
June 30, 2000 5.625:1.0
September 30, 2000 5.500:1.0
December 31, 2000 5.375:1.0
March 31, 2001 5.250:1.0
June 30, 2001 5.250:1.0
September 30, 2001 5.125:1.0
December 31, 2001 5.125:1.0
March 31, 2002 5.000:1.0
June 30, 2002 5.000:1.0
September 30, 2002 4.875:1.0
December 31, 2002 4.875:1.0
March 31, 2003 4.750:1.0
June 30, 2003 4.750:1.0
September 30, 2003 4.625:1.0
December 31, 2003 4.625:1.0
March 31, 2004 4.500:1.0
June 30, 2004 4.500:1.0
September 30, 2004 4.500:1.0
December 31, 2004 4.500:1.0
March 31, 2005 4.500:1.0
</TABLE>
Notwithstanding anything to the contrary contained above or elsewhere in this
Agreement, all calculations of compliance with this Section 8.11 shall be made
on a Pro Forma Basis.
8.12 Limitation on Voluntary Payments; Preferred Stock;
Amendments or Modifications of Certain Agreements; etc. Holdings and the
Borrower will not, and will not permit any of their respective Subsidiaries
to: (i) make (or give any notice in respect of) any voluntary or optional
payment or prepayment of principal on or voluntary or optional redemption of
or acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities before
due for the purpose of paying when due), exchange, or purchase, redeem or
acquire for value (whether as a result of a Change of Control, the
consummation of asset sales or otherwise) any Senior Subordinated Notes or the
Indebtedness represented thereby, except that, so long as no Default or Event
of Default then exists or would exist after giving effect thereto, the
Borrower may prepay, redeem or repurchase Senior Subordinated Notes with the
net cash proceeds of one or more Public Equity Offerings, in each case to the
extent that such net cash proceeds have been contributed by Holdings to the
Borrower and are not required to be used by the Borrower to repay Term Loans
in accordance with the requirements of Section 2.6(g) and so long as the
Borrower has not theretofore increased the Retained Equity Amount by the
amount of such net cash proceeds, provided that any Senior Subordinated Notes
acquired pursuant to this clause (i) shall be cancelled by the Borrower and
returned by it to the trustee pursuant to the Senior Subordinated Note
Indenture for cancellation, and shall not be reissued, (ii) amend or modify,
or permit the amendment or modification of, any provision of the Senior
Subordinated Note Indenture or the Senior Subordinated Notes (other than, to
the extent no fees are paid in connection therewith, (w) modifications
requested by the trustee under the Senior Subordinated Note Indenture relating
to the Senior Subordinated Notes (which do not require any consent by the
holders of the Senior Subordinated Notes) that do not affect the subordination
provisions applicable thereto and do not otherwise adversely affect the rights
or remedies of or the benefits to the Agents or the Lenders, (x) any
relaxation of any covenant contained therein, (y) so long as no Default or
Event of Default exists pursuant to Section 9.1(a) or (e), any reduction in
the amount of any principal, interest, fees or other amounts due under the
documents relating to the Senior Subordinated Notes or (z) is a waiver of any
event of default thereunder), (iii) issue any preferred or preference stock
(other than Qualified Preferred Stock issued by Holdings) or (iv) amend,
modify or terminate, or permit the amendment, modification or termination of,
the Tax Sharing Agreement without the prior written consent of the Required
Lenders.
8.13 Issuance of Subsidiary Stock. The Borrower will not
permit any of its Subsidiaries directly or indirectly to issue, sell, assign,
pledge or otherwise encumber or dispose of any shares of its capital stock or
other equity securities (or warrants, rights or options to acquire shares or
other equity securities) of such Subsidiary to any Person other than the
Borrower or another Wholly-Owned Subsidiary of the Borrower, except (i) to the
extent permitted by Sections 8.1(c) and 8.5, (ii) for the issuance of
directors' qualifying shares to the extent required by applicable law and
(iii) for issuances by Subsidiaries of the Borrower which are not Wholly-Owned
Subsidiaries and which issuances do not decrease the Borrower's percentage
ownership interest in the respective Subsidiary.
8.14 Limitation on Restrictions Affecting Subsidiaries. The
Borrower will not, and will not permit any Subsidiary of the Borrower to,
directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of the Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower,
(b) make loans or advances to the Borrower or any Subsidiary of the Borrower,
(c) transfer any of its properties or assets to the Borrower or any Subsidiary
of the Borrower or (d) create, incur, assume or suffer to exist any lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, other than encumbrances and restrictions arising under (i)
applicable law, (ii) this Agreement and the other Transaction Documents, (iii)
Indebtedness permitted pursuant to Sections 8.3(c), (d) and (e), (iv)
customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or any of its Subsidiaries, (v)
customary restrictions on dispositions of real property interests found in
reciprocal easement agreements of the Borrower or any of its Subsidiaries,
(vi) any agreement relating to permitted Indebtedness incurred by a Subsidiary
of the Borrower prior to the date on which such Subsidiary was acquired by the
Borrower or any other Subsidiary of the Borrower and outstanding on such
acquisition date, (vii) the extension or continuation of contractual
obligations in existence on the date hereof; provided that any such
encumbrances or restrictions contained in such continuation are no less
favorable to the Lenders than those encumbrances and restrictions under or
pursuant to the contractual obligations continued hereby, and (viii)
restrictions imposed under the agreements relating to Indebtedness permitted
under Section 8.3(b); provided that such restrictions apply only to the
property giving rise to such Indebtedness.
8.15 Additional Negative Pledges. Holdings and the Borrower
will not, and will not permit any of their respective Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective, or permit any of its Subsidiaries to create or otherwise cause or
suffer to exist or become effective, directly or indirectly, (i) any
prohibition or restriction (including any agreement to provide equal and
ratable security to any other Person in the event a Lien is granted to or for
the benefit of the Agent and the Lenders) on the creation or existence of any
Lien upon the assets of Holdings, the Borrower or their respective
Subsidiaries, other than the restrictions contained in (i) the Transaction
Documents, (ii) any agreement relating to a Lien permitted pursuant to Section
8.2 as relating to the property encumbered thereby or (iii) restrictions
described in Section 8.14.
8.16 Additional Designated Senior Indebtedness. Holdings and
the Borrower shall not, and shall not permit any of their respective
Subsidiaries to, designate any Indebtedness as "Designated Senior
Indebtedness" under, and as defined in, the Senior Subordinated Note Indenture.
8.17 Limitation on Subsidiaries and Joint Ventures; Creation
of New Subsidiaries and Joint Ventures. The Borrower shall have no
Subsidiaries or Joint Ventures other than (x) its Wholly-Owned Subsidiaries as
same exist on the Restatement Effective Date, (y) any new Wholly-Owned
Subsidiary established by the Borrower after the Restatement Effective Date,
so long as no Default or Event of Default exists at the time of the creation
of such Subsidiary or immediately after giving effect thereto and (z) Joint
Ventures established in accordance with the provisions of Section 8.5(d). At
the time of the creation, establishment or acquisition of any Subsidiary or
Joint Venture, any capital stock or other equity interest thereof required to
be pledged pursuant to the Pledge Agreement shall be pledged in accordance
with the terms thereof, and all action required to be taken pursuant to
Section 7.14 shall be taken in connection with the creation, establishment or
acquisition of the respective Subsidiary or Joint Venture.
ARTICLE 9.
Events of Default and Remedies
9.1 Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of, any
interest on the Loans or any drawings under Letters of Credit which have not
been reimbursed by the Borrower (including through the incurrence of Revolving
Loans), or (iii) default, and such default shall continue for five or more
days after written demand therefor by the Administrative Agent, in the payment
when due of any Fees, Expense or any other amounts owing hereunder or under
any other Credit Document; or
(b) Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
(c) Covenants. Holdings or the Borrower shall (i) default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 7.1(f) or 7.11 or Article 8, or (ii) default in the due
performance or observance by it of any term, covenant or agreement contained
in this Agreement (other than those referred to in Section 9.1(a), 9.1(b) or
clause (i) of this Section 9.1(c) contained in this Agreement) and such
default shall continue unremedied for a period of at least 30 days after
notice to the defaulting party by the Administrative Agent or the Required
Lenders; or
(d) Default Under Other Agreements. Holdings, the Borrower or
any of their respective Subsidiaries (excluding any Immaterial Subsidiaries)
shall (i) default in any payment in respect to any Indebtedness (other than
the Obligations) of the Borrower and its Subsidiaries (excluding any
Immaterial Subsidiaries) beyond the period of grace, if any, provided in the
agreement or instrument under which such Indebtedness was issued or (ii)
default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee
or agent on behalf of such holder or holders) to cause (determined without
regard to whether any notice is required to so cause), any such Indebtedness
to become due prior to its stated maturity or (iii) any such Indebtedness of
Holdings, the Borrower or any such Subsidiary (excluding any Immaterial
Subsidiaries) shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment, prior to the stated maturity thereof, provided that it
shall not constitute an Event of Default under this Section 9.1(d) unless the
aggregate amount of all Indebtedness referred to in clauses (i), (ii) and
(iii) above exceeds $2,000,000; or
(e) Bankruptcy, etc. Holdings, the Borrower or any of their
respective Subsidiaries (excluding any Immaterial Subsidiaries) shall commence
a voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against Holdings,
the Borrower or any of their respective Subsidiaries (excluding any Immaterial
Subsidiaries) and the petition is not controverted within 30 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings, the Borrower or any of their
respective Subsidiaries (excluding any Immaterial Subsidiaries); or Holdings,
the Borrower or their respective Subsidiaries (excluding any Immaterial
Subsidiaries) commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to Holdings, the Borrower or such Subsidiary; or there is
commenced against Holdings, the Borrower or any of their respective
Subsidiaries (excluding any Immaterial Subsidiaries) any such proceeding which
remains undismissed for a period of 60 days; or Holdings, the Borrower or any
of their respective Subsidiaries (excluding any Immaterial Subsidiaries) is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or Holdings, the Borrower or
any of their respective Subsidiaries (excluding any Immaterial Subsidiaries)
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or Holdings, the Borrower or any of their respective Subsidiaries
(excluding any Immaterial Subsidiaries) makes a general assignment for the
benefit of creditors; or any corporate action is taken by Holdings, the
Borrower or any of their respective Subsidiaries (excluding any Immaterial
Subsidiaries) for the purpose of effecting any of the foregoing; or
(f) ERISA. (i) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of
such standard or extension of any amortization period is sought or granted
under Section 412 of the Code or Section 302 of ERISA, any Plan is, shall have
had or is reasonably likely to have a trustee appointed to administer such
Plan, any Plan is, shall have been, or is reasonably likely to be terminated
or the subject of termination proceedings under ERISA, an event shall have
occurred or a condition shall exist in either case entitling the PBGC to
terminate a Plan, any Plan shall have an Unfunded Current Liability, a
contribution required to be made to a Plan or a Foreign Pension Plan has not
been timely made by Holdings, the Borrower, any of the Borrower's Subsidiaries
or any ERISA Affiliate, Holdings, the Borrower or any Subsidiary or any ERISA
Affiliate has incurred or is reasonably likely to incur a liability to or on
account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975, or 4980
of the Code, or Holdings, the Borrower or any Subsidiary has incurred or is
reasonably likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as defined
in Section 3(2) of ERISA) or Foreign Pension Plans; (ii) there shall result
from any event or events set forth in clause (i) of this Section 9.1(f) the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (iii) such lien, security interest
or liability, individually, and/or in the aggregate, has had, or is reasonably
likely to have, a Material Adverse Effect; or
(g) Collateral Documents. Any Collateral Document shall cease
to be in full force and effect, or shall cease to give the Collateral Agent on
behalf of the Lenders the Liens, rights, powers and privileges purported to be
created thereby in favor of the Collateral Agent, or any Credit Party shall
default in any material respect in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant
to any such Collateral Document and such default shall continue unremedied for
a period of at least 30 days after notice to the Borrower by the
Administrative Agent or the Required Lenders; or
(h) Guaranty. Any Guaranty or any provision thereof shall
cease to be in full force or effect as to the relevant Guarantor, or any
Guarantor or Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under the relevant Guaranty, or any
Guarantor shall default in the due performance or observance of any material
term, covenant or agreement on its part to be performed or observed pursuant
to any Guaranty; or
(i) Judgments. One or more judgments or decrees shall be
entered against Holdings, the Borrower or any of their respective Subsidiaries
(excluding any Immaterial Subsidiaries) involving liability of $2,000,000 or
more in the aggregate for all such judgments and decrees for Holdings, the
Borrower and all of such Subsidiaries (to the extent not paid or covered by
insurance provided by a carrier that has acknowledged coverage) and all such
judgments or decrees shall not have been vacated, discharged or stayed pending
appeal within 60 days from the entry thereof; or
(j) Change of Control. A Change of Control shall occur; then,
and in any such event, and at any time thereafter, if any Event of Default shall
then be continuing, the Administrative Agent shall, upon the written request of
the Required Lenders, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of any Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default specified
in Section 9.1(e) shall occur with respect to the Borrower, the result which
would occur upon the giving of written notice by the Administrative Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitments terminated,
whereupon the Commitment of each Lender shall forthwith terminate immediately
and any Unused Line Fee accrued and unpaid shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all Obligations owing hereunder
to be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) direct the Collateral Agent to enforce any
or all of the Liens and security interests created pursuant to the Collateral
Documents; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; and/or (v) direct the Borrower to pay (and the
Borrower hereby agrees upon receipt of such notice, or upon the occurrence of
any Event of Default specified in Section 9.05 in respect of the Borrower, that
it will pay) to the Administrative Agent at its Payment Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement
obligations in respect of Letters of Credit then outstanding equal to the
aggregate of all Letters of Credit Obligations.
ARTICLE 10.
The Agents
10.1 Appointment. Each Lender hereby irrevocably designates
and appoints BTCo as Administrative Agent, Morgan Stanley Senior Funding, Inc.
as Syndication Agent, General Electric Capital Corporation as Documentation
Agent and BTCC as Collateral Agent, in each case to act as specified herein
and in the other Credit Documents, and each such Lender hereby irrevocably
authorizes the Administrative Agent, the Collateral Agent, the Syndication
Agent and the Documentation Agent to take such action on its behalf under the
provisions of this Agreement and the other Credit Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental
thereto. Each of the Administrative Agent, the Collateral Agent, the
Syndication Agent and the Documentation Agent agrees to act as such upon the
express conditions contained in this Section 10. Notwithstanding any
provision to the contrary elsewhere in this Agreement or in any other Credit
Document, the Administrative Agent, the Collateral Agent, the Syndication
Agent and the Documentation Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other
Credit Documents, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent. The provisions of this Section 10 are solely for the
benefit of the Administrative Agent, the Collateral Agent, the Syndication
Agent, the Documentation Agent and the Lenders, and neither Holdings nor any
of its Subsidiaries shall have any rights as a third party beneficiary of any
of the provisions hereof. In performing its functions and duties under this
Agreement, each of the Administrative Agent, the Collateral Agent, the
Syndication Agent and the Documentation Agent shall act solely as agent of the
Lenders and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for Holdings or any of
its Subsidiaries.
10.2 Delegation of Duties. Each of the Administrative Agent,
the Collateral Agent, the Syndication Agent and the Documentation Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. None of the
Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent shall be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. None of the Administrative
Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person in its capacity as
Administrative Agent, the Collateral Agent, Syndication Agent or Documentation
Agent, as the case may be, under or in connection with this Agreement or the
other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Lenders
for any recitals, statements, representations or warranties made by Holdings,
any of its Subsidiaries or any of their respective officers contained in this
Agreement or the other Credit Documents, any other Document or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent under or in connection with, this
Agreement or any other Document or for any failure of Holdings or any of its
Subsidiaries or any of their respective officers to perform its obligations
hereunder or thereunder. None of the Administrative Agent, the Collateral
Agent, the Syndication Agent or the Documentation Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Documents, or to inspect the properties, books or
records of Holdings or any of its Subsidiaries. None of the Administrative
Agent, the Collateral Agent, the Syndication Agent or the Documentation Agent
shall be responsible to any Lender for the effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement or
any other Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports, certificates or
any other documents in connection herewith or therewith furnished or made by
the Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent, as the case may be, to the Lenders or by or on behalf of
Holdings or any of its Subsidiaries to the Administrative Agent, the
Collateral Agent, the Syndication Agent or the Documentation Agent, as the
case may be, or any Lender or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default.
10.4 Reliance by Agents. The Administrative Agent, the
Collateral Agent, the Syndication Agent and the Documentation Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile, telex or teletype message, statement, order
or other document or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without
limitation, counsel to Holdings or any of its Subsidiaries), independent
accountants and other experts selected by the Administrative Agent, the
Collateral Agent, the Syndication Agent or the Documentation Agent, as the case
may be. The Administrative Agent, the Collateral Agent, the Syndication Agent
and the Documentation Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Credit Document unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Administrative
Agent, the Collateral Agent, the Syndication Agent and the Documentation Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement and the other Credit Documents in accordance with a
request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders.
10.5 Notice of Default. None of the Administrative Agent, the
Collateral Agent, the Syndication Agent or the Documentation Agent shall be
deemed to have knowledge or notice of the occurrence of any Default or Event
of Default unless the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent, as the case may be, has actually
received notice from a Lender, Holdings or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent,
the Collateral Agent, the Syndication Agent or the Documentation Agent
receives such a notice, the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent, as the case may be, shall give
prompt notice thereof to the Lenders. The Administrative Agent, the
Collateral Agent, the Syndication Agent or the Documentation Agent, as the
case may be, shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided
that, unless and until the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent, as the case may be, shall have
received such directions, the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent, as the case may be, may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
10.6 Nonreliance on Agents and Other Lenders. Each Lender
expressly acknowledges that none of the Administrative Agent, the Collateral
Agent, the Syndication Agent, the Documentation Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent hereinafter taken, including any review of the affairs of
Holdings or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent, the Collateral Agent,
the Syndication Agent or the Documentation Agent to any Lender. Each Lender
represents to the Administrative Agent, the Collateral Agent, the Syndication
Agent and the Documentation Agent that it has, independently and without
reliance upon the Administrative Agent, the Collateral Agent, the Syndication
Agent, the Documentation Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of Holdings or
its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent, the
Collateral Agent, the Syndication Agent, the Documentation Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of Holdings or its Subsidiaries. None of the Administrative
Agent, the Collateral Agent, the Syndication Agent or the Documentation Agent
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, assets, property,
financial and other condition, prospects or creditworthiness of Holdings or
its Subsidiaries which may come into the possession of the Administrative
Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7 Indemnification. The Lenders agree to indemnify each of
the Administrative Agent, the Collateral Agent, the Syndication Agent and the
Documentation Agent in their respective capacities as such ratably according
to their respective "percentages" as used in determining the Required Lenders
at such time or, if the Commitments have terminated and all Loans have been
repaid in full, as determined immediately prior to such termination and
repayment (with such "percentages" to be determined as if there are no
Defaulting Lenders), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, reasonable
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Administrative
Agent, the Collateral Agent, the Syndication Agent or the Documentation Agent
in their respective capacities as such in any way relating to or arising out
of this Agreement or any other Credit Document, or any documents contemplated
by or referred to herein or the transactions contemplated hereby or any action
taken or omitted to be taken by the Administrative Agent, the Collateral
Agent, the Syndication Agent or the Documentation Agent under or in connection
with any of the foregoing, but only to the extent that any of the foregoing is
not paid by Holdings or any of its Subsidiaries; provided that no Lender shall
be liable to the Administrative Agent, the Collateral Agent, the Syndication
Agent or the Documentation Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting primarily from the gross
negligence or willful misconduct of the Administrative Agent, the Collateral
Agent, the Syndication Agent or the Documentation Agent. If any indemnity
furnished to the Administrative Agent, the Collateral Agent, the Syndication
Agent or the Documentation Agent for any purpose shall, in the opinion of the
Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent, be insufficient or become impaired, the Administrative
Agent, the Collateral Agent, the Syndication Agent or the Documentation Agent,
as the case may be, may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity
is furnished. The agreements in this Section 10.7 shall survive the payment
of all Obligations.
10.8 Agents in Their Individual Capacities. Each of the
Administrative Agent, the Collateral Agent, the Syndication Agent, the
Documentation Agent and their respective affiliates may make loans to, accept
deposits from and generally engage in any kind of business with Holdings and
its Subsidiaries as though the Administrative Agent, the Collateral Agent, the
Syndication Agent or the Documentation Agent, as the case may be, were not the
Administrative Agent, the Collateral Agent, the Syndication Agent or the
Documentation Agent, as the case may be, hereunder. With respect to the Loans
made by it and all Obligations owing to it, each of the Administrative Agent,
the Collateral Agent, the Syndication Agent and the Documentation Agent shall
have the same rights and powers under this Agreement as any Lender and may
exercise the same as though it were not the Administrative Agent, the
Collateral Agent, the Syndication Agent or the Documentation Agent, as the
case may be, and the terms "Lender" and "Lenders" shall include the
Administrative Agent, the Collateral Agent, the Syndication Agent and the
Documentation Agent in their individual capacities.
10.9 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Administrative Agent. Any
request, authority or consent of any Person or entity who, at the time of
making such request or giving such authority or consent, is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee,
assignee or indorsee, as the case may be, of such Note or of any Note or Notes
issued in exchange therefor.
10.10 Resignation of Agents. (a) The Administrative Agent
may resign from the performance of all its functions and duties hereunder
and/or under the other Credit Documents at any time by giving 30 Business
Days' prior written notice to the Borrower and the Lenders. Such resignation
shall take effect upon the appointment of a successor Administrative Agent
pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who
shall be a commercial bank or trust company reasonably acceptable to the
Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 30 Business Day period, the Administrative Agent, with
the consent of the Borrower (which consent shall not be unreasonably withheld
or delayed), shall then appoint a successor Administrative Agent who shall
serve as Administrative Agent hereunder or thereunder until such time, if any,
as the Required Lenders appoint a successor Administrative Agent as provided
above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date
such notice of resignation was given by the Administrative Agent, the
Administrative Agent's resignation shall become effective and the Required
Lenders shall thereafter perform all the duties of the Administrative Agent
hereunder and/or under any other Credit Document until such time, if any, as
the Lenders appoint a successor Administrative Agent as provided above.
(e) The Syndication Agent may resign from the performance of
all its functions and duties hereunder and/or under the other Credit Documents
at any time by giving five Business Days' prior written notice to the Lenders.
Such resignation shall take effect at the end of such five Business Day
period. Upon the effectiveness of the resignation of the Syndication Agent,
the Administrative Agent shall assume all of the functions and duties of the
Syndication Agent hereunder and/or under the other Credit Documents.
(f) The Collateral Agent may resign from the performance of
all its functions and duties under the Collateral Documents at any time by
giving five Business Days' prior written notice to the Lenders. Such
resignation shall take effect at the end of such five Business Day period.
Upon the effectiveness of the resignation of the Collateral Agent, the
Administrative Agent shall assume all of the functions and duties of the
Collateral Agent under the Collateral Documents.
(g) The Documentation Agent may resign from the performance of
all its functions and duties hereunder and/or under the other Credit Documents
at any time by giving five Business Days' prior written notice to the Lenders.
Such resignation shall take effect at the end of such five Business Day
period. Upon the effectiveness of the resignation of the Documentation Agent,
the Administrative Agent shall assume all of the functions and duties of the
Documentation Agent hereunder and/or under the other Credit Documents.
10.11 Collateral Matters. (a) Each Lender authorizes and
directs the Collateral Agent to enter into the Collateral Documents for the
benefit of the Lenders. Each Lender hereby agrees, and each holder of any
Note by the acceptance thereof will be deemed to agree, that, except as
otherwise set forth herein, any action taken by the Required Lenders in
accordance with the provisions of this Agreement or the Collateral Documents,
and the exercise by the Required Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders. The Collateral Agent
is hereby authorized on behalf of all of the Lenders, without the necessity of
any notice to or further consent from any Lender, from time to time prior to
an Event of Default, to take any action with respect to any Collateral or
Collateral Documents which may be necessary to perfect and maintain perfected
the security interest in and liens upon the Collateral granted pursuant to the
Collateral Documents.
(b) The Lenders hereby authorize the Collateral Agent, at its
option and in its discretion, upon the direction of the Administrative Agent
to release any Lien granted to or held by the Collateral Agent upon any
Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations at any time arising under or in respect
of this Agreement or the Credit Documents or the transactions contemplated
hereby or thereby, (ii) constituting property being sold or disposed of upon
receipt of the proceeds of such sale by the Collateral Agent if the Borrower
certifies to the Collateral Agent that the sale or disposition is made in
compliance with Section 8.1 hereof (and the Administrative Agent may rely
conclusively on any such certificate, without further inquiry) or (iii) if
approved, authorized or ratified in writing by the Required Lenders, unless
such release is required to be approved by all of the Lenders hereunder. Upon
request by the Administrative Agent at any time, the Lenders will confirm in
writing the Collateral Agent's authority to release particular types or items
of Collateral pursuant to this Section 10.11.
(c) Upon any sale and transfer of Collateral which is
expressly permitted pursuant to the terms of this Agreement, or consented to
in writing by the Required Lenders or all of the Lenders, as applicable, and
upon at least five (5) Business Days' prior written request by the Borrower,
the Collateral Agent shall (and is hereby irrevocably authorized by the
Lenders to) execute such documents as may be necessary to evidence the release
of the Liens granted to the Collateral Agent for the benefit of the Lenders
herein or pursuant hereto upon the Collateral that was sold or transferred;
provided that (i) the Collateral Agent shall not be required to execute any
such document on terms which, in the Collateral Agent's opinion, would expose
the Collateral Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse,
representation or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations
of the Borrower or any of its Subsidiaries in respect of) all interests
retained by Holdings or any of its Subsidiaries, including, without
limitation, the proceeds of the sale, all of which shall continue to
constitute part of the Collateral. In the event of any sale or transfer of
Collateral, or any foreclosure with respect to any of the Collateral, the
Collateral Agent shall be authorized to deduct all of the Expenses reasonably
incurred by the Collateral Agent from the proceeds of any such sale, transfer
or foreclosure.
(d) The Collateral Agent shall have no obligation whatsoever
to the Lenders or to any other Person to assure that the Collateral exists or
is owned by Holdings or any of its Subsidiaries or is cared for, protected or
insured or that the Liens granted to the Collateral Agent herein or pursuant
hereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise or to continue exercising at all or in any manner or under any duty
of care, disclosure or fidelity any of the rights, authorities and powers
granted or available to the Collateral Agent in this Section 10.11 or in any
of the Collateral Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, the Collateral
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Collateral Agent's own interest in the Collateral as one of the
Lenders and that the Collateral Agent shall have no duty or liability
whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
(e) Notwithstanding anything to the contrary contained in this
Agreement or any other Credit Document, (i) to the extent the Borrower or any
of its Subsidiaries enters into any operating lease which does not cause a
violation of the terms of this Agreement, the Collateral Agent is authorized
to enter into such disclaimers of a security interest in the assets subject to
such operating lease, or such releases or subordinations of the assets subject
to such operating lease, as may be requested by the Borrower in connection
therewith and (ii) in connection with the incurrence of any Indebtedness
permitted to remain outstanding pursuant to Section 8.3(b), at the request of
the Borrower the Collateral Agent shall, and is hereby authorized to, enter
into such releases or subordinations of security interests in the assets
securing such Indebtedness in accordance with the relevant requirements of
such Section 8.2, all as may be requested by the Borrower. In taking any
actions pursuant to the requirements of this Section 10.11(e), the Collateral
Agent shall be entitled to rely on a certificate of an officer of the Borrower
as to its entitlement to such release, subordination or other action, and
shall have no liability in connection therewith.
10.12 Delivery of Information. The Administrative Agent shall
not be required to deliver to any Lender originals or copies of any documents,
instruments, notices, communications or other information received by the
Administrative Agent from Holdings, the Borrower, any Subsidiary, the Required
Lenders, any Lender or any other Person under or in connection with this
Agreement or any other Credit Document except (i) as specifically provided in
this Agreement or any other Credit Document and (ii) as specifically requested
from time to time in writing by any Lender with respect to a specific
document, instrument, notice or other written communication received by and in
the possession of such Administrative Agent at the time of receipt of such
request and then only in accordance with such specific request.
ARTICLE 11.
Miscellaneous
11.1 Submission to Jurisdiction; Waivers. Each of Holdings
and the Borrower hereby irrevocably and unconditionally:
(a) Submits (to the maximum extent permitted by applicable
law) for itself and its property in any legal action or proceeding
relating to this Agreement and the other credit documents to which it
is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York located in New York City, the Courts
of the United States of America for the Southern District of New York
and appellate courts from any thereof;
(b) Consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) Agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to Holdings or the Borrower, as the case may be, at its
address set forth in Section 11.5 or at such other address of which
the agent shall have been notified pursuant thereto;
(d) Agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction;
(e) To the maximum extent permitted by law, waives the right
to assert any setoff, counterclaim or cross-claim in respect of, and
all statutes of limitations which may be relevant to, such action or
proceeding (other than compulsory counterclaims), provided that
nothing in this clause (e) shall preclude a separate action asserting
any such claims; and
(f) Waives due diligence, demand, presentment and protest and
any notices thereof as well as notice of nonpayment.
11.2 WAIVER OF JURY TRIAL. HOLDINGS, THE BORROWER, ANY AGENT,
THE ISSUING BANK AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE CREDIT
DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
11.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
11.4 Delays; Partial Exercise of Remedies. No delay or
omission of any Agent, the Issuing Bank, the Collateral Agent, or the Lenders
to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by any Agent, the Collateral Agent, the Issuing
Bank or the Lenders of any right or remedy shall preclude any other or further
exercise thereof, or preclude any other right or remedy.
11.5 Notices. Except as otherwise provided herein, all
notices and correspondences hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, if to the Administrative Agent, or
any of the Lenders, then to Bankers Trust Company, 130 Liberty Street, New
York, New York 10006, Attention: David Bell, if to the Collateral Agent, then
to BT Commercial Corporation, c/o Bankers Trust Company, 130 Liberty Street,
New York, New York 10006, Attention: David Bell, if to the Issuing Bank, then
to Bankers Trust Company, One Bankers Trust Plaza, 130 Liberty Street, New
York, New York 10005, Attention: Letter of Credit Department, if to the
Borrower, then to the Borrower at American Color Graphics, Inc., c/o ACG
Holdings, Inc., 225 High Ridge Road, Stamford, Connecticut 06905, Attention:
Timothy Davis, Esq., with a copy to Joseph Milano, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, and if
to Holdings, then to Holdings at ACG Holdings, Inc., 225 High Ridge Road,
Stamford, Connecticut 06905, Attention: Timothy Davis, Esq., with a copy to
Joseph Milano, or by facsimile transmission, promptly confirmed in writing
sent by first class mail, or if to the Administrative Agent, or any of the
Lenders, at 212-250-7218, and if to Holdings or the Borrower at 203-978-5408.
All such notices and correspondence shall be deemed given when received by the
party to whom sent.
11.6 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, neither
Holdings nor the Borrower may assign or transfer any of its rights,
obligations or interest hereunder or under any other Credit Document without
the prior written consent of the Lenders and, provided further, that, although
any Lender may transfer, assign or grant participations in its rights
hereunder, such Lender shall remain a "Lender" for all purposes hereunder (and
may not transfer or assign all or any portion of its Commitments hereunder
except as provided in Sections 4.12 and 11.6(b)) and the transferee, assignee
or participant, as the case may be, shall not constitute a "Lender" hereunder
and, provided further, that no Lender shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except
to the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit in which such participant is
participating, or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total
Commitments shall not constitute a change in the terms of such participation,
and that an increase in any Commitment or Loan shall be permitted without the
consent of any participant if the participant's participation is not increased
as a result thereof), (ii) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Collateral
Documents (except as expressly provided in the Credit Documents) supporting
the Loans hereunder in which such participant is participating. In the case
of any such participation, the participant shall (x) not have any rights under
this Agreement or any of the other Credit Documents (the participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder shall be determined
as if such Lender had not sold such participation and (y) if such participant
is not a bank, represent that either (i) no part of its acquisition of its
participation is made out of assets of any employee benefit plan, or (ii)
after consultation, in good faith, with the Borrower and provision by the
Borrower of such information as may be reasonably requested by the
participant, the acquisition and holding of such participation does not
constitute a non-exempt prohibited transaction under Section 406 of ERISA and
Section 4975 of the Code, or (iii) such participation is an "insurance company
general account," as such term is defined in the Department of Labor Prohibited
Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and,
as of the date of the transfer there is no "employee benefit plan" with
respect to which the aggregate amount of such general account's reserves and
liabilities for the contracts held by or on behalf of such "employee benefit
plan" and all other "employee benefit plans" maintained by the same employer
(and affiliates thereof as defined in Section V(a)(1) of PTCE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTCE 95-60) exceeds 10% of the total reserves and liabilities of
such general account (as determined under PTCE 95-60) (exclusive of separate
account liabilities) plus surplus as set forth in the National Association of
Insurance Commissioners Annual Statement filed with the state of domicile of
the participant. As used in this Section 11.6(a), the term "employee benefit
plan" shall have the meaning assigned to it in Title I of ERISA and shall also
include a "plan" as defined in Section 4975(e)(1) of the Code.
(b) Notwithstanding the foregoing, but subject to the
provisions of Section 11.6(d), any Lender (or any Lender together with one or
more other Lenders) may (x) assign all or a portion of its Commitments and
related outstanding Obligations hereunder to its parent company and/or any
affiliate of such Lender which is at least 50% owned by such Lender or its
parent company or to one or more Lenders or (y) assign all, or if less than
all, a portion equal to at least $5,000,000 in the aggregate for the assigning
Lender or assigning Lenders, of such Commitments and related outstanding
Obligations hereunder to one or more Eligible Transferees, each of which
assignees shall become a party to this Agreement as a Lender by execution of
an Assignment and Assumption Agreement; provided that (i) at such time
Schedule I shall be deemed modified to reflect the Commitments (or outstanding
Term Loans, as the case may be) of such new Lender and of the existing
Lenders, (ii) new Notes will be issued, at the Borrower's expense, to such new
Lender and to the assigning Lender upon the request of such new Lender or
assigning Lender, such new Notes to be in conformity with the requirements of
Sections 2.1 and 2.2 (with appropriate modifications) to the extent needed to
reflect the revised Commitments (or outstanding Term Loans, as the case may
be), (iii) the consent of the Administrative Agent shall be required in
connection with any assignment to an Eligible Transferee pursuant to clause
(y) above, (iv) the Administrative Agent shall receive at the time of each
such assignment, from the assigning or assignee Lender, the payment of a
non-refundable assignment fee of $3,500 and (v) if such Eligible Transferee is
not a bank, represent that either (i) no part of its acquisition of its
Commitments and Loans is made out of assets of any employee benefit plan, or
(ii) after consultation, in good faith, with the Borrower and provision by the
Borrower of such information as may be reasonably requested by such Eligible
Transferee, the acquisition and holding of such Commitments and Loans does not
constitute a non-exempt prohibited transaction under Section 406 of ERISA and
Section 4975 of the Code, or (iii) such assignment is an "insurance company
general account," as such term is defined in the Department of Labor
Prohibited Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE
95-60"), and, as of the date of the assignment, there is no "employee benefit
plan" with respect to which the aggregate amount of such general account's
reserves and liabilities for the contracts held by or on behalf of such
"employee benefit plan" and all other "employee benefit plans" maintained by
the same employer (and affiliates thereof as defined in Section V(a)(1) of
PTCE 95-60) or by the same employee organization (in each case determined in
accordance with the provisions of PTCE 95-60) exceeds 10% of the total
reserves and liabilities of such general account (as determined under PTCE
95-60) (exclusive of separate account liabilities) plus surplus as set forth
in the National Association of Insurance Commissioners Annual Statement filed
with the state of domicile of such Eligible Transferee; provided further, that
such transfer or assignment will not be effective until recorded by the
Administrative Agent on the Register pursuant to Section 11.12 and (v) in
connection with any assignment of a Revolving Loan Commitment (or portion
thereof) pursuant to clause (y) above, the consent of the Borrower shall be
required, which shall not be unreasonably withheld or delayed. As used in
this Section 11.6(b), the term "employee benefit plan" shall have the meaning
assigned to it in Title I of ERISA and shall also include a "plan" as defined
in Section 4975(e)(1) of the Code. To the extent of any assignment pursuant
to this Section 11.6(b), the assigning Lender shall be relieved of its
obligations hereunder with respect to its assigned Commitments. At the time
of each assignment pursuant to this Section 11.6(b) to a Person which is not
already a Lender hereunder and which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Lender shall, to the extent legally entitled
to do so, provide to the Borrower the forms described in Section 4.11(e). To
the extent that an assignment of all or any portion of a Lender's Commitments
and related outstanding Obligations pursuant to Section 4.12 or this Section
11.6(b) would, at the time of such assignment, result in increased costs
(including, without limitation, amounts described in Section 4.11) from those
being charged by the respective assigning Lender prior to such assignment,
then the Borrower shall not be obligated to pay such increased costs (although
the Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank
in support of borrowings made by such Lender from such Federal Reserve Bank.
11.7 Confidentiality. Each Lender agrees that it will use its
reasonable best efforts not to disclose without the prior consent of the
Borrower (other than to its employees, auditors, or counsel, or to another
Lender if the disclosing Lender or such disclosing Lender's holding or parent
company in its sole discretion determines that any such party should have access
to such information and informs such party of the confidential nature of such
information) any information with respect to Holdings, the Borrower or any of
the Borrower's Subsidiaries, which is furnished pursuant to the Credit Documents
and which is designated by the Borrower to the Lenders in writing as
confidential; provided that any Lender may disclose any such information (a) as
has become generally available to the public, (b) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over such Lender, (c) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) in order to comply with any Requirement of
Law, and (e) to any prospective or actual transferee or participant in
connection with any contemplated transfer or participation of any of the Notes
or Commitments or any interest therein by such Lender which prospective
transferee or participant shall have agreed in writing to be subject to the
confidentiality provisions of this Section 11.7; provided, however, that in the
case of any disclosure pursuant to the foregoing clauses (c) or (d), such Lender
will use its reasonable efforts to notify the Borrower, to the extent permitted
as advised by counsel, in advance (or, in the case of clause (d), promptly
thereafter) of such disclosure so as to afford the Borrower the opportunity to
protect the confidentiality of the information proposed to be so disclosed.
11.8 Indemnification. (a) Each of Holdings and the Borrower
shall and hereby agrees to jointly and severally indemnify, defend and hold
harmless each Agent, the Collateral Agent, the Issuing Bank and each of the
Lenders and their respective directors, officers, agent and employees (each,
an "Indemnitee") from and against (x) any and all losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred by any of them
(except to the extent that it is finally judicially determined to have
resulted from their own gross negligence or willful misconduct) arising out of
or by reason of any litigations, investigations, claims or proceedings which
arise out of or are in any way related to (i) this Agreement or the
transactions contemplated thereby, (ii) the issuance of the Letters of Credit,
(iii) the failure of the Issuing Bank to honor a drawing under any Letter of
Credit, as a result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or Governmental
Authority, (iv) any actual or proposed use by the Borrower of the proceeds of
the Loans or (v) the Agents', the Collateral Agent's or the Lenders' entering
into this Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in any
settlement agreed to by the Borrower, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with
any of the foregoing and (y) any such losses, claims, damages, liabilities,
deficiencies, judgments or expenses incurred in connection with any remedial
or other action taken by Holdings, the Borrower or any of their respective
Subsidiaries or any of the Lenders in connection with compliance by Holdings,
the Borrower or any of their respective Subsidiaries, or any of their
respective properties, with any applicable federal, state or local
environmental laws, acts, rules, regulations, orders, directions, ordinances,
criteria or guidelines.
(b) If and to the extent that the Obligations of either of
Holdings or the Borrower hereunder are unenforceable for any reason, each of
Holdings and the Borrower hereby agrees to make the maximum contribution to
the payment and satisfaction of such Obligations which is permissible under
applicable law. Each of Holdings' and the Borrower's Obligations hereunder
shall survive any termination of this Agreement and the other Credit Documents
and the payment in full of the Obligations, and are in addition to, and not in
substitution of, any other of their Obligations set forth in this Agreement.
(c) In addition, each of Holdings and the Borrower shall, upon
demand, pay to each Agent and the Collateral Agent (and any Lender in the case
of following clause (y)) all costs and expenses (including the reasonable fees
and disbursements of counsel and other professionals) paid or incurred by (x)
any Agent or the Collateral Agent in connection with the preparation,
execution and delivery of this Agreement and the other Credit Documents and
the documents and instruments referred to herein and therein and any
amendment, waiver or consent relating hereto or thereto, and in connection
with the Agents' syndication efforts with respect to this Agreement, (y) such
Agent, the Collateral Agent or such Lender in (i) enforcing or defending its
rights under or in respect of this Agreement, the other Credit Documents or
any other document or instrument now or hereafter executed and delivered in
connection herewith, and (ii) in collecting the Loans, and (z) each Agent or
the Collateral Agent in (i) foreclosing or otherwise collecting upon the
Collateral or any part thereof and (ii) obtaining any legal, accounting or
other advice in connection with any of the foregoing.
11.9 Entire Agreement; Successors and Assigns. This Agreement
and the other Credit Documents constitute the entire agreement among Holdings,
the Borrower, the Agents, the Collateral Agent and the Lenders, supersedes any
prior agreements among them, and shall bind and benefit Holdings, the
Borrower, the Agents, the Collateral Agent and the Lenders and their
respective successors and permitted assigns.
11.10 Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the respective Credit Parties party thereto and the
Required Lenders, provided that no such change, waiver, discharge or
termination shall, without the consent of each Lender (other than a Defaulting
Lender) with Obligations being directly modified, (i) extend the final
scheduled maturity of any Loan or Note or extend the stated expiration date of
any Letter of Credit beyond the A TL/RL Maturity Date, or reduce the rate
(except for the waiver of post-default rates) or extend the time of payment of
interest or Fees thereon, or reduce the principal amount thereof (except to
the extent repaid in cash), (ii) release all or substantially all of the
Collateral (except as expressly provided in the Credit Documents) under all the
Collateral Documents, (iii) amend, modify or waive any provision of this
Section 11.10, (iv) reduce the percentage specified in the definition of
Required Lenders (it being understood that, with the consent of the Required
Lenders, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Lenders on substantially the
same basis as the extensions of Term Loans and Commitments are included on the
Restatement Effective Date) or (v) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall (s)
increase the Commitment of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of
Default or of a mandatory reduction in the Commitments shall not constitute an
increase of the Commitment of any Lender, and that an increase in the
available portion of any Commitment of any Lender shall not constitute an
increase of the Commitment of such Lender), (t) without the consent of the
Issuing Bank, amend, modify or waive any provision of Article 3 or alter its
rights or obligations with respect to Letters of Credit, (u) without the
consent of the Swingline Bank, amend, modify or waive any provision relating
to the rights or obligations of the Swingline Bank or with respect to
Swingline Loans (including, without limitation, the obligations of the other
Lenders with Revolving Loan Commitments to fund Mandatory Borrowings), (v)
without the consent of each Agent, amend, modify or waive any provision of
Article 10 or any other provision as same relates to the rights or obligations
of such Agent, (w) without the consent of the Collateral Agent, amend, modify
or waive any provision relating to the rights or obligations of the Collateral
Agent, (x) without the consent of the Majority Lenders of each Tranche which
is being allocated a lesser prepayment, repayment or commitment reduction as a
result of the actions described below (or without the consent of the Majority
Lenders of each Tranche in the case of an amendment to the definition of
Majority Lenders), amend the definition of Majority Lenders or alter the
required application of any prepayments or repayments (or commitment
reductions), as between the various Tranches, pursuant to Section 2.6
(excluding Section 2.6(f)) (although the Required Lenders may waive, in whole
or in part, any such prepayment, repayment or commitment reduction, so long as
the application, as amongst the various Tranches, of any such prepayment,
repayment or commitment reduction which is still required to be made is not
altered), (y) without the consent of the Supermajority A Term Lenders,
decrease, defer or waive any Tranche A Term Loan Scheduled Repayment or (z)
without the consent of the Supermajority B Term Lenders, decrease, defer or
waive any Tranche B Term Loan Scheduled Repayment.
11.11 Nonliability of Agents and Lenders. The relationship
between Holdings, the Borrower and the Borrower's Subsidiaries, on the one
hand, and the Lenders and the Agents and the Collateral Agent, on the other
hand, shall be solely that of debtors and creditors. None of any Agent, the
Collateral Agent or any Lender shall have any fiduciary responsibilities to
Holdings, the Borrower, or any of the Borrower's Subsidiaries. None of the
Agents, the Collateral Agent or any Lender undertakes any responsibility to
Holdings, the Borrower or any of the Borrower's Subsidiaries to review or
inform Holdings, the Borrower or any of the Borrower's Subsidiaries of any
matter in connection with any phase of the business or operations of Holdings,
the Borrower or any of the Borrower's Subsidiaries.
11.12 Registry. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 11.12, to maintain a register (the "Register") on which it will
record the Commitments from time to time of each of the Lenders, the Loans
made by each of the Lenders and each repayment in respect of the principal
amount of the Loans of each Lender. Failure to make any such recordation, or
any error in such recordation shall not affect the Borrower's obligations in
respect of such Loans. With respect to any Lender, the transfer of the
Commitments of such Lender and the rights to the principal of, and interest
on, any Loan made pursuant to such Commitments shall not be effective until
such transfer is recorded on the Register maintained by the Administrative
Agent with respect to ownership of such Commitments and Loans and prior to
such recordation all amounts owing to the transferor with respect to such
Commitments and Loans shall remain owing to the transferor. The registration
of assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Administrative Agent on the Register only upon the acceptance
by the Administrative Agent of a properly executed and delivered Assignment
and Assumption Agreement pursuant to Section 11.6(b). Coincident with the
delivery of such an Assignment and Assumption Agreement to the Administrative
Agent for acceptance and registration of assignment or transfer of all or part
of a Loan, or as soon thereafter as practicable, the assigning or transferor
Lender shall surrender the Note evidencing such Loan, and thereupon one or more
new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Lender and/or the new Lender. The Borrower agrees to
indemnify the Administrative Agent from and against any and all losses,
claims, damages and liabilities of whatsoever nature which may be imposed on,
asserted against or incurred by the Administrative Agent in performing its
duties under this Section 11.12.
11.13 Counterparts. This Agreement may be executed in any
number of counterparts (including by way of telecopied transmissions) and by
the different parties hereto in separate counterparts (including by way of
telecopied transmissions), each of which when so executed and delivered shall
be an original, but all of which shall together constitute one and the same
instrument.
11.14 Effectiveness. This Agreement shall become effective on
the date (the "Restatement Effective Date") on which (i) each of Holdings, the
Borrower, each Continuing Lender, each New Lender, the Administrative Agent,
the Syndication Agent and the Documentation Agent shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered the same (including by way of facsimile transmission) to the
Administrative Agent and (ii) the conditions contained in Section 5 are met to
the satisfaction of the Agents and the Required Lenders (determined immediately
after the occurrence of the Restatement Effective Date). Unless the
Administrative Agent has received actual notice from any Lender that the
conditions contained in Section 5 have not been met to its satisfaction, upon
the satisfaction of the condition described in clause (i) of the immediately
preceding sentence and upon the Administrative Agent's good faith
determination that the conditions described in clause (ii) of the immediately
preceding sentence have been met, then the Restatement Effective Date shall
have been deemed to have occurred, regardless of any subsequent determination
that one or more of the conditions thereto had not been met (although the
occurrence of the Restatement Effective Date shall not release the Borrower
from any liability for failure to satisfy one or more of the applicable
conditions contained in Section 5). The Administrative Agent will give the
Borrower and each Lender prompt written notice of the occurrence of the
Restatement Effective Date.
11.15 Severability. In case any provision in or obligation
under this Agreement or the Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
11.16 Headings Descriptive. The headings of the several
sections and subsections of this Agreement, and the Table of Contents, are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
11.17 Maximum Rate. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Credit Document,
Holdings, the Borrower, the Agents and the Lenders hereby agree that all
agreements among them under this Agreement and the other Credit Documents,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to any Agent or any Lender for the use,
forbearance, or detention of the money loaned to the Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the Highest Lawful Rate. If
due to any circumstance whatsoever, fulfillment of any provisions of this
Agreement or any of the other Credit Documents at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance and Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrower.
All sums paid or agreed to be paid to any Agent or any Lender for the use,
forbearance, or detention of the Obligations and other Indebtedness of the
Borrower to any Agent or any Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such Indebtedness until payment in full so that the actual rate
of interest on account of all such Indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such Indebtedness. The terms and
provisions of this Section shall control every other provision of this
Agreement and all agreements among Holdings, the Borrower, the Agents and the
Lenders.
11.18 Right of Setoff. In addition to and not in limitation
of all rights of offset that any Lender or any Issuing Bank may have under
applicable law, each Lender and the Issuing Bank shall, upon the occurrence
and during the continuance of any Event of Default and whether or not the
Lender or the Issuing Bank has made any demand or the Obligations of any
Credit Party are matured, have the right, without any prior notice to Holdings
or the Borrower, to appropriate and apply to the payment of the Obligations of
Holdings or the Borrower all deposits (general or special, time or demand,
provisional or final) then or thereafter held by and other Indebtedness or
property then or thereafter owing by such Lender or the Issuing Bank. Each
Lender or the Issuing Bank exercising such rights shall notify the Borrower
and the Administrative Agent thereof and any amount received as a result of
the exercise of such rights shall be reallocated among the Lenders and the
Issuing Bank as set forth in Section 2.8 hereof, provided, however, that
failure of Holdings or the Borrower to receive such notice shall not impair
any Lender's or the Issuing Bank's rights hereunder.
11.19 Entire Agreement; Successors and Assigns. This
Agreement and the other Credit Documents constitute the entire agreement among
Holdings, the Borrower, the Agents and the Lenders, and supersedes any prior
agreements among them, and shall bind and benefit Holdings, the Borrower and
the Lenders and their respective successors and permitted assigns.
11.20 Additions of New Lenders; Conversion of Original Loans of
Continuing Lenders; Termination of Commitments of Non-Continuing Lenders. (a)
On and as of the occurrence of the Restatement Effective Date in accordance
with Section 11.14 hereof, each New Lender shall become a "Lender" under, and
for all purposes of, this Agreement and the other Credit Documents.
(b) The parties hereto acknowledge that each Original Lender
has been offered the opportunity to participate in this Agreement, after the
occurrence of the Restatement Effective Date, as a Continuing Lender
thereunder, but that no Original Lender is obligated to be a Continuing
Lender. By their execution and delivery hereof, Holdings, the Borrower and
the Required Lenders (determined immediately before the occurrence of the
Restatement Effective Date) consent to the voluntary repayment by the Borrower
of all outstanding Original Loans and other Obligations owing to each Original
Lender which has not elected to become a Continuing Lender (each such Lender,
a "Non-Continuing Lender") and to the voluntary termination by the Borrower of
the Revolving Loan Commitment (under, and as defined in, the Original Credit
Agreement) of each Non-Continuing Lender, in each case to be effective on, and
contemporaneously with the occurrence of, the Restatement Effective Date, in
each case in accordance with the provisions of Section 11.20(c).
(c) Notwithstanding anything to the contrary contained in the
Original Credit Agreement or any Credit Document, Holdings, the Borrower and
each of the Lenders hereby agree that on the Restatement Effective Date, (i)
each Lender with a Commitment as set forth on Schedule I (after giving effect
to the Restatement Effective Date) shall make or maintain (including by way of
conversion) that principal amount of B Term Loans and/or Revolving Loans to
the Borrower as is required by Sections 2.1(b) and 2.2, provided that if the
Original Loans of any Continuing Lender outstanding on the Restatement
Effective Date (immediately before giving effect thereto) exceed the aggregate
principal amount of Loans required to be made available by such Lender on such
date (after giving effect to the Restatement Effective Date), then Original
Loans of such Continuing Lender in an amount equal to such excess shall be
repaid on the Restatement Effective Date to such Continuing Lender and (ii) in
the case of each Non-Continuing Lender, all of such Non-Continuing Lender's
Original Loans outstanding on the Restatement Effective Date shall be repaid
in full on such date, together with interest thereon and all accrued Fees (and
any other amounts) owing to such Non-Continuing Lender, and the Revolving Loan
Commitment (under, and as defined in, the Original Credit Agreement) of such
Non-Continuing Lender, if any, shall be terminated, effective upon the
occurrence of the Restatement Effective Date. Notwithstanding anything to the
contrary contained in the Original Credit Agreement, this Agreement or any
other Credit Document, the parties hereto hereby consent to the repayments and
reductions required above, and agree that in the event that any Original
Lender shall fail to execute a counterpart of this Agreement prior to the
occurrence of the Restatement Effective Date, such Original Lender shall be
deemed to be a Non-Continuing Lender and, concurrently with the occurrence of
the Restatement Effective Date, the Revolving Loan Commitment (in each case,
under, and as defined in, the Original Credit Agreement) of such Original
Lender, if any, shall be terminated, all Original Loans of such Original
Lender outstanding on the Restatement Effective Date shall be repaid in full,
together with interest thereon and all accrued Fees (and any other amounts)
owing to such Original Lender, and concurrently with the occurrence of the
Restatement Effective Date, such Original Lender shall no longer constitute a
"Lender" under this Agreement and the other Credit Documents, provided that
(i) all indemnities of the Credit Parties under the Original Credit Agreement
and the other Credit Documents (as in effect prior to the Restatement
Effective Date) for the benefit of such Original Lender shall continue to
apply to such Original Lender, and shall be deemed incorporated herein by
reference, (ii) such Original Lender shall retain a claim against the Borrower
pursuant to this Agreement for all amounts which should have been paid to it in
respect of its Original Loans on the Restatement Effective Date (including
breakage and other similar costs), except to the extent such amounts are
actually paid on the Restatement Effective Date and (iii) to the extent any
amounts are owing by the Borrower to any Original Lender as contemplated by
this Section 11.20, such amount shall be deemed to constitute Obligations
pursuant to this Agreement and shall be fully entitled to the benefits of (and
shall be fully guaranteed and secured pursuant to) the Guaranties and the
Collateral Documents.
11.21 Post-Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the
parties hereto acknowledge and agreed that:
(a) UCC-11 Search Reports. Within 60 days following the
Restatement Effective Date, the Administrative Agent shall have
received certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of recent date listing all
effective financing statements that name Holdings, the Borrower or
any Subsidiary Guarantor, together with copies of such financing
statements (none of which shall cover the Collateral except those (x)
with respect to which appropriate termination statements executed by
the secured lender thereunder have been delivered to the
Administrative Agent, (y) identified on Schedule X hereto and (z) in
respect of Permitted Liens; and
(b) Opinions of Local Counsel. Within 60 days following the
Restatement Effective Date, the Collateral Agent shall have received
additional opinions, addressed to each Agent, the Collateral Agent
and each of the Lenders from local counsel to Credit Parties and/or
the Agents reasonably satisfactory to the Collateral Agent, which
opinions (x) shall cover the perfection of the security interests
granted pursuant to the Collateral Documents and such other matters
relating to the transactions contemplated herein as the Collateral
Agent may reasonably request and (y) shall be in form and substance
reasonably request satisfactory to the Collateral Agent.
All provisions of this Agreement and the other Credit Documents
(including, without limitation, all conditions precedent, representations,
warranties, covenants, events of default and other agreements herein and
therein) shall be deemed modified to the extent necessary to effect the
foregoing (and to permit the taking of the actions described above within the
time periods, required above, rather than as otherwise provided in the Credit
Documents); provided, that (x) to the extent any representation and warranty
would not be true because the foregoing actions were not taken on the
Restatement Effective Date, the respective representation and warranty shall
be required to be true and correct in all material respects at the time the
respective action is taken (or was required to be taken) in accordance with
the foregoing provisions of this Section 11.21 and (y) all representations and
warranties relating to the Collateral Documents shall be required to be true
immediately after the actions required to be taken by Section 11.21 have been
taken (or were required to be taken). The acceptance of the benefits of the
Loans shall constitute a representation, warranty and covenant by the Borrower
to each of the Lenders that the actions required pursuant to this Section
11.21 will be, or have been, taken within the relevant time periods referred
to in this Section 11.21 and that, at such time, all representations and
warranties contained in this Credit Agreement and the other Credit Documents
shall then be true and correct without any modification pursuant to this
Section 11.21. The parties hereto acknowledge and agree that the failure to
take any of the actions required above, within the relevant time periods
required above, shall give rise to an immediate Event of Default pursuant to
this Agreement.
ARTICLE 12.
Parent Guaranty
12.1 The Parent Guaranty. In order to induce the Lenders to
enter into this Agreement and to extend credit hereunder and in recognition of
the direct benefits to be received by the Parent Guarantor from the proceeds
of the Loans and the issuance of the Letters of Credit, the Parent Guarantor
hereby agrees with the Lenders as follows: the Parent Guarantor hereby
unconditionally and irrevocably guarantees as primary obligor and not merely
as surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all of the Guaranteed Obligations to the
Guaranteed Creditors. If any or all of the Guaranteed Obligations becomes due
and payable to the Guaranteed Creditors hereunder, the Parent Guarantor
unconditionally promises to pay such Guaranteed Obligations to the Guaranteed
Creditors, or order, on demand, together with any and all reasonable expenses
which may be incurred by (x) the Agents in connection with the preparation,
execution and delivery of this Agreement and the other Credit Documents and
the documents and instruments referred to herein and therein and any
amendment, waiver or consent relating hereto or thereto, in connection with
its syndication efforts with respect to this Agreement, or (y) Guaranteed
Creditors in collecting any of the Guaranteed Obligations. If claim is ever
made upon any Guaranteed Creditor for repayment or recovery of any amount or
amounts received in payment or on account of any of the Guaranteed Obligations
and any of the aforesaid payees repays all or part of said amount by reason of
(i) any judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event the Parent Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be
binding upon Parent Guarantor, notwithstanding any revocation of this Parent
Guaranty or other instrument evidencing any liability of the Borrower, and the
Parent Guarantor shall be and remain liable to the aforesaid payees hereunder
for the amount so repaid or recovered to the same extent as if such amount had
never originally been received by any such payee.
12.2 Bankruptcy. Additionally, the Parent Guarantor
unconditionally and irrevocably guarantees the payment of any and all
Guaranteed Obligations to the Guaranteed Creditors whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any
of the events specified in Section 9.1(e), and unconditionally and irrevocably
promises to pay such indebtedness to the Lenders, or order, on demand, in
lawful money of the United States of America.
12.3 Nature of Liability. The liability of the Parent Guarantor
hereunder is exclusive and independent of any security for or other guaranty of
the Guaranteed Obligations whether executed by the Parent Guarantor, any other
guarantor or by any other party, and the liability of the Parent Guarantor
hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the Borrower or by any other party, or (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the Guaranteed Creditors of the Borrower, or (c) any
payment on or in reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed
Obligations which any such Guaranteed Creditor repays to the Borrower pursuant
to court order in any bankruptcy, reorganization, arrangement, moratorium or
other debtor relief proceeding, and the Parent Guarantor waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
12.4 Independent Obligation. The obligations of the Parent
Guarantor hereunder are independent of the obligations of any other guarantor,
any other party or the Borrower, and a separate action or actions may be
brought and prosecuted against the Parent Guarantor whether or not action is
brought against any other guarantor, any other party or the Borrower and
whether or not any other guarantor, any other party or the Borrower be joined
in any such action or actions. The Parent Guarantor waives, to the fullest
extent permitted by law, the benefit of any statute of limitations affecting
its liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of
limitations as to the Borrower shall, to the fullest extent permitted by law,
operate to toll the statute of limitations as to the Parent Guarantor.
12.5 Authorization. The Parent Guarantor authorizes the
Guaranteed Creditors without notice or demand (except as shall be required by
applicable statute and cannot be waived), and without affecting or impairing
its liability hereunder, from time to time to:
(a) subject to the agreement of the Borrower, change the
manner, place or terms of payment of, and/or change or extend the
time of payment of, renew, increase, accelerate or alter, any of the
Guaranteed Obligations (including any increase or decrease in the
rate of interest thereon), any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the Parent
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including
any of those hereunder) incurred directly or indirectly in respect
thereof or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers,
guarantors, the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
its creditors other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed
Creditors regardless of what liability or liabilities of the Parent
Guarantor or the Borrower remain unpaid; and/or
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of
the instruments or agreements referred to herein, or otherwise, with
the agreement of the Borrower, amend, modify or supplement this
Agreement, any other Credit Document or any of such other instruments
or agreements.
12.6 Reliance. It is not necessary for any Guaranteed
Creditor to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agent acting or
purporting to act on its behalf, and any Guaranteed Obligations made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
12.7 Subordination. Any indebtedness of the Borrower relating
to the Guaranteed Obligations now or hereafter owing to the Parent Guarantor
is hereby subordinated in right of payment to the Guaranteed Obligations owing
to the Guaranteed Creditors; provided that payment may be made by the Borrower
on any such indebtedness owing to the Parent Guarantor so long as the same is
not prohibited by this Agreement; and provided further, that if the
Administrative Agent so requests at a time when an Event of Default exists,
all such indebtedness relating to the Guaranteed Obligations to the Parent
Guarantor shall be collected, enforced and received by the Parent Guarantor as
trustee for the Guaranteed Creditors and be paid over to the Administrative
Agent on behalf of the Guaranteed Creditors on account of the Guaranteed
Obligations to the Guaranteed Creditors, but without affecting or impairing in
any manner the liability of the Parent Guarantor under the other provisions of
this Parent Guaranty. Prior to the transfer by the Parent Guarantor of any
note or negotiable instrument evidencing any indebtedness relating to the
Guaranteed Obligations to the Parent Guarantor, the Parent Guarantor shall mark
such note or negotiable instrument with a legend that the same is subject to
this subordination. Without limiting the generality of the foregoing, the
Parent Guarantor hereby agrees with the Guaranteed Creditors that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Parent Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
12.8 Waiver. (a) The Parent Guarantor waives any right
(except as shall be required by applicable statute and cannot be waived) to
require any Guaranteed Creditor to (i) proceed against the Borrower, any other
guarantor or any other party, (ii) proceed against or exhaust any security
held from the Borrower, any other guarantor or any other party or (iii) pursue
any other remedy in the Guaranteed Creditors' power whatsoever. The Parent
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full of
the Guaranteed Obligations, including, without limitation, any defense based
on or arising out of the disability of the Borrower, any other guarantor or
any other party, or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the liability
of the Borrower, other than payment in full of the Guaranteed Obligations.
The Guaranteed Creditors may, at their election, foreclose on any security
held by the Administrative Agent, the Collateral Agent or any other Guaranteed
Creditor by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the
Guaranteed Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of the
Parent Guarantor hereunder except to the extent the Guaranteed Obligations has
been paid. The Parent Guarantor waives, to the fullest extent permitted by
law, any defense arising out of any such election by the Guaranteed Creditors,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Parent Guarantor
against the Borrower or any other party or any security.
(b) The Parent Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Parent Guaranty, and notices of the existence, creation or incurring
of new or additional Guaranteed Obligations. The Parent Guarantor 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 Guaranteed Obligations and the nature, scope and
extent of the risks which the Parent Guarantor assumes and incurs hereunder,
and agrees that the Guaranteed Creditors shall have no duty to advise the
Parent Guarantor of information known to them regarding such circumstances or
risks.
12.9 Limitation on Enforcement. The Guaranteed Creditors
agree that this Parent Guaranty may be enforced only by the action of the
Administrative Agent, in each case acting upon the instructions of the
Required Lenders and that no Guaranteed Creditors shall have any right
individually to seek to enforce or to enforce this Parent Guaranty, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent for the benefit of the Guaranteed Creditors upon the
terms of this Agreement. The Guaranteed Creditors further agree that this
Parent Guaranty may not be enforced against any Affiliate, director, officer,
employee or stockholder of the Parent Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
ACG HOLDINGS, INC.,
a Delaware corporation
By /s/ Joseph M. Milano
------------------------------
Title: Senior Vice President
Chief Financial Officer
AMERICAN COLOR GRAPHICS, INC.,
a New York corporation
By /s/ Joseph M. Malino
------------------------------
Title: Senior Vice Pesident
BANKERS TRUST COMPANY,
Individually and as Administrative
Agent
By /s/ Jeff Ogden
------------------------------
Title: Managing Director
MORGAN STANLEY SENIOR FUNDING,
INC., Individually and
as Syndication Agent
By /s/ Michael A. Hart
------------------------------
Title: Principal
GENERAL ELECTRIC CAPITAL
CORPORATION,
Individually and
as Documentation Agent
By /s/ Kevin P. Walsh
------------------------------
Title: Managing Director
SCHEDULE I
LIST OF LENDERS AND COMMITMENTS
-------------------------------
Revolving
A Term Loan B Term Loan Loan
Lender Commitment Commitment Commitment
- ------ ----------- ----------- ----------
Bankers Trust $12,931,034.48 $25,862,068.96 $36,206,896.56
Company
Morgan Stanley
Senior Funding, Inc. $ 6,034,482.76 $12,068,965.52 $16,896,551.72
General Electric
Capital Corporation $ 6,034,482.76 $12,068,965.52 $16,896,551.72
------------- ------------- -------------
Total $25,000,000.00 $50,000,000.00 $70,000,000.00
Schedules II - XII are on file with the Company.
EXHIBIT A-1
FORM OF A TERM NOTE
-------------------
$________________ New York, New York
______ ___, ____
FOR VALUE RECEIVED, AMERICAN COLOR GRAPHICS, INC., a New York
corporation (the "Borrower"), hereby promises to pay to the order of
______________________ (the "Lender"), in lawful money of the United States
of America in immediately available funds, at the Payment Office (as
defined in the Agreement referred to below) initially located at One
Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, on the A
TL/RL Maturity Date (as defined in the Agreement) the principal sum of
_______________ DOLLARS or, if less, the then unpaid principal amount of
all A Term Loans (as defined in the Agreement) made by the Lender pursuant
to the Agreement, payable at such times and in such amounts as are
specified in the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount of each A Term Loan made by the Lender in like money at
said office from the date such A Term Loan is made until paid at the rates
and at the times provided in the Agreement.
This Note is one of the A Term Notes referred to in the Credit
Agreement, dated as of August 15, 1995 and amended and restated as of May
8, 1998, among ACG Holdings, Inc., the Borrower, the financial institutions
from time to time party thereto (including the Lender), General Electric
Capital Corporation, as Documentation Agent, Morgan Stanley Senior Funding,
Inc., as Syndication Agent and Bankers Trust Company, as Administrative
Agent (as the same may be further amended, modified or supplemented from
time to time, the "Agreement") and is entitled to the benefits thereof and
of the other Credit Documents (as defined in the Agreement). This Note is
also entitled to the benefits of the Guaranties (as defined in the
Agreement) and is secured by and entitled to the benefits of the Collateral
Documents (as defined in the Agreement). As provided in the Agreement,
this Note is subject to voluntary and mandatory prepayment prior to the A
TL/RL Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note
may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
AMERICAN COLOR GRAPHICS, INC.
By
--------------------------------
Name:
Title:
EXHIBIT A-2
FORM OF B TERM NOTE
-------------------
$________________ New York, New York
________ ___, ____
FOR VALUE RECEIVED, AMERICAN COLOR GRAPHICS, INC., a New York
corporation (the "Borrower"), hereby promises to pay to the order of
______________________ (the "Lender"), in lawful money of the United States
of America in immediately available funds, at the Payment Office (as
defined in the Agreement referred to below) initially located at One
Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, on the B
TL Maturity Date (as defined in the Agreement) the principal sum of
_______________ DOLLARS or, if less, the then unpaid principal amount of
all B Term Loans (as defined in the Agreement) made by the Lender pursuant
to the Agreement, payable at such times and in such amounts as are
specified in the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount of each B Term Loan made by the Lender in like money at
said office from the date such B Term Loan is made until paid at the rates
and at the times provided in the Agreement.
This Note is one of the B Term Notes referred to in the Credit
Agreement, dated as of August 15, 1995 and amended and restated as of May
8, 1998, among ACG Holdings, Inc., the Borrower, and the financial
institutions from time to time party thereto (including the Lender),
General Electric Capital Corporation, as Documentation Agent, Morgan
Stanley Senior Funding, Inc., as Syndication Agent and Bankers Trust
Company, as Administrative Agent (as amended, modified or supplemented from
time to time, the "Agreement") and is entitled to the benefits thereof and
of the other Credit Documents (as defined in the Agreement). This Note is
also entitled to the benefits of the Guaranties (as defined in the
Agreement) and is secured by and entitled to the benefits of the Collateral
Documents (as defined in the Agreement). As provided in the Agreement,
this Note is subject to voluntary and mandatory prepayment prior to the B
TL Maturity Date in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note
may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
AMERICAN COLOR GRAPHICS, INC.
By
---------------------------------
Name:
Title:
EXHIBIT A-3
FORM OF REVOLVING NOTE
----------------------
$________________ New York, New York
________ ___, ____
FOR VALUE RECEIVED, AMERICAN COLOR GRAPHICS, INC., a New York
corporation (the "Borrower"), hereby promises to pay to the order of
______________________ (the "Lender"), in lawful money of the United States
of America in immediately available funds, at the Payment Office (as
defined in the Agreement referred to below) initially located at One
Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, on the A
TL/RL Maturity Date (as defined in the Agreement) the principal sum of
_______________ DOLLARS or, if less, the then unpaid principal amount of
all Revolving Loans (as defined in the Agreement) made by the Lender
pursuant to the Agreement, payable at such times and in such amounts as are
specified in the Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount of each Revolving Loan made by the Lender in like money at said office
from the date such Revolving Loan is made until paid at the rates and at the
times provided in the Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of August 15, 1995 and amended and restated as of May
8, 1998, among ACG Holdings, Inc., the Borrower, the financial institutions
from time to time party thereto (including the Lender), General Electric
Capital Corporation, as Documentation Agent, Morgan Stanley Senior Funding,
Inc., as Syndication Agent and Bankers Trust Company, as Administrative
Agent (as amended, modified or supplemented from time to time, the
"Agreement") and is entitled to the benefits thereof and of the other
Credit Documents (as defined in the Agreement). This Note is also entitled
to the benefits of the Guaranties (as defined in the Agreement) and is
secured by and entitled to the benefits of the Collateral Documents (as
defined in the Agreement). As provided in the Agreement, this Note is
subject to voluntary and mandatory prepayment prior to the A TL/RL Maturity
Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note
may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
AMERICAN COLOR GRAPHICS, INC.
By
-----------------------------
Name:
Title:
EXHIBIT A-4
FORM OF SWINGLINE NOTE
----------------------
$________________ New York, New York
________ ___, ____
FOR VALUE RECEIVED, AMERICAN COLOR GRAPHICS, INC., a New York
corporation (the "Borrower"), hereby promises to pay to the order of
BANKERS TRUST COMPANY (the "Lender"), in lawful money of the United States
of America in immediately available funds, at the Payment Office (as
defined in the Agreement referred to below) initially located at One
Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, on the
Swingline Expiry Date (as defined in the Agreement) the principal sum of
_______________ DOLLARS or, if less, the then unpaid principal amount of
all Swingline Loans (as defined in the Agreement) made by the Lender
pursuant to the Agreement, payable at such times and in such amounts as are
specified in the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount of each Swingline Loan made by the Lender in like money at
said office from the date such Swingline Loan is made until paid at the
rates and at the times provided in the Agreement.
This Note is one of the Swingline Notes referred to in the Credit
Agreement, dated as of August 15, 1995, and amended and restated as of May
8, 1998, among ACG Holdings, Inc., the Borrower, the financial institutions
from time to time party thereto (including the Lender), General Electric
Capital Corporation, as Documentation Agent, Morgan Stanley Senior Funding,
Inc., as Syndication Agent and Bankers Trust Company, as Administrative
Agent (as amended, modified or supplemented from time to time, the
"Agreement") and is entitled to the benefits thereof and of the other
Credit Documents (as defined in the Agreement). This Note is also entitled
to the benefits of the Guaranties (as defined in secured by and entitled to
the benefits of the Collateral Documents (as the Agreement) and is defined
in the Agreement). As provided in the Agreement, this Note is subject to
voluntary and mandatory prepayment prior to the Swingline Expiry Date, in
whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note
may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
AMERICAN COLOR GRAPHICS, INC.
By
--------------------------------
Name:
Title:
EXHIBIT B-1
FORM OF NOTICE OF BORROWING
---------------------------
[DATE]
To: Bankers Trust Company, as Administrative Agent
(the "Administrative Agent") for the various
lending institutions (the "Lenders") party to the
Credit Agreement referred to below
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: __________________
Ladies and Gentlemen:
The undersigned, American Color Graphics, Inc. (the "Company"),
refers to the Credit Agreement, dated as of August 15, 1995 and amended and
restated as of May 8, 1998 (as the same may be further amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), among ACG Holdings, Inc.,
the Company, the Lenders, General Electric Capital Corporation, as
Documentation Agent, Morgan Stanley Senior Funding, Inc., as Syndication
Agent and Bankers Trust Company, as Administrative Agent, and hereby gives
you notice, irrevocably, pursuant to Section 2.4(a) of the Credit
Agreement, that the undersigned hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by
Section 2.4(a) of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is
$___________.
(ii) The Business Day of the Proposed Borrowing is
______________, ____.
(iii) The Proposed Borrowing is to consist of [A Term Loans]
[B Term Loans] [Revolving Loans].
(iv) The Proposed Borrowing is to consist of [Base Rate Loans]
[Eurodollar Rate Loans].(1)
[(v) The initial Interest Period for the Proposed Borrowing is
[one month] [two months] [three months] [six months] [, subject to
availability to all the Lenders which are required to make Loans of
the respective Tranche, twelve months and, if such Interest Period is
unavailable [specify alternative desired]].](2)
- ------------
(1) Unless the Syndication Date has theretofore occurred, prior to the
90(th) day after the Restatement Effective Date (or, if later, the
last day of the third month following the initial Borrowing of
Eurodollar Rate Loans), Loans to be maintained as Eurodollar Rate
Loans may only be incurred on, or within 5 Business Days after, the
Restatement Effective Date and on each one month anniversary of the
initial date of Borrowing of such Eurodollar Rate Loans.
(2) To be included for a Proposed Borrowing of Eurodollar Rate Loans.
Unless the Syndication Date has theretofore occurred, prior to the 90
(th )day after the Restatement Effective Date (or, if later, the last
day of the third month following the initial Borrowing of Eurodollar
Rate Loans), Loans to be maintained as Eurodollar Rate Loans may not
have an Interest Period in excess of one month.
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
(A) the representations and warranties contained in Article 6 of
the Credit Agreement are true and correct in all material respects,
before and after giving effect to the Proposed Borrowing and to the
application of the proceeds thereof, as though made on and as of such
date, except to the extent that such representations and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct in all
material respects on and as of such earlier date); and
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof.
Very truly yours,
AMERICAN COLOR GRAPHICS, INC.
By
--------------------------------
Name:
Title:
EXHIBIT B-2
FORM OF LETTER OF CREDIT REQUEST
--------------------------------
No. _______________(1) Dated ______________(2)
To: Bankers Trust Company, as Issuing Bank and
as Administrative Agent under the Credit
Agreement, dated as of August 15, 1995
and amended and restated as of May 8,
1998, among ACG Holdings, Inc.,
American Color Graphics, Inc., the
financial institutions from time to time
party thereto, General Electric Capital
Corporation, as Documentation Agent,
Morgan Stanley Senior Funding, as
Syndication Agent and Bankers Trust
Company, as Administrative Agent (as the
same may be further amended, modified or
supplemented from time to time, the
"Credit Agreement")
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Pursuant to Section 3.4 of the Credit Agreement, the undersigned
hereby requests that the Issuing Bank issue a [trade] [standby] Letter of
Credit on _____________(3) (the "Date of Issuance") in the aggregate
Stated Amount of __________________.(4)
- ----------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request.
(3) Date of Issuance which shall be (x) a Business Day and (y) at least
three Business Days from the date hereof (or such shorter period as
may be agreed to by the Issuing Bank in a given case).
(4) Aggregate initial Stated Amount of Letter of Credit which shall be an
amount acceptable to the Administrative Agent.
For purposes of this Letter of Credit Request, unless otherwise
defined, all capitalized terms used herein which are defined in the Credit
Agreement shall have the respective meanings provided therein.
The beneficiary of the requested Letter of Credit will be
______________,(5) and such Letter of Credit will be in support of
______________(6) and will have a stated termination date of
_________________.)(7)
- ------------
(5) Insert name and address of beneficiary.
(6) Insert description of supported obligations and name of agreement, if
any, or, in the case of trade Letters of Credit, the commercial
transaction, to which it relates.
(7) Insert last date upon which drafts may be presented which may not be
later than the earliest to occur of (x) the date occurring 365/366
days after the Date of Issuance in the case of standby Letters of
Credit, (y) the date occurring 180 days after the Date of Issuance in
the case of trade Letters of Credit and (z) the date occurring five
Business Days prior to the ATL/RL Maturity Date.
The undersigned hereby certifies that:
(1) the representations and warranties contained in the Credit
Documents will be true and correct in all material respects on and as
of the Date of Issuance, both before and after giving effect to the
issuance of the Letter of Credit requested hereby, except to the
extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and
warranties shall have been true and correct in all material respects
on and as of such earlier date); and
(2) no Default or Event of Default has occurred and is continuing
nor, after giving effect to the issuance of the Letter of Credit requested
hereby, would such a Default or Event of Default occur.
Copies of all documentation with respect to the supported
transaction are attached hereto.
AMERICAN COLOR GRAPHICS, INC.
By
-----------------------------------
Name:
Title:
EXHIBIT B-3
FORM OF NOTICE OF CONTINUATION
------------------------------
[Date]
To: Bankers Trust Company, as Administrative Agent
(the "Administrative Agent") for the various lending
institutions (the "Lenders") party to
the Credit Agreement referred to below
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: _________________
Ladies and Gentlemen:
The undersigned, American Color, Inc. (the "Company"), refers to
the Credit Agreement, dated as of August 15, 1995 and amended and restated
as of May 8, 1998 (as the same may be further amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among ACG Holdings, Inc.,
the Company, the Lenders, General Electric Capital Corporation, as
Documentation Agent, Morgan Stanley Senior Funding, Inc., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent and hereby gives
you notice, irrevocably, pursuant to Section 4.3(a) of the Credit
Agreement, that the undersigned hereby elects to maintain the Eurodollar
Rate Loan (or portion thereof) described below as a Eurodollar Rate Loan
under the Credit Agreement, and in that connection sets forth below the
information relating to such Continuation (the "Proposed Continuation") as
required by Section 4.3(a) of the Credit Agreement:
(i) $[aggregate principal amount to be continued] of the
Eurodollar Rate Loan presently outstanding with an Interest Period expiring
on [_____________ __, ____] is to be continued as a Eurodollar Rate Loan
commencing on [__________].(1)
(ii) The date of the Borrowing pursuant to which such Eurodollar
Rate Loan was made is [____________, ____] and the Interest Period
applicable thereto was [one] [two] [three] [six] [twelve] month[s].
- ------------
(1) Shall be a Business Day occurring (x) on the expiration date of
Interest Period of the existing Eurodollar Rate Loan to be continued
hereby and (y) at least three Business Days after the date hereof (to
the extent this Notice of Continuation is given prior to 12:00 Noon
(New York City time) on the date hereof).
(iii) The Eurodollar Rate Loan to be continued as a Eurodollar Rate
Loan shall have an Interest Period of [one] [two] [three] [six] [, subject
to availability to all the Lenders which are required to make Loans of the
respective Tranche, twelve and, if such Interest Period is unavailable
[specify alternative desired]] month[s].(2)
- ------------
(2) Unless the Syndication Date has theretofore occurred, prior to the
90(th) day after the Restatement Effective Date (or, if later, the
last day of the third month following the initial Borrowing of
Eurodollar Rate Loans), Loans to be maintained as Eurodollar Rate
Loans may not have an Interest Period in excess of one month.
The undersigned hereby certifies that on the date hereof, and on
the date of the Proposed Continuation, no Default or Event of Default has
occurred and is continuing.
Very truly yours,
AMERICAN COLOR GRAPHICS, INC.
By
-------------------------------
Name:
Title:
EXHIBIT B-4
FORM OF NOTICE OF CONVERSION
----------------------------
[Date]
To: Bankers Trust Company, as Administrative Agent
(the "Administrative Agent") for the various
lending institutions (the "Lenders") party to
the Credit Agreement referred to below
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: _________________
Ladies and Gentlemen:
The undersigned, American Color Graphics, Inc. (the "Company"),
refers to the Credit Agreement, dated as of August 15, 1995 and amended and
restated as of May 8, 1998 (as the same may be further amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among ACG Holdings, Inc.,
the Company, the Lenders, General Electric Capital Corporation, as
Documentation Agent, Morgan Stanley Senior Funding, Inc., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, and hereby gives
you notice, irrevocably, pursuant to Section 4.3(b) of the Credit
Agreement, that the undersigned hereby requests a conversion of a[n] [A
Term] [B Term] [Revolving] Loan under the Credit Agreement, and in that
connection sets forth below the information relating to such Conversion
(the "Proposed Conversion") as required by Section 4.3(b) of the Credit
Agreement:
(i) The Business Day of the Proposed Conversion is
______________ __, ____.(1)
- ------------
(1) Shall be a Business Day (x) immediately following the date hereof in
the case of a Proposed Conversion into Base Rate Loans and (y)
occurring three Business Days after the date hereof in the case of a
Proposed Conversion into Eurodollar Rate Loans, in each case to the
extent this Notice of Conversion is given prior to 12:00 Noon (New
York City time) on the date hereof.
(ii) The [Base Rate] [Eurodollar Rate] Loans to be converted
are to be converted into [Eurodollar Rate] [Base Rate] Loans.
(iii) The aggregate principal amount of the [A Term] [B Term]
[Revolving] Loans to be converted is $[_______].
(iv) The date of the Borrowing pursuant to which such [A Term]
[B Term] [Revolving] Loans were made is [_______] [and the Interest Period
applicable thereto was [one] [two] [three] [six] [twelve] month[s]].
[(v) The [A Term] [B Term] [Revolving] Loans to be converted
into Eurodollar Rate Loans shall initially have an Interest Period of [one]
[two] [three] [six] [, subject to availability to all the Lenders which are
required to make Loans of the respective Tranche, twelve and, if such
Interest Period is unavailable [specify alternative desired]] month[s]].(2)
- ------------
(2) To be included in the event the Proposed Conversion involves a
conversion into a Eurodollar Rate Loan. Unless the Syndication Date
has theretofore occurred, prior to the 90 (th) day after the
Restatement Effective Date (or, if later, the last day of the third
month following the initial Borrowing of Eurodollar Rate Loans), Loans
to be maintained as Eurodollar Rate Loans may not have an Interest
Period in excess of one month.
The undersigned hereby certifies that on the date hereof, and on
the date of the Proposed Conversion, no Default or Event of Default has
occurred and is continuing.
Very truly yours,
AMERICAN COLOR GRAPHICS, INC.
By
-----------------------------
Name:
Title:
EXHIBIT C-1
FORM OF OPINION OF DAVIS POLK & WARDWELL
----------------------------------------
May 8, 1998
To the Lenders, the Documentation
Agent, the Syndication Agent and the Administrative
Agent party to the Credit Agreement
referred to below
c/o Bankers Trust Company,
as Administrative Agent,
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Re: American Color Graphics
Ladies and Gentlemen:
We have acted as special New York counsel to ACG Holdings,
Inc., a Delaware corporation ("Holdings"), American Color Graphics, Inc., a
New York corporation (the "Borrower"), American Images of North America,
Inc., a New York Corporation ("American Images"), Sullivan Marketing, Inc.,
a Delaware corporation ("Marketing") and Sullivan Media Corporation, a
Delaware corporation ("Media" and, together with American Images and
Marketing, the "Subsidiaries," and each a "Subsidiary"), in connection with
the Amended and Restated Credit Agreement (the "Credit Agreement") dated as
of May 8, 1998 among Holdings, the Borrower, the various financial
institutions as are parties thereto (the "Lenders"), General Electric
Capital Corporation, as Documentation Agent (the "Documentation Agent"),
Morgan Stanley Senior Funding, as Syndication Agent (the "Syndication
Agent"), and Bankers Trust Company, as Administrative Agent (the
"Administrative Agent", and, together with the Documentation Agent and
Syndication Agent, the "Agents"). Holdings, the Borrower and the
Subsidiaries are sometimes hereinafter referred to, collectively, as the
"Credit Parties" and each a "Credit Party"). Other capitalized terms
defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
We have reviewed executed copies of:
(i) the Credit Agreement;
(ii) the Notes delivered on the date hereof;
(iii) the Amended and Restated Security Agreement dated as of
May 8, 1998 among Holdings, the Borrower, each of the
Subsidiary Guarantors and BT Commercial Corporation, as
Collateral Agent;
(iv) the Amended and Restated Subsidiaries Guaranty dated as
of May 8, 1998 made by each Subsidiary Guarantor of
the Borrower; and
(v) the Amended and Restated Pledge Agreement dated as of
May 8, 1998 among Holdings, the Borrower, each of the
Subsidiary Guarantors and BT Commercial Corporation,
as Collateral Agent.
The agreements referred to in items (i) through (v) above are
sometimes hereinafter referred to as the "Credit Documents" and each a "Credit
Document"; and the agreements referred to in items (iii) and (v) above are
sometimes hereinafter referred to as the "Security Documents" and each a
"Security Document".
In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate
records, certificates of public officials and other instruments, and have
conducted such other investigations of fact and law, as we have deemed
necessary or advisable for purposes of this opinion.
In addition, in rendering the opinions below, we have assumed,
as to the Credit Parties, the accuracy of the conclusions with respect to
incorporation, organization, existence, good standing, qualification,
corporate power, authorization, execution, delivery and non-contravention of
laws, agreements or constitutive documents in the opinion of Timothy M. Davis,
Esq., General Counsel of Holdings, dated and delivered to you on the date
hereof and our opinions below are subject to the assumptions, qualifications
and limitations set forth and expressed in such opinion with respect to such
matters.
Based upon and subject to the foregoing, and subject to the
qualifications and exceptions set forth herein, we are of the opinion that:
1. Each Credit Document (other than the Notes) is a valid and
binding agreement of each Credit Party party thereto, and the Notes are valid
and binding obligations of the Borrower, in each case enforceable against such
Credit Party in accordance with its terms.
2. The Security Agreement creates a valid security interest in
favor of the Collateral Agent for the benefit of the Bank Creditors (as
defined in the Security Agreement) in all right, title and interest of each
Credit Party party thereto in the Collateral covered thereby (to the extent
that Article 9 of the UCC is applicable thereto and governs the creation of
security interests therein) as security for the payment of the Obligations (as
defined in the Security Agreement).
3. The Pledge Agreement creates a valid security interest in
favor of the Collateral Agent for the benefit of the Bank Creditors (as
defined in the Pledge Agreement) in all right, title and interest of each
Credit Party party thereto in the Pledged Securities as security for the
Obligations (as defined in the Pledge Agreement).
4. None of (x) the execution, delivery and performance by any
Credit Party of the Credit Documents to which it is a party, (y) compliance
with the terms and provisions thereof or (z) the consummation of the
transactions contemplated therein (i) contravene any applicable provision of
the laws of the State of New York, the Delaware General Corporation Law or the
federal laws of the United States that in our experience is normally
applicable to general business corporations in connection with transactions of
the type contemplated by the Credit Agreement or (ii) violate any provision of
or constitute a default under the Senior Subordinated Note Documents.
5. The Obligations constitute "Senior Indebtedness" under (and
as defined in) the Senior Subordinated Note Indenture.
The foregoing are subject to the following qualifications:
(a) Our opinions in paragraphs 1, 2 and 3 above are subject
to applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and general principles of equity.
(b) Certain provisions of the Security Documents are or may be
unenforceable in whole or in part, but the inclusion of such provisions does
not affect the validity of any of such Security Documents, and each such
Security Document contains adequate provisions for the practical realization
of the rights and benefits afforded thereby.
(c) Except as expressly set forth in paragraphs 2 and 3, we
express no opinion as to the creation of any security interest or lien.
(d) We express no opinion as to the perfection or priority of
any security interest or lien or as to the right, title or interest, if any,
of any Credit Party to any Collateral or the value given therefore.
(e) We express no opinion as to the effect of the law of any
jurisdiction (except the State of New York) in which any Lender or Agent
may be located or wherein enforcement of any Credit Document may be sought
that limits the rates of interest that any such Lender or Agent may legally
charge or collect.
(f) The continuation of security interests in proceeds is
limited to the extent set forth in Section 9-306 of the UCC.
(g) We express no opinion as to the enforceability of any
provision in the Credit Documents purporting to confer subject matter
jurisdiction of any federal court of the United States over any Person.
(h) We express no opinion as to the enforceability of Section
11.17 of the Credit Agreement.
(i) We express no opinion as to the effect of Section 548 of
the United States Bankruptcy Code or any similar provision of State law.
(j) We note that certain of the Credit Documents constitute
amendments and restatements of existing agreements. In giving the opinions
stated above, we are expressing no opinion as to such existing agreements
or as to the validity, perfection or priority of any security interest
purported to be created thereby and, to the extent relevant to our opinions
set forth herein, have assumed that such existing agreements constitute
valid, binding and enforceable agreements of the parties thereto and that
such security interests have been duly created and perfected thereunder.
We are members of the bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the
Delaware General Corporation Law and the federal laws of the United States of
America.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT C-2
FORM OF OPINION OF GENERAL COUNSEL OF HOLDINGS
----------------------------------------------
May 8, 1998
To the Lenders from time to time
party to the Credit Agreement
referred to below, to GE Capital
Corporation, as Documentation
Agent, Morgan Stanley Senior
Funding, Inc., as Syndication
Agent, and to Bankers Trust
Company, as Administrative Agent
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.1(c)(ii)
of the Credit Agreement dated as of August 15, 1995 and amended and restated
as of May 8, 1998 (the "Credit Agreement") among ACG Holdings, a Delaware
corporation ("Holdings"), American Color Graphics, Inc., a New York
corporation (the "Borrower"), each of the Lenders party thereto, GE Capital
Corporation, as Documentation Agent, Morgan Stanley Senior Funding, Inc., as
Syndication Agent and Bankers Trust Company, as Administrative Agent. All
capitalized terms used but not defined herein have the respective meanings
given to such terms in the Credit Agreement.
I am General Counsel of Holdings, the Borrower, American Images
of North America. Inc., a New York corporation ("American Images"), Sullivan
Marketing. Inc., a Delaware corporation ("Marketing") and Sullivan Media
Corporation, a Delaware corporation ("Media"). Holdings, the Borrower,
American Images, Marketing and Media are collectively referred to herein as
the "Credit Parties".
In rendering the opinions expressed below, I have examined:
(i) a copy of the Credit Agreement executed by the parties
thereto;
(ii) a copy of the Notes executed by the Borrower;
(iii) a copy of the Subsidiaries Guaranty executed
by the parties thereto;
(iv) a copy of the Security Agreement executed by the
parties thereto;
(v) a copy of the Pledge Agreement executed by the parties
thereto (the Security Agreement and the Pledge Agreement being,
collectively, the "Covered Security Agreements"; and the Covered Security
Agreements, together with the Credit Agreement, the Notes and the
Subsidiaries Guaranty being, collectively, the "Covered Agreements");
(vi) copies of the forms of Mortgage Amendments executed by
the parties thereto; and
(vii) the certificate of incorporation and bylaws of each
Credit Party.
In addition, I have examined originals, or copies certified or
otherwise identified to my satisfaction, of such corporate records of the
Credit Parties, certificates of public officials and of officers of the Credit
Parties and agreements, instruments and other documents as I have deemed
necessary as a basis for the opinions expressed below. I have relied, with
respect to certain factual matters, on (i) the representations and warranties
of the Credit Parties contained in the Credit Documents and (ii) the officer's
certificates and other certificates I have examined.
In rendering this opinion, I have assumed, as to all parties
other than the Credit Parties (i) the genuineness of all signatures, the
conformity to the original documents of all documents submitted to me as
copies or composite copies, the authenticity of the documents submitted to me
as originals and the conformity to the executed copies of all documents
submitted to me as execution copies, (ii) the due authorization, execution and
delivery of the documents, pursuant to full power, authority and legal right
of, and the validity and enforceability of the documents against, such parties
and (iii) that each such party has full corporate power and authority to
perform its respective obligations thereunder.
My opinions expressed below are limited to the laws of the
State of New York, the Delaware General Corporation Law and the federal law of
the United States of America, and I do not express any opinion herein
concerning any other law.
Based on and subject to the foregoing and subject to the
qualifications and limitations hereinafter set forth, I am of the opinion that
as of the date hereof:
1. Each Credit Party is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of
its organization and has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage.
2. Each Credit Party has the corporate power and authority
to execute, deliver and carry out the terms and provisions of the Credit
Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance of the Credit
Documents to which it is a party.
3. Neither the execution, delivery and performance by any
Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will, after
giving effect to any waivers, constitute a default under, or (other than
pursuant to the Collateral Documents) result in the creation or imposition
of (or the obligation to create or impose) any Lien upon any of the
property or assets of such Credit Party or any of its Subsidiaries pursuant
to, the terms of any indenture, mortgage, deed of trust, agreement or other
instrument to which such Credit Party or any of its Subsidiaries is a party
or by which it or any of its property or assets are bound or to which it
may be subject or (iii) will violate any provision of the certificate of
incorporation or bylaws of any Credit Party.
4. To the best of my knowledge, there are no actions, suits
or proceedings pending or threatened with respect to Holdings, the Borrower
or any of the Borrower's Subsidiaries that, after giving effect to expected
insurance proceeds and indemnity payments, are reasonably likely to have a
Material Adverse Effect.
5. Except for the filing of the Mortgage Amendments and the
filing of financing statements and continuation required under the
Collateral Documents, no order, consent, approval, license, or validation
of, or filing, recording or registration with, or exemption by, any foreign
or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance by each Credit Party of any Credit
Document or (ii) the legality, validity, binding effect or enforceability
of any Credit Document as against each Credit Party thereto.
The opinions expressed herein are given solely as of the date
hereof, and I shall have no obligation to update, bring down or supplement
such opinions. Accordingly, any addressee hereof relying on this letter
should seek advice of its counsel as to the proper application of this letter
My opinions expressed above are furnished solely for your
benefit in .connection with the Credit Agreement and the other Covered
Agreements, and, without my prior written consent, you shall not be entitled
to rely hereon for any other purpose and no Person shall be entitled to rely
hereon for any purpose.
Very truly yours
Timothy M. Davis
EXHIBIT D
FORM OF OFFICERS' CERTIFICATE
-----------------------------
I, the undersigned, [President/Vice President] of [Name of
Corporation], a corporation organized and existing under the laws of the
State of _____________ (the "Company"), do hereby certify on behalf of the
Company that:
1. This Certificate is furnished pursuant to the Credit
Agreement, dated as of August 15, 1995 and amended and restated as of May
8, 1998, among [ACG Holdings, Inc.,] [American Color Graphics, Inc.,] the
Company, the financial institutions from time to time party thereto,
General Electric Capital Corporation, as Documentation Agent, Morgan
Stanley Senior Funding, as Syndication Agent and Bankers Trust Company, as
Administrative Agent, (such Credit Agreement, as in effect on the date of
this Certificate, being herein called the "Credit Agreement"). Unless
otherwise defined herein, capitalized terms used in this Certificate shall
have the meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers of the
Company, each holds the office of the Company set forth opposite his name
and has held such office since __________, 19__.(1) The signature written
opposite the name and title of each such officer is his genuine signature.
Name(2) Office Signature
--------- -------- -----------
-------------- -------------- ---------------
-------------- -------------- ---------------
-------------- -------------- ---------------]
- ------------
(1) Insert a date prior to the time of any corporate action relating to the
Credit Documents or related documentation.
(2) Include name, office and signature of each officer who will sign any
Credit Document, including the officer who will sign the certification
at the end of this Certificate or related documentation.
[3. Attached hereto as Exhibit A is a true and correct copy of
the Certificate of Incorporation of the Company as filed in the Office of
the Secretary of State of the State of ________ on ___________, 19__,
together with all amendments thereto adopted through the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of
the By-Laws of the Company which were duly adopted, are in full force and
effect on the date hereof, and have been in effect since _____________,
19__.](3)
- ------------
(3) Insert bracketed Items 3 and 4 only in the Certificate of each New
Credit Party.
[3][5]. Attached hereto as Exhibit [A][C] is a true and correct
copy of resolutions which were duly adopted on __________, 19__ [by
unanimous written consent of the Board of Directors of the Company] [by a
meeting of the Board of Directors of the Company at which a quorum was
present and acting throughout], and said resolutions have not been
rescinded, amended or modified. Except as attached hereto as Exhibit
[A][C], no resolutions have been adopted by the Board of Directors of the
Company which deal with the execution, delivery or performance of any of
the Documents to which the Company is party.
[4. On the date hereof, all of the conditions set forth in
Sections 5.1(e), (f), (g), (r) and 5.2 of the Credit Agreement have been
satisfied.
5. Attached hereto as Exhibit B are true and correct copies of
all Employee Benefit Plans of Holdings and its Subsidiaries required to be
delivered to the Administrative Agent pursuant to Section 5.1(n) of the
Credit Agreement.
6. Attached hereto as Exhibit C are true and correct copies of
all Collective Bargaining Agreements of Holdings and its Subsidiaries
required to be delivered to the Administrative Agent pursuant to Section
5.1(n) of the Credit Agreement.
7. Attached hereto as Exhibit D are true and correct copies of
all Existing Indebtedness Agreements of Holdings and its Subsidiaries
required to be delivered to the Administrative Agent pursuant to Section
5.1(n) of the Credit Agreement.
8. Attached hereto as Exhibit E are true and correct copies of
all Shareholders' Agreements with respect to the capital stock of Holdings
and its Subsidiaries required to be delivered to the Administrative Agent
pursuant to Section 5.1(n) of the Credit Agreement.
9. Attached hereto as Exhibit F are true and correct copies of
all Management Agreements of Holdings and its Subsidiaries required to be
delivered to the Administrative Agent pursuant to Section 5.1(n) of the
Credit Agreement.
10. Attached hereto as Exhibit G are true and correct copies of
all Employment Agreements of Holdings and its Subsidiaries required to be
delivered to the Administrative Agent pursuant to Section 5.1(n) of the
Credit Agreement.
11. Attached hereto as Exhibit H are true and correct copies of
all Tax Sharing Agreements entered into by Holdings or any of its
Subsidiaries required to be delivered to the Administrative Agent pursuant
to Section 5.1(n) of the Credit Agreement.
12. Attached hereto as Exhibit I is a true and correct copy of
the pro forma balance sheet referred to in Section 5.1(o) of the Credit
Agreement.
13. Attached hereto as Exhibit J are true and correct copies of
all Refinancing Documents.
14. On the date hereof, all of the agreements and plans referred
to in Section 5.1(p) of the Original Credit Agreement, previously delivered
(or made available) to the Administrative Agent by each Credit Party (other
than any New Credit Party), remain in full force and effect.](4)
[[4][15]. On the date hereof, there have been no changes to the
Governing Documents of the Company as delivered pursuant to Section 5.1(d)
of the Original Credit Agreement, and the Company is in good standing in
the State of _______ and in those jurisdictions where the Company conducts
its business.](5)
- ------------
(4) Insert bracketed Items 4 through 14 only in the Certificate delivered on
behalf of the Borrower.
(5) Insert bracketed Item [4][15] in the certificate of each Credit Party
(other than any New Credit Party)
[5][6][16]. On the date hereof, the representations and
warranties contained in the Credit Agreement and in the other Credit
Documents are true and correct in all material respects, both before and
after giving effect to each Credit Event to occur on the date Credit
Party). hereof and the application of the proceeds thereof (it being
understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and
correct in all material respects as of such specified date).
[6][7][17]. On the date hereof, no Default or Event of Default
has occurred and is continuing or would result from the Credit Events to
occur on the date hereof or from the application of the proceeds thereof.
[7][8][18]. There is no proceeding for the dissolution or
liquidation of the Company or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
April __, 1998.
[NAME OF COMPANY]
---------------------------------
Name:
Title:
I, the undersigned, [Secretary/Assistant Secretary] of the
Company, do hereby certify on behalf of the Company that:
1. [Name of Person making above certifications] is the duly
elected and qualified [President/Vice President] of the Company and the
signature above is his genuine signature.
2. The certifications made by [name of Person making above
certifications] on behalf of the Company in Items 2, 3, 4, [5], [15] and
[7] [8] [18] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
April __, 1998.
[NAME OF COMPANY]
---------------------------------
Name:
Title:
[Exhibit E Conformed as Executed]
AMENDED AND RESTATED SUBSIDIARIES GUARANTY
------------------------------------------
AMENDED AND RESTATED SUBSIDIARIES GUARANTY, dated as of August
15, 1995 and amended and restated as of May 8, 1998 (as the same may be
further amended, modified or supplemented from time to time, "this
Guaranty"), made by each Subsidiary Guarantor of the Borrower whose name
appears below (each Subsidiary Guarantor, together with any other entity
which becomes a party hereto pursuant to Section 23 a "Guarantor," and,
collectively, the "Guarantors"). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as defined below) shall
have their respective meanings as set forth therein.
W I T N E S S E T H :
-------------------
WHEREAS ACG Holdings, Inc. ("Holdings"), American Color
Graphics, Inc. (the "Borrower"), the financial institutions from time to
time party thereto (the "Lenders"), General Electric Capital Corporation,
as Documentation Agent (the "Documentation Agent"), Morgan Stanley Senior
Funding, Inc., as Syndication Agent (the "Syndication Agent") and Bankers
Trust Company, as Administrative Agent (the "Administrative Agent"), have
entered into a Credit Agreement, dated as of August 15, 1995 and amended
and restated as of May 8, 1998 (as the same may be further amended,
modified or supplemented from time to time, the "Credit Agreement"),
providing for the making of Loans and the issuance of, and participation
in, Letters of Credit as contemplated therein (with the Lenders from time
to time party to the Credit Agreement, the Administrative Agent, the
Documentation Agent, the Syndication Agent and the Collateral Agent being
herein called the "Bank Creditors");
WHEREAS, the Borrower may from time to time be party to one or
more interest rate agreements (including, without limitation, interest rate
swaps, caps, floors, collars, and similar agreements) (collectively, the
"Interest Rate Agreements") with Bankers Trust Company, in its individual
capacity ("BTCo"), any Lender or a syndicate of financial institutions
organized by BTCo or an affiliate of BTCo (even if BTCo or any such Lender
ceases to be a Lender under the Credit Agreement for any reason), and any
institution that participates, and in each case their subsequent assigns,
in such Interest Rate Agreement (collectively, the "Interest Rate
Creditors," and the Interest Rate Creditors together with the Bank
Creditors, collectively, the "Creditors");
WHEREAS, each Guarantor is a Wholly-Owned Subsidiary of the
Borrower;
WHEREAS, the Guarantors have heretofore entered into a
Subsidiaries Guaranty, dated as of August 15, 1995 (as amended, modified
and supplemented to the date hereof, the "Original Subsidiaries Guaranty");
WHEREAS, the Guarantors desire to amend and restate the Original
Subsidiaries Guaranty in the form of this Guaranty;
WHEREAS, it is a condition to the making of Loans and the
issuance of, and participation in, Letters of Credit under the Credit
Agreement that each Guarantor shall have executed and delivered this
Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the extensions
of credit to the Borrower under the Credit Agreement and the entering into
of Interest Rate Agreements and, accordingly, desires to execute this
Guaranty in order to satisfy the conditions described in the preceding
paragraph;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which
are hereby acknowledged, each Guarantor hereby makes the following
representations and warranties to the Creditors and hereby covenants and
agrees with each Creditor as follows:
1. Each Guarantor irrevocably and unconditionally, and jointly
and severally, guarantees:
(i) to the Bank Creditors the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of (a)
the principal of and interest on the Notes issued by, and the Loans
made to, the Borrower under the Credit Agreement, (b) all
reimbursement obligations and unpaid drawings with respect to Letters
of Credit issued under the Credit Agreement and (c) all other
obligations (including obligations which, but for any automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and
liabilities owing by the Borrower to a Bank Creditor under the Credit
Agreement and the Credit Documents (including, without limitation,
indemnities, Fees and interest thereon) now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement or any other Credit Document and the due performance and
compliance with the terms of the Credit Documents (all such principal,
interest, liabilities and obligations, the "Credit Agreement
Obligations"); and
(ii) to each Interest Rate Creditor the full and prompt payment
when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations (including obligations which, but for
any automatic stay under Section 362(a) of the Bankruptcy Code, would
become due) and liabilities owing by the Borrower under any Interest
Rate Agreement, whether now in existence or hereafter arising, and the
due performance and compliance by the Borrower with all terms,
conditions and agreements contained therein (all such obligations and
liabilities, the "Interest Rate Obligations," and the Interest Rate
Obligations together with the Credit Agreement Obligations,
collectively the "Guaranteed Obligations");
provided, that the maximum amount payable hereunder by each Guarantor with
respect to the Guaranteed Obligations shall at no time exceed the Maximum
Amount (as defined below) of such Guarantor. As used herein, Maximum
Amount for any Guarantor means an amount equal to 95% of the amount by
which (i) the present fair saleable value of such Guarantor's assets
exceeds (ii) the total liabilities of such Guarantor (including the maximum
amount reasonably expected to come due in respect of contingent
liabilities, other than contingent liabilities of such Guarantor
hereunder), in each case determined on the Restatement Effective Date or on
the day any demand is made under this Guaranty, whichever date results in
the higher Maximum Amount. Each Guarantor understands, agrees and confirms
that the Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against each Guarantor (subject to the proviso in
the second preceding sentence) without proceeding against the Borrower or
any security for the Guaranteed Obligations, or under any other guaranty
covering all or a portion of the Guaranteed Obligations. All payments by
each Guarantor under this Guaranty shall be made on the same basis as
payments by the Borrower under Sections 2.7 and 4.11 of the Credit
Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations (subject to the proviso contained above) to the
Creditors upon the occurrence in respect of the Borrower of any of the
events specified in Section 9.1(e) of the Credit Agreement, and, jointly
and severally, unconditionally and irrevocably, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand in lawful
money of the United States of America.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed
Obligations whether executed by such Guarantor, any other guarantor of the
Borrower or by any other party, and the liability of each Guarantor
hereunder shall not be affected or impaired by (i) any direction as to
application of payment by the Borrower or by any other party, (ii) any
other continuing or other guaranty, undertaking or maximum liability of a
guarantor or of any other party as to the Guaranteed Obligations, (iii) any
payment on or in reduction of any such other guaranty or undertaking, (iv)
any dissolution, termination or increase, decrease or change in personnel
by the Borrower, (v) any payment made to any Creditor on the Guaranteed
Obligations which any Creditor repays the Borrower pursuant to court order
in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and each Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such
proceeding, (vi) any action or inaction by the Creditors as contemplated in
Section 6 hereof or (vii) any invalidity, irregularity or unenforceability
of all or part of the Guaranteed Obligations or of any security therefor.
4. The obligations of each Guarantor hereunder are independent
of the obligations of any other Guarantor, any other guarantor of the
Borrower or the Borrower, and a separate action or actions may be brought
and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, any other guarantor of the Borrower or the
Borrower and whether or not any other Guarantor, any other guarantor of the
Borrower or the Borrower be joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefit of
any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Borrower or other circumstance
which operates to toll any statute of limitations as to the Borrower shall
operate to toll the statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other
action by the Administrative Agent or any other Creditor against, and any
other notice to, any party liable thereon (including each Guarantor,
Holdings, or any other guarantor of the Borrower).
6. Any Creditor may at any time and from time to time without
the consent of, or notice to, any Guarantor, without incurring
responsibility to any Guarantor, without impairing or releasing the
obligations of any Guarantor hereunder, upon or without any terms or
conditions and in whole or in part:
(i) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the guaranty
herein made shall apply to the Guaranteed Obligations as so changed,
extended, renewed or altered;
(ii) take and hold security for the payment of the Guaranteed
Obligations and/or sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(iii) exercise or refrain from exercising any rights against the
Borrower, any Guarantor, any other guarantor or others or otherwise
act or refrain from acting;
(iv) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to creditors of the
Borrower;
(v) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors
regardless of what liabilities of the Borrower remain unpaid;
(vi) consent to or waive any breach of, or any act, omission or
default under, any of the Credit Documents, the Interest Rate
Agreements or any of the instruments or agreements referred to
therein, or otherwise amend, modify or supplement any of the Credit
Documents, the Interest Rate Agreements or any of such other
instruments or agreements; and/or
(vii) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall
affect, impair or be a defense to this Guaranty, and this Guaranty shall be
primary, absolute and unconditional notwithstanding the occurrence of any
event or the existence of any other circumstances which might constitute a
legal or equitable discharge of a surety or guarantor except payment in
full of the Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on
the part of any Creditor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein expressly specified are
cumulative and not exclusive of any rights or remedies which any Creditor
would otherwise have. No notice to or demand on each Guarantor in any case
shall entitle any Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
Creditor to any other or further action in any circumstances without notice
or demand. It is not necessary for any Creditor to inquire into the
capacity or powers of the Borrower or any of its Subsidiaries or the
officers, directors, partners or agents acting or purporting to act on its
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to each Guarantor, if the
Administrative Agent, after an Event of Default (as defined below) has
occurred, so requests, shall be collected, enforced and received by such
Guarantor as trustee for the Creditors and be paid over to the Creditors on
account of the indebt edness of the Borrower to the Creditors, but without
affecting or impairing in any manner the liability of any Guarantor under
the other provisions of this Guaranty. Prior to the transfer by any
Guarantor of any note or negotiable instrument evidencing any indebtedness
of the Borrower to such Guarantor, such Guarantor shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each
Guarantor hereby agrees with the Creditors that it will not exercise any
right of subrogation which it may at any time otherwise have as a result of
this Guaranty (whether contractual, under Section 509 of the Bankruptcy
Code or otherwise) until all Guaranteed Obligations have been irrevocably
paid in full in cash.
10. (a) Each Guarantor hereby waives any right (except as shall
be required by applicable statute and cannot be waived) to require the
Creditors to: (i) proceed against the Borrower, any other guarantor of the
Borrower or any other party; (ii) proceed against or exhaust any security
held from the Borrower, any other guarantor of the Borrower or any other
party; or (iii) pursue any other remedy in the Creditors' power whatsoever.
Each Guarantor waives any defense based on or arising out of any defense of
the Borrower, any other guarantor of the Borrower or any other party other
than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other guarantor of the Borrower or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Creditors
may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the other Creditors by one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may
have against the Borrower or any other party, or any security, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the Guaranteed Obligations have been paid in full.
Each Guarantor waives any defense arising out of any such election by the
Administrative Agent, the Collateral Agent and the Creditors, even though
such election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of any Guarantor against the
Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices
of nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor 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 Guaranteed Obligations and the nature, scope
and extent of the risks which each Guarantor assumes and incurs hereunder,
and agrees that the Creditors shall have no duty to advise any Guarantor of
information known to them regarding such circumstances or risks.
11. Each Guarantor covenants and agrees that on and after the
date hereof and until the termination of the Total Commitment and all
Interest Rate Agreements and when no Note or Letter of Credit remains
outstanding and all other Guaranteed Obligations have been paid in full
(other than those arising from indemnities for which no request has been
made), such Guarantor shall take, or will refrain from taking, as the case
may be, all actions that are necessary to be taken or not taken so that no
violation of any provision, covenant or agreement contained in Article 7 or
8 of the Credit Agreement, and so that no Event of Default, is caused by
the actions of such Guarantor or any of its Subsidiaries.
12. Each Guarantor hereby agrees to pay all reasonable out-of-
pocket costs and expenses (including, without limitation, the reasonable
fees and disbursements of counsel) of each Creditor in connection with the
enforcement of this Guaranty and of the Administrative Agent in connection
with any amendment, waiver or consent relating hereto.
13. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns to the extent permitted under the Credit
Agreement.
14. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated in any manner whatsoever unless
in writing duly signed by the Administrative Agent (with the consent of (x)
the Required Lenders or, to the extent required by Section 11.10 of the
Credit Agreement, all of the Lenders, at all times prior to the time at
which all Credit Agreement Obligations have been paid in full, or (y) the
holders of at least a majority of the outstanding Interest Rate Obligations
at all times after the time at which all Credit Agreement Obligations have
been paid in full) and each Guarantor directly affected thereby (it being
understood that the addition or release of any Guarantor hereunder shall
not constitute a change, waiver, discharge or termination affecting any
Guarantor other than the Guarantor so added or released); provided, that
any change, waiver, modification or variance affecting the rights and
benefits of a single class (as defined below) of Creditors (and not all
Creditors in a like or similar manner) shall require the written consent of
the Requisite Creditors (as defined below) of such Class. For the purpose
of this Guaranty, the term "Class" shall mean each class of Creditors,
i.e., whether (i) the Bank Creditors as holders of the Credit Agreement
Obligations or (ii) the Interest Rate Creditors as holders of the Interest
Rate Obligations. For the purpose of this Guaranty, the term "Requisite
Creditors" of any Class shall mean each of (i) with respect to the Credit
Agreement Obligations, the Required Lenders and (ii) with respect to the
Interest Rate Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate
Agreements.
15. Each Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents has been made available to its
principal executive officers and such officers are familiar with the
contents thereof.
16. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default (such
term to mean and include any "Event of Default" as defined in the Credit
Agreement and any payment default under any Interest Rate Agreement and
shall in any event, include, without limitation, any payment default on any
of the Guaranteed Obligations continuing after any applicable grace
period), each Creditor is hereby authorized, to the extent not prohibited
by applicable law, at any time or from time to time, without notice to any
Guarantor or to any other Person, any such notice being expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by such
Creditor to or for the credit or the account of any Guarantor, against and
on account of the obligations and liabilities of such Guarantor to such
Creditor under this Guaranty, irrespective of whether or not such Creditor
shall have made any demand hereunder and although said obligations,
liabilities, deposits or claims, or any of them, shall be contingent or
unmatured. Each Creditor agrees to promptly notify each Guarantor after
any such set off and application, provided, however, that the failure to
give such notice shall not affect the validity of such set off and
application.
17. All notices, requests, demands or other communications
provided for here under made in writing (including telexed or facsimile
communication) shall be deemed to have been duly given or made when
delivered to the Person to which such notice, request, demand or other
communication is required or permitted to be given or made under this
Guaranty, addressed to such party at (i) in the case of any Bank Creditor,
as provided in the Credit Agreement, (ii) in the case of any Guarantor, at
its address set forth opposite its signature below and (iii) in the case of
any Interest Rate Creditor, at such address as such Interest Rate Creditor
shall have specified in writing to the Borrower; or in any case at such
other address as any of the Persons listed above may hereafter notify the
others in writing.
18. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any
of the Guaranteed Obligations and any of the aforesaid Creditors repays all
or part of said amount by reason of (i) any judgment, decree or order of
any court or administrative body having jurisdiction over such Creditor or
any of its property or (ii) any settlement or compromise of any such claim
effected by such Creditor with any such claimant (including the Borrower),
then and in such event each Guarantor agrees that any such judgment,
decree, order, settlement or compromise shall be binding upon such
Guarantor, notwithstanding any revocation hereof or the cancellation of any
Note or any Interest Rate Agreement or other instrument evidencing any
liability of the Borrower, and each Guarantor shall be and remain liable to
the aforesaid payees hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by any
such Creditor.
19. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal
action or proceeding with respect to this Guaranty may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this
Guaranty, each Guarantor hereby irrevocably accepts (to the maximum extent
permitted by law) for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to each
Guarantor at its address set forth opposite its signature below, such
service to become effective 30 days after such mailing and appoints the
Borrower as its agent for services of process in respect of any such action
or proceeding. Each Guarantor hereby irrevocably waives any objection to
such service of process and further irrevocably waives and agrees not to
plead or claim in any action or proceeding commenced hereunder or under any
other credit document to which such guarantor is a party that service of
process was in any way invalid or ineffective. Nothing herein shall affect
the right of any of the Creditors to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed
against any Guarantor in any other jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Guaranty
or any other Credit Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or
claim in any such court that such action or proceeding brought in any such
court has been brought in an inconvenient forum.
(c) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
20. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance
with the requirements of Section 8.1 of the Credit Agreement (or such sale
or other disposition has been approved in writing by the Required Lenders
(or all Lenders if required by Section 11.10 of the Credit Agreement)) and
the proceeds of such sale, disposition or liquidation are applied in
accordance with the provisions of the Credit Agreement, to the extent
applicable, such Guarantor shall be released from this Guaranty and this
Guaranty shall, as to each such Guarantor or Guarantors, terminate, and
have no further force or effect (it being understood and agreed that the
sale of one or more Persons that own, directly or indirectly, all of the
capital stock of any Guarantor shall be deemed to be a sale of such
Guarantor for the purposes of this Section 19).
21. This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and
the Administrative Agent.
22. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
23. It is understood and agreed that any Subsidiary of Holdings
that is required to execute a counterpart of this Guaranty pursuant to the
Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the
Administrative Agent.
24. Notwithstanding anything else to the contrary in this
Guaranty, the Creditors agree that this Guaranty may be enforced only by
the action of the Administrative Agent or the Collateral Agent, in each
case acting upon the instructions of the Required Lenders (or, after the
date on which all Credit Agreement Obligations have been paid in full, the
holders of at least a majority of the outstanding Interest Rate
Obligations), and that no other Creditor shall have any right individually
to seek to enforce or to enforce this Guaranty or to realize upon the
security to be granted by the Collateral Documents, it being understood and
agreed that such rights and remedies may be exercised by the Administrative
Agent or the Collateral Agent or the holders of at least a majority of the
outstanding Interest Rate Obligations, as the case may be, for the benefit
of the Creditors upon the terms of this Guaranty and the Collateral
Documents. The Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor here
under). It is understood that the agreement in this Section 24 is among
and solely for the benefit of the Lenders and that if the Required Lenders
so agree (without requiring the consent of any Guarantor), this Guaranty
may be directly enforced by any Creditor.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Addresses:
- ----------
c/o ACG Holdings, Inc. AMERICAN IMAGES OF NORTH
225 High Ridge Road AMERICA INC., as a Guarantor
Stamford, Connecticut 06905
Attention: Timothy N. Davis, Esq. By /s/ Joseph M. Milano
Tel: 203-978-5404 ------------------------------
Fax: 203-978-5408 Title: Chief Financial Officer
w/a copy to:
Joseph Milano
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. SULLIVAN MEDIA CORPORATION,
225 High Ridge Road as a Guarantor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5408 By /s/ Joseph M. Milano
w/a copy to: ------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5404
c/o ACG Holdings, Inc. SULLIVAN MARKETING, INC.,
225 High Ridge Road as a Guarantor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5408 By /s/ Joseph M. Milano
w/a copy to: ------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5404
Accepted and Agreed to:
BANKERS TRUST COMPANY
as Administrative Agent for the Lenders
By /s/ Jeffrey Ogden
-------------------------
Title: Managing Director
[Exhibit F Conformed as Executed]
AMENDED AND RESTATED PLEDGE AGREEMENT
AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of August 15, 1995
and amended and restated as of May 8, 1998 (as amended, restated, modified or
supplemented from time to time, this "Agreement"), made by AMERICAN COLOR
GRAPHICS, INC. (the "Borrower"), a New York corporation, the Parent
Guarantor, the Subsidiary Guarantors and each other Subsidiary of the
Borrower that is required to execute a counterpart hereof pursuant to
Section 23 of this Agreement, (the "Pledgors", and each, a "Pledgor"), in
favor of BT COMMERCIAL CORPORATION, as Collateral Agent (including any
successor collateral agent the "Pledgee") for the benefit of (x) the
Lenders and the Administrative Agent under, and any other lenders from time
to time party to, the Credit Agreement hereinafter referred to (such
Lenders, the Administrative Agent and other lenders, if any, are
hereinafter called the "Bank Creditors") and (y) if BT Commercial
Corporation, in its individual capacity ("BTCC"), any Lenders or any
Affiliate of a Lender enters into one or more interest rate agreements
relating to the Loans (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements) (collectively, the "Interest
Rate Agreements") with, or guaranteed by, any of the Pledgors, BTCC, any
such Lender or Lenders or a syndicate of financial institutions organized
by BTCC or an affiliate of BTCC (even if BTCC or the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any
reason) so long as any such Lender or Affiliate participates in the
extension of such Interest Rate Agreements and their subsequent assigns, if
any (collectively, the "Interest Rate Creditors," and the Interest Rate
Creditors together with the Bank Creditors, are hereinafter called the
"Secured Creditors"). Except as otherwise defined herein, terms used
herein and defined in the Credit Agreement shall be used herein as so
defined.
W I T N E S S E T H :
WHEREAS, ACG Holdings, Inc. (the "Parent Guarantor"), the
Borrower, the financial institutions from time to time party thereto (the
"Lenders"), Bankers Trust Company, as Administrative Agent (the
"Administrative Agent"), General Electric Capital Corporation, as
Documentation Agent (the "Documentation Agent"), and Morgan Stanley Senior
Funding, Inc., as Syndication Agent (the "Syndication Agent"), have entered
into a Credit Agreement, dated as of August 15, 1995 and amended and
restated as of May 8, 1998 (as amended, restated, modified or supplemented
from time to time, and including any agreement extending the maturity of,
or restructuring (including, but not limited to, the inclusion of
additional borrowers thereunder that are Subsidiaries of the Borrower and
whose obligations are guaranteed by the Pledgors thereunder or any increase
in the amount borrowed) of all or any portion of the Indebtedness under
such agreement or any successor agreements) (the "Credit Agreement"),
providing for the making of Loans and the issuance of, and participation
in, Letters of Credit as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or
more Interest Rate Agreements with the Interest Rate Creditors;
WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor
has guaranteed to the Secured Creditors the payment when due of all
obligations and liabilities of the Borrower under or with respect to the
Credit Documents and the Interest Rate Agreements which may hereinafter
arise;
WHEREAS, pursuant to the Subsidiaries Guaranty, dated as of
August 15, 1995 and amended and restated as of May 8, 1998 (as amended,
restated, modified or supplemented from time to time, the "Amended and
Restated Subsidiaries Guaranty"), each Pledgor (other than the Borrower)
has jointly and severally guaranteed to the Secured Creditors the payment
when due of all obligations and liabilities of the Borrower under or with
respect to the Credit Documents and the Interest Rate Agreements;
WHEREAS, each Pledgor has heretofore entered into a Pledge
Agreement, dated as of August 15, 1995 (as amended, modified or
supplemented to the date hereof, the "Original Pledge Agreement");
WHEREAS, it is a condition precedent to the making of Loans and
the issuance of, and participation in, Letters of Credit under the Credit
Agreement that each Pledgor shall have executed and delivered to the
Pledgee this Agreement;
WHEREAS, each Pledgor desires to execute this Agreement to
satisfy the conditions described in the preceding paragraph and to amend
and restate the Original Pledge Agreement in the form of this Agreement;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the
Pledgee and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of such Pledgor to the
Bank Creditors, whether now existing or hereafter incurred under,
arising out of, or in connection with the Credit Agreement and
the other Credit Documents to which such Pledgor is a party
(including all such obligations and indebtedness under the
Guaranty to which such Pledgor is a party) and the due
performance and compliance by such Pledgor with all of the terms,
conditions and agreements contained in the Credit Agreement and
such other Credit Documents (all such obligations and liabilities
under this clause (i), except to the extent guaranteeing
obligations of the Borrower under Interest Rate Agreements, being
herein collectively called the "Credit Agreement Obligations");
(ii) the full and prompt payment when due of all
obligations of such Pledgor to the Interest Rate Creditors
pursuant to any Interest Rate Agreement, whether now in existence
or hereinafter arising, and the due performance and compliance
with the terms of the Interest Rate Agreements by such Pledgor
including, in the case of Pledgors other than the Borrower, all
obligations under the Parent Guaranty and Subsidiaries Guaranty
in respect of the Interest Rate Agreements (all such obligations
and liabilities under this clause (ii) being herein collectively
called the "Interest Rate Obligations");
(iii) any and all sums advanced by the Pledgee in order
to preserve the Collateral (as hereinafter defined) and/or its
security interest therein; and
(iv) in the event of any proceeding for the collection
of the Obligations (as defined below) or the enforcement of this
Agreement, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of selling or otherwise
disposing of or realizing on the Collateral, or of any exercise
by the Pledgee of its rights hereunder, together with reasonable
attorneys' fees and court costs;
all such obligations, liabilities, sums and expenses set forth in
clauses (i) through (iv) of this Section 1 being collectively
called the "Obligations", it being acknowledged and agreed that
the "Obligations" shall include extensions of credit described
above, whether outstanding on the date of this Agreement or
extended from time to time after the date of this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein,
(i) the term "Stock" shall mean securities consisting of any and all of the
issued and outstanding shares of stock (whether certificated or
uncertificated) at any time owned by any Pledgor of (x) any Subsidiary of
such Pledgor and (y) any other corporation, to the extent the Pledgors own
shares in such corporations with an aggregate value in excess of $45,000;
(ii) the term "Notes" shall mean all promissory notes at any time issued
to, or held by, any Pledgor; provided, however, the term "Notes" shall not
include (A) any promissory notes from employees, officers and directors of
any Pledgor with a face value of less than $500,000 to the extent the
aggregate amount of all such promissory notes issued to or held by, the
Pledgors does not exceed $2,500,000 and (B) any promissory notes from a
customer of any Pledgor to the extent the aggregate amount of all such
promissory notes issued to or held by the Pledgors does not exceed
$700,000; and (iii) the term "Securities" shall mean all of the Stock and
Notes. Each Pledgor represents and warrants that on the date hereof: (a)
the Stock (described in clause (x) of the definition hereof) held by such
Pledgor consists of the number and type of shares of the stock of the
corporations as described under the name of such Pledgor in Part I of Annex
A hereto; (b) such Stock constitutes that percentage of the issued and
outstanding capital stock of the issuing corporation as set forth under the
name of such Pledgor in Part I of Annex A hereto; (c) the Notes held by
such Pledgor consist of the promissory notes described under the name of
such Pledgor in Part II of Annex A hereto and (d) such Pledgor is the
holder of record and sole beneficial owner of the Stock and Notes held by
such Pledgor and there exist no options or preemption rights in respect of
any of such Stock.
3. PLEDGE OF SECURITIES, ETC.
3.1 Pledge. To secure the Obligations and for the purposes set
forth in Section 1, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral; (ii) pledges and deposits as
security with the Pledgee the Securities owned by such Pledgor on the date
hereof; and delivers to the Pledgee certificates therefor, duly endorsed in
blank in the case of promissory notes and accompanied by undated stock
powers duly executed in blank by such Pledgor (and accompanied by any
transfer tax stamps required in connection with the pledge of such
securities, with signatures appropriately guaranteed to the extent
required) in the case of capital stock, or such other instruments of
transfer as are reasonably acceptable to the Pledgee; and (iii)
collaterally assigns, transfers, hypothecates, mortgages, charges and sets
over to the Pledgee all of such Pledgor's right, title and interest in and
to such Securities (and in and to the certificates or instruments
evidencing such Securities), to be held by the Pledgee, upon the terms and
conditions set forth in this Agreement.
3.2 Subsequently Acquired Securities. If any Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional
Securities at any time or from time to time after the date hereof, such
Pledgor will forthwith pledge and deposit such Securities as security with
the Pledgee and deliver to the Pledgee certificates thereof, duly endorsed
in blank in the case of promissory notes and accompanied by undated stock
powers duly executed in blank by such Pledgor (and accompanied by any
transfer tax stamps required in connection with the pledge of such
Securities, with signatures appropriately guaranteed to the extent
required) in the case of capital stock, or such other instruments of
transfer as are reasonably acceptable to the Pledgee, and will promptly
thereafter deliver to the Pledgee a certificate executed by a principal
executive officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder.
3.3 Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Securities (whether or
not now owned or hereafter acquired) are uncertificated securities, the
respective Pledgor shall promptly notify the Pledgee thereof, and shall
promptly take all actions reasonably required to perfect the security
interest of the Pledgee under applicable law (including, in any event,
under Sections 8-313 and 8-321 of the New York Uniform Commercial Code if
applicable). Each Pledgor further agrees to take such actions as the
Pledgee reasonably deems necessary or desirable to effect the foregoing and
to permit the Pledgee to exercise any of its rights and remedies hereunder,
and agrees to provide an opinion of counsel reasonably satisfactory to the
Pledgee with respect to any such pledge of uncertificated securities
promptly upon request of the Pledgee.
3.4 Definitions of Pledged Stock, Pledged Notes; Pledged
Securities and Collateral. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock"; all Notes at
any time pledged or required to be pledged hereunder are hereinafter called
the "Pledged Notes", all Pledged Stock and Pledged Notes together are
called the "Pledged Securities" and the Pledged Securities, together with
all proceeds thereof whether consisting of dividends, returns of capital or
other distributions (whether consisting of securities, general intangibles,
accounts, instruments, chattel paper, bank accounts or any other property),
including any securities and moneys received and at the time held by the
Pledgee hereunder, are hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held
(in the discretion of the Pledgee) in the name of the relevant Pledgor,
endorsed or assigned in blank or in favor of the Pledgee or any nominee or
nominees of the Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
there shall have occurred and be continuing an Event of Default (or a
Default under Section 9.1(a) or (e) of the Credit Agreement), each Pledgor
shall be entitled to exercise all voting rights attaching to any and all
Pledged Securities owned by it, and to give consents, waivers or
ratifications in respect thereof, provided that no vote shall be cast or
any consent, waiver or ratification given or any action taken which would
violate, result in breach of any covenant contained in, or be inconsistent
with, any of the terms of this Agreement, the Credit Agreement, any other
Credit Document or any Interest Rate Agreement (collectively, the "Secured
Debt Agreements"), or which would have the effect of impairing the value of
the Collateral or any part thereof or the position or interests of the
Pledgee or any Secured Creditor therein. All such rights of a Pledgor to
vote and to give consents, waivers and ratifications shall cease in case an
Event of Default (or a Default under Section 9.1(a) or (e) of the Credit
Agreement) shall occur and be continuing and Section 7 hereof shall become
applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until an Event
of Default (or a Default under Section 9.1(a) or (e) of the Credit
Agreement) shall have occurred and be continuing, all cash dividends
payable in respect of the Pledged Stock and all payments in respect of the
Pledged Stock shall, subject to the requirement of Section 8.16 of the
Credit Agreement, be paid to the respective Pledgor. The Pledgee shall
also be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional stock, or other securities
(other than cash) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(ii) all other or additional stock or other securities
(other than cash) paid or distributed in respect of the Pledged
Securities by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement;
and
(iii) all other or additional stock or other securities
(other than cash) which may be paid in respect of the Collateral
by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate
reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive the proceeds of the Collateral in any form in
accordance with Section 3 of this Agreement. All dividends, distributions
or other payments which are received by the respective Pledgor contrary to
the provisions of this Section 6 or Section 7 shall be received in trust
for the benefit of the Pledgee, shall be segregated from other property or
funds of such Pledgor and shall be forthwith paid over to the Pledgee as
Collateral in the same form as so received (with any necessary
endorsement).
7. REMEDIES IN CASE OF AN EVENT OF DEFAULT OR CERTAIN DEFAULTS.
In case an Event of Default shall have occurred and be continuing, the
Pledgee shall be entitled to exercise all of the rights, powers and
remedies (whether vested in it by this Agreement or any other Secured Debt
Agreement or by law) for the protection and enforcement of its rights in
respect of the Collateral, including, without limitation, all the rights
and remedies of a secured party upon default under the Uniform Commercial
Code, and the Pledgee shall be entitled, without limitation, to exercise
any or all of the following rights, which each Pledgor hereby agrees to be
commercially reasonable:
(i) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 to such Pledgor;
(ii) to transfer all or any part of the Collateral into
the Pledgee's name or the name of its nominee or nominees;
(iii) to accelerate any Pledged Note which may be
accelerated in accordance with its terms, and take any other
lawful action to collect upon any Pledged Note (including,
without limitation, to make any demand for payment thereon);
(iv) to vote all or any part of the Pledged Stock
(whether or not transferred into the name of the Pledgee) and
give all consents, waivers and ratifications in respect of the
Collateral and otherwise act with respect thereto as though it
were the outright owner thereof (each Pledgor hereby irrevocably
constituting and appointing the Pledgee the proxy and attorney-
in-fact of such Pledgor, with full power of substitution to do
so); and
(v) at any time or from time to time to sell, assign
and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private
sale, without demand of performance, advertisement or notice of
intention to sell or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are hereby waived
by each Pledgor), for cash, on credit or for other property, for
immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the
Pledgee in its absolute discretion may determine, provided that
at least 10 days' notice of the time and place of any such sale
shall be given to such Pledgor. The Pledgee shall not be
obligated to make such sale of Collateral regardless of whether
any such notice of sale has theretofore been given. Each
purchaser at any such sale shall hold the property so sold
absolutely free from any claim or right on the part of each
Pledgor, and each Pledgor hereby waives and releases to the
fullest extent permitted by law any right or equity of redemption
with respect to the Collateral, whether before or after sale
hereunder, all rights, if any, of marshalling the Collateral and
any other security for the Obligations or otherwise, and all
rights, if any, of stay and/or appraisal which it now has or may
at any time in the future have under rule of law or statute now
existing or hereafter enacted. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of all
Secured Creditors (or certain of them) may bid for and purchase
(by bidding in Obligations or otherwise) all or any part of the
Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any Secured Creditor shall
be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall it be under
any obligation to take any action whatsoever with regard thereto.
; provided that, upon the occurrence of a Default under Section 9.1(a) or
(e) of the Credit Agreement, the Pledgee may exercise the rights specified
in clause (i) above.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
such right, power or remedy. The exercise or beginning of the exercise by
the Pledgee of any one or more of the rights, powers or remedies provided
for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any Secured
Creditor of all such other rights, powers or remedies, and no failure or
delay on the part of the Pledgee or any Secured Creditor to exercise any
such right, power or remedy shall operate as a waiver thereof. Unless
otherwise required by the Credit Documents, no notice to or demand on any
Pledgor in any case shall entitle it to any other or further notice or
demand in similar other circumstances or constitute a waiver of any of the
rights of the Pledgee or any Secured Creditor to any other further action
in any circumstances without demand or notice.
9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms
of this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of Obligations in the manner
provided in Section 7.4 of the Security Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt of the
Pledgee or 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 Pledgee or such officer or be
answerable in any way for the misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other
Secured Creditor and their respective successors, assigns, employees,
agents and servants (individually an "Indemnitee," and collectively, the
"Indemnitees") from and against any and all claims, demands, losses,
judgments and liabilities (including liabilities for penalties) of
whatsoever kind or nature, and (ii) to reimburse each Indemnitee for all
costs and expenses, including attorneys' fees, in each case growing out of
or resulting from this Agreement or the exercise by any Indemnitee of any
right or remedy granted to it hereunder or under any other Secured Debt
Agreement (but excluding any claims, demands, losses, judgments and
liabilities (including liabilities for penalties) or expenses of whatsoever
kind or nature to the extent incurred or arising by reason of gross
negligence or willful misconduct of such Indemnitee). In no event shall
the Pledgee be liable, in the absence of gross negligence or willful
misconduct on its part, for any matter or thing in connection with this
Agreement other than to account for monies actually received by it in
accordance with the terms hereof. If and to the extent that the
obligations of any Pledgor under this Section 11 are unenforceable for any
reason, such Pledgor hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such
Pledgor's own expense, file and refile under the Uniform Commercial Code
such financing statements, continuation statements and other documents in
such offices as the Pledgee may deem reasonably necessary or appropriate
and wherever required or permitted by law in order to perfect and preserve
the Pledgee's security interest in the Collateral hereunder and hereby
authorizes the Pledgee to file financing statements and amendments thereto
relative to all or any part of the Collateral without the signature of such
Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional
conveyances, assignments, agreements and instruments as the Pledgee may
reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder or thereunder.
(b) Each Pledgor hereby appoints the Pledgee, such Pledgor's
attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor or otherwise, from time to time
after the occurrence and during the continuance of an Event of Default, in
the Pledgee's reasonable discretion to take any reasonable action and to
execute any instrument which the Pledgee may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under
this Agreement. It is expressly understood and agreed that the obligations
of the Pledgee as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and in Article 9 of the
Uniform Commercial Code. The Pledgee shall act hereunder on the terms and
conditions set forth herein and in Article 10 of the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral of such Pledgor or any interest
therein (except in accordance with the terms of this Agreement and the
Credit Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS.
(a) Each Pledgor represents, warrants and covenants that:
(i) it is, or at the time when pledged hereunder will
be, the legal, beneficial and record owner of, and has (or will
have) good title to, all Securities pledged by it hereunder,
subject to no pledge, lien, mortgage, hypothecation, security
interest, charge, option or other encumbrance whatsoever, except
the liens and security interests created by this Agreement;
(ii) it has full power, authority and legal right to
pledge all the Securities pledged by it pursuant to this
Agreement;
(iii) this Agreement has been duly authorized, executed
and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable against such
Pledgor in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought
in equity or at law);
(iv) except as set forth in Section 6.6 of the Credit
Agreement (including Schedule IV referred to therein) and except
to the extent already obtained or made, no consent of any other
party (including, without limitation, any stockholder or creditor
of such Pledgor or any of their Subsidiaries) and no consent,
license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by such
Pledgor in connection with (a) the execution, delivery or
performance of this Agreement, (b) the validity or enforceability
of this Agreement (except as set forth in clause (iii) above),
(c) the perfection or enforceability of the Pledgee's security
interest in the Collateral or (d) except for compliance with or
as may be required by applicable securities laws, the exercise by
the Pledgee of any of its rights or remedies provided herein;
(v) the execution, delivery and performance of this
Agreement will not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or
foreign, applicable to such Pledgor, or of the Certificate of
Incorporation or By-Laws of such Pledgor or of any securities
issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, lease, loan agreement, credit agreement or
other contract, agreement or instrument or undertaking to which
such Pledgor or any of its Subsidiaries is a party or which
purports to be binding upon such Pledgor or any of its
Subsidiaries or upon any of their respective assets, except any
immaterial violation which is not reasonably likely to adversely
affect any Lender or have a Material Adverse Effect, and will not
result in the creation or imposition of (or the obligation to
create or impose) any lien or encumbrance on any of the assets of
such Pledgor or any of its Subsidiaries except as contemplated by
this Agreement (other than the Liens created by the Collateral
Documents);
(vi) all the shares of the Stock (as described in
clause (x) of the definition thereof) have been duly and validly
issued, are fully paid and non-assessable and are subject to no
options to purchase or similar rights;
(vii) to its knowledge, each of the Pledged Notes of
such Pledgor constitutes, or when executed by the obligor thereof
will constitute, the legal, valid and binding obligation of such
obligor, enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought
in equity or at law); and
(viii) the pledge, collateral assignment and delivery
to the Pledgee of the Securities (other than uncertificated
securities) pursuant to this Agreement creates a valid and
perfected first priority Lien in the Securities, and the proceeds
thereof, subject to no other Lien or to any agreement purporting
to grant to any third party a Lien on the property or assets of
such Pledgor which would include the Securities (other than
Permitted Liens).
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and
the proceeds thereof against the claims and demands of all persons
whomsoever; and each Pledgor covenants and agrees that it will have like
title to and right to pledge any other property at any time hereafter
pledged to the Pledgee as Collateral hereunder and will likewise defend the
right thereto and security interest therein of the Pledgee and the Secured
Creditors.
(c) Each Pledgor covenants and agrees that it will take no
action which would violate any of the terms of any Secured Debt Agreement.
16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation:
(i) any renewal, extension, amendment or modification
of, or addition or supplement to or deletion from any of the
Secured Debt Agreements, or any other instrument or agreement
referred to therein, or any assignment or transfer of any
thereof;
(ii) any waiver, consent, extension, indulgence or
other action or inaction under or in respect of any such
agreement or instrument or this Agreement;
(iii) any furnishing of any additional security to the
Pledgee or its assignee or any acceptance thereof or any release
of any security by the Pledgee or its assignee;
(iv) any limitation on any party's liability or
obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or
(v) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like
proceeding relating to any Pledgor or any Subsidiary of any
Pledgor, or any action taken with respect to this Agreement by
any trustee or receiver, or by any court, in any such proceeding,
whether or not such Pledgor shall have notice or knowledge of any
of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the
Pledgee a written request or requests that such Pledgor cause any
registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of
the Pledged Stock, such Pledgor as soon as practicable and at its expense
will use its best efforts to cause such registration to be effected (and be
kept effective) and will use its best efforts to cause such qualification
and compliance to be effected (and be kept effective) as may be so
requested and as would permit or facilitate the sale and distribution of
such Pledged Stock, including, without limitation, registration under the
Securities Act of 1933, as then in effect (or any similar statute then in
effect), appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with any other
governmental requirements, provided that the Pledgee shall furnish to such
Pledgor such information regarding the Pledgee as such Pledgor may request
in writing and as shall be required in connection with any such
registration, qualification or compliance. Each Pledgor will cause the
Pledgee to be kept reasonably advised in writing as to the progress of each
such registration, qualification or compliance and as to the completion
thereof, will furnish to the Pledgee such number of prospectuses, offering
circulars and other documents incident thereto as the Pledgee from time to
time may reasonably request, and will indemnify, to the extent permitted by
law, the Pledgee and all others participating in the distribution of such
Stock against all claims, losses, damages or liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the
like) or by any omission (or alleged omission) to state therein (or in any
related registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to
such Pledgor by the Pledgee expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise
its right to sell all or any part of the Pledged Securities pursuant to
Section 7, and such Pledged Securities or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933, as then in effect, the Pledgee may, in its sole and
absolute discretion, sell such Pledged Securities or part thereof by
private sale in such manner and under such circumstances as Pledgee may
deem necessary or advisable in order that such sale may legally be effected
without such registration. Without limiting the generality of the
foregoing, in any such event the Pledgee, in its sole and absolute
discretion, (i) may proceed to make such private sale notwithstanding that
a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under such Securities Act,
(ii) may approach and negotiate with a single possible purchaser to effect
such sale and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account,
for investment, and not with a view to the distribution or sale of such
Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability for selling all or any
part of the Pledged Securities at a price which the Pledgee, in its sole
and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher
price might be realized if the sale were deferred until the registration as
aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all
indemnities set forth herein including, without limitation, in Section 11
hereof shall survive any such termination) and the Pledgee, at the request
and expense of the respective Pledgor, will execute and deliver to such
Pledgor a proper instrument or instruments acknowledging the satisfaction
and termination of this Agreement as provided above, and will duly assign,
transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement, together with any moneys at
the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Commitments
have been terminated, no Letter of Credit or Note is outstanding and all
other Obligations then due and payable have been paid in full (other than
arising from indemnities for which no request has been made).
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 8.1 of the Credit Agreement or
is otherwise released at the direction of the Required Lenders (or all the
Lenders if required by Section 11.10 of the Credit Agreement), and the
proceeds of such sale or sales or from such release are applied in
accordance with the terms of the Credit Agreement to the extent required to
be so applied, the Pledgee, at the request and expense of the respective
Pledgor will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral
as is then being (or has been) so sold or released and as may be in
possession of the Pledgee and has not theretofore been released pursuant to
this Agreement.
(c) At any time that any Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a) or (b), it shall
deliver to the Pledgee a certificate signed by a principal executive
officer stating that the release of the respective Collateral is permitted
pursuant to Section 18(a) or (b). The Pledgee shall have no liability
whatsoever to any Secured Creditor as the result of any release of
Collateral by it as permitted by this Section 18.
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(i) if to any Pledgor, at its address set forth opposite
its signature below;
(ii) if to the Pledgee, at:
BT Commercial Corporation
c/o Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Dave Bell
Tel: (212) 250-2500
Fax: (212) 250-7218;
(iii) if to any Lender (other than the Pledgee), at such
address as such Lender shall have specified in the Credit Agreement;
(iv) if to any Interest Rate Creditor, at such address as
such Interest Rate Creditor shall have specified in writing to
the Borrower and the Pledgee;
or at such address as shall have been furnished in writing by any
Person described above to the party required to give notice
hereunder.
20. WAIVER; AMENDMENT. Except as contemplated in Section 23
hereof, none of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by each Pledgor to be bound thereby and the Collateral Agent (with
the consent of the Required Lenders or, to the extent required by Section
11.10 of the Credit Agreement, all of the Lenders), provided, however, that
no such change, waiver, modification or variance shall be made to Section 9
hereof or this Section 20 without the consent of each Secured Creditor
adversely affected thereby, provided further that any change, waiver,
modification or variance affecting the rights and benefits of a single
Class of Secured Creditors (and not all Secured Creditors in a like or
similar manner) shall require the written consent of the Requisite
Creditors of such Class of Secured Creditors. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Creditors,
i.e., whether (x) the Bank Creditors as holders of the Credit Agreement
Obligations, (y) the Interest Rate Creditors as holders of the Interest
Rate Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to each of the
Credit Agreement Obligations, the Required Lenders and (y) with respect to
the Interest Rate Obligations, the holders of 51% of all obligations
outstanding from time to time under the Interest Rate Agreements.
21. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect, subject to release and/or termination as set forth in Section 18,
(ii) be binding upon each Pledgor, its successors and assigns; provided,
however, that each Pledgor shall not assign any of its rights or
obligations hereunder without the prior written consent of the Pledgee
(with the prior written consent of the Required Lenders or to the extent
required by Section 11.10 of the Credit Agreement, all of the Lenders), and
(iii) inure, together with the rights and remedies of the Pledgee
hereunder, to the benefit of the Pledgee, the Secured Creditors and their
respective successors, transferees and assigns. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK. The headings of the several sections and subsections in this
Agreement are for purposes of reference only and shall not limit or define
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
22. WAIVER OF JURY TRIAL. Each Pledgor hereby irrevocably
waives all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this agreement or the
transactions contemplated hereby.
23. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of
this Agreement pursuant to the Credit Agreement shall automatically become
a Pledgor hereunder by executing a counterpart hereof and delivering the
same to the Pledgee.
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Addresses: ACG HOLDINGS, INC.,
225 High Ridge Road as Pledgor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: --------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. AMERICAN COLOR GRAPHICS, INC.,
225 High Ridge Road as Pledgor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: --------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. AMERICAN IMAGES OF NORTH
225 High Ridge Road AMERICA, INC.,
Stamford, Connecticut 06905 as Pledgor
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: --------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. SULLIVAN MARKETING, INC.,
225 High Ridge Road as Pledgor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: --------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. SULLIVAN MEDIA CORPORATION,
225 High Ridge Road as Pledgor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: --------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
BT COMMERCIAL CORPORATION,
as Collateral Agent and as Pledgee
By /s/ Jeffrey Ogden
--------------------------------
Title: Senior Vice President
[Exhibit G Conformed as Executed]
SECURITY AGREEMENT
among
ACG HOLDINGS, INC.,
AMERICAN COLOR GRAPHICS, INC.,
VARIOUS SUBSIDIARIES,
and
BT COMMERCIAL CORPORATION,
as Collateral Agent
_______________________________________________
Dated as of August 15, 1995
and
Amended and Restated as of May 8, 1998
_______________________________________________
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of August 15,
1995 and amended and restated as of May 8, 1998, among ACG HOLDINGS, INC. a
Delaware corporation ("Holdings") AMERICAN COLOR GRAPHICS, INC., a New
York corporation (the "Borrower"), and the Subsidiary Guarantors (together
with Holdings, the Borrower and each entity which becomes a party hereto
pursuant to Section 10.11, each, an "Assignor" and, collectively, the
"Assignors") and BT COMMERCIAL CORPORATION, as Collateral Agent (the
"Collateral Agent") for the Secured Creditors (as defined below).
Capitalized terms used herein shall have the meaning specified in Article
IX herein or, if not defined therein, as specified in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the financial institutions from
time to time party thereto (the "Lenders"), General Electric Capital
Corporation, as Documentation Agent (the "Documentation Agent"), Morgan
Stanley Senior Funding, Inc., as Syndication Agent (the "Syndication
Agent") and Bankers Trust Company, as Administrative Agent (the
"Administrative Agent") have entered into a Credit Agreement, dated as of
August 15, 1995 and amended and restated as of May 8, 1998 (as the same may
be further amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the making of Loans and the issuance of, and
participation in, Letters of Credit as contemplated therein (with the
Lenders from time to time party to the Credit Agreement, the Collateral
Agent, the Issuing Bank, the Swingline Bank, the Documentation Agent, the
Syndication Agent and the Administrative Agent being herein called the
"Bank Creditors");
WHEREAS, the Borrower may from time to time be party to one or
more interest rate agreements (including, without limitation, interest rate
swaps, caps, floors, collars, and similar agreements) (collectively, the
"Interest Rate Agreements," and each such Interest Rate Agreement with an
Interest Rate Creditor (as defined below), a "Secured Interest Rate
Agreement") with Bankers Trust Company, in its individual capacity
("BTCo"), any Lender or a syndicate of financial institutions organized by
BTCo or an affiliate of BTCo (even if BTCo or any such Lender ceases to be
a Lender under the Credit Agreement for any reason), and any institution
that participates, and in each case their subsequent assigns, in such
Secured Interest Rate Agreement (collectively, the "Interest Rate
Creditors," and the Interest Rate Creditors together with the Bank
Creditors, collectively, the "Secured Creditors");
WHEREAS, pursuant to the Parent Guaranty, Holdings has guaranteed
to the Secured Creditors the payment when due of the Guaranteed
Obligations;
WHEREAS, pursuant to the Amended and Restated Subsidiaries
Guaranty, dated as of August 15, 1995 and amended and restated as of May 8,
1998 (as the same may be further amended, modified or supplemented from
time to time, the "Amended and Restated Subsidiaries Guaranty"), each
Assignor (other than Holdings and the Borrower) has guaranteed to the
Secured Creditors the payment when due of the Guaranteed Obligations (as
defined in the Subsidiaries Guaranty);
WHEREAS, the Assignors (other than Holdings) have heretofore
entered into a Security Agreement, dated as of August 15, 1995 (as amended,
modified or supplemented to the date hereof, the "Original Security
Agreement");
WHEREAS, Holdings desires to enter into this Agreement and the
other Assignors desire to amend and restate the Original Security Agreement
in the form of this Agreement;
WHEREAS, it is a condition to the making of Loans and the
issuance of, and participation in, Letters of Credit under the Credit
Agreement that each Assignor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Assignor, the receipt and sufficiency of which
are hereby acknowledged, each Assignor hereby makes the following
representations and warranties to the Collateral Agent and hereby covenants
and agrees with the Collateral Agent as follows:
ARTICLE I
SECURITY INTERESTS
1.1 Grant of Security Interests. (a) Each Assignor, as security
for the prompt and complete payment and performance when due of all of the
Obligations of such Assignor, does hereby sell, assign and transfer unto
the Collateral Agent, and does hereby grant to the Collateral Agent for the
benefit of the Secured Creditors a continuing security interest (or, in the
case of clause (vii) below to the extent not registered with the United
States Patent and Trademark Office, a security interest to the extent
permitted by applicable law) in, all of the right, title and interest of
such Assignor in, to and under all of the following, whether now existing
or hereafter from time to time acquired: (i) each and every Receivable,
(ii) all Contracts, together with all Contract Rights arising thereunder,
(iii) all Inventory, (iv) all Equipment, (v) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of such Assignor symbolized by such Marks, (vi) the Cash
Collateral Account established for such Assignor and all monies, securities
and instruments deposited or required to be deposited in such Cash
Collateral Account, (vii) all Patents and Copyrights and all reissues,
renewals or extensions thereof, (viii) all computer programs of such
Assignor and all intellectual property rights therein and all other
proprietary information of such Assignor, including, but not limited to,
Trade Secret Rights, (ix) all insurance policies, (x) all other Goods,
General Intangibles, Chattel Paper, Documents and Instruments (other than
the Pledged Securities), and (xi) all Proceeds and products of any and all
of the foregoing (all of the above collectively, the "Collateral").
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of
this Agreement which each Assignor may acquire at any time during the
continuation of this Agreement.
1.2 Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably,
with full power after the occurrence of and during the continuance of an
Event of Default (in the name of such Assignor or otherwise) to act,
require, demand, receive, compound and give acquittance for any and all
monies and claims for monies due or to become due to such Assignor under or
arising out of the Collateral, to endorse any checks or other instruments
or orders in connection therewith and to file any claims or take any action
or institute any proceedings which the Collateral Agent may deem to be
necessary or advisable in the premises, which appointment as attorney is
coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and
delivery of this Agreement, as follows:
2.1 Necessary Filings. Except as set forth in Section 6.6 of the
Credit Agreement, all filings, registrations and recordings necessary or
appropriate to create, preserve, protect and perfect the security interest
granted by such Assignor to the Collateral Agent hereby in respect of the
Collateral have been accomplished and the security interest granted to the
Collateral Agent pursuant to this Agreement in and to the Collateral
constitutes a perfected security interest therein prior to the rights of
all other Persons therein and subject to no other Liens (except Permitted
Liens) and is entitled to all the rights, priorities and benefits afforded
by the Uniform Commercial Code or other relevant law as enacted in any
relevant jurisdiction to perfected security interests.
2.2 No Liens. Such Assignor is, and as to Collateral acquired by
it from time to time after the date hereof such Assignor will be, the owner
of all Collateral free from any Lien, security interest, encumbrance or
other right, title or interest of any Person (other than Permitted Liens),
and such Assignor shall defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
2.3 Other Financing Statements. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) on file or of record in any relevant
jurisdiction covering or purporting to cover any interest of any kind in
the Collateral of such Assignor (other than in respect of Permitted Liens),
and so long as the Total Commitments have not been terminated or any Letter
of Credit or Note remains outstanding or any of the Obligations remain
unpaid or any Interest Rate Agreement remains in effect or any Obligations
are owed with respect thereto, such Assignor will not execute or authorize
to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction)
or statements relating to the Collateral, except financing statements filed
or to be filed in respect of and covering the security interests granted
hereby by such Assignor or as permitted by the Credit Agreement.
2.4 Chief Executive Office; Records. The chief executive office
of such Assignor is located at the address or addresses indicated under the
name of such Assignor on Annex A hereto. Such Assignor will not move its
chief executive office except to such new location as such Assignor may
establish in accordance with the last sentence of this Section 2.4. The
originals of all documents evidencing all Receivables and Contract Rights
and Trade Secret Rights of such Assignor and the only original books of
account and records of such Assignor relating thereto are, and will
continue to be, kept at such chief executive office and/or one or more of
the locations shown on Annex A, or at such new locations as such Assignor
may establish in accordance with the last sentence of this Section 2.4.
All Receivables and Contract Rights and Trade Secret Rights of such
Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes)
from, the office locations described above, or such new locations as such
Assignor may establish in accordance with the last sentence of this Section
2.4. Such Assignor shall not establish new locations for such offices
until (i) it shall have given to the Collateral Agent not less than 30
days' prior written notice (or such lesser notice as shall be acceptable to
the Collateral Agent in the case of a new record location to be established
in connection with newly acquired Contracts) of its intention so to do,
clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request, and
(ii) with respect to such new location, it shall have taken all action,
reasonably satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
2.5 Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by such Assignor is located at one of the
locations shown under the name of such Assignor on Annex B attached hereto.
Such Assignor agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in transport to
or from) any one of the locations shown on Annex B hereto, or such new
location as such Assignor may establish in accordance with the last
sentence of this Section 2.5, provided that Equipment may be removed from
any such location so long as (x) such Equipment is returned to such
location within 30 days after such removal and (y) the replacement value of
all of such Assignor's Equipment which has been removed from one of the
locations shown on Annex B, or from a new location established in
accordance with the last sentence of this Section 2.5, and has not been
returned to any such location, does not exceed $250,000 in the aggregate at
any one time. Such Assignor may establish a new location for Inventory and
Equipment only if (i) it shall have given to the Collateral Agent not less
than 20 days prior written notice of its intention so to do, clearly
describing such new location and providing such other information in
connection therewith as the Collateral Agent may reasonably request, and
(ii) with respect to such new location, it shall have taken all action
reasonably satisfactory to the Collateral Agent to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
2.6 Trade Names; Change of Name. Such Assignor does not have or
operate in any jurisdiction under, or in the preceding 12 months has not
had or has not operated in any jurisdiction under, any trade names,
fictitious names or other names (including, without limitation, any names
of divisions or operations) except its legal name and such other trade,
fictitious or other names as are listed under the name of such Assignor on
Annex C hereto. Such Assignor has only operated under each name set forth
in Annex C in the jurisdiction or jurisdictions set forth opposite each
such name on Annex C. Such Assignor shall not change its legal name or
assume or operate in any jurisdiction under any trade, fictitious or other
name except those names listed on Annex C hereto in the jurisdictions
listed with respect to such names and new names (including, without
limitation, any names of divisions or operations) and/or jurisdictions
established in accordance with the last sentence of this Section 2.6. Such
Assignor shall not assume or operate in any jurisdiction under any new
trade, fictitious or other name or operate under any existing name in any
additional jurisdiction until (i) it shall have given to the Collateral
Agent not less than 30 days' prior written notice of its intention so to
do, clearly describing such new name and/or jurisdiction and, in the case
of a new name, the jurisdictions in which such new name shall be used and
providing such other information in connection therewith as the Collateral
Agent may reasonably request, and (ii) with respect to such new name and/or
new jurisdiction, it shall have taken all action reasonably required to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full
force and effect.
2.7 Recourse. This Agreement is made with full recourse to each
Assignor (subject, in the case of the Subsidiary Guarantors, to the limits
set forth in the Subsidiary Guaranty) and pursuant to and upon all the
warranties, representations, covenants, and agreements on the part of such
Assignor contained herein, in the other Credit Documents, in the Secured
Interest Rate Agreements and otherwise in writing in connection herewith or
therewith.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS; ETC.
3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what
they purport to be, and that all papers and documents (if any) relating
thereto (i) will represent the genuine, legal, valid and binding obligation
of the account debtor, subject to adjustments customary in the business of
such Assignor, and evidencing indebtedness unpaid and owed by the
respective account debtor arising out of the performance of labor or
services or the sale or lease and delivery of the merchandise listed
therein, or both, (ii) will be the only original writings evidencing and
embodying such obligation of the account debtor named therein (other than
copies created for general accounting purposes), (iii) will evidence true
and valid obligations, enforceable in accordance with their respective
terms, subject to adjustments customary in the business of such Assignor,
and (iv) will be in compliance and will conform with all applicable
federal, state and local laws and applicable laws of any relevant foreign
jurisdiction.
3.2 Maintenance of Records. Each Assignor will keep and maintain
at its own cost and expense satisfactory and complete records of its
Receivables and Contracts, including, but not limited to, the originals of
all documentation (including each Contract) with respect thereto, records
of all payments received, all credits granted thereon, all merchandise
returned and all other dealings therewith, and such Assignor will make the
same available to the Collateral Agent for inspection, at such Assignor's
own cost and expense, at any and all reasonable times upon demand. Upon
the occurrence and during the continuance of an Event of Default, each
Assignor shall, upon request of the Collateral Agent and at its own cost
and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, copies of all documents evidencing
the Receivables and all Contracts, such copies to be certified as true and
complete by an appropriate officer of such Assignor) and such books and
records to the Collateral Agent or to its representatives (copies of which
evidence and books and records may be retained by such Assignor) at any
time upon its demand. If, upon the occurrence and during the continuance
of an Event of Default, the Collateral Agent so directs, such Assignor
shall legend, in form and manner reasonably satisfactory to the Collateral
Agent, the Receivables and Contracts, as well as books, records and
documents of such Assignor evidencing or pertaining to the Receivables with
an appropriate reference to the fact that the Receivables and Contracts
have been assigned to the Collateral Agent and that the Collateral Agent
has a security interest therein.
3.3 Modification of Terms; etc. No Assignor shall rescind or
cancel any indebtedness evidenced by any Receivable of such Assignor or
under any Contract of such Assignor, or modify any term thereof or make any
adjustment with respect thereto, or extend or renew the same, or compromise
or settle any material dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or Contract of such Assignor, or interest
therein, without the prior written consent of the Collateral Agent (which
consent shall not be unreasonably withheld), except (i) as permitted by
Section 3.4 hereof and (ii) so long as no Event of Default is then in
existence in respect of which the Collateral Agent has given notice that
this exception is no longer applicable, each Assignor may modify, make
adjustments with respect to, extend, renew, rescind or cancel any Contracts
in the ordinary course of business. Each Assignor will duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts of such Assignor and will do nothing to impair
the rights of the Collateral Agent in such Receivables or Contracts.
3.4 Collection. Each Assignor shall, in accordance with its
ordinary business practices, endeavor to cause to be collected from the
account debtor named in each of its Receivables or obligor under any
Contract of such Assignor, as and when due (including, without limitation,
amounts which are delinquent, such amounts to be collected in accordance
with generally accepted lawful collection procedures) any and all amounts
owing under or on account of such Receivable or Contract, and apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Receivable or under such Contract, except that,
so long as no Event of Default is then in existence in respect of which the
Collateral Agent has given notice that this exception is no longer
applicable, any Assignor may allow in the ordinary course of business as
adjustments to amounts owing under its Receivables and Contracts (i) an
extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance, which such Assignor finds appropriate
in accordance with reasonable business judgment and (ii) a refund or credit
due as a result of returned or damaged merchandise or improperly performed
services or such other adjustments which such Assignor deems appropriate in
the exercise of its commercially reasonable business judgment. The
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, whether incurred by an Assignor or the
Collateral Agent, shall be borne by such Assignor.
3.5 Direction to Account Debtors; etc. Upon the occurrence and
during the continuance of an Event of Default, and if the Collateral Agent
so directs any Assignor, to the extent permitted by applicable law, such
Assignor agrees (x) to cause all payments on account of the Receivables and
Contracts to be made directly to the Cash Collateral Account, (y) that the
Collateral Agent may, at its option, directly notify the obligors with
respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (x) and (z) that the
Collateral Agent may enforce collection of any such Receivables and
Contracts and may adjust, settle or compromise the amount of payment
thereof. The Collateral Agent may apply any or all amounts then in, or
thereafter deposited in, the Cash Collateral Account in the manner provided
in Section 8.4 of this Agreement. The reasonable costs and expenses
(including reasonable attorneys' fees) of collection, whether incurred by
any Assignor or the Collateral Agent, shall be borne by such Assignor.
3.6 Instruments. If any Assignor owns or acquires any
Instrument, such Assignor will within 15 Business Days notify the
Collateral Agent thereof, and upon request by the Collateral Agent promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to
the order of the Collateral Agent as further security hereunder.
3.7 Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral
Agent from time to time such vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements,
powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to its Receivables,
Contracts, Instruments and other property or rights covered by the security
interest hereby granted, as the Collateral Agent may reasonably require to
give effect to the purposes of this Agreement.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1 Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of the Marks
listed under its name in Annex D attached hereto and that said listed Marks
constitute all the marks registered in the United States Patent and
Trademark Office that such Assignor now owns in connection with its
business. Each Assignor further warrants that it has no knowledge of any
third party claim that any aspect of such Assignor's present or
contemplated business operations infringes or will infringe any trademark,
service mark or tradename in a manner which is reasonably likely to have a
Material Adverse Effect. Each Assignor represents and warrants that upon
the recordation of an assignment of security interest in United States
Trademarks and Patents (each, an "Assignment of Security Interest in United
States Trademarks and Patents") in a form satisfactory to the Collateral
Agent in the United States Patent and Trademark Office, together with
filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate, to the extent
permitted by applicable law, to perfect the security interest granted to
the Collateral Agent in the United States Marks covered by this Agreement
under federal law will have been accomplished. Each Assignor agrees to
execute such Assignment of Security Interest in United States Trademarks
and Patents covering all right, title and interest in each United States
Mark, and the associated goodwill, of such Assignor, and to record the
same. Each Assignor hereby grants to the Collateral Agent an absolute
power of attorney to sign, upon the occurrence and during the continuance
of an Event of Default, any document which may be required by the U.S.
Patent and Trademark Office or secretary of state or equivalent
governmental agency of any State of the United States in order to effect an
absolute assignment of all right, title and interest in each Mark, and
record the same.
4.2 Licenses and Assignments. Each Assignor hereby agrees not to
divest itself of any right under a Mark of such Assignor other than in the
ordinary course of business absent prior written approval of the Collateral
Agent.
4.3 Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address
of, and to furnish such pertinent information that may be available with
respect to, any party who may be infringing or otherwise violating in any
material respect any of such Assignor's rights in and to any significant
Mark of such Assignor, or with respect to any party claiming that such
Assignor's use of any significant Mark of such Assignor violates any
property right of that party, to the extent that such infringement or
violation is reasonably likely to have a Material Adverse Effect. Each
Assignor further agrees, unless otherwise directed by the Collateral Agent,
diligently to prosecute any person infringing any significant Mark of such
Assignor in accordance with reasonable business practices.
4.4 Preservation of Marks. Each Assignor agrees to use its
significant Marks in interstate commerce during the time in which this
Agreement is in effect, sufficiently to preserve such Marks as trademarks
or service marks registered under the laws of the United States; provided
that, no Assignor shall be obligated to preserve any Mark to the extent the
Assignor determines, in its reasonable business judgment, that the
preservation of such Mark is no longer desirable in the conduct of its
business.
4.5 Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of
1946, 15 U.S.C. Section Section 1051 et seq. to maintain trademark
registration to the extent that such Assignor's failure to do so could be
reasonably likely to have a Material Adverse Effect, including but not
limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Marks
pursuant to 15 U.S.C. Section Section 1058(a), 1059 and 1065, and shall
pay all fees and disbursements in connection therewith, and shall not
abandon any such filing of affidavit of use or any such application of
renewal prior to the exhaustion of all administrative and judicial remedies
without prior written consent of the Collateral Agent; provided that, no
Assignor shall be obligated to preserve any Mark to the extent the Assignor
determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
4.6 Future Registered Marks. If any registration for any Mark
that is material to its business issues hereafter to any Assignor as a
result of any application now or hereafter pending before the United States
Patent and Trademark Office, within 30 days of receipt of such certificate,
such Assignor shall deliver to the Collateral Agent a copy of such
certificate, and an Assignment of Security Interest in United States
Trademarks and Patents in respect of such Mark, to the Collateral Agent and
at the expense of such Assignor, confirming the assignment for security in
such Mark to the Collateral Agent hereunder.
4.7 Remedies. If an Event of Default (or a Default under Section
9.1(a) or (e) of the Credit Agreement) shall occur and be continuing, the
Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested, in which
event such rights, title and interest shall immediately vest, in the
Collateral Agent for the benefit of the Secured Creditors pursuant to the
trademark security agreement in form and substance satisfactory to the
Collateral Agent, executed by such Assignor and filed on the date hereof,
pursuant to which all of such Assignor's rights, title and interest in and
to the Marks are assigned to the Collateral Agent for the benefit of the
Secured Creditors; (ii) take and use or sell the Marks of such Assignor
and the goodwill of such Assignor's business symbolized by the Marks of
such Assignor and the right to carry on the business and use the assets of
such Assignor in connection with which the Marks of such Assignor have been
used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks of such Assignor in any manner
whatsoever, directly or indirectly, and, if requested by the Collateral
Agent, change such Assignor's corporate name to eliminate therefrom any use
of any Mark of such Assignor and execute such other and further documents
that the Collateral Agent may request to further confirm this and to
transfer ownership of the Marks and registrations and any pending trademark
application in the United States Patent and Trademark Office to the
Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING PATENTS,
COPYRIGHTS AND TRADE SECRET RIGHTS
5.1 Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of all rights
in (i) all trade secrets and proprietary information necessary to operate
the business of such Assignor (the "Trade Secret Rights"), (ii) the Patents
listed under such Assignor's name in Annex E attached hereto and (iii) the
Copyrights listed under such Assignor's name in Annex F attached hereto,
that said Patents constitute all the United States patents and applications
for United States patents that such Assignor now owns and that said
Copyrights constitute all the registered United States copyrights that such
Assignor now owns. Each Assignor further represents and warrants that it
has the exclusive right to use and practice under all Patents and
Copyrights that it owns, uses or practices under and has the exclusive
right to exclude others from using or practicing under any Patents its
owns, uses or practices under. Each Assignor further warrants that it is
has no knowledge of any third party claim that any aspect of such
Assignor's present or contemplated business operations infringes or will
infringe any patent or any copyright in a manner which is reasonably likely
to have a Material Adverse Effect. Each Assignor agrees to execute an
Assignment of Security Interest in United States Trademarks and Patents
covering all right, title and interest in each United States Patent of such
Assignor and to record the same, and to execute an assignment of security
interest in United States Copyrights (each, an "Assignment of Security
Interest in United States Copyrights") in form and substance satisfactory
to the Collateral Agent covering all right, title and interest in each
United States Copyright of such Assignor and to record the same. Each
Assignor hereby grants to the Collateral Agent an absolute power of
attorney to sign, upon the occurrence and during the continuance of any
Event of Default, any document which may be required by the U.S. Patent
and Trademark Office or the U.S. Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
5.2 Licenses and Assignments. Each Assignor hereby agrees not to
divest itself of any right under a Patent or Copyright other than in the
ordinary course of business absent prior written approval of the Collateral
Agent.
5.3 Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement or
other violation in any material respect of such Assignor's rights in any
significant Patent or Copyright, or with respect to any claim that practice
of any significant Patent or Copyright of such Assignor violates any
property right of a third party, or with respect to any misappropriation of
any Trade Secret Right or any claim that practice of any Trade Secret Right
violates any property right of a third party, to the extent that such
infringement, violation or misappropriation is reasonably likely to have a
Material Adverse Effect. Each Assignor further agrees, absent direction of
the Collateral Agent to the contrary, diligently to prosecute any person
infringing any significant Patent or Copyright in a manner consistent with
its past practice and in the ordinary course of business.
5.4 Maintenance of Patents and Copyrights. At its own expense,
each Assignor shall make timely payment of all post-issuance fees required
pursuant to 35 U.S.C. Section 41 to maintain in force rights under each of
its material Patents apply as permitted pursuant to applicable law for any
renewal of each material Copyright, absent prior written consent of the
Collateral Agent.
5.5 Prosecution of Patent or Copyright Application. At its own
expense, each Assignor shall diligently prosecute all applications for
United States patents listed under such Assignor's name on Annex E hereto
and for United States Copyrights listed under such Assignor's name on Annex
F hereto, and shall not abandon any such application prior to exhaustion of
all administrative and judicial remedies, absent written consent of the
Collateral Agent; provided that, no Assignor shall be obligated to preserve
any application to the extent the Assignor determines, in its reasonable
business judgment, that the preservation of such application is no longer
desirable in the conduct of its business.
5.6. Other Patents and Copyrights. Within 30 days of the
acquisition or issuance of a Patent or of a Copyright registration, or of
filing of an application for a Patent or Copyright registration, that is in
each case material to its business, the relevant Assignor shall deliver to
the Collateral Agent a copy of said Copyright registration or Patent or
certificate or registration of, or application therefor, as the case may
be, with an Assignment of Security Interest in United States Trademarks or
Patents or an Assignment of Security Interest in United States Copyrights
for such Patent or Copyright, as the case may be, to the Collateral Agent
and at the expense of such Assignor, confirming the assignment for security
in such Patent or Copyright to the Collateral Agent.
5.7 Remedies. If an Event of Default (or a Default under Section
9.1(a) or (e) of the Credit Agreement) shall occur and be continuing, the
Collateral Agent may by written notice to the relevant Assignor take any or
all of the following actions: (i) declare the entire right, title and
interest of such Assignor in each of the Patents and Copyrights vested, in
which event such right, title and interest shall immediately vest in the
Collateral Agent for the benefit of the Secured Creditors, pursuant to the
patent security agreement in form and substance satisfactory to the
Collateral Agent, executed by such Assignor and filed on the date hereof,
pursuant to which all of such Assignor's right, title, and interest to such
Patents and Copyrights are assigned to the Collateral Agent for the benefit
of the Secured Creditors; (ii) take and practice or sell the Patents,
Copyrights and Trade Secret Rights of such Assignor; (iii) direct such
Assignor to refrain, in which event such Assignor shall refrain, from
practicing the Patents and Copyrights and/or Trade Secret Rights of such
Assignor directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to
confirm this and to transfer ownership of the Patents, Copyrights and Trade
Secret Rights of such Assignor to the Collateral Agent for the benefit of
the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1 Protection of Collateral Agent's Security. Each Assignor
will do nothing to impair the rights of the Collateral Agent in the
Collateral. Each Assignor will at all times keep its Inventory and
Equipment insured in favor of the Collateral Agent, at its own expense, to
the extent required by the Credit Agreement against fire, theft and all
other risks to which such Collateral may be subject; all policies or
certificates with respect to such insurance shall be endorsed to the
Collateral Agent's satisfaction for the benefit of the Collateral Agent
(including, without limitation, by naming the Collateral Agent as loss
payee and naming each of the Lenders, the Agents and the Collateral Agent
as additional insureds) and deposited with the Collateral Agent. If any
Assignor shall fail to insure such Inventory and Equipment to the extent
required by the Credit Agreement, or if any Assignor shall fail to so
endorse and deposit all policies or certificates with respect thereto, the
Collateral Agent shall have the right (but shall be under no obligation) to
procure such insurance and such Assignor agrees to reimburse the Collateral
Agent for all reasonable costs and expenses of procuring such insurance.
Upon the occurrence and during the continuance of an Event of Default (or a
Default under Section 9.1(a) or (e) of the Credit Agreement), the
Collateral Agent may apply any proceeds of such insurance required to be
maintained pursuant to this Section 6.1 in accordance with Section 7.4.
Each Assignor assumes all liability and responsibility in connection with
the Collateral acquired by it and the liability of such Assignor to pay its
Obligations shall in no way be affected or diminished by reason of the fact
that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2 Warehouse Receipts Non-Negotiable. Each Assignor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such warehouse receipt or
receipt in the nature thereof shall not be "negotiable" (as such term is
used in Section 7-104 of the Uniform Commercial Code as in effect in any
relevant jurisdiction or under other relevant law).
6.3 Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral
Agent from time to time such lists, descriptions and designations of its
Collateral, warehouse receipts, receipts in the nature of ware house
receipts, bills of lading, documents of title, vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest
hereby granted, which the Collateral Agent deems reasonably appropriate or
advisable to perfect, preserve or protect its security interest in the
Collateral.
6.4 Financing Statements. Each Assignor agrees to sign and
deliver to the Collateral Agent such financing statements, in form
acceptable to the Collateral Agent, as the Collateral Agent may from time
to time reasonably request or as are reasonably necessary or desirable in
the opinion of the Collateral Agent to establish and maintain a valid,
enforceable, security interest in the Collateral as provided herein and the
other rights and security contemplated hereby all in accordance with the
Uniform Commercial Code as enacted in any and all relevant jurisdictions or
any other relevant law. Each Assignor will pay any applicable filing fees
and related expenses. Each Assignor authorizes the Collateral Agent to
file any such financing state ments without the signature of such Assignor.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT
OF DEFAULT AND CERTAIN DEFAULTS
7.1 Remedies; Obtaining the Collateral Upon Default. Each
Assignor agrees that, if any Event of Default (or a Default under Section
9.1(a) or (e) of the Credit Agreement) shall have occurred and be
continuing, then and in every such case, subject to any mandatory
requirements of applicable law then in effect, the Collateral Agent, in
addition to any rights now or hereafter existing under applicable law,
shall have all rights as a secured creditor under the Uniform Commercial
Code in all relevant jurisdictions and may:
(i) personally, or by agents or attorneys, immediately
retake possession of the Collateral of such Assignor or any part
thereof, from such Assignor or any other Person who then has
possession of any part thereof with or without notice or process
of law, and for that purpose may enter upon such Assignor's
premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all
services, supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation,
the Receivables and the Contracts) constituting the Collateral of
such Assignor to make any payment required by the terms of such
instrument or agreement directly to the Collateral Agent;
(iii) withdraw all moneys, securities and other
instruments in the Cash Collateral Account for application to the
Obligations in accordance with Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate, or direct
such Assignor to sell, assign or otherwise liquidate, any or all
of the Collateral of such Assignor or any part thereof in
accordance with Section 7.2 hereof, and take possession of the
proceeds of any such sale or liquidation;
(v) take possession of the Collateral of such Assignor
or any part thereof, by directing such Assignor in writing to
deliver the same to the Collateral Agent at any place or places
designated by the Collateral Agent, in which event such Assignor
shall at its own expense:
(A) forthwith cause the same to be moved to
the place or places so designated by the Collateral
Agent and there delivered to the Collateral Agent;
(B) store and keep any Collateral of such
Assignor so delivered to the Collateral Agent at such
place or places pending further action by the
Collateral Agent as provided in Section 7.2; and
(C) while the Collateral of such Assignor
shall be so stored and kept, provide such guards and
maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good
condition; and
(vi) license or sublicense whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in
the Collateral of such Assignor for such term and on such
conditions and in such manner as the Collateral Agent shall in
its sole judgment determine;
it being understood that such Assignor's obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent
shall be entitled to a decree requiring specific performance by such
Assignor of said obligation.
7.2 Remedies; Disposition of the Collateral. Upon the
occurrence and during the continuance of an Event of Default (or a Default
under Section 9.1(a) or (e) of the Credit Agreement), any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and
any other Collateral whether or not so repossessed by the Collateral Agent,
may be sold, assigned, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering at the
place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as the
Collateral Agent may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the
Collateral may be sold, leased or otherwise disposed of, in the condition
in which the same existed when taken by the Collateral Agent or after any
overhaul or repair which the Collateral Agent shall determine to be
commercially reasonable. Any such disposition which shall be a private
sale or other private proceedings permitted by such requirements shall be
made upon not less than ten (10) days' written notice to the relevant
Assignor specifying the time at which such disposition is to be made and
the intended sale price or other consideration therefor, and shall be
subject, for the ten (10) days after receipt of such notice, to the right
of the relevant Assignor or any nominee of such Assignor to acquire the
Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any
such disposition which shall be a public sale permitted by such
requirements shall be made upon not less than ten (10) days' written notice
to the relevant Assignor specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public auction
(which may, at the Collateral Agent's option, be subject to reserve), after
publication of notice of such auction not less than 10 days prior thereto
in two newspapers in general circulation in the City of New York. To the
extent permitted by any such requirement of law, the Collateral Agent on
behalf of the Secured Creditors (or certain of them) may bid for and become
the purchaser (by bidding in the Obligations or otherwise) of the
Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the relevant Assignor (except to the
extent of surplus money received as provided in Section 7.4). If, under
mandatory requirements of applicable law, the Collateral Agent shall be
required to make disposition of the Collateral within a period of time
which does not permit the giving of notice to the relevant Assignor as
hereinabove specified, the Collateral Agent need give such Assignor only
such notice of disposition as shall be reasonably practicable in view of
such mandatory requirements of applicable law. Each Assignor agrees to do
or cause to be done all such other acts and things as may be reasonably
necessary to make such sale or sales of all or any portion of the
Collateral of such Assignor valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrations or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sale or sales, all at such Assignor's expense.
7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE
COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION
OF ANY OF THE COLLATERAL OF SUCH ASSIGNOR, INCLUDING, WITHOUT LIMITATION,
ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES
AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and such
Assignor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession
except any damages which are the direct result of the Collateral
Agent's gross negligence or wilful misconduct;
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the
enforcement of the Collateral Agent's rights hereunder; and
(iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in
force under any applicable law in order to prevent or delay the
enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and each Assignor, for itself
and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such
laws.
Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of the relevant Assignor
therein and thereto, and shall be a perpetual bar both at law and in equity
against such Assignor and against any and all Persons claiming or
attempting to claim the Collateral so sold, optioned or realized upon, or
any part thereof, from, through and under such Assignor.
7.4 Application of Proceeds. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral (or,
to the extent the Pledge Agreement or any Mortgage requires proceeds of
collateral thereunder to be applied in accordance with the provisions of
this Agreement, the Pledgee under the Pledge Agreement and the Mortgagee
under such Mortgage, as the case may be), together with all other moneys
received by the Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the
Collateral Agent of the type described in clauses (iii) and (iv)
of the definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal
to the outstanding Primary Obligations shall be paid to the
Secured Creditors as provided in Section 7.4(e), with each
Secured Creditor receiving an amount equal to its outstanding
Primary Obligations or, if the proceeds are insufficient to pay
in full all such Primary Obligations, its Pro Rata Share of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an
amount equal to the outstanding Secondary Obligations shall be
paid to the Secured Creditors as provided in Section 7.4(e), with
each Secured Creditor receiving an amount equal to its
outstanding Secondary Obligations or, if the proceeds are
insufficient to pay in full all such Secondary Obligations, its
Pro Rata Share of the amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement
pursuant to Section 10.8(a) hereof, to the relevant Assignor or
to whomever may be lawfully entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's
Primary Obligations or Secondary Obligations, as the case may be, and the
denominator of which is the then outstanding amount of all Primary
Obligations or Secondary Obligations, as the case may be, (y) "Primary
Obligations" shall mean (i) in the case of the Credit Agreement
Obligations, all principal of, and interest on, all Loans under the Credit
Agreement, all Unpaid Drawings theretofore made (together with all interest
accrued thereon), the aggregate Stated Amounts of all Letters of Credit
issued (or deemed issued) under the Credit Agreement, and all Fees and (ii)
in the case of the Interest Rate Obligations, all amounts due under the
Interest Rate Agreements (other than indemnities, fees (including, without
limitation, attorneys' fees) and similar obligations and liabilities) and
(z) "Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under
this Section 7.4 only) (i) first, to their Primary Obligations and (ii)
second, to their Secondary Obligations. If any payment to any Secured
Creditor of its Pro Rata Share of any distribution would result in
overpayment to such Secured Creditor, such excess amount shall instead be
distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each
Secured Creditor whose Primary Obligations or Secondary Obligations, as the
case may be, have not been paid in full to receive an amount equal to such
excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such
Secured Creditor and the denominator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued (or deemed issued) under
the Credit Agreement (which shall only occur after all outstanding Loans
and Unpaid Drawings with respect to such Letters of Credit have been paid
in full), such amounts shall be paid to the Administrative Agent under the
Credit Agreement and held by it, for the equal and ratable benefit of the
Bank Creditors, as cash security for the repayment of Obligations owing to
the Bank Creditors as such. If any amounts are held as cash security
pursuant to the immediately preceding sentence, then upon the termination
of all out standing Letters of Credit, and after the application of all
such cash security to the repayment of all Obligations owing to the Bank
Creditors after giving effect to the termination of all such Letters of
Credit, if there remains any excess cash, such excess cash shall be
returned by the Administrative Agent to the Collateral Agent for
distribution in accordance with Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d), all payments required
to be made hereunder shall be made (x) if to the Bank Creditors, to the
Administrative Agent under the Credit Agreement for the account of the Bank
Creditors, and (y) if to the Interest Rate Creditors, to the trustee,
paying agent or other similar representative (each, a "Representative") for
the Interest Rate Creditors or, in the absence of such a Representative,
directly to the Interest Rate Creditors.
(f) For purposes of applying payments received in accordance
with this Section 7.4, the Collateral Agent shall be entitled to rely upon
(i) the Administrative Agent under the Credit Agreement and (ii) the
Representative for the Interest Rate Creditors or, in the absence of such a
Representative, upon the Interest Rate Creditors for a determination (which
the Administrative Agent, each Representative for any Secured Creditors and
the Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Primary Obligations and Secondary
Obligations owed to the Bank Creditors or the Interest Rate Creditors, as
the case may be. Unless it has actual knowledge (including by way of
written notice from a Bank Creditor or an Interest Rate Creditor) to the
contrary, the Administrative Agent and each Representative, in furnishing
information pursuant to the preceding sentence, and the Collateral Agent,
in acting hereunder, shall be entitled to assume that no Secondary
Obligations are outstanding. Unless it has actual knowledge (including by
way of written notice from an Interest Rate Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Agreements are in existence.
(g) It is understood and agreed that each of the Assignors shall
remain liable to the extent of any deficiency between the amount of the
proceeds of the Collateral hereunder and the aggregate amount of the sums
referred to in clause (a) of this Section with respect to the relevant
Assignor.
7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this
Agreement, any Secured Interest Rate Agreement or the other Credit
Documents or now or hereafter existing at law or in equity, or by statute
and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by
the Collateral Agent. All such rights, powers and remedies shall be
cumulative and the exercise or the beginning of exercise of one shall not
be deemed a waiver of the right to exercise of any other or others. No
delay or omission of the Collateral Agent in the exercise of any such
right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an
acquiescence therein. In the event that the Collateral Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Collateral Agent may recover reasonable
expenses, including reasonable attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6 Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Collateral Agent, then and in
every such case the relevant Assignor, the Collateral Agent and each holder
of any of the Obligations shall be restored to their former positions and
rights hereunder with respect to the Collateral subject to the security
interest created under this Agreement, and all rights, remedies and powers
of the Collateral Agent shall continue as if no such proceeding had been
instituted.
ARTICLE VIII
INDEMNITY
8.1 Indemnity. (a) Each Assignor agrees to indemnify, reimburse
and hold the Collateral Agent, each other Secured Creditor and their
respective successors, assigns, employees, agents and servants (hereinafter
in this Section 8.1 referred to individually as "Indemnitee," and
collectively as "Indemnitees") harmless from any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including reasonable
attorneys' fees and expenses) (for the purposes of this Section 8.1 the
foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any
way relating to or arising out of this Agreement, any other Credit
Document, or any Interest Rate Agreement or in any other way connected with
the enforcement of any of the terms of, or the preservation of any rights
hereunder, or in any way relating to or arising out of the manufacture,
ownership, ordering, purchase, delivery, control, acceptance, lease,
financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation,
latent or other defects, whether or not discoverable), the violation of the
laws of any country, state or other governmental body or unit, any tort
(including, without limitation, claims arising or imposed under the
doctrine of strict liability, or for or on account of injury to or the
death of any Person (including any Indemnitee), or property damage), or
contract claim; provided that no Indemnitee shall be indemnified pursuant
to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or wilful misconduct of such Indemnitee.
Each Assignor agrees that upon written notice by any Indemnitee of the
assertion of such a liability, obligation, loss, damage, penalty, claim,
demand, action, judgment or suit, such Assignor shall assume full
responsibility for the defense thereof. Each Indemnitee agrees to use its
best efforts to promptly notify such Assignor of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for (if the Collateral Agent shall have incurred fees, costs or
expenses because such Assignor shall have failed to comply with its
obligations under this Agreement or any Credit Document), any and all
reasonable fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the Collateral
Agent's Liens on, and security interest in, the Collateral, including,
without limitation, all reasonable fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment
or discharge of any taxes or Liens upon or in respect of the Collateral,
premiums for insurance with respect to the Collateral and all other
reasonable fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of
or relating to the Collateral.
(c) If and to the extent that the obligations of each Assignor
under this Section 8.1 are unenforceable for any reason, such Assignor
hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
8.2 Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all
the Notes issued under the Credit Agreement, the termination of all
Interest Rate Agreements and Letters of Credit and the payment of all of
the other Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified
unless the context otherwise requires. Such definitions shall be equally
applicable to the singular and plural forms of the terms defined.
"Administrative Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning specified in the first
paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control
of, the Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning assigned that term under
the Uniform Commercial Code as in effect on the date hereof in the State of
New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a).
"Collateral Agent" shall have the meaning specified in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of an Assignor
(including, without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between an Assignor and one
or more additional parties to the extent the grant by an Assignor of a
security interest pursuant to this Agreement in its right, title and
interest in any such contract is not prohibited by such contract without
the consent of any other party thereto or would not give any other party to
such contract the right to terminate its obligations thereunder; provided,
that the foregoing limitation shall not affect, limit, restrict or impair
the grant by an Assignor of a security interest pursuant to this Agreement
in any Account or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture..
"Copyrights" shall mean any U.S. copyright to which an Assignor
now or hereafter has title, as well as any application for a U.S. copyright
hereafter made by an Assignor.
"Credit Agreement" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in
the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of
time, or both, would constitute an Event of Default.
"Documentation Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Documents" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Equipment" shall mean any "equipment," as such term is defined
in the Uniform Commercial Code as in effect on the date hereof in the State
of New York, now or hereafter owned by each Assignor and, in any event,
shall include, but shall not be limited to, all machinery, equipment,
furnishings, fixtures and vehicles now or hereafter owned by such Assignor
and any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement or any payment default under any Interest
Rate Agreement and shall in any event, without limitation, include any
payment default on any of the Obligations after the expiration of any
applicable grace period.
"General Intangibles" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect on the date hereof in the
State of New York.
"Goods" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Indemnitee" shall have the meaning provided in Section 8.1.
"Instrument" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Interest Rate Agreements" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
"Interest Rate Creditors" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
"Interest Rate Obligations" shall have the meaning provided in
the definition of "Obligations" in this Article IX.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials,
labels, materials and any other items used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production -- from
raw materials through work-in-process to finished goods -- and all products
and proceeds of whatever sort and wherever located and any portion thereof
which may be returned, rejected, reclaimed or repossessed by the Collateral
Agent from an Assignor's customers, and shall specifically include all
"inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New York, now or hereafter owned
by an Assignor.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in
a financing lease or analogous instrument, in, of, or on an Assignor's
property.
"Marks" shall mean any trademarks and service marks now held or
hereafter acquired by an Assignor, which are registered in the United
States Patent and Trademark Office, as well as any unregistered marks used
by an Assignor in the United States and trade dress including logos and/or
designs in connection with which any of these registered or unregistered
marks are used.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities (including, without limitation, indemnities,
fees and interest thereon) of each Assignor owing to the Bank Creditors,
now existing or hereafter incurred under, arising out of or in connection
with any Credit Document to which such Assignor is a party (including all
such obligations and indebtedness under any Guaranty to which such Assignor
is a party) and the due performance and compliance by each Assignor with
the terms, conditions and agreements of each such Credit Document (all such
obligations or liabilities under this clause (i), except to the extent
consisting of obligations or indebtedness with respect to Interest Rate
Agreements, being herein collectively called the "Credit Agreement
Obligations"); (ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities (including, without limitation, indemnities, fees and interest
thereon) of each Assignor owing to the Interest Rate Creditors, now
existing or hereafter incurred under, arising out of or in connection with
any Interest Rate Agreement, whether such Interest Rate Agreement is now in
existence or hereafter arising, including, in the case of each Guarantor,
all obligations under the relevant Guaranty in respect of Interest Rate
Agreements, and the due performance and compliance by such Assignor with
all of the terms, conditions and agreements contained in any such Interest
Rate Agreement (all such obligations and indebtedness under this clause
(ii) being herein collectively called the "Interest Rate Obligations");
(iii) any and all sums advanced by the Collateral Agent in order to
preserve the Collateral or preserve its security interest in the
Collateral; (iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of each
Assignor referred to in clauses (i), (ii) and (iii) after an Event of
Default shall have occurred and be continuing, the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee
as to which such Indemnitee has the right to reimbursement under Section
8.1 of this Agreement. It is acknowledged and agreed that the
"Obligations" shall include extensions of credit of the types described
above, whether outstanding on the date of this Agreement or extended from
time to time after the date of this Agreement.
"Patents" shall mean any U.S. patent to which each Assignor now
or hereafter has title, as well as any application for a U.S. patent now or
hereafter made by such Assignor.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect in the State of New York on the date
hereof or under other relevant law and, in any event, shall include, but
not be limited to, (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Collateral Agent or an Assignor from
time to time with respect to any of the Collateral, (ii) any and all
payments (in any form whatsoever) made or due and payable to an Assignor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by
any governmental authority (or any person acting under color of
governmental authority) and (iii) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Receivables" shall mean any "account" as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of
New York, now or hereafter owned by an Assignor and, in any event, shall
include, but shall not be limited to, all of such Assignor's rights to
payment for goods sold or leased or services performed by such Assignor,
whether now in existence or arising from time to time hereafter, including,
without limitation, rights evidenced by an account, note, contract,
security agreement, chattel paper, or other evidence of indebtedness or
security, together with (a) all security pledged, assigned, hypothecated or
granted to or held by such Assignor to secure the foregoing, (b) all of such
Assignor's right, title and interest in and to any goods, the sale of which
gave rise thereto, (c) all guarantees, endorsements and indemnifications on,
or of, any of the foregoing, (d) all powers of attorney for the execution of
any evidence of indebtedness or security or other writing in connection
therewith, (e) all books, records, ledger cards, and invoices relating
thereto, (f) all notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other
writings related in any way to the foregoing.
"Representative" shall have the meaning provided in Section
7.4(e) of this Agreement.
"Representative Creditors" shall have the meaning provided in
Section 10.2 of this Agreement.
"Secondary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the second
WHEREAS clause of this Agreement.
"Secured Interest Agreements" shall have the meaning provided in
the second WHEREAS clause of this Agreement.
"Syndication Agent" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Termination Date" shall have the meaning provided in Section
10.8 of this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section
5.1.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
BT Commercial Corporation
c/o Bankers Trust Company
130 Liberty Street
One Bankers Trust Plaza
New York, New York 10006
Attention: David Bell
Telephone No.: (212) 250-2500
Facsimile No.: (212) 250-7218
(c) if to any Bank Creditor (other than the Collateral Agent), at
such address as such Bank Creditor shall have specified in the Credit
Agreement; and
(d) if to any Interest Rate Creditor, at such address as such
Interest Rate Creditor shall have specified in writing to each Assignor and
the Collateral Agent;
or at such other address as shall have been furnished in writing by any
Person described above to the party required to give notice hereunder.
10.2 Waiver; Amendment. (a) None of the terms and conditions
of this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Assignor directly and
adversely affected thereby and the Collateral Agent (with the consent of
(x) the Required Lenders (or all the Lenders if required by Section 11.10
of the Credit Agreement) at all times prior to the time at which all Credit
Agreement Obligations (other than those arising from indemnities for which
no request has been made) have been paid in full and all Commitments under
the Credit Agreement have been terminated or (y) the holders of at least a
majority of the outstanding Interest Rate Obligations at all times after
the time on which all Credit Agreement Obligations have been paid in full
and all Commitments under the Credit Agreement have been terminated;
provided, that any change, waiver, modification or variance affecting the
rights and benefits of a single Class (as defined below) of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors (as defined below)
of such Class of Secured Creditors. For the purpose of this Agreement the
term "Class" shall mean each class of Secured Creditors, i.e., whether (x)
the Bank Creditors as holders of the Credit Agreement Obligations or (y)
the Interest Rate Creditors as the holders of the Interest Rate
Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Agreement Obligations, the Required Lenders and (y) with respect to the
Interest Rate Obligations, the holders of at least 51% of all obligations
outstanding from time to time under the secured Interest Rate Agreements.
(b) No delay on the part of the Collateral Agent in exercising
any of its rights, remedies, powers and privileges hereunder or partial or
single exercise thereof, shall constitute a waiver thereof. No notice to
or demand on any Assignor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand.
10.3 Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and
shall not be impaired by, (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of any
Assignor; (b) any exercise or non-exercise, or any waiver of, any right,
remedy, power or privilege under or in respect of this Agreement or any
other Credit Document or any Secured Interest Rate Agreement except as
specifically set forth in a waiver granted pursuant to the restrictions of
Section 10.2 hereof; or (c) any amendment to or modification of any Credit
Document or any Secured Interest Rate Agreement or any security for any of
the Obligations; or (d) any waiver, consent, extension, indulgence or other
action or inaction under or in respect or any such agreement or instrument
including, without limitation, this Agreement; whether or not any Assignor
shall have notice or knowledge of any of the foregoing. The rights and
remedies of the Collateral Agent herein provided are cumulative and not
exclusive of any rights or remedies which the Collateral Agent would
otherwise have.
10.4 Successors and Assigns. This Agreement shall be binding
upon each Assignor and its successors and assigns and shall inure to the
benefit of the Collateral Agent and its successors and assigns, provided
that no Assignor may transfer or assign any or all of its rights or
obligations hereunder without the written consent of the Collateral Agent.
All agreements, statements, representations and warranties made by each
Assignor herein or in any certificate or other instrument delivered by such
Assignor or on its behalf under this Agreement shall be considered to have
been relied upon by the Secured Creditors and shall survive the execution
and delivery of this Agreement, the other Credit Documents and the Secured
Interest Rate Agreements regardless of any investigation made by the
Secured Creditors on their behalf.
10.5 Headings Descriptive. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Agreement.
10.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
10.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
10.8 Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with
respect to the Collateral and the Collateral Agent shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required
or obligated in any manner to perform or fulfill any of the obligations of
any Assignor under or with respect to any Collateral.
10.9 Termination; Release. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all
indemnities set forth herein including, without limitation, in Section 8.1
hereof shall survive such termination) and the Collateral Agent, at the
request and expense of the respective Assignor, will promptly execute and
deliver to such Assignor a proper instrument or instruments (including
Uniform Commercial Code termination statements on form UCC-3) acknowledging
the satisfaction and termination of this Agreement, and will duly assign,
transfer and deliver to such Assignor (without recourse and without any
representation or warranty) such of the Collateral as may be in the
possession of the Collateral Agent and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement. As used in this
Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Agreements have been terminated, no Note
is outstanding (and all Loans have been paid in full), all Letters of
Credit have been terminated and all other Obligations (other than arising
from indemnities for which no request has been made) then owing have been
paid in full.
(b) In the event that any part of the Collateral is sold (x) at
any time prior to the time at which all Credit Agreement Obligations have
been paid in full and all Commitments under the Credit Agreement have been
terminated, in connection with a sale permitted by Section 8.1 of the
Credit Agreement or is otherwise released at the direction of the Required
Lenders (or all the Lenders if required by Section 11.10 of the Credit
Agreement) or (y) at any time thereafter, to the extent permitted by the
Interest Rate Agreements, and in the case of clauses (x) and (y), the
proceeds of such sale or sales or from such release are applied in
accordance with the terms of the Credit Agreement or such Interest Rate
Agreements, as the case may be, to the extent required to be so applied,
the Collateral Agent, at the request and expense of such Assignor, will
duly assign, transfer and deliver to such Assignor (without recourse and
without any representation or warranty) such of the Collateral as is then
being (or has been) so sold or released and as may be in the possession of
the Collateral Agent and has not theretofore been released pursuant to this
Agreement.
(c) At any time that the relevant Assignor desires that the
Collateral Agent take any action to give effect to any release of
Collateral pursuant to the foregoing Section 10.9(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by an authorized
officer stating that the release of the respective Collateral is permitted
pursuant to Section 10.9(a) or (b). In the event that any part of the
Collateral is released as provided in the preceding paragraph (b), the
Collateral Agent, at the request and expense of such Assignor, will duly
assign, transfer and deliver to such Assignor or its designee (without
recourse and without any representation or warranty) such of the Collateral
as is then being (or has been) so sold and as may be in the possession of
the Collateral Agent and has not theretofore been released pursuant to this
Agreement. The Collateral Agent shall have no liability whatsoever to any
Secured Creditor as the result of any release of Collateral by it as
permitted by this Section 10.9. Upon any release of Collateral pursuant to
Section 10.9(a) or (b), none of the Secured Creditors shall have any
continuing right or interest in such Collateral, or the proceeds thereof.
10.10 Collateral Agent. By accepting the benefits of this
Agreement, each Secured Creditor acknowledges and agrees that the rights
and obligations of the Collateral Agent shall be as set forth in Section 10
of the Credit Agreement. Notwithstanding anything to the contrary
contained in Section 10.2 of this Agreement or Section 11.10 of the Credit
Agreement, this Section 10.10, and the duties and obligations of the
Collateral Agent set forth in this Section 10.10, may not be amended or
modified without the consent of the Collateral Agent.
10.11 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Collateral Agent.
10.12 Additional Assignors. It is understood and agreed that any
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart
hereof and delivering the same to the Collateral Agent.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their duly authorized officers as of the date
first above written.
ACG Holdings, Inc. ACG HOLDINGS, INC.
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: ---------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. AMERICAN COLOR GRAPHICS, INC.,
225 High Ridge Road as Assignor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: ---------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
Fax: 203-978-5408
c/o ACG Holdings, Inc. AMERICAN IMAGES OF NORTH
225 High Ridge Road AMERICA, INC.,
Stamford, Connecticut 06905 as Assignor
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: ---------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. SULLIVAN MARKETING, INC.,
225 High Ridge Road as Assignor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: ---------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
c/o ACG Holdings, Inc. SULLIVAN MEDIA CORPORATION,
225 High Ridge Road as Assignor
Stamford, Connecticut 06905
Attention: Timothy M. Davis, Esq.
Tel: 203-978-5404
Fax: 203-978-5408 By /s/ Joseph M. Milano
with a copy to: ---------------------------------
Joseph Milano Title: Chief Financial Officer
Tel: 203-978-3405
Fax: 203-978-5408
BT COMMERCIAL CORPORATION,
as Collateral Agent and as Pledgee
By /s/ Jeff Ogden
---------------------------------
Title: Senior Vice President
EXHIBIT H-1
AMERICAN COLOR GRAPHICS, INC.
as Corporation
and
BT COMMERCIAL CORPORATION
as Lender
- ------------------------------------------------------------------------------
DEMAND DEBENTURE
May 8, 1998
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Stikeman, Elliott
TABLE OF CONTENTS
ARTICLE 1
SECURITY
Section 1.1 Terms Incorporated by Reference................................. 1
Section 1.2 Grant of Security............................................... 1
Section 1.3 Obligations Secured............................................. 3
Section 1.4 Attachment...................................................... 3
Section 1.5 Scope of Security Interest...................................... 4
Section 1.6 Lender's Care and Custody of Collateral......................... 4
Section 1.7 Filings and Registrations....................................... 4
ARTICLE 2
ENFORCEMENT
Section 2.1 Default......................................................... 5
Section 2.2 Remedies........................................................ 5
Section 2.3 Additional Rights............................................... 5
Section 2.4 Concerning the Receiver......................................... 6
Section 2.5 Appointment of Attorney......................................... 6
Section 2.6 Dealing with the Collateral and the Security Interest........... 6
Section 2.7 Standards of Sale............................................... 7
Section 2.8 Dealings by Third Parties....................................... 7
ARTICLE 3
GENERAL
Section 3.1 Discharge....................................................... 7
Section 3.2 No Merger, etc.................................................. 7
Section 3.3 Waivers, etc.................................................... 7
Section 3.4 Further Assurances.............................................. 8
Section 3.5 Successors and Assigns.......................................... 8
Section 3.6 Headings, etc................................................... 8
Section 3.7 Severability.................................................... 8
Section 3.8 Negotiable Instrument........................................... 8
Section 3.9 Governing Law................................................... 8
SCHEDULES
SCHEDULE "B" LOCATIONS
DEMAND DEBENTURE
Principal Sum: $U.S. 150,000,000.00
Due: ON DEMAND
Interest Rate: twenty-five (25) per cent per annum
AMERICAN COLOR GRAPHICS, INC. (the "Corporation"), incorporated
under the laws of the State of New York, and having its chief executive
office at 100 Winners Circle, Brentwood, Tennessee, U.S.A. 37027, FOR VALUE
RECEIVED, hereby acknowledges itself indebted and promises to pay to or to
the order of BT COMMERCIAL CORPORATION (the "Lender"), ON DEMAND, the sum
of ONE HUNDRED AND FIFTY MILLION DOLLARS ($150,000,000.00) in lawful money
of the United States of America at the Lender's office located at 14 Wall
Street, 3rd Floor, New York, New York USA 10005 or at such other place as
the Lender may designate by notice in writing to the Corporation, and to
pay interest on the principal amount outstanding from time to time and all
other amounts from time to time owing hereunder to the date of payment at a
rate of twenty-five (25) per cent per annum. Such interest shall be
calculated monthly, not in advance and to be payable in like money at the
same place commencing on the first day of the month immediately following
the date hereof and thereafter on the first day of each and every month in
each year until the principal sum outstanding and all other amounts from
time owing hereunder shall be paid in full.
ARTICLE 1
SECURITY
SECTION 1.1 TERMS INCORPORATED BY REFERENCE.
Terms defined in the Ontario Personal Property Security Act, 1989
(as amended from time to time, the "PPSA") and used in this debenture shall
have the same meaning herein.
Section 1.2 Grant of Security.
(1) Subject to Scope of Security Interest., the Corporation hereby:
(a) Grants, mortgages and charges to and in favour of the Lender,
as and by way of a first fixed and specific mortgage and
charge, that certain real property situate, lying and being
in the Town of Fort Erie, in the Regional Municipality of
Niagara, more particularly legally described in Schedule "A"
hereto, including all buildings, erections and improvements
of every kind thereon from time to time, all fixtures forming
a part thereof and all appurtenances thereto (collectively,
the "Real Property");
(b) Assigns and transfers to the Lender by way of a specific
assignment and transfer and grants to the Lender a security
interest in:
(i) All licences, permits, approvals, certificates and
agreements with or from any board, agency or department,
governmental or otherwise (collectively, "Governmental
Authorities"), relating directly or indirectly to the
ownership, use, development, operation and maintenance of
the Real Property or the alteration or renovation of or
construction of improvements on the Real Property,
whether heretofore or hereafter issued or executed
(collectively, the "Licences");
(ii) All options, contracts, subcontracts, agreements, service
agreements, warranties and purchase orders which have
heretofore been or will hereafter be executed by or on
behalf of the Corporation or which have been assigned to
the Corporation, in connection with the use, development,
operation and maintenance of the Real Property or the
construction of improvements on the Real Property
(collectively, the "Contracts", the other parties thereto
being "Contractors"); and
(iii) All plans and specifications, studies, tests or design
materials relating to the design, construction, repair,
maintenance, alteration or leasing of the Real Property
or any part thereof, to the extent any of the same may be
assigned, transferred, pledged or subjected to a security
interest;
(c) Assigns and transfer to the Lender by way of a specific
assignment and transfer and grants to the Lender a security
interest in all rents, issues and profits (collectively, the
"Rents") of and from the Real Property; and
(d) Assigns and transfers to the Lender by way of a specific
assignment and transfer and grants to the Lender a security
interest in all of the Corporation's right, title, claim or
demand with respect to proceeds of insurance in effect with
respect to the Real Property or any awards made in respect of
the taking by expropriation or by any proceedings or purchase
in lieu thereof of the whole or any part of the Real
Property.
(2) Subject to Scope of Security Interest., the Corporation hereby
mortgages and charges to the Lender, as and by way of a fixed
mortgage and charge; pledges to the Lender; assigns and transfers
to the Lender as and by way of a specific transfer and
assignment; and grants to the Lender a security interest in all
the Corporation's right, title and interest in and to the
personal property and undertaking of the Corporation now owned or
hereafter acquired including, without limitation, any and all of
the Corporation's:
(a) Inventory including goods held for sale or lease, goods
furnished or to be furnished to third parties under contracts
of lease, consignment or service, goods which are raw
materials or work in process, goods used in or procured for
packing, materials used or consumed in the business of the
Corporation;
(a) Equipment, fixtures and other goods of every kind and
description, all licences and other rights and all records,
files, charts, plans, drawings, specifications, manuals and
documents relating thereto;
(b) Accounts due or accruing due and all agreements, books,
accounts, invoices, letters, documents and papers recording,
evidencing or relating thereto;
(c) Money, documents of title, chattel paper, instruments and
securities;
(d) Intangibles including all security interests, goodwill, choses
in action and other contractual benefits and all trade marks,
trade mark registrations and pending trade mark applications,
patents and pending patent applications and copyrights and
other intellectual property (collectively, the "Intellectual
Property");
(e) Substitutions and replacements of and increases, additions and,
where applicable, accessions to the property described in
Subject to Scope of Security Interest., the Corporation
hereby: and Inventory including goods held for sale or lease,
goods furnished or to be furnished to third parties under
contracts of lease, consignment or service, goods which are
raw materials or work in process, goods used in or procured
for packing, materials used or consumed in the business of
the Corporation;-Intangibles including all security
interests, goodwill, choses in action and other contractual
benefits and all trade marks, trade mark registrations and
pending trade mark applications, patents and pending patent
applications and copyrights and other intellectual property
(collectively, the "Intellectual Property"); inclusive; and
(f) Proceeds in any form derived directly or indirectly from any
dealing with all or any part of the property described in
Subject to Scope of Security Interest., the Corporation
hereby: and Inventory including goods held for sale or lease,
goods furnished or to be furnished to third parties under
contracts of lease, consignment or service, goods which are
raw materials or work in process, goods used in or procured
for packing, materials used or consumed in the business of
the Corporation;-Substitutions and replacements of and
increases, additions and, where applicable, accessions to the
property described in Subject to Scope of Security Interest.,
the Corporation hereby: and Inventory including goods held
for sale or lease, goods furnished or to be furnished to
third parties under contracts of lease, consignment or
service, goods which are raw materials or work in process,
goods used in or procured for packing, materials used or
consumed in the business of the Corporation;-Intangibles
including all security interests, goodwill, choses in action
and other contractual benefits and all trade marks, trade
mark registrations and pending trade mark applications,
patents and pending patent applications and copyrights and
other intellectual property (collectively, the "Intellectual
Property"); inclusive; and inclusive or the proceeds
therefrom.
(3) All of the real and personal property and undertaking of the
Corporation referred to in Subject to Scope of Security
Interest., the Corporation hereby: and Subject to Scope of
Security Interest., the Corporation hereby mortgages and charges
to the Lender, as and by way of a fixed mortgage and charge;
pledges to the Lender; assigns and transfers to the Lender as and
by way of a specific transfer and assignment; and grants to the
Lender a security interest in all the Corporation's right, title
and interest in and to the personal property and undertaking of
the Corporation now owned or hereafter acquired including,
without limitation, any and all of the Corporation's: above are
herein referred to, collectively, as the "Collateral" and all
references thereto herein include any part or parts thereof.
Without limiting the generality of the foregoing, the Collateral
shall include all personal property of the Corporation now or
hereafter located on or about or in transit to or from the
locations set out in Schedule Error! Reference source not found.
hereto. The Corporation shall promptly inform the Lender in
writing of any other location at which the Collateral consisting
of tangible personal property may in future be located.
Section 1.3 Obligations Secured.
(1) The mortgages, charges, pledges, transfers, assignments and security
interest granted hereby (collectively, the "Security Interest")
secure payment to the Lender of the principal amount hereof,
interest thereon and all other amounts from time to time owing
hereunder or pursuant hereto and performance by the Corporation
of all of its obligations hereunder (collectively, and together
with the expenses, costs and charges set out in All expenses,
costs and charges incurred by or on behalf of the Lender in
connection with this debenture, the Security Interest or the
realization of the Collateral, including all legal fees, court
costs, receiver's or agent's remuneration and other expenses of
taking possession of, repairing, protecting, insuring, preparing
for disposition, realizing, collecting, selling, transferring,
delivering or obtaining payment of the Collateral shall be added
to and form a part of the Obligations., the "Obligations").
(2) All expenses, costs and charges incurred by or on behalf of the
Lender in connection with this debenture, the Security Interest or
the realization of the Collateral, including all legal fees, court
costs, receiver's or agent's remuneration and other expenses of
taking possession of, repairing, protecting, insuring, preparing
for disposition, realizing, collecting, selling, transferring,
delivering or obtaining payment of the Collateral shall be added to
and form a part of the Obligations.
Section 1.4 Attachment.
(1) The Corporation and the Lender hereby acknowledge that value has
been given; the Corporation has rights in the Collateral (other
than after-acquired Collateral); they have not agreed to postpone
the time of attachment of the Security Interest; and the
Corporation has received a copy of this debenture.
(2) The Corporation agrees to promptly inform the Lender in writing of
the acquisition by the Corporation of any personal property which
is not adequately described herein, and the Corporation agrees to
execute and deliver at its own expense from time to time amendments
to this debenture or the schedules hereto or additional security or
schedules as may be required by the Lender in order that the
Security Interest shall attach to such personal property.
Section 1.5 Scope of Security Interest.
(1) To the extent that the creation of the Security Interest would
constitute a breach or permit the acceleration of any agreement
right, licence or permit to which the Corporation is a party, the
Security Interest shall not attach thereto but the Corporation
shall hold its interest therein in trust for the Lender, and
shall assign such agreement, right, license or permit to the
Lender or as it may direct forthwith upon obtaining the consent
of the other party thereto.
(2) Until the Security Interest shall have become enforceable, the grant
of the Security Interest in the Intellectual Property shall not
affect in any way the Corporation's rights to commercially exploit
the Intellectual Property, to defend the Intellectual Property, to
enforce the Corporation's rights therein or with respect thereto
against third parties in any court or to claim and be entitled to
receive any damages with respect to any infringement thereof.
(3) The Security Interest shall not extend to consumer goods.
(4) The Security Interest shall not extend or apply to the last day of
any term of years reserved by a lease, verbal or written, or any
agreement therefor, now held or hereafter acquired by the
Corporation in respect of real property but the Corporation shall
stand possessed of any such reversion upon trust to assign and
dispose thereof as the Bank may direct.
(5) The Lender will not be deemed in any manner to have assumed any
obligation of the Corporation under any of the Licences or
Contracts nor shall the Lender be liable to any Governmental
Authorities or Contractors by reason of any default by any party
under the Licences or Contracts. The Corporation agrees to
indemnify and hold the Lender harmless of and from any and all
liability, loss or damage which it may or might incur by reason
of any claim or demand against it based on its alleged assumption
of the Corporation's duty and obligation to perform and discharge
the terms, covenants and agreements in the Licences and
Contracts.
Section 1.6 Lender's Care and Custody of Collateral.
(1) The Lender shall not be bound to collect, dispose of, realize,
protect or enforce any of the Corporation's right, title and
interest in and to the Collateral or to institute proceedings for
the purpose thereof and, without limiting the generality of the
foregoing, the Lender shall not be required to take any steps
necessary to preserve rights against prior parties in respect of
any Negotiable Collateral.
(2) The Lender shall have no obligation to keep identifiable Collateral
in its possession consisting of tangible personal property.
(3) The Lender may, both before and after the Security Interest shall
have become enforceable, notify any person obligated on an
account or on chattel paper or any obligor on an instrument to
make payment thereunder to the Lender whether or not the
Corporation was theretofore making collections thereon; and
assume control of any proceeds arising from the Collateral.
Section 1.7 Filings and Registrations.
The Corporation shall cause this debenture, and financing
statements and financing change statements under the PPSA in respect
thereof, to be registered and filed at all times in such manner and in such
places within the Province of Ontario as may be required by law fully to
evidence, perfect, secure and preserve the Security Interest and shall pay
all registration and filing fees in connection therewith.
ARTICLE 2
ENFORCEMENT
SECTION 2.1 DEFAULT.
The Security Interest shall be and become enforceable against the
Corporation if and when it shall fail to pay or perform any of the
Obligations on demand or otherwise when due and payable or to be performed,
as the case may be.
Section 2.2 Remedies.
Whenever the Security Interest has become enforceable, the Lender
may realize upon the Collateral and enforce the rights of the Lender by:
(a) Entry onto any premises, including the Real Property, where
Collateral consisting of tangible personal property may be
located;
(b) Entry into possession of the Collateral by any method permitted
by law;
(c) Sale or lease of the Collateral;
(d) Collection of any proceeds arising in respect of the Collateral;
(e) Collection, realization or sale of or other dealing with the
accounts;
(f) The appointment by instrument in writing of a receiver (which
term as used in this debenture includes a receiver and manager)
or agent of the Collateral;
(g) The institution of proceedings in any court of competent
jurisdiction for the appointment of a receiver of the
Collateral;
(h) The institution of proceedings in any court of competent
jurisdiction for sale or foreclosure of the Collateral;
(i) Filing proofs of claim and other documents to establish claims
in any proceeding relating to the Corporation; and
(j) Any other remedy or proceeding authorized or permitted under
the PPSA or otherwise by law or equity.
Such remedies may be exercised from time to time separately or in combination
and are in addition to and not in substitution for any other rights of the
Lender however created. The Lender shall not be bound to exercise any such
right or remedy, and the exercise of such rights and remedies shall be without
prejudice to the rights of the Lender in respect of the Obligations including
the right to claim for any deficiency.
Section 2.3 Additional Rights.
In addition to the remedies of the Lender set forth in Remedies.,
the Lender may, whenever the Security Interest has become enforceable:
(a) Require the Corporation, at the Corporation's expense, to
assemble the Collateral consisting of tangible personal
property at a place or places designated by notice in writing
given by the Lender to the Corporation;
(b) Require the Corporation, by notice in writing given by the
Lender to the Corporation, to disclose to the Lender the
location or locations of the Collateral consisting of
tangible personal property;
(c) Repair, process, modify, improve, complete or otherwise deal
with the Collateral and prepare for the disposition of the
Collateral, whether on the premises of the Corporation or
otherwise;
(d) Carry on all or any part of the business or businesses of the
Corporation and, to the exclusion of all others including the
Corporation, enter upon, occupy and use all or any of the
premises, buildings, plant, undertaking and other property of
or used by the Corporation, including the Real Property, for
such time as the Lender sees fit, free of charge, and the
Lender shall not be liable to the Corporation for any act,
omission or negligence in so doing or for any rent, charges,
depreciation or damages incurred in connection therewith or
resulting therefrom;
(e) Borrow for the purpose of carrying on the business of the
Corporation or for the maintenance, preservation or
protection of the Collateral and mortgage, charge, pledge or
grant a security interest in the Collateral, whether or not
in priority to the Security Interest, to secure repayment;
and
(f) Demand, commence, continue or defend any judicial or
administrative proceedings for the purpose of protecting,
seizing, collecting, realizing or obtaining possession or
payment of the Collateral, and give valid and effectual
receipts and discharges therefor and compromise or give time
for the payment or performance of all or any part of the
accounts or any other obligation of any third party to the
Corporation.
Section 2.4 Concerning the Receiver.
(1) Any receiver appointed by the Lender shall be vested with the
rights and remedies which could have been exercised by the Lender
in respect of the Corporation or the Collateral and such other
powers and discretions as are granted in the instrument of
appointment and any instrument or instruments supplemental
thereto. The identity of the receiver, any replacement thereof
and any remuneration thereof shall be within the sole and
unfettered discretion of the Lender.
(2) Any receiver appointed by the Lender shall act as agent for the
Lender for the purposes of taking possession of the Collateral, but
otherwise and for all other purposes (except as provided below),
as agent for the Corporation. The receiver may sell, lease, or
otherwise dispose of Collateral as agent for the Corporation or
as agent for the Lender as the Lender may determine in its
discretion. The Corporation agrees to ratify and confirm all
actions of the receiver acting as agent for the Corporation, and
to release and indemnify the receiver in respect of all such
actions.
(3) The Lender, in appointing or refraining from appointing any receiver
shall not incur liability to the receiver, the Corporation or
otherwise and shall not be responsible for any misconduct or
negligence of such receiver.
Section 2.5 Appointment of Attorney.
The Corporation hereby irrevocably appoints the Lender (and any
officer thereof) as attorney of the Corporation (with full power of
substitution) to exercise in the name of and on behalf of the Corporation,
for so long as the Security Interest has become enforceable against the
Corporation, any of the Corporation's right (including the right of
disposal), title and interest in and to the Collateral including the
execution, endorsement and delivery of any agreements, documents,
instruments, securities, documents of title and chattel paper and any
notices, receipts, assignments or verifications of the accounts. All acts
of any such attorney are hereby ratified and approved, and such attorney
shall not be liable for any act, failure to act or any other matter or
thing in connection therewith, except for its own negligence or wilful
misconduct.
Section 2.6 Dealing with the Collateral and the Security Interest.
(1) The Lender shall not be obliged to exhaust its recourse against the
Corporation or any other person or persons or against any other
security it may hold in respect of the Obligations before
realizing upon or otherwise dealing with the Collateral in such
manner as the Lender may consider desirable.
(2) The Lender may grant extensions or other indulgences, take and give
up securities, accept compositions, grant releases and discharges
and otherwise deal with the Corporation and with other parties,
sureties or securities as the Lender may see fit without
prejudice to the Obligations or the rights of the Lender in
respect of the Collateral.
(3) The Lender shall not be liable or accountable for any failure to
collect, realize or obtain payment in respect of the Collateral;
bound to institute proceedings for the purpose of collecting,
enforcing, realizing or obtaining payment of the Collateral or
for the purpose of preserving any rights of the Lender, the
Corporation or any other parties in respect thereof; responsible
for any loss occasioned by any sale or other dealing with the
Collateral or by the retention of or failure to sell or otherwise
deal therewith; and bound to protect the Collateral from
depreciating in value or becoming worthless.
Section 2.7 Standards of Sale.
Without prejudice to the ability of the Lender to dispose of the
Collateral in any manner which is commercially reasonable, the Corporation
acknowledges that a disposition of Collateral by the Lender which takes
place substantially in accordance with the following provisions shall be
deemed to be commercially reasonable:
(a) Collateral may be disposed of in whole or in part;
(b) Collateral may be disposed of by public auction, public tender
or private contract, with or without advertising and without
any other formality;
(c) Any purchaser or lessee of such Collateral may be a customer of
the Lender;
(d) A disposition of Collateral may be on such terms and conditions
as to credit or otherwise as the Lender, in its sole
discretion, may deem advantageous; and
(e) The Lender may establish an upset or reserve bid or price in
respect of the Collateral.
Section 2.8 Dealings by Third Parties.
No person dealing with the Lender or its agent or a receiver shall
be required to determine whether the Security Interest has become enforceable;
to determine whether the powers which the Lender or its agent is purporting
to exercise have become exercisable; to determine whether any money remains
due to the Lender by the Corporation; to determine the necessity or
expediency of the stipulations and conditions subject to which any sale or
lease shall be made; to determine the propriety or regularity of any sale
or of any other dealing by the Lender with the Collateral; or to see to the
application of any money paid to the Lender.
ARTICLE 3
GENERAL
SECTION 3.1 DISCHARGE.
The Security Interest shall be discharged upon, but only upon, full
payment of the Obligations and at the request and at the expense of the
Corporation. The Lender shall execute and deliver to the Corporation such
releases and discharges as the Corporation may reasonably require.
Section 3.2 No Merger, etc.
No judgment recovered by the Lender shall operate by way of merger
of or in any way affect the Security Interest, which is in addition to and
not in substitution for any other security now or hereafter held by the
Lender in respect of the Obligations.
Section 3.3 Waivers, etc.
No amendment, consent or waiver by the Lender shall be effective
unless made in writing and signed by an authorized officer of the Lender
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 3.4 Further Assurances.
The Corporation shall from time to time, whether before or after
the Security Interest shall have become enforceable, do all such acts and
things and execute and deliver all such deeds, transfers, assignments and
instruments as the Lender may reasonably require for protecting the
Collateral or perfecting the Security Interest and for exercising all
powers, authorities and discretions hereby conferred upon the Lender, and
the Corporation shall, from time to time after the Security Interest has
become enforceable do all such acts and things and execute and deliver all
such deeds, transfers, assignments and instruments as the Lender may
require for facilitating the sale of the Collateral in connection with any
realization thereof.
Section 3.5 Successors and Assigns.
This debenture shall be binding upon the Corporation, its successors
and assigns, and shall enure to the benefit of the Lender and its
successors and assigns. All rights of the Lender hereunder shall be
assignable and in any action brought by an assignee to enforce any such
right, the Corporation shall not assert against such assignee any claim or
defence which the Corporation now has or hereafter may have against the
Lender.
Section 3.6 Headings, etc.
The division of this debenture into sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation thereof.
Section 3.7 Severability.
If any provision of this debenture shall be deemed by any court of
competent jurisdiction to be invalid or void, the remaining provisions
shall remain in full force and effect.
Section 3.8 Negotiable Instrument.
This debenture is a negotiable instrument and all holders hereof
from time to time are invited by the Corporation to treat it accordingly.
Section 3.9 Governing Law.
This debenture shall be governed by and construed in accordance
with the laws of the Province of Ontario and of Canada applicable therein
and shall be treated in all respects as an Ontario contract.
IN WITNESS WHEREOF the Corporation has executed this Demand Debenture.
AMERICAN COLOR GRAPHICS, INC.
By:____________________________________
Authorized Signing Officer
By:____________________________________
Authorized Signing Officer
SCHEDULE "A"
LEGAL DESCRIPTION OF THE REAL PROPERTY
FIRSTLY:
That certain parcel or tract of land and premises situate, lying and being in
the Town of Fort Erie, Regional Municipality of Niagara (formerly in the
Township of Bertie, in the County of Welland) and Province of Ontario and
being composed of part of Lot 12, Concession 11 N.R. of the said Township and
premising that the northerly limit of said Lot has a bearing of N88degrees
22' 30" E. and relating all bearings herein thereto, the said parcel being
particularly described as follows:
COMMENCING at an iron bar in the northerly limit of said lot distant therein
195.0 feet measured on a bearing of N88degrees 22' 30"E. from the
northwesterly angle of said Lot;
THENCE N88degrees 22' 30"E. along the northerly limit of said Lot 2229.85
feet to an iron bar;
THENCE S1degree 12' E., being parallel to the westerly limit of said Lot,
665.93 feet to an iron bar planted in the northerly limit of the right-of-
way of the Penn Central Railway;
THENCE N78degrees 23' 30"W. along said northerly limit 794.54 feet to an iron
bar planted at the beginning of a curve to the left having a radius of
11,499 feet;
THENCE northwesterly in the arc of said curve 846.27 feet to an iron bar
planted at the end thereof, said arc having a chord of 846.08 feet measured on
a bearing of N80degrees 30'W;
THENCE N82degrees 36' 30"W. continuing along said northerly limit 27.96 feet
to an iron bar marking an angle therein;
THENCE N1degree 12' W. continuing along said northerly limit 50.57 feet to an
iron bar marking an angle therein;
THENCE N82degrees 36' 30"W. continuing along said northerly limit 602.77 feet
to an iron bar planted in a line drawn through the Point of Commencement on a
bearing of S1 12'E.;
THENCE N1degree 12' W. continuing along said line 171.36 feet more or less to
the Point of Commencement.
As set out in Instrument No. 98908B registered March 28, 1969.
SAVE AND EXCEPT that part of Lot 12, Concession 11 N.R., designated as Part 2
on Reference Plan 59R-1744.
SECONDLY:
That part of Lot 12, Concession 11 N.R., Town of Fort Erie, Regional
Municipality of Niagara (formerly in the Township of Bertie, County of
Welland, and Province of Ontario, designated as Part 1 on Reference Plan
59R-4382.
SCHEDULE "B"
LOCATIONS
1. 3565 Eagle Street, P.O. Box 130, Stevensville, Ontario LOS 1S
EXHIBIT H-2
DEBENTURE PLEDGE AGREEMENT
--------------------------
Debenture Pledge Agreement dated as of August 15, 1995 and
amended and restated as of May 8, 1998, made by AMERICAN COLOR GRAPHICS,
INC. (the "Corporation"), a corporation duly incorporated, organized and
existing under the laws of the State of New York and having its chief
executive office at 100 Winners Circle, Brentwood, Tennessee, U.S.A.,
37027, to and in favour of BT COMMERCIAL CORPORATION (the "Collateral
Agent"), for the Secured Creditors (as defined below).
WHEREAS the Corporation, ACG Holdings, Inc., the financial
institutions from time to time party thereto (the "Lenders"), Morgan
Stanley Senior Funding, Inc., as Syndication Agent (the "Syndication
Agent"), GE Capital Corporation, as Documentation Agent and Bankers Trust
Company, as Administrative Agent (the "Administration Agent") have entered
into a Credit Agreement, dated as of August 15, 1995 and amended and
restated as of May 8, 1998 (as the same may be further amended, modified or
supplemented from time to time the "Credit Agreement") providing for the
making of Loans and the issuance of, and participation in Letters of Credit
as contemplated therein (with the Lenders from time to time party to the
Credit Agreement, the Collateral Agent, the Issuing Bank, the Swingline
Bank, the Syndication Agent and the Administration Agent being herein
called the "Bank Creditors");
AND WHEREAS, the Borrower may from time to time be party to one
or more interest rate agreements (including, without limitation, interest
rate swaps, caps, floors, collars, and similar agreements) (collectively,
the "Interest Rate Agreements", and each such Interest Rate Agreement with
an Interest Rate Creditor (as defined below), a "Secured Interest Rate
Agreement") with Bankers Trust Company, in its individual capacity
("BTCo"), any Lender or a syndicate of financial institutions organized by
BTCo or an affiliate of BTCo (even if BTCo or any such Lender ceases to be
a Lender under the Credit Agreement for any reason), and any institution
that participates, and in each case their subsequent assigns, in such
Secured Interest Rate Agreement (collectively, the "Interest Rate
Creditors", and the Interest Rate Creditors together with the Bank
Creditors, collectively, the "Secured Creditors");
AND WHEREAS the Corporation has heretofore entered into a
debenture pledge agreement dated as of August 15, 1995 (as amended,
modified or supplemented to the date hereof, the "Original Debenture Pledge
Agreement");
AND WHEREAS the Corporation desires to amend and restate the
Original Debenture Pledge Agreement in the form of this Debenture Pledge
Agreement;
AND WHEREAS capitalized terms used in this Debenture Pledge
Agreement, but not defined herein, are intended to have the respective
meanings ascribed thereto in the Credit Agreement, except for the term
"Obligations", which shall have the meaning ascribed thereto in the
Security Agreement and except for the term "Event of Default", which shall
have the meaning ascribed thereto in the Security Agreement;
AND WHEREAS it is a condition precedent to the making of Loans
and the issuance of, and participation in, Letters of Credit under the
Credit Agreement that the Corporation shall have executed and delivered to
the Collateral Agent this Debenture Pledge Agreement;
AND WHEREAS the Corporation desires to execute this Debenture
Pledge Agreement to satisfy the conditions described in the preceding
paragraph;
NOW THEREFORE, in consideration of the foregoing premises, the
sum of $10.00 in lawful money of Canada now paid by the Collateral Agent to
the Corporation and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Corporation hereby agrees
as follows:
1. Pledge, etc. The Corporation hereby pledges and hypothecates to and
deposits with the Collateral Agent, for its own benefit and as
Collateral Agent for the benefit of the Secured Creditors, the
debentures created by the Corporation, copies of which are attached
hereto as Schedule 'A', together with all renewals thereof,
substitutions therefor, accretions thereto, interest thereon and
proceeds thereof (collectively, the "Debentures").
2. Obligations Secured. (1) The pledge and hypothecation granted hereby
secures payment to the Collateral Agent and the Secured Creditors and
performance of all of the Obligations.
(2) All expenses, costs and charges incurred by or on behalf of the
Secured Creditors in connection with this Debenture Pledge Agreement, the
Credit Agreement, the Secured Interest Rate Agreements, the Debentures or
the realization of the Debentures or the Collateral (as defined in the
Debentures), including all legal fees, court costs, receiver's or
Collateral Agent's remuneration and other expenses of taking possession of,
repairing, protecting, insuring, preparing for disposition, realizing,
collecting, selling, transferring, delivering or obtaining payment of the
Collateral shall be added to and form a part of the Obligations.
3. Realization Upon Default. If an Event of Default shall occur,
and for so long as it is continuing, the Collateral Agent may realize
upon or otherwise dispose of the Debentures or either of them by sale,
transfer or delivery or exercise and enforce all rights and remedies
of a holder of either of the Debentures as if the Collateral Agent
were absolute owner thereof, without notice to or control by the
Corporation and any such remedy may be exercised separately or in
combination and shall be in addition to and not in substitution for
any other rights the Collateral Agent may have, however created.
4. Payment of Interest. Payment to the Collateral Agent of interest
for any period in respect of the Obligations shall be deemed to be
payment in satisfaction of the interest payment for the same period
under the Debentures in such manner as the Collateral Agent shall deem
appropriate.
5. Application of Proceeds. The proceeds of the Debentures may be
applied by the Collateral Agent in accordance with the provisions of
Section 7.4 of the Security Agreement.
6. No Merger. The Debentures shall not operate by way of merger of
any of the Obligations and no judgment recovered by the Collateral
Agent shall operate by way of merger of or in any way affect the
security of the Debentures which are in addition to and not in
substitution for any other security now or hereafter held by the
Collateral Agent in respect of the Obligations.
7. Dealing with the Debentures. (1) The Collateral Agent shall not be
obliged to exhaust its recourse against the Corporation or any other
person or persons or against any other security it may hold in respect
of the Obligations before realizing upon or otherwise dealing with the
Debentures in such manner as the Collateral Agent may consider
desirable.
(2) The Collateral Agent may grant extensions or other indulgences,
take and give up securities, accept compositions, grant releases and
discharges and otherwise deal with the Corporation and with other parties,
sureties or securities as the Collateral Agent may see fit without
prejudice to the Obligations or the rights of the Collateral Agent in
respect of the Debentures.
(3) The Collateral Agent shall not be (i) liable or accountable for
any failure to collect, realize or obtain payment in respect of the
Debentures; (ii) bound to institute proceedings for the purpose of
collecting, enforcing, realizing or obtaining payment of the Debentures or
for the purpose of preserving any rights of the Collateral Agent, the
Corporation or any other parties in respect thereof; (iii) responsible for
any loss occasioned by any sale or other dealing with the Debentures or by
the retention of or failure to sell or otherwise deal therewith; or (iv)
bound to protect the Debentures from depreciating in value or becoming
worthless.
8. Further Assurances. The Corporation shall from time to time,
whether before or after the Collateral Agent shall have become
entitled to realize upon or otherwise dispose of the Debentures, do
all such acts and things and execute and deliver all such deeds,
transfers, assignments and instruments as the Collateral Agent may
reasonably require for perfecting the security constituted by the
Debentures and for exercising all powers, authorities and discretions
hereby conferred upon the Collateral Agent, and the Corporation shall,
from time to time after the Collateral Agent shall have become
entitled to realize upon or otherwise dispose of the Debentures, do
all such acts and things and execute and deliver all such deeds,
transfers, assignments and instruments as the Collateral Agent may
require for facilitating the sale of the Debentures in connection with
any realization thereof.
9. Successors and Assigns. This Debenture Pledge Agreement shall be
binding upon the Corporation, its successors and assigns, and shall
enure to the benefit of the Collateral Agent and its successors and
assigns. All rights of the Collateral Agent hereunder shall be
assignable and in any action brought by an assignee to enforce any
such right, the Corporation shall not assert against such assignee any
claim or defence which the Corporation now has or hereafter may have
against the Collateral Agent.
10. Severability. Any provision of this Debenture Pledge Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
enforceability 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.
11. Headings, etc. The division of this Debenture Pledge Agreement into
sections and subsections and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation thereof.
12. Governing Law. This Debenture Pledge Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario
and of Canada applicable therein and shall be treated in all respects
as an Ontario contract.
IN WITNESS WHEREOF the Corporation has duly executed this Debenture
Pledge Agreement as of the date first above written.
AMERICAN COLOR GRAPHICS, INC.
- ------------------------------
Per
-------------------------------------------
Authorized Signing Officer c/s
EXHIBIT I
FORM OF COMPLIANCE CERTIFICATE
------------------------------
[Letterhead of the American Color Graphics, Inc.]
________________, ____
To: Bankers Trust Company, as Administrative Agent
(the "Administrative Agent"), and each of the
financial institutions party to the Credit
Agreement referred to below (the "Lenders")
Ladies and Gentlemen:
I hereby certify to you as follows:
(a) I am the duly elected [Title] of American Color Graphics, Inc., a
New York corporation (the "Borrower"). Capitalized terms used herein
without definition shall have the meanings given to such terms in the
Credit Agreement, dated as of August 15, 1995 and amended and restated as
of May 8, 1998, among ACG Holdings, Inc. ("Holdings"), the Borrower, the
Lenders, General Electric Capital Corporation, as Documentation Agent,
Morgan Stanley Senior Funding, Inc., as Syndication Agent and Bankers Trust
Company, as Administrative Agent (as the same may be further amended,
modified or supplemented from time to time, the "Credit Agreement")
(b) I have reviewed the terms of the Credit Agreement, and have made,
or have caused to be made under my supervision, a review in reasonable
detail of the transactions and the financial condition of Holdings, the
Borrower, and each of their respective Subsidiaries during the immediately
preceding [fiscal year/fiscal quarter].
(c) The review described in paragraph (b) above did not disclose the
existence during or at the end of such [fiscal year/fiscal quarter], and I
have no knowledge of the existence and continuance on the date hereof, of
any condition or event which constitutes a Default or an Event of Default,
except as set forth on Schedule I attached hereto. Described on Schedule I
attached hereto are the exceptions, if any, to this paragraph (c) listing,
in detail, the nature of the condition or event, the period during which it
has existed and the action which Holdings, the Borrower or any of their
respective Subsidiaries has taken, is taking, or proposes to take with
respect to such condition or event.
I further certify that, based on the review described in
paragraph (b) above, neither the Borrower nor Holdings at any time during
or at the end of such [fiscal year/fiscal quarter], except as specifically
described on Schedule II attached hereto or as permitted by the Credit
Agreement, did any of the following:
(i) Changed its respective corporate name, or transacted
business under any trade name, style, or fictitious
name, other than those previously described to you and
set forth in the Credit Agreement.
(ii) Changed the location of its chief executive office, or
changed the location of or disposed of any of its
properties or assets (other than pursuant to the sale of
inventory in the ordinary course of its business or as
otherwise permitted by Section 8.1 of the Credit
Agreement), or established any new asset locations.
(iii) Materially changed the terms upon which it sells goods
(including sales on consignment) or provides services,
nor has any vendor or trade supplier to the Borrower
or Holdings during or at the end of such period
materially adversely changed the terms upon which it
supplies goods to the Borrower or Holdings.
(iv) Permitted or suffered to exist any Liens on any of its
properties, whether real or personal, other than as
specifically permitted in the Credit Agreement.
(v) Received any materially adverse notices from any federal,
state or local agency, tribunal or other authority
regulating or having responsibility for any environmental
matters.
(vi) Become aware of, obtained knowledge of, or received
notification of, any breach or violation of any material
covenant contained in any instrument or agreement in
respect of Indebtedness for money borrowed by
Holdings, the Borrower or any of their respective
Subsidiaries.
(d) Attached hereto as Schedule III are (i) the calculations
used in determining, as of the end of such [fiscal year/fiscal quarter]
whether the Borrower was in compliance with Section 2.6(i) and the
covenants set forth in Articles 7 and 8 of the Credit Agreement for such
[fiscal year/fiscal quarter], (ii) a statement of the Leverage Ratio as at
the last day of such [fiscal year/fiscal quarter] and the calculations used
in determining same, (iii) a statement of the Retained Excess Cash Flow
Amount, the Retained Equity Amount and the Available Basket Amount on the
date hereof and the calculations used in determining the same [and (iv) the
amount of Excess Cash Flow for such fiscal year and the calculations used
in determining the same].
The foregoing certifications are made and delivered this
___________ day of ___________, ____.
Very truly yours,
AMERICAN COLOR GRAPHICS, INC.
By:
-----------------------------------
Name:
Title:
Schedule I
----------
DEFAULTS AND EVENTS OF DEFAULT
------------------------------
SCHEDULE II
-----------
SCHEDULE III
------------
CALCULATIONS
------------
EXHIBIT J
FORM OF COLLATERAL ACCESS AGREEMENT
-----------------------------------
[American Color Graphics, Inc. Letterhead]
__________, 19__
[Landlord's Address]
[Property Address]
Dear Landlord:
As you know, American Color Graphics, Inc. (the "Company") is
the tenant at the above location (the "Property").
We have arranged for financing from the group of financial
institutions (the "Lenders") pursuant to the Credit Agreement, dated as of
August 15, 1995 and amended and restated as of May 8, 1998, among ACG
Holdings, Inc., the Company, Bankers Trust Company, as Administrative Agent
(the "Administrative Agent"), General Electric Capital Corporation, as
Documentation Agent (the "Documentation Agent"), and Morgan Stanley Senior
Funding, Inc., as Syndication Agent (the "Syndication Agent"). As a
condition of such financial accommodations, the Company has granted to BT
Commercial Corporation, as Collateral Agent (the "Collateral Agent") for
the benefit of the Secured Creditors under, and as defined in, the Amended
and Restated Security Agreement, dated as of August 15, 1995 and amended
and restated as of May 8, 1998 (the "Amended and Restated Security
Agreement"), among the Company, certain subsidiaries of the Company
signatory thereto and the Collateral Agent, a first priority lien on any
inventory and accounts that are now or in the future may be located in our
properties. The Collateral Agent has asked that we notify you and have you
agree to this letter and return it to us in the enclosed postage-paid
envelope.
By signing this letter, you confirm that you are the landlord
under our lease, that our lease of the Property is in full force and effect
and has not been modified and that to the best of your knowledge, we are
not in default under the lease.
You also agree that any lien of any kind that you may have or
obtain on our accounts or inventory shall be junior to the Collateral
Agent's lien, that any claim you may have on the accounts or inventory
shall be subordinated to the prior payment in full of our obligations to
the Collateral Agent and the Lenders, and that prior to taking any action
to enforce any lien, you will give the Collateral Agent at least thirty
(30) business days' prior notice of your intent to take action. If we
should default to the Lenders, you agree that in all circumstances the
Collateral Agent may have access to the Property for the purpose of
removing or selling the accounts or inventory. The Collateral Agent agrees
to pay you for any physical damage to the Property caused by the Collateral
Agent in connection with any removal or sale.
You also agree to send to the Collateral Agent (at the address
indicated below) any notice of default that you deliver to our Company
under the lease covering the Property.
Since these loans are important for the future of our Company and
since the Lenders and the Collateral Agent will be relying on this letter,
we would greatly appreciate it if you would sign the enclosed copy of this
letter and return it to me in the enclosed envelope. If you have any
questions, please feel free to contact me at ______.
Thank you in advance for your cooperation.
Sincerely,
Acknowledged and agreed as of
the date first above written:
[Landlord's Name]
By:
--------------------------------
(Signature)
- -----------------------------------
(Print or Type Name)
- -----------------------------------
(Print or Type Title)
BT COMMERCIAL CORPORATION,
as Collateral Agent for
the Lenders
By:
--------------------------------
- -----------------------------------
(Print or Type Name)
- -----------------------------------
(Print or Type Title)
c/o Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attn: David Bell
EXHIBIT K
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
Date _____________, ____
Reference is made to the Credit Agreement described in Item 2 of
Annex I hereto (as such Credit Agreement may hereafter be amended, modified
or supplemented from time to time, the "Credit Agreement"). Unless defined
in Annex I hereto, terms defined in the Credit Agreement are used herein as
therein defined. _________________ (the "Assignor") and ________________
(the "Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the date hereof which
represents the percentage interest specified in Item 4 of Annex I hereto
(the "Assigned Share") of all of the outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 4 of
Annex I hereto, including, without limitation, (x) in the case of any
assignment of outstanding A Term Loans, all rights and obligations with
respect to the Assigned Share of all then outstanding A Term Loans, (y) in
the case of any assignment of outstanding B Term Loans, all rights and
obligations with respect to the Assigned Share of all then outstanding B
Term Loans and (z) in the case of any assignment of all or any portion of
the Total Revolving Loan Commitments, all rights and obligations with
respect to the Assigned Share of the Total Revolving Loan Commitments and
of all then outstanding Revolving Loans and Letters of Credit. After
giving effect to such sale and assignment, the Assignee's Revolving Loan
Commitment and the amount of the outstanding Term Loans owing to the
Assignee will be as set forth in Item 4 of Annex I hereto.
2. The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
the Credit Agreement or the other Credit Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of
the Credit Agreement or the other Credit Documents or any other instrument
or document furnished pursuant thereto; and (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of Holdings, the Borrower or any of their respective Subsidiaries
or the performance or observance by Holdings, the Borrower or any of their
respective Subsidiaries of any of their respective obligations under the
Credit Agreement or the other Credit Documents to which they are a party or
any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement and the other Credit Documents, together with copies of
the financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Assumption Agreement; (ii)
agrees that it will, independently and without reliance upon any Agent, the
Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement; (iii)
confirms that it is a parent company or an affiliate of the Assignor which
is at least 50% owned by the Assignor or its parent company or an Eligible
Transferee under Section 11.6 of the Credit Agreement; (iv) appoints and
authorizes the Administrative Agent, the Documentation Agent, the
Syndication Agent and the Collateral Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement and the
other Credit Documents as are delegated to the Administrative Agent, the
Documentation Agent, the Syndication Agent or the Collateral Agent, as the
case may be, by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) represents and warrants that it is duly
authorized to enter into and perform the terms of this Agreement and
Assumption Agreement [and] (vi) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender[; and (vii)
represents that (I) no part of its acquisition of its Loans or Commitments
is made out of assets of any employee benefit plan, or (II) after
consultation, in good faith, with the Borrower and provision by the
Borrower of such information as may be reasonably requested by the
Assignee, the acquisition and holding of such Commitments and Loans does
not constitute a non-exempt prohibited transaction under Section 406 of
ERISA and Section 4975 of the Code or (III) such assignment is an
"insurance company general account," as such term is defined in the
Department of Labor Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTCE 95-60"), and, as of the date of the transfer, there
is no "employee benefit plan" with respect to which the aggregate amount of
such general account's reserves and liabilities for the contracts held by
or on behalf of such "employee benefit plan" and all other "employee
benefit plans" maintained by the same employer (and affiliates thereof as
defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of
PTCE 95-60) exceeds 10% of the total reserves and liabilities of such
general account (as determined under PTCE 95-60) (exclusive of separate
account liabilities) plus surplus as set forth in the National Association
of Insurance Commissioners Annual Statement filed with the state of
domicile of the Assignee](1)[; and [(vii)][(viii)] attaches the forms
prescribed by the Internal Revenue Service of the United States certifying
as to the Assignee's status for purposes of determining exemption from
United States withholding taxes with respect to all payments to be made to
the Assignee under the Credit Agreement or such other documents as are
necessary to indicate that all such payments are subject to such rates at a
rate reduced by an applicable tax treaty](2).
- -----------
(1) Include if the Assignee is not a commercial bank.
(2) Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative
Agent. The effective date of this Assignment and Assumption Agreement
shall be (x) the date upon which all of the following conditions have been
satisfied: (i) the execution hereof by the Assignor and the Assignee, (ii)
the receipt of the consent of the Administrative Agent and the Borrower to
the extent required by Section 11.6 of the Credit Agreement, (iii) receipt
by the Administrative Agent of the assignment fee referred to in Section
11.6 of the Credit Agreement and (iv) the recordation of the assignment
effected hereby on the Register by the Administrative Agent as provided in
Section 11.12 of the Credit Agreement or (y) such later date as is
otherwise specified in Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original hereof to the
Agent, as of the Settlement Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and
Assumption Agreement, have the rights and obligations of a Lender
thereunder and under the other Credit Documents and (ii) the Assignor
shall, to the extent provided in this Assignment and Assumption Agreement,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Credit Documents.
6. It is agreed that upon the effectiveness hereof, the Assignee
shall be entitled to (x) all interest on the Assigned Share of the
outstanding A Term Loans, B Term Loans and/or Revolving Loans at the rates
specified in Item 6 of Annex I; (y) all Unused Line Fees (if applicable)
on the Assigned Share of the Total Revolving Loan Commitments at the rate
specified in Item 7 of Annex I hereto; and (z) all Letter of Credit Fees
(if applicable) on the Assignee's participation in all Letters of Credit at
the rate specified in Item 8 of Annex I hereto, which, in each case, accrue
on and after the Settlement Date, such interest and, if applicable, Unused
Line Fees and Letter of Credit Fees, to be paid by the Administrative Agent
upon receipt thereof from the Borrower directly to the Assignee. It is
further agreed that all payments of principal made on the Assigned Share of
the outstanding A Term Loans, B Term Loans and/or Revolving Loans which
occur on and after the Settlement Date will be paid directly by the
Administrative Agent to the Assignee. Upon the Settlement Date, the
Assignee shall pay to the Assignor an amount specified by the Assignor in
writing which represents the Assigned Share of the principal amount of the
outstanding A Term Loans, B Term Loans and/or Revolving Loans which are
outstanding on the Settlement Date, net of any closing costs. The Assignor
and the Assignee shall make all appropriate adjustments in payments under
the Credit Agreement for periods prior to the Settlement Date directly
between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being
made on Annex I hereto.
Accepted this _____ day [NAME OF ASSIGNOR]
______________, ____ as Assignor
By
---------------------------
Name:
Title:
[NAME OF ASSIGNEE]
as Assignee
By
---------------------------
Name:
Title:
Acknowledged and Agreed:
[BANKERS TRUST COMPANY,
as Administrative Agent
By
---------------------------
Name:
Title:](3)
- ------------
(3) The consent of each of the Administrative Agent is required in
connection with any assignment to an Eligible Transferee pursuant to
clause (y) of Section 11.6(b) of the Credit Agreement.
[AMERICAN COLOR GRAPHICS,
INC.
By
---------------------------
Name:
Title:](4)
- ------------
(4) The consent of the Borrower is required in connection with any
assignment of Revolving Loan Commitment to an Eligible Transferee
pursuant to clause (y) of Section 11.6(b) of the Credit Agreement
(which consent shall not be unreasonably withheld or delayed).
ANNEX I
-------
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
---------------------------------------------
1. Borrower: American Color Graphics, Inc.
2. Name and Date of Credit Agreement:
Credit Agreement, among ACG Holdings, Inc., the Borrower, the Lenders
from time to time party thereto, General Electric Capital Corporation,
as Documentation Agent, Morgan Stanley Senior Funding, Inc., as
Syndication Agent, and Bankers Trust Company, as Administrative Agent,
dated as of August 15, 1995 and amended and restated as of May 8,
1998, as so amended and restated and as the same may be further
amended, restated, modified or supplemented from time to time.
3. Date of Assignment and Assumption Agreement:
4. Amounts (as of date of item #3 above):
Outstanding Outstanding Total Revolv-
Principal of Principal of ing Loan
A Term Loans B Term Loans Commitments
--------------- -------------- ---------------
a. Aggregate Amount for $__________ $___________ $__________
all Lenders
b. Assigned Share __________% ___________% __________%
c. Amount of Assigned $__________ $___________ $__________
Share
5. Settlement Date:
6. Rate of Interest to the As set forth in Sections 4.1
Assignee: and 4.2 of the Credit Agreement
(unless otherwise agreed to
by the Assignor and the
Assignee)(5)
7. Unused Line Fee: As set forth in Section 4.6
of the Credit Agreement
(unless otherwise agreed to
by the Assignor and the
Assignee)(6)
8. Letter of Credit Fees As set forth in Section 4.7(a) of
to the Assignee the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)(7)
- ------------
(5) The Borrower and the Administrative Agent shall direct the entire
amount of the interest to the Assignee at the rates set forth in
Sections 4.1 and 4.2 of the Credit Agreement, with the Assignor and
Assignee effecting any agreed upon sharing of the interest through
payments by the Assignee to the Assignor.
(6) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitments are being assigned. Otherwise, the
Borrower and the Administrative Agent shall direct the entire amount
of the Unused Line Fees to the Assignee at the rate set forth in
Section 4.6 of the Credit Agreement, with the Assignor and the
Assignee effecting any agreed upon sharing of the Unused Line Fees
through payment by the Assignee to the Assignor.
(7) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitments are being assigned. Otherwise, the
Borrower and the Administrative Agent shall direct the entire amount
of the Letter of Credit Fees to the Assignee at the rate set forth in
Section 4.7(a) of the Credit Agreement, with the Assignor and the
Assignee effecting any agreed upon sharing of Letter of Credit Fees
through payment by the Assignee or the Assignor.
9. Notice:
ASSIGNOR:
_____________________
_____________________
_____________________
_____________________
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
_____________________
_____________________
_____________________
_____________________
Attention:
Telephone:
Telecopier:
Reference:
10. Payment Instructions:
ASSIGNOR:
_____________________
_____________________
_____________________
_____________________
Attention:
Reference:
ASSIGNEE:
_____________________
_____________________
_____________________
_____________________
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By_______________________ By______________________
_______________________ ______________________
(Print Name and Title) (Print Name and Title)
EXHIBIT L
FORM OF SECTION 4.11(e) CERTIFICATE
-----------------------------------
Reference is hereby made to the Credit Agreement, dated as of
August 15, 1995, and amended and restated as of May 8, 1998, among ACG
Holdings, Inc., American Color Graphics, Inc., various financial
institutions, General Electric Capital Corporation, as Documentation Agent,
Morgan Stanley Senior Funding, Inc., as Syndication Agent, and Bankers
Trust Company, as Administrative Agent (as the same may be further amended,
modified or supplemented from time to time, the "Credit Agreement").
Pursuant to the provisions of Section 4.11(e) of the Credit Agreement, the
undersigned hereby certifies that it is not a "bank" as such term is used
in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended.
[NAME OF BANK]
By
-------------------------------
Name:
Title:
Date: _______________, ____
EXHIBIT 10a
SEVENTH AMENDMENT TO CREDIT AGREEMENT
SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
March 13, 1998, among ACG HOLDINGS, INC. ("Holdings"), AMERICAN COLOR
GRAPHICS, INC. (the "Borrower"), the financial institutions party to the
Credit Agreement referred to below (the "Lenders"), BT COMMERCIAL CORPORATION,
as Agent (the "Agent") for the Lenders, and BANKERS TRUST COMPANY, as Issuing
Bank (the "Issuing Bank"). All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in
the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Lenders, the Agent and the Issuing
Bank are parties to a Credit Agreement, dated as of August 15, 1995 (as
amended, modified or supplemented to the date hereof, the "Credit Agreement");
and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. Section 3.1(a) of the Credit Agreement is hereby amended by deleting
the amount "$15,000,000" appearing in said Section and inserting the amount
"$25,000,000" in lieu thereof.
2. In order to induce the Lenders to enter into this Amendment, the
Borrower hereby represents and warrants that (x) no Default or Event of
Default exists as of the Seventh Amendment Effective Date (as defined below),
both before and after giving effect to this Amendment and (y) all of the
representations and warranties contained in the Credit Agreement and the other
Credit Documents are true and correct in all material respects on the Seventh
Amendment Effective Date, both before and after giving effect to this
Amendment, with the same effect as though such representations and warranties
had been made on and as of the Seventh Amendment Effective Date (it being
understood that any representation or warranty made as of a specific date
shall be true and correct in all material respects as of such specific date).
3. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
6. This Amendment shall become effective on the date (the "Seventh
Amendment Effective Date") when each of Holdings, the Borrower and the Required
Lenders shall have signed a copy hereof (whether the same or different copies)
and shall have delivered (including by way of facsimile transmission) the same
to the Agent at 14 Wall Street, New York, New York 10005 Attention: Bruce
Addison.
7. From and after the Seventh Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as amended
hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
ACG HOLDINGS, INC.
By
--------------------------------
Title:
AMERICAN COLOR GRAPHICS, INC.
By
--------------------------------
Title:
BT COMMERCIAL CORPORATION,
Individually and as Agent
By
--------------------------------
Title:
BTM CAPITAL CORPORATION
By
--------------------------------
Title:
BNY FINANCIAL CORPORATION
(successor by merger to THE BANK OF
NEW YORK COMMERCIAL
CORPORATION)
By
--------------------------------
Title:
DEUTSCHE FINANCIAL SERVICES
HOLDING CORP.
By
--------------------------------
Title:
FINOVA CAPITAL CORPORATION
By
--------------------------------
Title:
GIBRALTAR CORPORATION OF
AMERICA
By
--------------------------------
Title:
LASALLE NATIONAL BANK
By
--------------------------------
Title:
SANWA BUSINESS CREDIT
CORPORATION
By
--------------------------------
Title:
HELLER BUSINESS CREDIT
CORPORATION
By
--------------------------------
Title:
SIXTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of June 30, 1997, among SULLIVAN COMMUNICATIONS, INC. ("Communications"),
SULLIVAN GRAPHICS, INC. (the "Borrower"), the financial institutions party to
the Credit Agreement referred to below (the "Lenders"), BT COMMERCIAL
CORPORATION, as Agent (the "Agent") for the Lenders, and BANKERS TRUST
COMPANY, as Issuing Bank (the "Issuing Bank"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings provided
such terms in the Credit Agreement.
W I T N E S S E T H :
-------------------
WHEREAS, Communications, the Borrower, the Lenders, the Agent
and the Issuing Bank are parties to a Credit Agreement, dated as of August 15,
1995 (as amended, modified or supplemented to the date hereof, the "Credit
Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
1. The definition of "Borrowing Base" contained in Section 1.1
of the Credit Agreement is hereby amended by (i) deleting the period at the
end of clause (D) thereof and inserting in lieu thereof the phrase ", minus"
and (ii) inserting at the end of said definition the following new clause:
"(E) an amount equal to (i) on any date prior to December 31,
1997, $4,000,000, (ii) on any date from and including December 31 to
and including March 30, 1998, $3,000,000 and (iii) on any date
thereafter, 0.".
2. Section 1.1 of the Credit Agreement is hereby amended by
inserting in the appropriate alphabetical order the following new definitions:
"New Term Loan Agreement" shall mean a term loan agreement to be
entered into among Communications, the Borrower, the financial
institutions a party thereto and Bankers Trust Company, as
Administrative Agent thereunder, providing for the making of up
$25,000,0000 aggregate principal amount of term loans to the
Borrower, as same may be amended, modified or supplemented from time
to time. It is understood that the new Term Loan Agreement shall be
on terms and conditions substantially in accordance with the
provisions attached as Exhibit A to the Sixth Amendment, with such
changes as would be permitted pursuant to Permitted New Term Loan
Amendments.
"New Term Loan Documents" shall mean the New Term Loan Agreement
and all guaranties, security documents and other documents
(including, without limitation, all Credit Documents as defined in
the New Term Loan Agreement) delivered pursuant to the requirements
of the New Term Loan Agreement.
"Permitted New Term Loan Amendments" shall mean any amendment,
modification or waiver to the New Term Loan Agreement and/or any
other New Term Loan Documents (x) which makes such document or
documents less restrictive or waives any provision contained therein
or (y) which makes the covenants, defaults or other provisions
contained in the New Term Loan Agreement more restrictive, provided
that any such Permitted New Term Facility Amendment pursuant to
clause (y) of this definition (i) is deemed necessary or desirable in
connection with the syndication of the New Term Loan Agreement by the
lenders thereunder and (ii) does not make the covenants, defaults or
other provisions contained therein more restrictive than those
contained in this Credit Agreement.
"Sixth Amendment" shall mean the Sixth Amendment to this Credit
Agreement, dated as of June 30, 1997, among Communications, the
Borrower, various of the Lenders, the Agent and the Issuing Bank.
3. Section 2.6(f) of the Credit Agreement is hereby Amended by
inserting at the end thereof the following new sentence:
"Notwithstanding anything to the contrary contained above, with
respect to mandatory repayments pursuant to this Section 2.6(f) only
as a result of equity issuances by Communications, at the time of
each event giving rise to a mandatory repayment pursuant to such
Section, to the extent the amount otherwise required to be applied
pursuant to the terms of said Section is used to permanently repay
Indebtedness under the New Term Loan Agreement, the amount so applied
shall apply to reduce the amount of the mandatory repayment otherwise
required pursuant to this Section 2.6(f)."
4. Section 7.1(a) of the Credit Agreement is hereby amended by
inserting the parenthetical "(or, in the case of fiscal year 1997 only, 120
days)" immediately following the phrase "90 days" contained in the first
sentence of said Section.
5. Section 7.1(b) of the Credit Agreement is hereby amended by
inserting immediately following the phrase "in any event within 45 days"
appearing in the first sentence thereof the parenthetical "and in any event
not later than July 20, 1998 in the case of the fiscal quarter ending on, or
closest to, June 30, 1998)".
6. Section 8.2 (c) of the Credit Agreement is hereby amended
by inserting the following parenthetical immediately after the phrase "other
Credit Documents" appearing therein:
"(it being understood and agreed that, from and after the date of any
extension of loans pursuant to Section 8.3(l), all such loans and
obligations relating thereto may be secured pursuant to the Credit
Documents, on a second-priority basis to the Obligations, in
accordance with the amendments to the various Collateral Documents
authorized pursuant to the Sixth Amendment, and any Collateral
Documents thereafter entered into may likewise secure such
Indebtedness and related obligations pursuant to 8.3(l) on
substantially the same basis)".
7. Section 8.3 of the Credit Agreement is hereby amended by
(i) deleting the period at the end of clause (l) of said Section and inserting
a semicolon in lieu thereof, (ii) redesignating clause (m) of said Section as
clause (n), (iii) deleting the text "(l)" appearing in redesignated clause
(n) of said Section and inserting in lieu thereof the text "(m)" and (iv)
inserting the following new clause (m) immediately after clause (l) of said
Section:
"(m) Indebtedness of the Borrower in an aggregate principal
amount not to exceed $25,000,000 (less any payments of principal
thereon) in respect of loans made pursuant to the New Term Loan
Agreement and guarantees thereof by the Guarantors; provided that the
cash proceeds of the loans under the New Term Loan Agreement (net of
any costs, fees and expenses payable in connection therewith) are
used by the Borrower to repay outstanding Revolving Loans hereunder
(although no reduction to the Total Revolving Loan Commitment shall
be required in connection therewith); and".
8. Section 8.9 of the Credit Agreement is hereby amended by
deleting in its entirety the table appearing in said Section and inserting in
lieu thereof the following new table:
"Fiscal Quarter Ended Minimum EBITDA
--------------------- --------------
March 31, 1997 $46,600,000
June 30, 1997 $45,700,000
September 30, 1997 $43,500,000
December 31, 1997 $41,500,000
March 31, 1998 $44,200,000
June 30, 1998 $50,100,000
September 30, 1998 $62,000,000
December 31, 1998 $63,000,000
March 31, 1999 $65,000,000
June 30, 1999 $65,000,000
September 30, 1999 $66,000,000
December 31, 1999 $67,000,000
Each fiscal quarter
ended thereafter $68,000,000
; provided, that should the Borrower fail to deliver the financial statements
and accompanying information for the fiscal quarter ended June 30, 1998 by
July 20, 1998 as required by to Section 7.1(b), EBITDA of the Borrower
required to be achieved (x) for the period ending June 30, 1998 shall be
$61,000,000 and (y) for each period ending after June 30, 1998 shall be
respective amount as provided in the Credit Agreement before giving effect to
the Sixth Amendment, in each case rather than the amount set forth for such
period in the table above."
9. Section 8.10 of the Credit Agreement is hereby amended by
inserting immediately prior to the period at the end thereof the following
parenthetical:
"(or, for the three fiscal quarters ended June 30, 1997, December 31,
1997 and June 30, 1998, 1.05:1.0, provided that should the Borrower
fail to deliver the financial statements and accompanying information
for the fiscal quarter ended June 30, 1998 by July 20, 1998 as
required by Section 7.1(b), the minimum Current Ratio for the fiscal
quarter ended June 30, 1998 shall be 1.1:1.0 rather than 1.05:1.0)".
10. Section 8.11 of the Credit Agreement is hereby amended by
deleting the table appearing in said Section in its entirety and inserting in
lieu thereof the following new table:
"Fiscal Quarter Ended Minimum Fixed Charge Ratio
--------------------- --------------------------
March 31, 1997 0.68:1.0
June 30, 1997 0.60:1.0
September 30, 1997 0.60:1.0
December 31, 1997 0.60:1.0
March 31, 1998 0.67:1.0
June 30, 1998 0.72:1.0
Each fiscal quarter
ended thereafter 0.80:1.0
; provided that should the Borrower fail to deliver the financial statements
and accompanying information for the fiscal quarter ended June 30, 1998 by
July 20, 1998 as required by to Section 7.1(b), the Minimum Fixed Charge Ratio
required to be achieved (x) for the period ending June 30, 1998 shall be
0.80:1.0 and (y) for each period ending after June 30, 1998 shall be
respective amount as provided in the Credit Agreement before giving effect to
the Sixth Amendment, in each case rather than the ratio set forth for such
period in the table above."
11. Section 8.12 of the Credit Agreement is hereby amended by
(i) deleting the word "or" at the end of clause (iii) of said Section and
inserting in lieu thereof a comma and (ii) inserting immediately prior to the
period at the end of said Section the following new clauses:
", (v) after any incurrence of Indebtedness pursuant to Section
8.3(l), make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on or voluntary or
optional redemption of or acquisition for value of, exchange or
purchase, redeem or acquire for value (whether as a result of a Change
of Control, the consummation of asset sales or otherwise) any of the
Indebtedness outstanding pursuant to the New Term Loan Agreement
except payments or prepayments with proceeds of sales or issuances of
equity of Communications or (vi) amend or modify, or permit the
amendment or modification of, any provision of the New Term Loan
Agreement or the other New Term Loan Documents other than (a)
Permitted New Term Facility Amendments and (b) modifications to the
Collateral Documents made in accordance with the respective terms and
provisions thereof".
12. Section 9.1(c)(i) of the Credit Agreement is hereby
amended by inserting the phrase "or fail to deliver, by July 20, 1998,
financial statements and accompanying information for the fiscal quarter ended
June 30, 1998 as required by Section 9.1(b)" immediately prior to the comma at
the end thereof.
13. The Banks hereby agree that if and when the New Term Loan
Agreement is entered into by the parties thereto and loans are made
thereunder, then Communications, the Borrower, the Subsidiary Guarantors and
the Collateral Agent shall be permitted (and are hereby authorized) (i) to
enter into amendments to the Pledge Agreement substantially in the form of
Exhibit H-2 hereto, (ii) to enter into amendments to the Security Agreement
substantially in the form of Exhibit I-2 hereto, (iii) to enter into such
amendments to the Mortgages, the Canadian Debenture and the Canadian Pledge
Agreement as they may deem necessary and desirable in light of the New Term
Loan Agreement so long as any such amendments are consistent with the
amendments described in clauses (i) and (ii) of this Section 13, (iv) to enter
into revised Lockbox Agreements, Blocked Account Agreements and Concentration
Account Agreements substantially in the forms of Exhibits D-1, D-2 and D-3
hereto, respectively, and (v) to obtain new Collateral Access Agreements in
the form of Exhibit N hereto. Furthermore, from and after the date of the
occurrences described above in this Section 13, and on a prospective basis, all
Collateral Assignments of Equipment Purchase Contracts shall be in the form of
Exhibit B hereto, and any new Lockbox Agreement, Blocked Account Agreement,
Concentration Account Agreement or Collateral Access Agreement shall be
entered into in the forms of Exhibits B, D-1, D-2, D-3 or N hereto,
respectively, rather than in the forms originally annexed as said Exhibits
pursuant to the Credit Agreement.
14. In order to induce the Lenders to enter into this
Amendment, the Borrower hereby represents and warrants that (x) no Default or
Event of Default exists as of the Sixth Amendment Effective Date (as defined
below), both before and after giving effect to this Amendment and (y) all of
the representations and warranties contained in the Credit Agreement and the
other Credit Documents are true and correct in all material respects on the
Sixth Amendment Effective Date, both before and after giving effect to this
Amendment, with the same effect as though such representations and warranties
had been made on and as of the Sixth Amendment Effective Date (it being
understood that any representation or warranty made as of a specific date
shall be true and correct in all material respects as of such specific date).
15. The Borrower hereby agrees to pay to the Agent for the
account of each Non-Defaulting Lender which has approved, executed and
delivered a copy of this Amendment as set forth in Section 20 hereof a fee
equal to 1/5 of 1% of (x) such Lender's Revolving Loan Commitment in effect at
the time of such payment and (y) the principal amount of the Term Loans made
by such Lender that are outstanding at the time of such payment.
16. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
17. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which counterparts when executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts shall be lodged with the Borrower and the Agent.
18. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
19. This Amendment shall become effective on the date (the
"Sixth Amendment Effective Date") when each of Communications, the Borrower,
each Subsidiary Guarantor and the Required Lenders shall have signed a copy
hereof (whether the same or different copies) and shall have delivered
(including by way of facsimile transmission) the same to the Agent at 14 Wall
Street, New York, New York 10005 Attention: Bruce Addison.
20. From and after the Sixth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to
the Credit Agreement shall be deemed to be references to the Credit Agreement
as amended hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
SULLIVAN COMMUNICATIONS, INC.
By
-----------------------------
Title:
SULLIVAN GRAPHICS, INC.
By
-----------------------------
Title:
BT COMMERCIAL CORPORATION,
Individually and as Agent
By
-----------------------------
Title:
BTM CAPITAL CORPORATION
By
-----------------------------
Title:
BNY FINANCIAL CORPORATION
(successor by merger to THE BANK OF
NEW YORK COMMERCIAL CORPORATION)
By
-----------------------------
Title:
DEUTSCHE FINANCIAL SERVICES
HOLDING CORP.
By
-----------------------------
Title:
FINOVA CAPITAL CORPORATION
By
-----------------------------
Title:
GIBRALTAR CORPORATION OF
AMERICA
By
-----------------------------
Title:
LASALLE NATIONAL BANK
By
-----------------------------
Title:
SANWA BUSINESS CREDIT
CORPORATION
By
-----------------------------
Title:
HELLER BUSINESS CREDIT
CORPORATION
By
-----------------------------
Title:
Each of the undersigned, each being a Subsidiary Guarantor pursuant to the
Credit Agreement referenced in the foregoing Amendment and a party to various
Collateral Documents, hereby acknowledges and agrees to the foregoing
provisions of the Amendment.
Acknowledged and
Agreed this _______ day
of _______, 1997.
AMERICAN IMAGES OF NORTH
AMERICA, INC.
By
-----------------------------
Name:
Title:
SULLIVAN MARKETING, INC.
By
-----------------------------
Name:
Title:
SULLIVAN MEDIA CORPORATION
By
-----------------------------
Name:
Title:
EXHIBIT 10g
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of June 8,
1998, among ACG HOLDINGS, INC., a Delaware corporation ("Holdings"),
AMERICAN COLOR GRAPHICS, INC., a New York corporation (the "Borrower"), the
lenders party to the Credit Agreement referred to below on the date hereof
and immediately before giving effect to this Amendment (the "Existing
Lenders"), GENERAL ELECTRIC CAPITAL CORPORATION, as Documentation Agent (in
such capacity, the "Documentation Agent"), MORGAN STANLEY SENIOR FUNDING,
INC., as Syndication Agent (in such capacity, the "Syndication Agent"), and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the
"Administrative Agent"), and each of the lenders listed on Schedule A
hereto (each, a "New Lender" and, collectively, the "New Lenders"). All
capitalized terms used herein and not otherwise defined herein shall have
the respective meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Existing Lenders, the
Documentation Agent, the Syndication Agent and the Administrative Agent are
parties to a Credit Agreement, dated as of August 15, 1995 and amended and
restated as of May 8, 1998 (the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Each Existing Lender hereby sells and assigns to each New
Lender without recourse and without representation or warranty (other than as
expressly provided herein), and each New Lender hereby purchases and assumes
from each Existing Lender, that interest in and to each Existing Lender's rights
and obligations in respect of those Tranches set forth on Schedule B hereto
under the Credit Agreement as of the date hereof which in the aggregate for each
such New Lender represents such New Lender's pro rata share (for each such New
Lender, its "Pro Rata Share") in such Tranches as set forth on such Schedule B
(calculated after giving effect to this Amendment), and such Pro Rata Share
represents all of the outstanding rights and obligations under the Credit
Agreement in respect of the Tranches that are being sold and assigned to each
such New Lender pursuant to this Amendment, including, without limitation, (i)
in the case of any assignment of the outstanding A Term Loans, all rights and
obligations with respect to such New Lender's Pro Rata Share of such outstanding
A Term Loans, (ii) in the case of any assignment of the outstanding B Term
Loans, all rights and obligations with respect to such New Lender's Pro Rata
Share of such outstanding B Term Loans and (iii) in the case of any assignment
of any portion of the Total Revolving Loan Commitments, all rights and
obligations with respect to such New Lender's Pro Rata Share of the Total
Revolving Loan Commitments and of any outstanding Revolving Loans and Letters of
Credit. After giving effect to this Amendment, each Lender's outstanding A Term
Loans, B Term Loans and Revolving Loan Commitment will be as set forth on
Schedule C hereto.
2. In accordance with the requirements of Section 11.6(b) of
the Credit Agreement, on the First Amendment Effective Date (as defined below),
(i) the Credit Agreement shall be amended by deleting Schedule I thereto in its
entirety and by inserting in lieu thereof a new Schedule I in the form of
Schedule C hereto and (ii) the Borrower agrees that it will issue an appropriate
A Term Note, B Term Note and/or Revolving Note to each Lender in conformity with
the requirements of Sections 2.1(a), 2.1(b) and 2.2, respectively, of the Credit
Agreement.
3. Each Existing Lender (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Holdings or
any of its Subsidiaries or the performance or observance by Holdings or any of
its Subsidiaries of any of their respective obligations under the Credit
Agreement or the other Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
4. Each New Lender (i) confirms that it has received a copy of
the Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Amendment; (ii) agrees that it will, independently
and without reliance upon the Documentation Agent, the Syndication Agent, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is a parent company or an affiliate of an Existing Lender
which is at least 50% owned by such Existing Lender or its parent company or an
Eligible Transferee under Section 11.6 of the Credit Agreement; (iv) appoints
and authorizes the Administrative Agent, the Syndication Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Administrative Agent, the Syndication Agent and the Collateral
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (vi) in the event such New
Lender is not a commercial bank, represents that either (I) no part of its
acquisition of its Loans or Commitments is made out of assets of any employee
benefit plan, or (II) after consultation, in good faith, with the Borrower and
provision by the Borrower of such information as may be reasonably requested by
such New Lender, the acquisition and holding of such Commitments and Loans does
not constitute a non-exempt prohibited transaction under Section 406 of ERISA
and Section 4975 of the Code or (III) such assignment is an "insurance company
general account," as such term is defined in the Department of Labor Prohibited
Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and, as
of the date of the transfer, there is no "employee benefit plan" with respect to
which the aggregate amount of such general account's reserves and liabilities
for the contracts held by or on behalf of such "employee benefit plan" and all
other "employee benefit plans" maintained by the same employer (and affiliates
thereof as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of PTCE
95-60) exceeds 10% of the total reserves and liabilities of such general account
(as determined under PTCE 95-60) (exclusive of separate account liabilities)
plus surplus as set forth in the National Association of Insurance Commissioners
Annual Statement filed with the state of domicile of such New Lender.
5. Each of the Existing Lenders, the New Lenders and the
Administrative Agent hereby agree that (x) all interest on any New Lender's Pro
Rata Share of the Loans, all Commitment Fees (if any) on such New Lender's Pro
Rata Share of the Total Revolving Loan Commitments, and all Letter of Credit
Fees (if applicable) on such New Lender's participation in all Letters of
Credit, in each case accrued prior to the delivery by such New Lender of the
amount referred to in clause (ii) of Section 13 of this Amendment, shall be for
the account of the respective Existing Lenders and (y) all such interest,
Commitment Fees and Letter of Credit Fees accrued on and after the delivery of
the amount referred to in clause (ii) of such Section 13 shall be for the
account of such New Lender.
6. In accordance with Section 11.6(b) of the Credit Agreement,
on and as of the date upon which each New Lender delivers the amount referred to
in clause (ii) of Section 13 of this Amendment, such New Lender shall become a
"Lender" under, and for all purposes of, the Credit Agreement and the other
Credit Documents and, notwithstanding anything to the contrary in Section 11.12
of the Credit Agreement, the Administrative Agent shall record the transfers
contemplated hereby in the Register. The Administrative Agent hereby waives the
assignment fee referred to in Section 11.6(b) of the Credit Agreement in
connection with the assignments effected hereby.
7. The definition of "Unrestricted Subsidiary" appearing in
Section 1.1 of the Credit Agreement is hereby amended by (i) deleting the word
"and" appearing after the text "(excluding other Unrestricted Subsidiaries)" in
said definition and inserting a comma in lieu thereof and (ii) inserting the
following new clause (d) at the end of the second sentence of said definition:
"and (d) on the date of such designation, such Subsidiary
(except to the extent same is a Subsidiary of an
Unrestricted Subsidiary on such date of designation) does
not own or hold assets with an aggregate value in excess
of $10,000."
8. Section 10 of the Credit Agreement is hereby amended by
inserting the following new Section 10.13 at the end of said Section:
"10.13 Special Provisions Relating to the Responsibilities
of the Collateral Agent. Notwithstanding anything to the
contrary contained in this Agreement or any other Credit
Document, the Administrative Agent agrees to perform all
of the duties delegated to, and to assume all of the
responsibilities of, the Collateral Agent hereunder and
under the other Credit Documents other than the
performance of such ministerial duties relating to the
execution of documents and instruments as may be required
by the Collateral Agent from time to time hereunder and
thereunder (it being understood and agreed that BTCC's
continuing obligation to perform such ministerial duties
as Collateral Agent will be subject to its receipt of a
direction from the Administrative Agent to perform such
duties). The Lenders hereby irrevocably authorize Bankers
Trust Company to act as Collateral Agent for all purposes
of this Agreement and the other Credit Documents and to
take such actions on such Lenders' behalf under the
provisions of this Agreement and the other Credit
Documents and to exercise such powers and perform such
duties as are expressly delegated to the Collateral Agent
by the terms of this Agreement and the other Credit
Documents, together with such other powers as are
reasonably incidental thereto. In consideration of the
Administrative Agent's assumption of the duties and
obligations of the Collateral Agent hereunder and under
the other Credit Documents as specified above, the parties
hereto agree that the Administrative Agent shall be
entitled to the benefits of all of the rights of the
Collateral Agent granted hereunder and under the other
Credit Documents (including, without limitation, all
indemnification rights of the Collateral Agent), it being
understood and agreed that all such indemnification and
other rights shall continue to apply to BTCC as Collateral
Agent notwithstanding the transfer of responsibilities
contemplated by this Section 10.13.
9. Section 11.7 of the Credit Agreement is hereby amended by
inserting the text "its holding or parent company" immediately after the text
"auditors or counsel," appearing in said Section.
10. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
11. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
12. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
13. Subject to Section 14 of this Amendment, this Amendment
shall become effective on the date (the "First Amendment Effective Date") when
(i) Holdings, the Borrower, the Administrative Agent, the Documentation Agent,
the Syndication Agent, each Existing Lender and each New Lender shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmission) the same to
the Administrative Agent at its Notice Office and (ii) each New Lender shall
have delivered to the Administrative Agent for the account of the relevant
Existing Lender, an amount equal to such New Lender's relevant Pro Rata Share of
the principal amount of the outstanding Loans being assigned to such New Lender.
14. Notwithstanding Section 13 of this Amendment, if for any
reason any New Lender shall not have (i) signed a counterpart hereof and
delivered the same to the Administrative Agent at its Notice Office and (ii)
delivered to the Administrative Agent an amount equal to such New Lender's
relevant Pro Rata Share of the principal amount of the outstanding Loans being
assigned to such New Lender, in each case on or prior to June 9, 1998, then, if
the respective Existing Lender agrees, this Amendment shall become effective
notwithstanding such failure, provided that (x) Schedule C shall be modified to
delete any such New Lender and such New Lender's relevant Pro Rata Share shall
be reallocated to the respective Existing Lenders on a pro rata basis and (y)
the signature pages of this Amendment shall be deemed revised to delete such New
Lender's name therefrom.
15. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
ACG HOLDINGS, INC.
By:_____________________________________
Name:
Title:
AMERICAN COLOR GRAPHICS, INC.
By:_____________________________________
Name:
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By:_____________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
Individually and as Documentation Agent
By:_____________________________________
Name:
Title:
MORGAN STANLEY SENIOR FUNDING, INC.,
Individually and as Syndication Agent
By:_____________________________________
Name:
Title:
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC., as Attorney-in-Fact
and on behalf of
First Allmerica Financial Life
Insurance Company,
as Portfolio Manager
By:_____________________________________
Name:
Title:
CYPRESSTREE INVESTMENT PARTNERS I, LTD.,
By: Cypresstree Investment Management
Company, Inc., as Portfolio Manager
By:_____________________________________
Name:
Title:
DEUTSCHE FINANCIAL SERVICES CORPORATION
By:_____________________________________
Name:
Title:
FINOVA CAPITAL CORPORATION
By:_____________________________________
Name:
Title:
FREMONT FINANCIAL CORPORATION
By:_____________________________________
Name:
Title:
OAK HILL SECURITIES FUND, L.P.
By:_____________________________________
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: Pilgrim America Investments, Inc.,
as its Investment Manager
By:_____________________________________
Name:
Title:
PPM AMERICA SPECIAL INVESTMENTS FUND, L.P.
By: PPM America, Inc.
By:_____________________________________
Name:
Title:
PPM AMERICA SPECIAL INVESTMENTS CBO II, L.P.
By: PPM America, Inc.
By:_____________________________________
Name:
Title:
SANWA BUSINESS CREDIT CORPORATION
By:_____________________________________
Name:
Title:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:_____________________________________
Name:
Title:
Schedule A
NEW LENDERS
First Allmerica Financial Life Insurance Company 125 High Street, 14th Floor
Boston, MA 02110
Attention: Larry Grantham
Tel: 617-946-0600
Fax: 617-946-5687
Cypresstree Investment Partners I, Ltd. 125 High Street, 14th Floor
Boston, MA 02110
Attention: Larry Grantham
Tel: 617-946-0600
Fax: 617-946-5687
Deutsche Financial Services Corporation 2859 Paces Ferry Road
Suite 1100
Atlanta, GA 30339-6207
Attention: Tina Lane
Tel: 770-435-6264
Fax: 770-434-4002
FINOVA Capital Corporation 311 South Wacker Drive
Suite 4400
Chicago, IL 60606
Attention: Brian Rujawitz
Tel: 312-322-7240
Fax: 312-322-7250
Fremont Financial Corporation 2020 Santa Monica Boulevard
Suite 600
Santa Monica, CA 90404
Attention: Steve Bierman
Tel: 310-315-5538
Fax: 310-315-5559
Oak Hill Securities Fund, L.P. Park Avenue Tower
65 East 55th Street
New York, NY 10022
Attention: Scott Krase
Tel: 212-326-1500
Fax: 212-593-3596
Pilgrim America Prime Rate Trust Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Attention: Thomas Hunt
Tel: 602-417-8257
Fax: 602-417-8327
PPM America Special Investments Fund, L.P. 225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attention: Brian C. Baldwin
Tel: 312-634-2583
Fax: 312-634-0053
PPM America Special Investments CBO II, L.P. 225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attention: Brian C. Baldwin
Tel.: 312-634-2583
Fax: 312-634-0053
Sanwa Business Credit Corporation One South Wacker Drive
Chicago, IL 60606
Attention: Chris Coloumb
Tel: 312-853-8677
Fax: 312-853-1438
Transamerica Business Credit Corporation 555 Theodore Fremd Avenue
Suite C-301
Rye, NY 10580
Attention: Ron Walker
Tel: 914-925-7218
Fax: 914-921-0110
Schedule B
RELEVANT PERCENTAGES
<TABLE>
A Term Loan B Term Loan Revolving Loan
Lender Commitment Commitment Commitment
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
Bankers Trust Company 12.26% 12.26%
Morgan Stanley Senior Funding, Inc. 12.11% 12.11%
General Electric Capital Corporation 17.21% 17.30% 17.21%
First Allmerica Financial Life 6.00%
Insurance Company
Cypresstree Investment Partners I, Ltd. 12.00%
Deutsche Financial Services
Corporation 10.00% 10.70% 10.00%
FINOVA Capital Corporation 12.11% 12.11%
Fremont Financial Corporation 12.11% 12.11%
Oak Hill Securities Fund, L.P. 18.00%
Pilgrim America Prime Rate Trust 18.00%
PPM America Special Investments
Fund, L.P. 12.00%
PPM America Special Investments
CBO II, L.P. 6.00%
Sanwa Business Credit Corporation 12.11% 12.11%
TransAmerica Business Credit
Corporation 12.11% 12.11%
</TABLE>
Schedule C
COMMITMENTS
<TABLE>
A Term Loan B Term Loan Revolving Loan
Lender Commitment Commitment Commitment
------ ---------- ---------- ----------
<S> <C> <C> <C>
Bankers Trust Company $3,065,789.47 $8,584,210.53
Morgan Stanley Senior Funding, Inc. $3,026,315.79 $8,473,684.21
General Electric Capital Corporation $4,302,631.58 $8,650,000.00 $12,047,368.42
First Allmerica Financial Life $3,000,000.00
Insurance Company
Cypresstree Investment Partners I, Ltd. $6,000,000.00
Deutsche Financial Services Corporation $2,500,000.00 $5,350,000.00 $7,000,000.00
FINOVA Capital Corporation $3,026,315.79 $8,473,684.21
Fremont Financial Corporation $3,026,315.79 $8,473,684.21
Oak Hill Securities Fund, L.P. $9,000,000.00
Pilgrim America Prime Rate Trust $9,000,000.00
PPM America Special Investments Fund, L.P. $6,000,000.00
PPM America Special Investments CBO II, L.P. $3,000,000.00
Sanwa Business Credit Corporation $3,026,315.79 $8,473,684.21
TransAmerica Business Credit Corporation $3,026,315.79 $8,473,684.21
------------- -------------- ---------------
Total $25,000,000.00 $50,000,000.00 $70,000.000.00
</TABLE>
EMPLOYMENT AGREEMENT dated as of August , 1997 (the
"Agreement"),between AMERICAN COLOR ("AC"), a division of AMERICAN COLOR
GRAPHICS, INC., a New York corporation (the "Company") and TERRENCE M. RAY
(the "Executive").
WHEREAS, AC desires to employ Executive as its President and replace
the existing Employment Agreement, dated February 19, 1996, between AC and the
Executive;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1. General. The Company hereby employs the Executive, and the
Executive agrees to serve, as President of AC, upon the terms and conditions
contained herein. The Executive shall report directly to the Chief Executive
Officer of the Company's parent, ACG Holdings, Inc. ("ACG"), and shall be
responsible for all prepress and digital imaging activities of ACG and its
subsidiaries, with the exception of the Digiscope Division and the plant-based
prepress activities of the American Color Graphics Division, provided that
such prepress activities will be transferred to AC when, by mutual agreement
of the Executive and the CEO of ACG, AC has demonstrated its ability to
provide such services. The Executive shall perform such other duties and
services for the Company, commensurate with the Executive's position, as may
be designated from time to time by the CEO of ACG. The Executive agrees to
serve the Company faithfully and to the best of his ability under the
direction of the CEO of ACG.
1.2. Exclusive Services. Except as may otherwise be approved in
advance by the CEO of ACG, and except during vacation periods and reasonable
periods of absence due to sickness, personal injury or other disability, the
Executive shall devote his full working time throughout the Employment Term
(as defined in Section 1.3) to the services required of him hereunder. The
Executive shall render his services exclusively to the Company during the
Employment Term, and shall use his best efforts, judgment and energy to
improve and advance the business and interests of the Company in a manner
consistent with the duties of his position.
1.3 Term of Employment. The Executive's employment under this
Agreement shall commence as of the date of this Agreement and
shall terminate on the earlier of (i) the third anniversary of
the date of this Agreement, or (ii) termination of the
Executive's employment pursuant to this Agreement; provided,
however, that the term of the Executive's employment shall be
automatically extended without further action of either party
for additional one year periods, unless written notice of
either party's intention not to extend has been given to the
other party at least one year prior to the expiration of the
then effective term. The period commencing as of the date of
this Agreement and ending on the third anniversary thereof or
such later date to which the term of the Executive's employment
under this Agreement shall have been extended is hereinafter
referred to as the "Employment Term".
1.4. Reimbursement of Expenses. AC shall reimburse the Executive
for reasonable travel and other business expenses incurred by him in the
fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with AC's practices
consistently applied.
1.5 Offices. Commencing September 1, 1997, Executive's office will
be located in Brentwood, Tennessee.
2. SALARY
2.1 Base Salary. From the date of this Agreement, the Executive
shall be entitled to receive a base salary ("Base Salary") at a rate of
$250,000 per annum, payable in arrears in equal installments not less
frequently than biweekly in accordance with AC's payroll practices, with such
increases as may be provided in accordance with the terms hereof. Once
increased, such higher amount shall constitute the Executive's annual Base
Salary.
2.2 Annual Review. The Executive's Base Salary shall be reviewed
by the CEO of ACG, based upon the Executive's performance, not less often
than annually, and may be increased but not decreased, provided that
Executive's Base Salary will be increased to at least $275,000 on July 1,
1998. In addition to any increases effected as a result of such review, the
CEO of ACG at any time may in its sole discretion increase the Executive's
Base Salary.
2.3 Annual Bonus. After the date of this Agreement, AC shall
annually adopt a bonus plan and performance criteria upon which the bonuses of
executives of AC shall be based. During his employment under this Agreement,
the Executive shall been titled to receive a bonus under such plan of up to
50% of his Base Salary, in accordance with the terms of such plan if the
budget performance criteria are satisfied.
2.4 Supplemental Bonus. For Fiscal Year 1998, Executive will
participate in a supplemental bonus plan pursuant to which he will receive an
amount equal to 30% of an incentive pool equal to 20% of the EBITDA of AC in
excess of $10,500,000.
3. EMPLOYEE BENEFITS
3.1 The Executive shall, during his employment under this Agreement,
be included to the extent eligible thereunder in all employee benefit plans,
programs or arrangements (including, without limitation, any plans, programs
or arrangements providing for retirement benefits, incentive compensation,
profit sharing, bonuses, disability benefits, health and life insurance, or
vacation and paid holidays) which shall be established by AC for, or made
available to, its senior executives.
3.2 The Executive shall be entitled to participate in the Company's
Supplemental Executive Retirement Plan (the "SERP") at a benefit level of
$50,000 per annum upon retirement in accordance with the terms of the SERP.
3.3 The Executive will also be reimbursed for membership fees and
annual dues in a country club in Nashville, Tennessee.
4. TERMINATION OF EMPLOYMENT
4.1 Termination Without Cause; Resignation for Good Reason.
4.1.1 General. Subject to the provisions of Sections 4.1.2 and
4.1.3, if, prior to the expiration of the Employment Term, the Executive's
employment is terminated by the Company without Cause (as defined in Section
4.3), or if the Executive terminates his employment hereunder for Good Reason
(as defined in Section 4.4), the Company shall (x)continue to pay the
Executive the Base Salary (at the rate in effect on the date of such
termination)for the greater of (i) the remainder of the Employment Term and
(ii) a period of two years beginning as of the date of termination (such period
being referred to hereinafter as the "Severance Period"), at such intervals as
the same would have been paid had the Executive remained in the active service
of AC, and (y)pay the Executive a pro rata portion of the bonus or incentive
payment to which the Executive would have been entitled for the year of
termination pursuant to Section 2.3 and Section 2.4 had the Executive remained
employed for the entire year, which bonus shall be payable at the time
payments under the applicable bonus plan or incentive program are paid to AC's
executives generally. In addition, the Executive shall be entitled to continue
to participate during the Severance Period in all employee benefit plans
(other than equity-based plans, except to the extent otherwise provided
therein, or bonus plans) that AC provides (and continues to provide) generally
to its employees, provided that the Executive is entitled to continue to
participate in such plans under the terms thereof. The Executive shall have
no further right to receive any other compensation or benefits after such
termination or resignation of employment except as determined in accordance
with the terms of the employee benefit plans or programs of AC.
4.1.2 Conditions Applicable to the Severance Period. If, during
the Severance Period, the Executive materially breaches his obligations under
Section 7 of this Agreement, the Company may, upon written notice to the
Executive, terminate the Severance Period and cease to make any further
payments or provide any benefits described in Section 4.1.1.
4.1.3 Date of Termination. The date of termination of employment
with Cause shall be the date specified in a written notice of termination to
the Executive. The date of resignation for Good Reason shall be the date
specified in the written notice of resignation from the Executive to the
Company; provided, however, that no such written notice shall be effective
unless the cure period specified in Section 4.4 has expired without the
Company having corrected, to the reasonable satisfaction of the Executive, the
event or events subject to cure. If no date of resignation is specified in
the written notice from the Executive to the Company, the date of termination
shall be the first day following such expiration of such cure period.
4.2 Termination for Cause; Resignation Without Good Reason.
4.2.1 General. If, prior to the expiration of the Employment
Term, the Executive's employment is terminated by AC for Cause, or the
Executive resigns from his employment hereunder other than for Good Reason,
the Executive shall be entitled only to payment of his Base Salary as then in
effect through and including the date of termination or resignation. The
Executive shall have no further right to receive any other compensation or
benefits after such termination or resignation of employment, except as
determined in accordance with the terms of the employee benefit plans or
programs of AC.
4.2.2 Date of Termination. Subject to the proviso to Section 4.3,
the date of termination for Cause shall be the date specified in a written
notice of termination to the Executive. The date of resignation without Good
Reason shall be the date specified in the written notice of resignation from
the Executive to the Company, or if no date is specified therein, 10 business
days after receipt by the Company of written notice of resignation from the
Executive.
4.3 Cause. Termination for "Cause" shall mean termination of the
Executive's employment because of:
(i) any act or omission that constitutes a material breach by
Executive of any of his obligations under this Agreement;
(ii) the continued failure or refusal of the Executive to
substantially perform the duties reasonably required of him as an
employee of the Company;
(iii) any willful and material violation by the Executive of any
Federal or state law or regulation applicable to the business of the
Company or any of its affiliates, or the Executive's conviction of a
felony, or any willful perpetration by the Executive of a common law
fraud; or
(iv) any other willful misconduct by the Executive which is
materially injurious to the financial condition or business reputation
of, or is otherwise materially injurious to, the Company or any of its
affiliates (it being understood that the good faith performance by the
Executive of the duties required of him pursuant to Section 1.1 shall not
constitute "misconduct" for purposes of this clause (iv));
provided, however, that if any such Cause relates to the Executive's
obligations under this Agreement, the Company shall not terminate the
Executive's employment hereunder unless the Company first gives the Executive
notice of its intention to terminate and of the grounds for such termination,
and the Executive has not, within 20 business days following receipt of the
notice, cured such Cause, or in the event such Cause is not susceptible to
cure within such 20 business day period, the Executive has not taken all
reasonable steps within such 20 business day period to cure such Cause as
promptly as practicable thereafter.
4.4 Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following (without the Executive's prior written
consent):
(i) a decrease in the Executive's base rate of compensation or a
failure by the Company to pay material compensation due and payable to
the Executive in connection with his employment;
(ii) a material diminution of the responsibilities or title of the
Executive with the Company;
(iii) the Company's requiring the Executive to be based at any office
or location more than 20 miles from (a) until September 1, 1997, Phoenix
Arizona, or(b) after September 1, 1997, Nashville, Tennessee;
(iv) a material breach by the Company of any term or provision of
this Agreement; provided, however, that no event or condition described
in clauses (i)through (iii) of this Section 4.4 shall constitute Good
Reason unless (X) the Executive gives the Company written notice of his
objection to such event or condition, (Y) such event or condition is not
corrected by the Company within 20 business days of its receipt of such
notice (or in the event that such event or condition is not susceptible
to correction within such 20 business day period, the Company has not
taken all reasonable steps within such 20 business day period to correct
such event or condition as promptly as practicable thereafter) and (Z)
the Executive resigns his employment with the Company and its
subsidiaries not more than 60 days following the expiration of the 20
business day period described in the foregoing clause (Y).
5. DEATH, DISABILITY OR RETIREMENT
In the event of termination of employment by reason of death,
Permanent Disability (as hereinafter defined) or retirement, the Executive (or
his estate, as applicable) shall be entitled to Base Salary and benefits
determined under Sections 2 and 3 hereof through the date of termination.
Other benefits shall be determined in accordance with the benefit plans
maintained by the AC, and the Company shall have no further obligation
hereunder. For purposes of this Agreement, "Permanent Disability" means a
physical or mental disability or infirmity of the Executive that prevents the
normal performance of substantially all his duties as an employee of the
Company, which disability or infirmity shall exist for any continuous period
of 180 days.
6. MITIGATION OF DAMAGES
The Executive shall be required to mitigate the amount of any payment
provided for in Section 4.1 by seeking other employment, and any such payment
will be reduced in the event such other employment is obtained.
7. NON-SOLICITATION; CONFIDENTIALITY; NON-COMPETITION
7.1 Non-solicitation. For so long as the Executive is employed by
the Company and continuing for two years thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, as a
sole proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent
of any person, partnership, corporation or other business organization or
entity other than the Company: (x) solicit or endeavor to entice away from
the Company, ACG or any of their respective subsidiaries any person or entity
who is, or, during the then most recent 12-month period, was employed by, or
had served as an agent or key consultant of, the Company, ACG or any of their
respective subsidiaries; or (y) solicit or endeavor to entice away from the
Company, ACG or any of their respective subsidiaries any person or entity who
is, or was within the then most recent 12-month period, a customer or client
(or reasonably anticipated (to the general knowledge of the Executive or the
public) to become a customer or client)of the Company, ACG or any of their
respective subsidiaries.
7.2 Confidentiality. The Executive covenants and agrees with the
Company that he will not at any time, except in performance of his obligations
to the Company hereunder or with the prior written consent of the Company,
directly or indirectly, disclose any secret or confidential information that
he may learn or has learned by reason of his association with the Company, ACG
or any of their respective subsidiaries and affiliates. The term
"confidential information" includes information not previously disclosed to
the public or to the trade by the Company's management, or otherwise in the
public domain, with respect to the Company's, ACG's or any of their respective
affiliates' or subsidiaries', products, facilities, applications and methods,
trade secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product price lists, customer lists, technical
information, financial information (including the revenues, costs or profits
associated with any of the Company's products), business plans, prospects or
opportunities, but shall exclude any information which (i) is or becomes
available to the public or is generally known in the industry or industries in
which the Company operates other than as a result of disclosure by the
Executive in violation of his agreements under this Section 7.2 or(ii) the
Executive is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law.
7.3 No Competing Employment. For so long as the Executive is
employed by the Company and continuing for two years thereafter (or, if the
Executive is entitled to a continuation of his Base Salary under Section
4.1.1, the period during which such Base Salary is continued), the Executive
shall not, directly or indirectly, as a sole proprietor, member of a
partnership, stockholder or investor (other than a stockholder or investor
owning not more than a5% interest), officer or director of a corporation, or
as an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than the Company,
ACG, or any of their respective subsidiaries, render any service to or in any
way be affiliated with a competitor (or any person or entity that is
reasonably anticipated (to the general knowledge of the Executive or the
public) to become a competitor) of AC, the Company, ACG or any of their
respective subsidiaries.
7.4 Exclusive Property. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by the
Executive relating to the business of the Company shall be and remain the
property of the Company, except for such papers customarily deemed to be the
personal copies of the Executive.
7.5 Injunctive Relief. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in this Section 7 may result in material and
irreparable injury to the Company, ACG or their respective affiliates or
subsidiaries for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat there of, the Company shall be entitled to seek a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Executive from engaging in activities prohibited by this
Section 7 or such other relief as may be required specifically to enforce any
of the covenants in this Section 7. If for any reason, it is held that the
restrictions under this Section 7 are not reasonable or that consideration
therefor is inadequate, such restrictions shall be interpreted or modified to
include as much of the duration and scope identified in this Section 7 as will
render such restrictions valid and enforceable.
8. ENFORCEMENT OF AGREEMENT
In the event that legal action is undertaken by either party to
enforce any provision of this Agreement, the Company shall reimburse the
Executive for any related reasonable legal fees and out-of-pocket expenses
directly attributable to such action, provided that such legal fees are
calculated on an hourly, and not on a contingency fee, basis and provided,
further, that the Executive shall bear all such fees and out-of-pocket
expenses (and reimburse the Company for its portion of such expenses) if the
relevant trier-of-fact determines that the Executive's claim or position was
frivolous and without reasonable foundation.
9. REPRESENTATION
The Executive hereby represents that (i) he is not in possession of
any documents or materials containing information constituting Confidential
Information (as such term is defined in the employment agreement (the "Wace
Agreement") dated October 4, 1988 between Executive and Techtron Graphic Arts,
Inc. ("Wace"), (ii) he has not and will not violate the provisions of the Wace
Agreement, including without limitation, Section 13 thereof and (iii)he has
read and will comply with the provisions of Exhibit C attached hereto.
10. INDEMNIFICATION
The Company shall indemnify the Executive and hold him harmless
against any and all damages, expenses and attorney's fees relating to any
Claim (as hereinafter defined). As used herein, "Claim" means any threatened,
pending or completed action, suit, proceeding, alternative dispute resolution
mechanism, inquiry, hearing or investigation by Wace against the Executive
based on an alleged breach by the Executive of the Wace Agreement, if such
alleged breach occurred after the date hereof. Notwithstanding the foregoing,
no amount shall be payable to the Executive pursuant to the immediately
preceding paragraph to the extent that (i) the Executive is in breach of this
Agreement or (ii) the Executive enters into a settlement agreement with Wace
in which he agrees to pay Wace an amount to settle such Claim. If either
(i)or (ii) of the immediately preceding sentence is true, the Executive shall
immediately reimburse the Company for any payment it made to him pursuant to
the preceding paragraph, and the Company shall have the right to set off the
amount of any such payment from any amounts it owes the Executive.
11. MISCELLANEOUS
11.1 Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
American Color Graphics, Inc.
225 High Ridge Road
Stamford, CT 06905
Telecopier No. (203) 978-5408
Attention: Timothy M. Davis
Senior Vice President,
General Counsel and Secretary
To the Executive:
Terrence M. Ray
11232 East Palomino Road
Scottsdale, AZ 85259
Telecopier No.: (602) 614-1989
with a copy to:
Thomas P. Riordan, Esq.
Riordan, Larson, Bruckert & Moore
208 S. LaSalle Street
Suite 650
Chicago, IL 60604
Telecopier Fax: (312) 346-1168
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by
telecopy or facsimile transmission, upon confirmation of receipt by the sender
of such transmission or (iii) if sent by registered or certified mail, on the
fifth day after the day on which such notice is mailed.
11.2 Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.3 Assignment. The Company's rights and obligations under this
Agreement shall not be assignable by the Company except as incident to a
reorganization, merger or consolidation, or transfer of all or substantially
all of the Company's business and properties (or portion thereof in which the
Executive is employed). Neither this Agreement nor any rights hereunder shall
be assignable or otherwise subject to hypothecation by the Executive.
11.4 Entire Agreement. This Agreement represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the Company and the Executive. This
Agreement may be amended at any time by mutual written agreement of the
parties hereto.
11.5 Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and
such other deductions as may be required under the Company's employee benefit
plans, if any.
11.6 Governing Law. This Agreement shall be construed, interpreted,
and governed in accordance with the laws of New York without reference to
rules relating to conflict of law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand, as of the day and year
first above written.
AMERICAN COLOR GRAPHICS, INC.,
By: _________________________________
Stephen M. Dyott
Chief Executive Officer
EXECUTIVE:
__________________________________
Terrence M. Ray
[SULLIVAN Letterhead]
September 8, 1995
Mr. M. J. Anderson
Sullivan Graphics, Inc.
100 Winners Circle
Brentwood, TN 37027
Dear Jack:
This letter, when signed by both of us, will constitute our agreement to employ
you as Senior Vice President, Operations for Sullivan Graphics, Inc. ("SGI").
The initial term of your employment pursuant to this agreement shall commence
immediately and shall continue for two years thereafter, unless earlier
terminated as provided below. The term of your employment hereunder shall be
extended automatically for additional one year periods unless written notice of
either party's intention not to extend has been given to the other party at
least one year prior to the expiration of the then current term.
Your salary shall be $200,000 per annum, to be paid bi-weekly. You shall also be
entitled to participate in SGI's incentive plan. SGI shall pay you directly or
reimburse you for reasonable expenses incurred by you in connection with the
performance of your duties, including without limitation, travel and
entertainment expenses reasonably related to SGI's business or interest, upon
submission of written documentation of such expenses.
In all other aspects (e.g. vacation, hours, sick leave and fringe benefits), the
terms of your employment will be in accordance with SGI's general policy in
effect from time to time as applied to executives.
Your employment will be on a full time basis and you will not engage in any
other business activities without SGI's prior written consent.
During your employment, and at all times thereafter, you will maintain the
confidentiality of all non-public information regarding SGI or its operations
that you receive during the course of your employment. Without limiting the
generality of the foregoing, such information includes trade secrets and
know-how, marketing, manufacturing and other plans, pricing and price policies,
sales forecasts, research and development, the terms upon which SGI deals with
customers and suppliers and proposed acquisitions. Such information shall not be
disclosed by you to any person other than an authorized representative of SGI
without its prior written consent. Upon termination of your employment, and
without regard to the circumstances of such termination, you shall (i)
immediately turn over to SGI all written materials, lists and records or copies
thereof that came into your possession in the course of your employment by SGI,
whether or not they contain confidential information and (ii) for a period of
two (2) years after such termination, not solicit or hire employees or customers
of SGI.
For so long as you are employed by SGI and continuing for one year thereafter,
you shall not, directly or indirectly, as a sole proprietor, member of a
partnership, stockholder or investor (other than a stockholder or investor
owning not more than a 5% interest), officer or director of a corporation, or as
an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than SGI, render any
service to, or in any way be affiliated with, a competitor (or any person or
entity that is reasonably anticipated to become a competitor) of SGI or any of
its affiliates.
Without intending to limit the remedies available to SGI, you acknowledge that a
breach of the covenant set forth in the preceding paragraph and the covenant set
forth in clause (ii) of the last paragraph on page 1 (relating to solicitation
of employees) may result in material and irreparable injury to SGI or its
affiliates for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, SGI shall be entitled to seek a temporary
restraining order and/or a preliminary or permanent injunction restraining you
from engaging in activities prohibited by this agreement or such other relief as
may be required specifically to enforce any of the foregoing covenants. If for
any reason, it is held that the foregoing restrictions are not reasonable or
that consideration therefor is inadequate, such restrictions shall be
interpreted or modified to include as much of the duration and scope identified
in the foregoing sections as will render such restrictions valid and
enforceable.
Your employment will terminate automatically upon your death. If you are
disabled from performing the duties of your employment for six consecutive
months, SGI may terminate your employment pursuant to this agreement at the end
of such period subject to whatever additional benefits you may be entitled to
receive under any disability plan maintained by SGI at the time.
Either you or SGI may terminate your employment with or without "Cause" (as
hereinafter defined) at any time. If during the term of this Agreement your
employment is terminated by SGI for any reason other than Cause, you shall
receive your base salary then in effect from the date of termination until the
later of the expiration date of this Agreement or two years after the date of
termination. If this Agreement is not extended and you are thereafter terminated
by SGI for any reason other than Cause, you shall receive your base salary then
in effect from the date of termination until two years after the date of
termination. Such base salary payments will be reduced to the extent you receive
compensation from another employer with respect to such period.
For purposes of this agreement:
"Cause" shall mean the termination of your employment hereunder in the event of
your (i) conviction of any crime or offense involving money or other property of
SGI or any felony, (ii) willful and unreasonable refusal to substantially
perform your duties hereunder, (iii) competition with SGI, or (iv) gross
negligence in the conduct of your duties; provided, however, no termination
shall be deemed for "Cause" under clauses (ii) or (iv) unless you shall have
first received written notice from SGI advising you of the acts or omissions
that constitute the refusal or gross negligence and you fail to correct the acts
or omissions complained of within 20 business days following receipt of such
notice.
All references to "SGI" include its divisions, subsidiaries and affiliates.
All questions concerning the construction, validity, enforcement and
interpretation of this agreement and the exhibits hereto will be governed by the
internal law, and not the law of conflicts, of the State of New York, and you
hereby consent to jurisdiction and venue in the State and Federal courts in New
York, New York in connection with such questions.
This agreement constitutes our entire agreement, supersedes all prior agreements
between us, and its provisions may not be changed or waived, except by a writing
signed by the party to be charged with such change.
Sincerely,
Sullivan Graphics, Inc.
By: /s/ Stephen M. Dyott
--------------------------------
Stephen M. Dyott
President & Chief Operating Officer
ACCEPTED AND AGREED TO:
/s/ M.J. Anderson
- ------------------------
M.J. Anderson
AMENDMENT NO. 1, dated as of January 16, 1998, TO THE AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT dated as of August 14, 1995 among ACG HOLDINGS,
INC., a Delaware corporation (the "Company"), and each of the other parties
signatory hereto.
WITNESSETH:
WHEREAS, the Company and its stockholders have previously entered into
an Amended and Restated Stockholders' Agreement, dated as of August 14, 1995
(the "Stockholders' Agreement");
WHEREAS, the Company has effected a recapitalization (the
"Recapitalization") of its capital stock, effective as of January 16, 1998,
pursuant to which each outstanding share of Series A Preferred Stock, par value
$.01 per share was reclassified as, and converted into, 0.9174 fully paid and
nonassessable shares of Series AA Preferred Stock, par value $.01 per share, and
each outstanding share of Series B Preferred Stock, par value $.01 per share was
reclassified as, and converted into, 0.9174 fully paid and nonassessable shares
of Series BB Preferred Stock, par value $.01 per share;
WHEREAS, the parties hereto have determined that it is appropriate to
amend the Stockholders' Agreement to reflect the Recapitalization; and
WHEREAS, the execution of this Amendment No. 1 to the Stockholders'
Agreement constitutes the consent to the amendment of the Stockholders'
Agreement of (a) the Company and (b) Stockholders holding Shares representing a
majority of the Common Stock into which Shares held by all the Stockholders'
could be converted as of the date hereof, thereby binding all Stockholders to
the Stockholders' Agreement as amended by this Amendment in accordance with
Section 6.04 of the Stockholders' Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreement and covenants hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Definitions. Unless otherwise specifically defined herein,
each term used herein which is defined in the Stockholders' Agreement shall have
the meaning assigned to such term in the Stockholders' Agreement.
SECTION 2. Certain Amendments. The Stockholders' Agreement is
hereby amended as follows:
(a) The term "Series A Preferred" shall be deleted wherever it appears
in the Stockholders' Agreement and the term "Series AA Preferred" shall be
substituted therefor; and
(b) The term "Series B Preferred" shall be deleted wherever it appears
in the Stockholders' Agreement and the term "Series BB Preferred" shall be
substituted therefor.
SECTION 3. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 4. Effect of Amendments; References. (a) Except as expressly
set forth herein, the amendments contained herein shall not constitute an
amendment of any term or condition of the Stockholders' Agreement, and all such
terms and conditions shall remain in full force and effect and are hereby
ratified and confirmed in all respects.
(b) Each reference to "this Agreement" and each other similar reference
contained in the Stockholders' Agreement shall from and after the date hereof
refer to the Stockholders' Agreement as amended by this Amendment.
SECTION 5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in their individual capacity or by their respective authorized
signatories thereunto duly authorized effective the date first written above.
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: Morgan Stanley Leveraged Equity Fund II, Inc.,
as general partner
By:
-----------------------------------------------
Name:
Title:
MORGAN STANLEY CAPITAL
PARTNERS III, L.P.
By: MSCP III, L.P., as general partner
By: Morgan Stanley Capital Partners III, Inc.
as general partner
By:
-----------------------------------------------
Name:
Title:
MORGAN STANLEY CAPITAL
INVESTORS, L.P.
By: MSCP III, L.P., as general partner
By: Morgan Stanley Capital Partners III, Inc.
as general partner
By:
------------------------------------------------
Name:
Title:
MSCP III 892 INVESTORS, L.P.
By: MSCP III, L.P., as general partner
By: Morgan Stanley Capital Partners III, Inc.,
as general partner
By:
------------------------------------------------
Name:
Title:
[Conformed copy with
Exhibits G, H-2, I-2,
K-3, and K-4 Conformed
as Executed]
==============================================================================
TERM LOAN AGREEMENT
among
SULLIVAN COMMUNICATIONS, INC.,
SULLIVAN GRAPHICS, INC.,
VARIOUS FINANCIAL INSTITUTIONS
and
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT
----------------------------
Dated as of June 30, 1997
----------------------------
==============================================================================
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit............................... 1
1.01 The Commitments.............................................. 1
1.02 Notice of Borrowing.......................................... 1
1.03 Disbursement of Funds........................................ 2
1.04 Notes........................................................ 3
1.05 Pro Rata Borrowings.......................................... 3
1.06 Interest..................................................... 3
1.07 Interest Periods............................................. 4
1.08 Increased Costs, Illegality, etc............................. 5
1.09 Compensation................................................. 8
1.10 Change of Applicable Lending Office.......................... 8
1.11 Replacement of Banks......................................... 8
1.12 Conversions.................................................. 9
SECTION 2. Fees; Reductions of Commitment........................... 9
2.01 Fees......................................................... 9
SECTION 3. Prepayments; Payments; Taxes............................. 10
3.01 Mandatory and Voluntary Payment; Mandatory and Voluntary
Reduction of Commitments.................................. 10
3.02 Method and Place of Payment.................................. 11
3.03 Net Payments................................................. 11
SECTION 4. Conditions Precedent..................................... 15
4.01 Execution of Agreement; Notes................................ 15
4.02 No Default; Representations and Warranties................... 15
4.03 Opinions of Counsel.......................................... 16
4.04 Corporate Documents; Proceedings; etc........................ 16
4.05 Adverse Change, etc.......................................... 16
4.06 Litigation................................................... 17
4.07 Subsidiaries Guaranty........................................ 17
4.08 Existing Pledge Agreement Amendment.......................... 17
4.09 Existing Security Agreement Amendment........................ 18
4.10 Mortgage Amendments; etc..................................... 18
4.11 Canadian Debenture and Pledge Agreement...................... 18
4.12 Form of Collateral Assignments of Rights..................... 18
4.13 Lockbox, Blocked Account and Concentration Account
Agreements................................................ 19
4.14 Collateral Access Agreements................................. 19
4.15 Amendment to the Existing Credit Agreement................... 19
4.16 Solvency Certificate......................................... 19
4.17 Notice of Borrowing.......................................... 19
4.18 Fees, etc.................................................... 19
SECTION 5. Representations, Warranties and Agreements............... 19
5.01 Corporate Status............................................. 20
5.02 Corporate Power and Authority................................ 20
5.03 No Violation................................................. 20
5.04 Litigation................................................... 21
5.05 Use of Proceeds.............................................. 21
5.06 Governmental Approvals....................................... 21
5.07 Investment Company Act....................................... 21
5.08 Public Utility Holding Company Act........................... 21
5.09 True and Complete Disclosure................................. 21
5.10 Financial Condition; Financial Statements.................... 22
5.11 Locations of Offices, Records and Inventory.................. 22
5.12 Fictitious Business Names.................................... 23
5.13 Security Interests........................................... 23
5.14 Tax Returns and Payments..................................... 23
5.15 Compliance with ERISA........................................ 24
5.16 Subsidiaries................................................. 25
5.17 Patents, etc................................................. 25
5.18 Compliance with Statutes, etc................................ 26
5.19 Properties................................................... 27
5.20 Labor Relations; Collective Bargaining Agreements............ 27
5.21 Restrictions on Restricted Subsidiaries...................... 28
5.22 Material Contracts........................................... 28
5.23 Senior Indebtedness, etc..................................... 28
5.24 Existing Collateral Documents................................ 28
SECTION 6. Affirmative Covenants.................................... 29
6.01 Financial Information........................................ 29
6.02 Corporate Franchises......................................... 30
6.03 Compliance with Statutes, etc................................ 31
6.04 ERISA........................................................ 31
6.05 Good Repair.................................................. 33
6.06 Additional Security; Further Assurances; etc................. 33
6.07 Insurance.................................................... 34
6.08 Taxes........................................................ 34
6.09 Corporate Separateness....................................... 34
6.10 New Wholly-Owned Restricted Subsidiaries..................... 35
SECTION 7. Negative Covenants....................................... 35
7.01 Limitation on Indebtedness................................... 36
7.02 Limitation on Restricted Payments............................ 39
7.03 Limitation on Restrictions on Distributions from Restricted
Subsidiaries.............................................. 40
7.04 Limitation on Sales of Assets and Subsidiary Stock........... 42
7.05 Limitation on Affiliate Transactions......................... 43
7.06 Change of Control............................................ 44
7.07 Limitation on the Issuance of Preferred Stock of Restricted
Subsidiaries.............................................. 44
7.08 When Communications or Borrower May Merge or Transfer
Assets.................................................... 44
7.09 Ownership of Restricted Subsidiaries......................... 45
7.09 Further Instruments and Acts................................. 45
SECTION 8. Events of Default........................................ 45
8.01 Events of Default Defined.................................... 45
8.02 Acceleration................................................. 47
8.03 Other Remedies............................................... 48
SECTION 9. Definitions.............................................. 48
9.01 General Definitions.......................................... 48
9.02 Accounting Terms and Determinations.......................... 79
9.03 Other Defined Terms.......................................... 80
SECTION 10. The Agent............................................... 80
10.01 Appointment................................................. 80
10.02 Nature of Duties of Agent................................... 81
10.03 Lack of Reliance on Agent................................... 81
10.04 Certain Rights of the Agent................................. 82
10.05 Reliance by Agent........................................... 82
10.06 Indemnification of Agent.................................... 82
10.07 The Agent in Its Individual Capacity........................ 83
10.08 Holders of Notes............................................ 83
10.09 Successor Agent............................................. 83
10.10 Collateral Matters.......................................... 84
10.11 Actions with Respect to Defaults............................ 86
10.12 Delivery of Information..................................... 86
SECTION 11. Special Provisions Providing Lien Priorities; etc....... 86
11.01 Priorities With Respect to Collateral....................... 87
11.02 Priority on Distribution of Proceeds of Collateral.......... 88
11.03 Certain Dispositions of Collateral.......................... 89
11.04 Waiver of Set-Off........................................... 89
11.05 Right to Contest............................................ 90
11.06 Payment Invalidated......................................... 90
11.07 Right to Amend, etc......................................... 90
11.08 Creation of Future Obligations.............................. 91
11.09 Waiver of Liability For Actions Taken With Respect To Second
Priority Secured Obligations and Collateral.............. 91
11.10 Financing Issues............................................ 92
11.11 Effectiveness............................................... 92
11.12 Further Assurances.......................................... 92
11.13 Nature of the Obligations................................... 93
11.14 Benefits of this Section 11................................. 93
SECTION 12. Miscellaneous........................................... 93
12.01 Payment of Expenses; Indemnification; etc................... 93
12.02 Right of Setoff............................................. 94
12.03 Notices..................................................... 95
12.04 Benefit of Agreement; Assignments; Participations........... 95
12.05 No Waiver; Remedies Cumulative.............................. 98
12.06 Payments Pro Rata........................................... 99
12.07 Computations................................................ 99
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL............................................... 99
12.09 Counterparts................................................101
12.10 Effectiveness...............................................101
12.11 Headings Descriptive........................................101
12.12 Amendment or Waiver; etc....................................101
12.13 Survival....................................................102
12.14 Domicile of Loans...........................................103
12.15 Register....................................................103
12.16 Confidentiality.............................................103
12.17 Designated Senior Indebtedness..............................104
12.18 Limitation on Additional Amounts, etc.......................104
12.19 Maximum Rate................................................105
12.20 Post Closing Actions........................................106
SECTION 13. Parent Guaranty.........................................107
13.01 The Parent Guaranty.........................................107
13.02 Bankruptcy..................................................108
13.03 Nature of Liability.........................................108
13.04 Independent Obligation......................................108
13.05 Authorization...............................................108
13.06 Reliance....................................................109
13.07 Subordination...............................................110
13.08 Waiver......................................................110
13.09 Limitation on Enforcement...................................111
SCHEDULE I List of Banks
SCHEDULE II Governmental Approvals
SCHEDULE III Chief Executive Offices, Records Locations and Inventory
and Equipment Locations
SCHEDULE IV Fictitious Business Names
SCHEDULE V Tax Matters
SCHEDULE VI Subsidiaries
SCHEDULE VII Real Properties
SCHEDULE VIII Collective Bargaining Agreements
SCHEDULE IX Insurance
SCHEDULE X Existing Indebtedness
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B Form of Note
EXHIBIT C Form of Section 3.03(e) Certificate
EXHIBIT D-1 Form of Opinion of Shearman & Sterling, special counsel
to the Credit Parties
EXHIBIT D-2 Form of Opinion of Timothy M. Davis, Esq., General
Counsel to Communications and the Borrower
EXHIBIT E Form of Officer's Certificate
EXHIBIT F Form of Solvency Certificate
EXHIBIT G Form of Subsidiaries Guaranty
EXHIBIT H-1 Existing Pledge Agreement
EXHIBIT H-2 Form of Existing Pledge Agreement Amendment
EXHIBIT I-1 Existing Security Agreement
EXHIBIT I-2 Form of Existing Security Agreement Amendment
EXHIBIT K-1 Existing Canadian Debenture
EXHIBIT K-2 Existing Canadian Pledge Agreement
EXHIBIT K-3 Form of Existing Canadian Debenture Amendment
EXHIBIT K-4 Form of Existing Canadian Pledge Agreement Amendment
EXHIBIT L Form of Collateral Assignment of Rights
EXHIBIT M-1 Form of Lockbox Agreement
EXHIBIT M-2 Form of Blocked Account Agreement
EXHIBIT M-3 Form of Concentration Account Agreement
EXHIBIT N Form of Collateral Access Agreement
EXHIBIT O Form of Compliance Certificate
EXHIBIT P Form of Assignment and Assumption Agreement
TERM LOAN AGREEMENT, dated as of June 30, 1997, among SULLIVAN
COMMUNICATIONS, INC., a Delaware corporation ("Communications" or the "Parent
Guarantor"), SULLIVAN GRAPHICS, INC., a New York Corporation (the "Borrower"),
the financial institutions party hereto from time to time (the "Banks"), and
BANKERS TRUST COMPANY, as Administrative Agent (all capitalized terms used
herein and defined in Section 9 are used herein as therein defined).
W I T N E S S E T H :
-------------------
WHEREAS, the Borrower wishes to obtain a term loan facility to
prepay outstandings under the revolving credit facility pursuant to the
Existing Credit Agreement and thereby improve its liquidity; and
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facility provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees to make, on the
Closing Date, a term loan or term loans (each, a "Loan" and, collectively, the
"Loans") to the Borrower, which Loans shall (i) be denominated in Dollars,
(ii) at any time prior to the Syndication Date, be incurred and maintained as
a single Borrowing of Base Rate Loans (subject to mandatory conversion in
whole into a single Borrowing of Eurodollar Loans pursuant to Section 1.12),
(iii) at any time on and after the Syndication Date, be maintained as and/or
converted into a single Borrowing of Eurodollar Loans (subject to conversion,
in whole or in part, into Base Rate Loans pursuant to Section 1.08 or as
provided in last sentence of Section 1.07) and (iv) be made by each such Bank
in that initial aggregate principal amount as is equal to the Commitment of
such Bank on the Closing Date (before giving effect to any reductions thereto
on such date pursuant to Section 3.01(b)). Once repaid, Loans incurred
hereunder may not be reborrowed.
1.02 Notice of Borrowing. (a) When the Borrower desires to
incur the Loans hereunder, it shall give the Administrative Agent at its
Notice Office at least one Business Day's (or same day notice if acceptable to
the Administrative Agent) prior written notice (or telephonic notice promptly
confirmed in writing) of the Loans to be made hereunder, provided that any
such notice shall be deemed to have been given on a certain day only if given
before 11:00 A.M. (New York time) on such day. Such written notice or written
confirmation of telephonic notice (the "Notice of Borrowing"), except as
otherwise expressly provided in Section 1.08, shall be irrevocable and shall
be given by the Borrower in the form of Exhibit A, appropriately completed to
specify (i) the aggregate principal amount of the Loans to be incurred
pursuant to such Borrowing and (ii) the date of such Borrowing (which shall be
a Business Day). The Administrative Agent shall promptly give each Bank
notice of such proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters required by the immediately preceding sentence to be
specified in the Notice of Borrowing.
(b) Without in any way limiting the obligation of the
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Administrative Agent may act without liability upon the basis
of such telephonic notice, believed by the Administrative Agent in good faith
to be from an Authorized Officer of the Borrower prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right to
dispute the Administrative Agent's record of the terms of such telephonic
notice.
1.03 Disbursement of Funds. No later than 12:00 Noon (New York
time) on the Closing Date, each Bank will make available its pro rata portion
(determined in accordance with Section 1.05) of the Loans to be made on such
date. All such amounts will be made available in Dollars and in immediately
available funds at the Payment Office of the Administrative Agent, and the
Administrative Agent will make available to the Borrower by depositing to its
account at the Payment Office the aggregate of the amounts so made available
by the Banks in the type of funds received. Unless the Administrative Agent
shall have been notified by any Bank prior to the Closing Date that such Bank
does not intend to make available to the Administrative Agent such Bank's
portion of the Loans to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative
Agent on the Closing Date and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Administrative
Agent by such Bank, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent shall promptly notify the Borrower and the
Borrower shall immediately pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to recover on demand
from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower until
the date such corresponding amount is recovered by the Administrative Agent,
at a rate per annum equal to (i) if recovered from such Bank, at the overnight
Federal Funds Rate and (ii) if recovered from the Borrower, the rate of
interest applicable to the Loans, as determined pursuant to Section 1.08.
Nothing in this Section 1.04 shall be deemed to relieve any Bank from its
obligation to make Loans hereunder or to prejudice any rights which the
Borrower may have against any Bank as a result of any failure by such Bank to
make Loans hereunder.
1.04 Notes. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans made by each Bank shall be evidenced
by a promissory note duly executed and delivered by the Borrower substantially
in the form of Exhibit B, with blanks appropriately completed in conformity
herewith (each, a "Note" and, collectively, the "Notes"). The Note issued to
each Bank shall (i) be executed by the Borrower, (ii) be payable to the order
of such Bank and be dated the Closing Date (or if issued thereafter, the date
of issuance), (iii) be in a stated principal amount equal to the principal
amount of the Loans made by such Bank and be payable in Dollars in the
outstanding principal amount of Loans evidenced thereby, (iv) mature on the
Final Maturity Date, (v) bear interest as provided in the appropriate clause
of Section 1.06 in respect of the Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby, (vi) be subject to voluntary and mandatory
prepayment as provided in Section 3.01 and (vii) be entitled to the benefits
of this Agreement and the other Credit Documents.
(b) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation or any error in such notation shall not affect the Borrower's
obligations in respect of such Loans.
1.05 Pro Rata Borrowings. All Loans made under this Agreement
shall be incurred from the Banks pro rata on the basis of their Commitments.
It is understood that no Bank shall be responsible for any default by any
other Bank of its obligation to make Loans hereunder and that each Bank shall
be obligated to make the Loans provided to be made by it hereunder, regardless
of the failure of any other Bank to make its Loans hereunder.
1.06 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date
the proceeds thereof are made available to the Borrower until the maturity
thereof (whether by acceleration or otherwise) at a rate per annum which shall
be equal to the sum of the Applicable Margin plus the Base Rate, each as in
effect from time to time.
(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date the proceeds
thereof are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) at a rate per annum which shall, during each
Interest Period applicable thereto, be equal to the sum of the Applicable
Margin (as in effect from time to time) plus the Eurodollar Rate for such
Interest Period.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
greater of (x) 2% per annum in excess of the rate otherwise applicable to Base
Rate Loans from time to time and (y) the rate which is 2% in excess of the
rate borne by such Loans at the time of the payment default, in each case with
such interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last
day of each Interest Period applicable thereto and (iii) in respect of each
Loan, on any repayment or prepayment (on the amount repaid or prepaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) Upon each Interest Determination Date, the Administrative
Agent shall determine the Eurodollar Rate for the respective Interest Period
or Interest Periods to be applicable to Eurodollar Loans and shall promptly
notify the Borrower and the Banks thereof. Each such determination shall,
absent manifest error, be final and conclusive and binding on all parties
hereto.
1.07 Interest Periods. All Eurodollar Loans outstanding
hereunder at any time shall have a single interest period applicable thereto
at such time of three (3) months duration (each, an "Interest Period"),
provided that:
(i) the initial Interest Period for the Eurodollar Loans shall
commence on the Syndication Date and each Interest Period occurring
thereafter in respect of such Eurodollar Loans shall commence (x) on
the day on which the next preceding Interest Period applicable
thereto expires or (y) only in the circumstances provided in Section
1.08(d)(y) (where all Eurodollar Loans have theretofore been
converted into Base Rate Loans), on the Business Day specified in
Section 1.08(d)(y);
(ii) if any Interest Period for a Eurodollar Loan begins on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
(iii) if any Interest Period for a Eurodollar Loan would
otherwise expire on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day; provided,
however, that if any Interest Period for a Eurodollar Loan would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
and
(iv) no Interest Period shall be selected which extends beyond
the Final Maturity Date.
If upon the expiration of an Interest Period, the Borrower is
not permitted by virtue of the application of clause (iv) above to elect a new
Interest Period to be applicable to a Borrowing of Eurodollar Loans as
provided above, the Borrower shall be deemed to have elected to convert such
Borrowing into a Borrowing of Base Rate Loans effective as of the expiration
date of such current Interest Period.
1.08 Increased Costs, Illegality, etc. (a) In the event that
any Bank shall have determined in good faith (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto but, with respect to clause (i) below, may be made only by the
Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for
in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loan because of (x) any change arising
after the date of this Agreement in any applicable law or
governmental rule, regulation, order, guideline or request (whether
or not having the force of law) or in the interpretation or
administration thereof and including the introduction of any new law
or governmental rule, regulation, order, guideline or request, such
as, for example, but not limited to: (A) a change in the basis of
taxation of payment to any Bank of the principal of or interest on
the Notes or any other amounts payable hereunder (except for changes
in the rate of tax on, or determined by reference to, the net income
or profits or franchise taxes based on net income of such Bank
pursuant to the laws of the jurisdiction in which it is organized or
in which its principal office or applicable lending office is located
or any subdivision hereof or therein) or (B) a change in official
reserve requirements (except to the extent included in the
computation of the Eurodollar Rate) or any special deposit,
assessment or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Bank (or its
applicable lending office) and/or (y) other circumstances since the
date of this Agreement affecting such Bank or the interbank
Eurodollar market or the position of such Bank in such market; or
(iii) at any time after the date of this Agreement, that the
making or continuance of any Eurodollar Loan has been made (x)
unlawful by any law or governmental rule, regulation or order, (y)
impossible by compliance by any Bank in good faith with any
governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the date
of this Agreement which materially and adversely affects the
applicable interbank market;
then, and in any such event, such Bank (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone promptly
confirmed in writing) to the Borrower and, except in the case of clause (i)
above, to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Banks).
Thereafter (x) in the case of clause (i) above, on the last day of the then
current Interest Period, all Loans shall be automatically converted to Base
Rate Loans, until such time as the circumstances described in clause (i) shall
no longer be applicable, in which event Section 1.08(d) shall apply, (y) in
the case of clause (ii) above, the Borrower shall, subject to the provisions
of Section 12.18 (to the extent applicable), pay to such Bank, upon its
written request therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to such Bank, showing in reasonable detail the basis for the calculation
thereof, submitted to the Borrower by such Bank shall, absent manifest error,
be final and conclusive and binding on all the parties hereto) and (z) in the
case of clause (iii) above, the Borrower shall take one of the actions
specified in Section 1.08(b) as promptly as possible and, in any event, within
the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.08(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.08(a)(iii) shall), upon at least three Business Days' written notice
to the Administrative Agent, require the affected Bank to convert such
Eurodollar Loan into a Base Rate Loan, until such time as the circumstances
described in Section 1.08(a)(ii) or (iii) shall no longer be applicable in
which event clause (d) below shall apply, provided that, if more than one Bank
is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.08(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change (which introduction or
change shall have occurred after the date of this Agreement) in any applicable
law or governmental rule, regulation, order, guideline, directive or request
(whether or not having the force of law) concerning capital adequacy, or any
change in interpretation or administration thereof by any governmental
authority, central bank or comparable agency, will have the effect of
increasing the amount of capital required or expected to be maintained by such
Bank or any corporation controlling such Bank based on the existence of such
Bank's Commitments hereunder or its obligations hereunder, then the Borrower
agrees to pay, subject to the provisions of Section 12.18 (to the extent
applicable), to such Bank, upon its written demand therefor, such additional
amounts as shall be required to compensate such Bank or such other corporation
for the increased cost to such Bank or such other corporation or the reduction
in the rate of return to such Bank or such other corporation as a result of
such increase of capital. In determining such additional amounts, each Bank
will act reasonably and in good faith and will use averaging and attribution
methods which are reasonable, provided that such Bank's determination of
compensation owing under this Section 1.08(c) shall, absent manifest error, be
final and conclusive and binding on all the parties hereto. Each Bank, upon
determining that any additional amounts will be payable pursuant to this
Section 1.08(c), will give prompt written notice thereof to the Borrower,
which notice shall show in reasonable detail the basis for calculation of such
additional amounts.
(d) In the event that any Base Rate Loan is outstanding at any
time and the relevant circumstances described in Section 1.08(a)(i), (ii)
and/or (iii), as the case may be, cease to be applicable, the respective
Bank(s) or the Administrative Agent (as applicable) shall give prompt notice
thereof to the Borrower and the Administrative Agent (as applicable) and (x)
if a Borrowing of Eurodollar Loans is outstanding at such time (from one or
more Banks which were not affected by such circumstances or as a result of the
application of following clause (y)), then on the last day of the Interest
Period then applicable thereto the Base Rate Loans of the respective affected
Bank or Banks to which the circumstances described above have ceased to be
applicable shall be converted back into (and thereafter shall form a part of)
the respective Borrowing of Eurodollar Loans (until such time, if any, as
Section 1.08(a) and (b) shall thereafter become applicable) and (y) if no
Eurodollar Loans remain outstanding at such time, then on the third Business
Day thereafter the Base Rate Loans of the respective Bank or Banks to which
the circumstances described above shall cease to be applicable shall be
converted into a Borrowing of Eurodollar Loans (with an Interest Period of
three months beginning on said third Business Day).
1.09 Compensation. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth in reasonable detail
the basis for requesting such compensation), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Bank to fund its Eurodollar Loans, but excluding
loss of anticipated profits) which such Bank may sustain: (i) if any
repayment (including any repayment made pursuant to Section 3.01 or as a
result of an acceleration of the Loans pursuant to Section 8) occurs on a date
which is not the last day of an Interest Period with respect thereto; (ii) if
any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by such Borrower; or (iii) as a
consequence of (x) any other default by such Borrower to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y)
any election made pursuant to Section 1.08(b).
1.10 Change of Applicable Lending Office. Each Bank agrees
that on the occurrence of any event giving rise to the operation of Section
1.08(a)(ii) or (iii), Section 1.08(c) or Section 3.03 with respect to such
Bank, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Bank) to designate another lending
office for any Loans affected by such event, provided that such designation is
made on such terms that such Bank and its lending office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence
of the event giving rise to the operation of such Section. Nothing in this
Section 1.10 shall affect or postpone any of the obligations of the Borrower
or the right of any Bank provided in Sections 1.08 and 3.03.
1.11 Replacement of Banks. (x) Upon the occurrence of an
event giving rise to the operation of Section 1.08(a)(ii) or (iii), Section
1.08(c) or Section 3.03 with respect to any Bank which results in such Bank
charging to the Borrower increased costs in excess of those being generally
charged by the other Banks or (y) in the case of certain refusals by a Bank to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as
(and to the extent) provided in Section 12.12(b), the Borrower shall have the
right, if no Default under Section 8.01(1), (6) or (7) and no Event of Default
then exists (or, in the case of preceding clause (y), no Default under Section
8.01(1), (6) or (7) and no Event of Default will exist immediately after giving
effect to such replacement), to replace such Bank (the "Replaced Bank") with
one or more other Eligible Transferees (collectively, the "Replacement Bank")
and each of whom shall be required to be reasonably acceptable to the
Administrative Agent, provided that (i) at the time of any replacement
pursuant to this Section 1.11, the Replacement Bank shall enter into one or
more Assignment and Assumption Agreements pursuant to Section 12.04(b) (and
with all fees payable pursuant to said Section 12.04(b) to be paid by the
Replacement Bank) pursuant to which the Replacement Bank shall acquire all of
the outstanding Loans of the Replaced Bank and, in connection therewith, shall
pay to the Replaced Bank in respect thereof an amount equal to the principal
of, and all accrued interest on, all outstanding Loans of the Replaced Bank
and (ii) all obligations of the Borrower due and owing to the Replaced Bank at
such time (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with
such replacement. Upon the execution of the respective Assignment and
Assumption Agreements, the payment of amounts referred to in clauses (i) and
(ii) above, recordation of the assignment on the Register by the
Administrative Agent pursuant to Section 12.15 and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of the appropriate Note or
Notes executed by the Borrower, the Replacement Bank shall become a Bank
hereunder and the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions under this Agreement
(including, without limitation, Sections 1.08, 1.09, 3.03, 10.06 and 12.01),
which shall survive as to such Replaced Bank. It is understood and agreed
that replacements pursuant to this Section 1.11 shall be effected by means of
assignments which otherwise meet the applicable requirements of Section
12.04(b).
1.12 Conversions. On the Syndication Date, the entire
outstanding principal amount of Loans made to the Borrower and then
outstanding shall be automatically converted into a single Borrowing of
Eurodollar Loans (with the first Interest Period applicable thereto to begin
on the Syndication Date).
SECTION 2. Fees; Reductions of Commitment.
2.01 Fees. (a) The Borrower shall pay to the Administrative
Agent, for its own account, such fees as have been previously agreed to in
writing by the Borrower and the Administrative Agent.
(b) In addition to any other fees payable pursuant to this
Agreement or any other agreement, if any Loans remain outstanding on either of
the 12 or 30 month anniversaries of the Closing Date, then on each such date
an additional cash fee shall be paid to each Bank (and retained by it for its
own account) in an amount equal to 1.0% of the aggregate principal amount of
the Loans of such Bank outstanding on the respective such date, and if any
Loans remain outstanding on any of the 6, 9, 18 or 24 month anniversaries of
the Closing Date, then additional cash fees shall be paid to each Bank on each
such date in an amount equal to 1/2 of 1% of the aggregate principal amount of
the Loans of such Bank outstanding on the respective such date (which fees
shall be retained by each Bank for its own account).
SECTION 3. Prepayments; Payments; Taxes.
3.01 Mandatory and Voluntary Payment; Mandatory and Voluntary
Reduction of Commitments. (a) The Total Commitment (and the Commitment of
each Bank) shall terminate in its entirety on July 30, 1997 unless the Closing
Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.01, the Total Commitment (and the commitment of
each Bank) shall terminate in its entirety on the Closing Date (after giving
effect to the making of Loans on such date).
(c) The Borrower shall have the right to prepay the Loans,
without premium or penalty, in whole or in part at any time and from time to
time on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent prior to 12:00 Noon (New York City time) at least three
Business Days' prior written notice (or telephonic notice promptly confirmed
in writing) of its intent to prepay Loans and the amount of such prepayment,
which notice the Administrative Agent shall promptly transmit to each of the
Banks; (ii) each partial prepayment shall be in an aggregate principal amount
of at least $1,000,000; (iii) if any partial prepayment of then outstanding
Loans shall reduce the aggregate principal amount of outstanding Loans to an
amount less than $1,000,000, then all then outstanding Loans shall be required
to be repaid in full at such time; (iv) prepayments of Eurodollar Loans made
pursuant to this Section 3.01(c) on any date which is not the last day of an
Interest Period applicable thereto shall be accompanied by the payment of all
breakage and similar costs required to be paid as a result thereof pursuant to
Section 1.09; and (v) each prepayment in respect of any Loans shall be applied
pro rata among the Banks (based on the respective outstanding principal
amounts of their outstanding Loans).
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 3.01, on each date after the Closing Date
upon which Communications receives any proceeds from any sale or issuance of
its equity, an amount equal to 50% of the cash proceeds of the respective sale
or issuance (net of all reasonable costs associated therewith, including,
without limitation, all due diligence costs and expenses paid for, or
reimbursed by, Communications, underwriting or similar fees discounts and
commissions, attorneys' fees and expenses paid for, or reimbursed by,
Communications and other direct costs associated therewith) shall be applied
as a mandatory repayment of principal of outstanding Loans in accordance with
the requirements of Section 3.01(e).
(e) Each mandatory repayment of Loans required by this Section
3.01 shall be applied pro rata to the then outstanding principal amount of the
Loans of the various Banks.
(f) In addition to the repayments specified above, (i) Excess
Proceeds Repayments shall be required to be made in accordance with, and to
the extent required by, Section 7.04 and (ii) repayments following the
occurrence of a Change of Control shall be required in accordance with the
provisions of Section 7.06. All repayments pursuant to this clause (i) shall,
except to the extent otherwise expressly provided in the second sentence of
Section 7.06, be applied in accordance with the provisions of Section 3.01(e).
3.02 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Bank or Banks
entitled thereto not later than 12:00 Noon (New York time) on the date when
due and shall be made in Dollars in immediately available funds at the Payment
Office of the Administrative Agent. The Administrative Agent will thereafter
cause to be distributed on the same day (if payment was actually received by
the Administrative Agent prior to 12:00 Noon (New York time) on such day) like
funds relating to the payment of principal, interest or fees ratably to the
Banks entitled thereto. Any payments under this Agreement which are made
later than 12:00 Noon (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day
and, with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
3.03 Net Payments. (a) Except as provided in Section
3.03(e), any and all payments by the Borrower (or any other Credit Party on
its behalf) hereunder, under the Loans or under the Guaranties to or for the
benefit of any Bank or the Administrative Agent shall be made free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings and penalties, interests and all
other liabilities with respect thereto ("Taxes"), excluding, (i) in the case
of each such Bank or the Administrative Agent, taxes imposed on its net income
(including, without limitation, any taxes imposed on branch profits) and
franchise taxes (that are imposed on or computed by reference to net income)
imposed on it by the jurisdiction under the laws of which such Bank or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof, and (ii) in the case of each Bank, taxes imposed on its
net income (including, without limitation, any taxes imposed on branch
profits), and franchise taxes imposed on it, by the jurisdiction of such
Bank's Applicable Lending Office or any political subdivision thereof (all such
nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). Except as
provided in Section 3.03(e), if the Borrower or any Credit Party shall be
required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder, under any Loan or under the Guaranties to or for the
benefit of any Bank or the Administrative Agent, (A) the sum payable shall be
increased as may be necessary so that after making all required deductions of
Covered Taxes (including deductions of Covered Taxes applicable to additional
sums payable under this Section 3.03) such Bank or the Administrative Agent,
as the case may be, receives an amount equal to the sum it would have received
had no such deductions been made, (B) the Borrower shall make such deductions
and (C) the Borrower shall pay the full amount so deducted to the relevant
taxation authority or other authority in accordance with applicable law. If
any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse any Bank, or the Administrative
Agent, within thirty days of the date of the written request of such Bank or
the Administrative Agent, as the case may be, for taxes imposed on or measured
by the net income or profits of such Bank or the Administrative Agent pursuant
to the laws of the jurisdiction in which the principal office or Applicable
Lending Office of such Bank or the Administrative Agent is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or Applicable Lending Office of
such Bank or the Administrative Agent is located and for any withholding of
income or similar taxes imposed by the United States as such Bank or the
Administrative Agent shall determine are payable by, or withheld from, such
Bank or the Administrative Agent in respect of such amounts so paid to or on
behalf of such Bank or the Administrative Agent pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank or
the Administrative Agent pursuant to this sentence ("Second Tier Taxes"). The
written request referred to in the preceding sentence shall certify and set
forth in reasonable detail the calculation of the payment and specify the type
of such Taxes. Any such certificate submitted in good faith to the Borrower
shall, absent manifest error, be final, conclusive and binding on all parties;
provided, however, that notwithstanding any of the foregoing with respect to
the above-referenced calculations, none of the Banks or the Administrative
Agent shall be obligated to provide any information with respect to its
assets, income or operations other than assets, income or operations solely
attributable to this Agreement, any Loan or any Guaranty.
(b) In addition, the Borrower agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies
that arise at any time or from time to time (i) from any payment made under
any and all Credit Documents, (ii) from the transfer of the rights of any Bank
(other than a Defaulting Bank) under any Credit Documents to any transferee
pursuant to Section 1.11, or (iii) from the execution or delivery by the
Borrower of, or from the filing or recording or maintenance of, or otherwise
with respect to the exercise by the Administrative Agent or the Banks of their
rights (subject to the provisions of Section 3.03(a), excluding transfers
pursuant to Section 12.04) under, any and all Credit Documents (hereinafter
referred to as "Other Taxes").
(c) Except as provided in Section 3.03(e), the Borrower shall
indemnify, to the extent not previously withheld and paid to the relevant
taxation authority or other authority in accordance with applicable law, each
Bank and the Administrative Agent for the full amount of (i) Covered Taxes
imposed on or with respect to amounts payable hereunder, (ii) Other Taxes, and
(iii) any Second Tier Taxes (other than Covered Taxes imposed by any
jurisdiction on amounts payable under this Section 3.03) paid by such Bank or
the Administrative Agent, as the case may be, and any liability (including
penalties, interest and expenses) arising solely therefrom or with respect
thereto. Payment of this indemnification shall be made within 30 days from
the date such Bank or the Administrative Agent certifies and sets forth in
reasonable detail the calculation thereof as to the amount and type of such
Taxes. Any such certificate submitted by the Bank or Administrative Agent in
good faith to the Borrower shall, absent manifest error, be final, conclusive
and binding on all parties; provided, however, that notwithstanding any of the
foregoing with respect to the above-referenced calculations, none of the Banks
or the Administrative Agent shall be obligated to provide any information with
respect to its assets, income or operations other than assets, income or
operations solely attributable to this Agreement, any Loan or any Guaranty.
(d) Within 30 days after having received a receipt of Covered
Taxes or Other Taxes, the Borrower will furnish to the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof.
(e) Each Foreign Bank agrees to deliver to each of the
Borrower and the Administrative Agent on or prior to the Closing Date, or in
the case of a Foreign Bank that is an assignee or transferee of an interest
under this Agreement pursuant to Section 1.11 or 12.04 (unless the respective
Foreign Bank was already a Bank hereunder immediately prior to such assignment
or transfer), on or prior to the date of such assignment or transfer to such
Foreign Bank, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such
Foreign Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under any and all Credit
Documents or (ii) if the Foreign Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above with respect to any
payments of interest, (x) a certificate substantially in the form of Exhibit C
(any such certificate, a "Section 3.03(e) Certificate") and (y) two accurate
and complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Foreign Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under any and all Credit Documents. In addition, each
Foreign Bank agrees that from time to time after the Closing Date, when a
lapse in time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the
Borrower and the Administrative Agent two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a
Section 3.03(e) Certificate, as the case may be, and such other forms and
statements as may be required in order to confirm or establish the entitlement
of such Foreign Bank to a continued exemption from or reduction in United
States withholding tax with respect to payments under any and all Credit
Documents or it shall immediately notify the Borrower and the Administrative
Agent of its inability to deliver any such Form or Certificate, in which case
such Foreign Bank shall not be required to deliver any such Form or Certificate
pursuant to this Section 3.03(e). Notwithstanding anything to the contrary
contained in Section 3.03(a) and (c), but subject to the immediately
succeeding sentence, (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder for
the account of any Foreign Bank for U.S. Federal income tax purposes to the
extent that such Foreign Bank has not provided to the Borrower Internal Revenue
Service Forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to Section
3.03(a) and (c) hereof to indemnify or to gross-up payments to be made to a
Foreign Bank in respect of income or similar taxes imposed by the United
States if (I) such Foreign Bank has not provided to the Borrower the forms or
statements required to be provided to the Borrower pursuant to this Section
3.03(e) or (II) in the case of a payment, other than interest, to a Foreign
Bank described in clause (ii) above, to the extent that such forms or
statements do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 3.03 and except as set forth in Section
12.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank or the Administrative Agent in the manner set forth in Section 3.03(a)
and (c) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
after the Closing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
(f) If any Taxes for which the Borrower would be required to
make payment under this Section 3.03 are imposed, the Bank or the
Administrative Agent, as the case may be, shall use its reasonable best
efforts to avoid or reduce such Taxes by taking any appropriate action
(including, without limitation, assigning its rights hereunder to a related
entity or a different office) which would not in the sole opinion of such Bank
or Administrative Agent be otherwise disadvantageous to such Bank or
Administrative Agent, as the case may be.
(g) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.03 shall survive the payment in full of the
Obligations.
(h) If the Borrower pays any additional amount under this
Section 3.03 to a Bank and such Bank determines in its sole discretion that it
has actually received or realized in connection therewith any refund or any
reduction of, or credit against, its liabilities with respect to Taxes in or
with respect to the taxable year in which the additional amount is paid, such
Bank shall pay to the Borrower an amount that the Bank shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was
obtained by the Bank in such year as a consequence of such refund, reduction
or credit.
(i) Notwithstanding any provision of this Agreement to the
contrary, Section 3.03 is the only provision of this Agreement that requires
the Borrower (or any Credit Party) to make any payment to a Bank, the
Administrative Agent or any of their successors and assigns, by reason of any
Tax imposed upon a Bank, the Administrative Agent or any of their successors
and assigns.
SECTION 4. Conditions Precedent. The obligation of each
Bank to make Loans on the Closing Date, is subject to the satisfaction of the
following conditions:
4.01 Execution of Agreement; Notes. On or prior to the
Closing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Banks the appropriate Note executed by the Borrower, in each case in the
amount, maturity and as otherwise provided herein.
4.02 No Default; Representations and Warranties. On the
Closing Date and after giving effect to the Loans made on such date, (i) there
shall exist no Default or Event of Default and (ii) all representations and
warranties contained herein and in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on the Closing Date (it being
understood and agreed that any representation or warranty which by its terms
is made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date).
4.03 Opinions of Counsel. On the Closing Date, the
Administrative Agent shall have received (i) from Shearman & Sterling, special
counsel to the Credit Parties, an opinion addressed to the Administrative
Agent, the Collateral Agent and each of the Banks and dated the Closing Date
in the form set forth as Exhibit D-1 and (ii) from Timothy M. Davis, Esq.,
General Counsel to Communications and the Borrower, an opinion addressed to
the Administrative Agent, the Collateral Agent and each of the Banks and dated
the Closing Date in the form set forth as Exhibit D-2. Without limiting the
foregoing, Shearman & Sterling's opinion as required pursuant to the
immediately preceding sentence shall contain an unqualified opinion, in form
satisfactory to the Administrative Agent, to the effect that all Loans and
related Obligations constitute "Senior Indebtedness" under, and as defined in,
the Senior Subordinated Notes Indenture.
4.04 Corporate Documents; Proceedings; etc. (a) On the
Closing Date, the Administrative Agent shall have received a certificate of
each Credit Party, dated the Closing Date, signed by an Authorized Officer of
such Credit Party, and attested to by the Secretary or any Assistant Secretary
of such Credit Party, in the form of Exhibit E with appropriate insertions,
together with copies of the certificate of incorporation (or equivalent
organizational document) and by-laws of such Credit Party and the resolutions
of such Credit Party referred to in such certificate, and the foregoing shall
be reasonably acceptable to the Administrative Agent.
(b) All corporate and legal proceedings and all instruments
and agreements in connection with the transactions contemplated by this
Agreement and the other Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent and the Required Banks, and the
Administrative Agent shall have received all information and copies of all
documents and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams or facsimiles,
if any, which the Administrative Agent reasonably may have requested in
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.
4.05 Adverse Change, etc. (a) On or prior to the Closing
Date, nothing shall have occurred (and neither the Administrative Agent nor
the Banks shall have become aware of any facts, conditions or other
information not previously known) which the Administrative Agent or the
Required Banks shall determine could reasonably be expected to have a material
adverse effect on the rights or remedies of the Administrative Agent or the
Banks, or on the ability of any Credit Party to perform its obligations to the
Administrative Agent and the Banks or which could reasonably be expected to
have a Material Adverse Effect.
(b) All necessary governmental (domestic and foreign) and
third party approvals and/or consents in connection with the making of the
Loans and the Transaction, the other transactions contemplated by the
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains,
prevents, or imposes materially adverse conditions upon, the consummation of
the Transaction or the other transactions contemplated by the Documents or
otherwise referred to herein or therein. Additionally, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the Transaction or
the other transactions contemplated by the Documents.
4.06 Litigation. On the Closing Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect
to this Agreement, any other Document or any documentation executed in
connection herewith or therewith or the transactions contemplated hereby or
thereby, or which the Administrative Agent or the Required Banks shall
determine could reasonably be expected to have a Material Adverse Effect.
4.07 Subsidiaries Guaranty. On the Closing Date, each of the
Wholly-Owned Restricted Subsidiaries of the Borrower, as well as any other
Restricted Subsidiary of the Borrower which has guaranteed outstandings
pursuant to the Existing Credit Agreement, shall have duly authorized,
executed and delivered a Subsidiaries Guaranty in the form of Exhibit G (as
modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, the "Subsidiaries Guaranty"), and the Subsidiaries
Guaranty shall be in full force and effect.
4.08 Existing Pledge Agreement Amendment. On the Closing
Date, the parties to the Existing Pledge Agreement shall have duly authorized,
executed and delivered an amendment thereto in the form of Exhibit H-2 (the
"Existing Pledge Agreement Amendment"), which amendment shall be in full force
and effect. Without limiting the foregoing, the consent of the requisite
lenders pursuant to the Existing Credit Agreement shall have been obtained to
the amendment of the Existing Pledge Agreement as required above.
4.09 Existing Security Agreement Amendment. On the Closing
Date, the parties thereto shall have duly authorized, executed and delivered
an amendment to the Existing Security Agreement in the form of Exhibit I-2
(the "Existing Security Agreement Amendment"), which amendment shall be in
full force and effect. Without limiting the foregoing, the consent of the
requisite lenders pursuant to the Existing Credit Agreement shall have been
obtained to the amendment of the Existing Security Agreement as required above.
4.10 Mortgage Amendments; etc. On or prior to the Closing
Date, the Collateral Agent shall have received:
(i) fully executed counterparts of amendments (the "Mortgage
Amendments"), in form and substance satisfactory to the
Administrative Agent and the Required Banks, to each of the
Existing Mortgages, together with evidence that counterparts of
each of the Mortgage Amendments have been delivered to the
title company insuring the Lien of the Existing Mortgages for
recording in all places to the extent necessary or desirable,
in the judgment of the Collateral Agent, effectively to
maintain a valid and enforceable first priority mortgage lien
(subject to Permitted Encumbrances relating thereto) on the
Existing Mortgaged Properties in favor of the Collateral Agent
(or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors; and
(ii) endorsements reasonably satisfactory to the Collateral
Agent to each Existing Mortgage Policy assuring the Collateral
Agent that each Existing Mortgage is a valid and enforceable
first priority mortgage lien on the respective Existing
Mortgaged Properties, free and clear of all defects and
encumbrances except Permitted Encumbrances.
4.11 Canadian Debenture and Pledge Agreement. On the Closing
Date, the parties thereto shall have entered into amendments, in the form of
Exhibits K-3 and K-4 hereto, respectively, to the Existing Canadian Debenture
(the "Existing Canadian Debenture Amendment") and the Existing Canadian Pledge
Agreement (the "Existing Canadian Pledge Agreement Amendment"), and shall have
taken such actions in connection therewith (including making any required
filings under the PPSA of the relevant jurisdictions or otherwise) as may be
determined by the Collateral Agent to be necessary or desirable in connection
therewith.
4.12 Form of Collateral Assignments of Rights. On the Closing
Date, the form of the Collateral Assignment of Rights pursuant to the Existing
Credit Agreement shall be amended, so that all such Collateral Assignments of
Rights executed and delivered after the Closing Date shall be in the form of
Exhibit L hereto.
4.13 Lockbox, Blocked Account and Concentration Account
Agreements. On the Closing Date, all Lockbox Agreements, Blocked Account
Agreements and Concentration Account Agreements previously entered into with
respect to the Existing Credit Agreement (and which remain in effect on the
Closing Date) shall be modified so that same are in the forms of Exhibits M-1,
M-2 and M-3, respectively, hereto.
4.14 Collateral Access Agreements. On the Closing Date, the
Borrower shall have caused all Existing Credit Agreement Collateral Access
Agreements to be replaced with Collateral Access Agreements in the form of
Exhibit N hereto.
4.15 Amendment to the Existing Credit Agreement. On or prior
to the Closing Date, the Existing Credit Agreement shall have been amended
pursuant to an amendment in form and substance satisfactory to the
Administrative Agent and the Required Banks. Without limiting the foregoing,
such amendment shall authorize the modifications to the Collateral Documents
previously delivered pursuant to the Existing Credit Agreement, as required by
preceding Section 4.08 through 4.14, inclusive.
4.16 Solvency Certificate. On the Closing Date, there shall
have been delivered to the Administrative Agent a solvency certificate in the
form of Exhibit F from the chief financial officer of the Borrower and dated
the Closing Date.
4.17 Notice of Borrowing. Prior to the making of any Loan on
the Closing Date, the Administrative Agent shall have received a Notice of
Borrowing meeting the requirements of Section 1.02(a).
4.18 Fees, etc. On the Closing Date, the Borrower shall have
paid to the Administrative Agent and each Bank all costs, fees and expenses
(including, without limitation, reasonable legal fees and expenses) payable to
the Administrative Agent and such Bank to the extent then due.
SECTION 5. Representations, Warranties and Agreements. To
induce the Banks to enter into this Agreement and to make Loans provided for
herein, each of Communications and the Borrower makes the following
representations, warranties and agreements, as to itself and as to each of its
Restricted Subsidiaries, with the Banks, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans:
5.01 Corporate Status. Each Credit Party (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate power and authority
to own its property and assets and to transact the business in which it is
engaged and presently proposes to engage and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified except where the failure to be so qualified,
when aggregated with all other such failures, would not reasonably be expected
to have a Material Adverse Effect.
5.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party
and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting the rights and remedies of creditors, (ii) federal
securities or other laws or regulations or public policy insofar as they may
restrict the enforceability of rights to indemnification and (iii) general
principles of equity (regardless of whether enforcement is sought in equity or
at law).
5.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will, after giving
effect to any waivers, conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Collateral
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of such Credit
Party or any of its Restricted Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which
such Credit Party or any of its Restricted Subsidiaries is a party or by which
it or any of its property or assets are bound or to which it may be subject
(including without limitation the Existing Credit Agreement and the Senior
Subordinated Notes Indenture) or (iii) will violate any provision of the
charter or By-Laws of Communications, the Borrower or any of the Borrower's
Restricted Subsidiaries, except, in the case of clauses (i) and (ii) any
immaterial contravention, conflict, inconsistency, breach or default (but not
under the Existing Credit Agreement or the Senior Subordinated Notes
Indenture) which is not reasonably likely to adversely affect any Bank or have
a Material Adverse Effect.
5.04 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened with respect to
Communications, the Borrower or any of the Borrower's Restricted Subsidiaries
that, after giving effect to expected insurance proceeds and indemnity
payments, are reasonably likely to have a Material Adverse Effect.
5.05 Use of Proceeds. (a) The proceeds of the Loans shall be
utilized (i) to pay certain fees and expenses owing in relation to this
Agreement and the extensions of credit hereunder and (ii) to repay outstanding
Revolving Loans under, and as defined in, the Existing Credit Agreement.
(b) No part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
5.06 Governmental Approvals. Except as set forth on Schedule
II hereto and except for the filing of the Mortgage Amendments and the filing
of continuation statements as required under the Collateral Documents, no
order, consent, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any foreign or domestic
governmental or public body or authority, or any subdivision thereof, is
required to authorize or is required in connection with (i) the execution,
delivery and performance by each Credit Party of any Credit Document or (ii)
the legality, validity, binding effect or enforceability of any Credit
Document as against each Credit Party thereto.
5.07 Investment Company Act. None of Communications, the
Borrower or any of the Borrower's Restricted Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. None of
Communications, the Borrower or any of the Borrower's Restricted Subsidiaries
is a "holding company," or a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.09 True and Complete Disclosure. As of the Closing Date,
there is no fact known to any Credit Party (other than matters of general
economic, political or social nature) which materially and adversely affects
the business, property, assets, liabilities, financial condition or prospects
of the Borrower and its Restricted Subsidiaries taken as a whole which has not
been disclosed herein or in such other documents, certificates and statements
furnished to the Banks for use in connection with the transactions
contemplated hereby.
5.10 Financial Condition; Financial Statements. (a) On and as
of the Closing Date on a pro forma basis after giving effect to the
Transaction and all Indebtedness incurred, and to be incurred, and Liens
created and to be created, by each Credit Party in connection with this
Agreement, (w) the value of the assets the Borrower, and of the Borrower and
its Restricted Subsidiaries on a consolidated basis, at a fair valuation,
would exceed the debts and liabilities, subordinated, contingent or otherwise,
of the Borrower, and of the Borrower and its Restricted Subsidiaries on a
consolidated basis, (x) the fair salable value of the property of the
Borrower, and of the Borrower and its Restricted Subsidiaries on a
consolidated basis, will be greater than the amount that will be required to
pay the probable liability of the Borrower, and of the Borrower and its
Restricted Subsidiaries on a consolidated basis, on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured, (y) the Borrower, and the Borrower
and its Restricted Subsidiaries on a consolidated basis, will be able to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, and (z) the Borrower, and
the Borrower and its Restricted Subsidiaries on a consolidated basis, will not
have unreasonably small capital with which to conduct the businesses in which
they are engaged as such businesses are now conducted and are proposed to be
conducted following the Closing Date.
(b) Communications has furnished to the Banks the following
financial statements, which have been prepared in accordance with GAAP
consistently applied throughout the periods involved: (i) Communications'
consolidated balance sheet as of, and consolidated statements of operations,
shareholders' equity and cash flows for the fiscal years ended, March 31, 1996
and March 31, 1997, in each case, audited by the Auditors, and accompanied by
an unqualified opinion thereof. After giving effect to the Transaction, since
March 31, 1997, there has occurred no Material Adverse Effect, and nothing has
occurred which is reasonably likely to result in a Material Adverse Effect.
5.11 Locations of Offices, Records and Inventory. The address
of the principal place of business and chief executive office of
Communications and the Borrower as of the date hereof and as of the Closing
Date is set forth on Schedule III. The books and records of the Borrower, and
all of its chattel paper and records of Accounts, are maintained exclusively
at the locations listed on Schedule III. As of the date hereof and as of the
Closing Date, there is no jurisdiction in which the Borrower has any chattel
paper, records of Account and Inventory (except for Inventory in transit)
other than those jurisdictions identified on Schedule III. Schedule III also
contains a complete list of the legal names and addresses of each facility or
warehouse at which Inventory is stored as of the date hereof and as of the
Closing Date. None of the receipts received by the Borrower from any
warehouseman states that the goods covered thereby are to be delivered to
bearer or to the order of a named person other than the Borrower or its
Restricted Subsidiaries or to a named person and such named person's assigns.
5.12 Fictitious Business Names. Except as set forth in
Schedule IV, no Credit Party has used any corporate or fictitious name since
August 1, 1990, other than the corporate name shown on its Governing Documents.
5.13 Security Interests. On and after the Closing Date, each
of the Collateral Documents create, as security for the Obligations, a valid
and enforceable perfected security interest in and Lien on all of the
Collateral, superior to and prior to the rights of all third persons and
subject to no other Liens, other than Liens Permitted by this Agreement and
under the Collateral Documents. At all times on or after the Closing Date,
the respective grantor under each Collateral Document shall have good and
marketable title to all the Collateral subject thereto free and clear of all
Liens other than Liens permitted under this Agreement. No filings or
recordings are required in order to perfect the security interests created
under any Collateral Document except for filings or recordings made as
required in connection with any such Collateral Document.
5.14 Tax Returns and Payments. Each of Communications, the
Borrower and each of their respective Subsidiaries has timely filed or caused
to be timely filed with the appropriate taxing authority, all material returns
and other material statements, forms and reports for taxes required to be
filed by or with respect to the income, properties or operations of
Communications, the Borrower and/or any of their respective Subsidiaries.
Such returns accurately reflect all liability for material taxes of
Communications, the Borrower and their respective Subsidiaries for the periods
covered thereby. Each of Communications, the Borrower and their respective
Subsidiaries has paid all material taxes payable by it other than taxes which
are not yet due and payable, and other than those contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles. Except as provided in Schedule V, there is no
material action, suit, proceeding, investigation, audit, or claim now pending
or, to the knowledge of Communications or the Borrower, threatened by any
authority regarding any taxes relating to Communications, the Borrower or any
of their respective Subsidiaries. Except as provided in Schedule V, as of the
Closing Date, none of Communications, the Borrower or any of their respective
Subsidiaries has entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of limitations
relating to the payment or collection of material taxes of Communications, the
Borrower or any of their respective Subsidiaries, or is aware of any
circumstances that would cause the taxable years or other taxable periods of
Communications, the Borrower or any of their respective Subsidiaries not to be
subject to the normally applicable statute of limitations. None of
Communications, the Borrower or any of their respective Subsidiaries have
provided, with respect to themselves or property held by them, any consent
under Section 341 of the Code. None of Communications, the Borrower or any of
their respective Subsidiaries has incurred, or will incur, any material tax
liability with respect to the Transaction and the other transactions
contemplated hereby.
5.15 Compliance with ERISA. Except to the extent that all
events and obligations described in the following clauses of this Section 5.15
and then in existence would not, in the aggregate, be reasonably likely to
have a Material Adverse Effect; (i) each Plan (other than a Multiemployer
Plan) is in substantial compliance with ERISA and the Code; to the knowledge
of Communications, the Borrower, any Subsidiary of Communications, or any
ERISA Affiliate, each Multiemployer Plan is in substantial compliance with
ERISA and the Code; no Reportable Event has occurred with respect to a Plan
(other than a Multiemployer Plan); no Multiemployer Plan is insolvent (as
defined in Section 4245 of ERISA) or in reorganization (as defined in Section
4241 of ERISA); no Plan (other than a Multiemployer Plan) has an Unfunded
Current Liability; no Plan (other than a Multiemployer Plan) has an
accumulated or waived funding deficiency or has applied for an extension of
any amortization period within the meaning of Section 412 of the Code or
Section 302 of ERISA; all contributions required to be made with respect to a
Plan and a Foreign Pension Plan have been timely made; neither Communications
nor the Borrower nor any Subsidiary of Communications nor any ERISA Affiliate
has incurred any liability which as of the date hereof has not been fully
satisfied, to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability
under any of the foregoing Sections with respect to any Plan; no proceedings
have been instituted to terminate or appoint a trustee to administer any Plan;
no condition exists which presents a material risk to Communications, the
Borrower or any Subsidiary of Communications or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, there would
be no liabilities of Communications, the Borrower, any Subsidiaries and any
ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom,
as of the close of the most recent fiscal year of each such Plan ended prior
to the Closing Date, which would result in a Material Adverse Effect; no lien
imposed under the Code or ERISA on the assets of Communications or any
Subsidiary of Communications or any ERISA Affiliate exists or is likely to
arise on account of any Plan; and Communications and its Subsidiaries do not
maintain or contribute to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA) the
obligations with respect to which could reasonably be expected to have a
Material Adverse Effect. With respect to Plans that are Multiemployer Plans the
representations and warranties in this Section 5.15, other than any made with
respect to liability under Section 4201 or 4204 of ERISA, are made to the
knowledge of the Borrower.
(ii) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. Neither Communications, nor the Borrower nor any of their
Subsidiaries has incurred any obligation in connection with the termination of
or withdrawal from any Foreign Pension Plan. No Foreign Pension Plan has any
unfunded liabilities, either on a "going concern" or on a "winding up" basis
and determined in accordance with all applicable laws and actuarial practices
and using actuarial assumptions and methods that are reasonable in the
circumstances. No event has occurred or will occur and no condition exists or
will exist with respect to any Foreign Pension Plan that has resulted or could
reasonably be expected to result in any Foreign Pension Plan having its
registration revoked or being wound up (in whole or in part) or refused for
the purposes of any applicable pension benefits or tax laws or being placed
under the administration of any relevant pension benefits regulatory authority
or being required to pay any taxes or penalties under any applicable pension
benefits or tax laws.
5.16 Subsidiaries. Schedule VI hereto lists each Subsidiary
of the Borrower, and the direct and indirect ownership interest of the
Borrower therein, in each case existing on the Closing Date. Communications
is the record and beneficial owner of 100% of the capital stock of the
Borrower. On the Closing Date, the only material asset of Communications is
the capital stock of the Borrower owned by it, and on such date Communications
owns no other capital stock of any other Person.
5.17 Patents, etc. Communications and each of its Restricted
Subsidiaries have obtained all material patents, trademarks, servicemarks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their respective
businesses as presently conducted and as proposed to be conducted except where
a failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.18 Compliance with Statutes, etc. (a) Each of
Communications, the Borrower and the Borrower's Restricted Subsidiaries is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property, except such noncompliances as are not likely to, in the aggregate,
have a Material Adverse Effect.
(b) Except as set forth in the Offering Memorandum, each of
Communications, the Borrower and the Borrower's Restricted Subsidiaries is in
compliance with all applicable Environmental Laws governing its business for
which failure to comply is likely to have a Material Adverse Effect, and none
of Communications, the Borrower or any of the Borrower's Restricted
Subsidiaries is liable for any material penalties, fines or forfeitures for
failure to comply with any of the foregoing in the manner set forth above.
All licenses, permits, registrations or approvals required for the business
of Communications, the Borrower and each of the Borrower's Restricted
Subsidiaries, as conducted as of the Closing Date, under any Environmental Law
have been secured and each of Communications, the Borrower and the Borrower's
Restricted Subsidiaries is in material compliance therewith, except such
licenses, permits, registrations or approvals the failure to secure or to
comply therewith is not likely to have a Material Adverse Effect. None of
Communications, the Borrower or any of the Borrower's Restricted Subsidiaries
is in any respect in noncompliance with, breach of or default under any
applicable writ, order, judgment, injunction, or decree to which any of
Communications, the Borrower or such Restricted Subsidiary is a party or which
would affect the ability of Communications, the Borrower or such Restricted
Subsidiary to operate its business or other Real Property and no event has
occurred and is continuing which, with the passage of time or the giving of
notice or both, would be reasonably likely to constitute noncompliance, breach
of or default thereunder, except in each such case, such noncompliances,
breaches or defaults as are not likely to, in the aggregate, have a Material
Adverse Effect. Except as set forth in the Offering Memorandum delivered to
the Administrative Agent, there are as of the Closing Date no Environmental
Claims pending or, to the best knowledge of the Borrower, threatened, which
(a) question the validity, term or entitlement of Communications, the Borrower
or any of the Borrower's Restricted Subsidiaries for any permit, license,
order or registration required for the operation of any facility which
Communications, the Borrower or any of the Borrower's Restricted Subsidiaries
currently operates and (b) wherein an unfavorable decision, ruling or finding
would be reasonably likely to have a Material Adverse Effect. To the best
knowledge of the Borrower, there are no facts, circumstances, conditions or
occurrences on any Real Property of Communications, the Borrower or any of the
Borrower's Restricted Subsidiaries or on any property adjoining or adjacent to
any such Real Property, that are reasonably expected (i) to form the basis of
an Environmental Claim against Communications, the Borrower any of the
Borrower's Restricted Subsidiaries or any Real Property of Communications, the
Borrower or any of the Borrower's Restricted Subsidiaries, or (ii) to cause
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually or in the aggregate are not likely to have a
Material Adverse Effect.
(c) Except as set forth in the Offering Memorandum, Hazardous
Materials have not at any time been (i) generated, used, treated or stored on,
or transported to or from, by Communications, the Borrower or any of the
Borrower's Restricted Subsidiaries, any Real Property of Communications, the
Borrower or any of the Borrower's Restricted Subsidiaries, except Hazardous
Materials generated, used, treated or stored on, or transported to or from,
any Real Property of Communications, the Borrower or any of the Borrower's
Restricted Subsidiaries in the ordinary course of business and in compliance
with Environmental Laws ("Permitted Materials") or (ii) released or disposed
of (not including the sale of Inventory) on any such Real Property in
violation of any Environmental Laws or in any quantity or amount which would
require any clean-up, removal, treatment or remediation, in each case where
such occurrence or event is likely to have a Material Adverse Effect.
5.19 Properties. Communications and each of its Restricted
Subsidiaries has good title to all material properties owned by it free and
clear of all Liens, other than as permitted by this Agreement. Schedule VII
contains a true and complete list of each Real Property owned, if any, and
each Real Property leased by Communications, the Borrower or any of the
Borrower's Restricted Subsidiaries on the Closing Date and the type of
interest therein held by Communications, the Borrower or the respective such
Restricted Subsidiary.
5.20 Labor Relations; Collective Bargaining Agreements. (a)
Set forth on Schedule VIII hereto is a list (including dates of termination)
of all collective bargaining or similar agreements between or applicable to
the Borrower or any of its Restricted Subsidiaries and any union, labor
organization or other bargaining agent in respect of the employees of the
Borrower and/or any of its Restricted Subsidiaries on the Closing Date.
(b) Neither the Borrower nor any of its Restricted
Subsidiaries is engaged in any unfair labor practice that is reasonably likely
to have a Material Adverse Effect. There is (i) no significant unfair labor
practice complaint pending against Communications, the Borrower or any of the
Borrower's Restricted Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of them, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of
or under any collective bargaining agreement is pending on the Closing Date
against Communications, the Borrower or any of the Borrower's Restricted
Subsidiaries or, to the best knowledge of the Borrower, threatened against any
of them, (ii) no significant strike, labor dispute, slowdown or stoppage is
pending against Communications, the Borrower or any of the Borrower's
Restricted Subsidiaries or, to the best knowledge of the Borrower, threatened
against Communications, the Borrower or any of the Borrower's Restricted
Subsidiaries, except (with respect to any matter specified in clause (i) and
(ii) above, either individually or in the aggregate) such as is not reasonably
likely to have a Material Adverse Effect.
5.21 Restrictions on Restricted Subsidiaries. Except for
restrictions contained in the Credit Documents, the Existing Credit Agreement
Documents, the Senior Subordinated Note Documents and in agreements with
respect to the Existing Indebtedness, as of the Closing Date there are no
contractual or consensual restrictions on the Borrower or any of its
Wholly-Owned Restricted Subsidiaries which prohibit or otherwise restrict (i)
the transfer of cash or other assets (x) between the Borrower and any of its
Wholly-Owned Restricted Subsidiaries or (y) between any Restricted
Subsidiaries of the Borrower or (ii) the ability of the Borrower or any of its
Wholly-Owned Restricted Subsidiaries to grant security interests to the Banks
in the Collateral.
5.22 Material Contracts. Neither the Borrower nor any of its
Restricted Subsidiaries is in breach of or in default under any Material
Contract.
5.23 Senior Indebtedness, etc. All Obligations pursuant to
this Agreement constitute "Senior Indebtedness" under, and as defined in, and
for all purposes of, the Senior Subordinated Notes Indenture. The Borrower
and its Restricted Subsidiaries have not more than $1.0 million of outstanding
Indebtedness under Section 4.03(b)(xiv) of the Senior Subordinated Notes
Indenture (other than Indebtedness pursuant to this Agreement). $24.0 million
of Indebtedness pursuant to this Agreement is permitted under Section
4.03(b)(xiv) of the Senior Subordinated Notes Indenture and $1.0 million of
Indebtedness pursuant to this Agreement is permitted under Section 4.03(b)(i)
of the Senior Subordinated Notes Indenture.
5.24 Existing Collateral Documents. True and correct copies,
as same are in effect on the Closing Date but before giving effect to the
amendments thereto required pursuant to Section 4 hereof, of each of (i) the
Existing Pledge Agreement is set forth as Exhibit H-1, (ii) the Existing
Security Agreement is set forth as Exhibit I-1, (iii) the Existing Canadian
Debenture is set forth as Exhibit K-1 and (iv) the Existing Canadian Pledge
Agreement is set forth as Exhibit K-2.
SECTION 6. Affirmative Covenants. Communications and the
Borrower hereby covenant and agree that on the Closing Date and thereafter,
for so long as this Agreement is in effect and until the Total Commitments
have terminated, no Notes are outstanding and the Loans, together with
interest, Fees, Expenses and all other Obligations (other than any indemnities
described in Section 12.01 hereof which are not then due and payable) incurred
hereunder, are paid in full:
6.01 Financial Information. Communications and the Borrower
shall furnish to, or cause to be furnished to, the Banks the following
information within the following time periods:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Communications or the Borrower, as the
case may be, (i) audited Financial Statements as of the close of the
fiscal year and for the fiscal year, together with a comparison to
the Financial Statements for the prior year, in each case accompanied
by (A) report thereon of the Auditors unqualified as to scope, which
report shall state that such consolidated financial statements fairly
present the consolidated financial position of Communications or the
Borrower, as the case may be, and each of its consolidated
Subsidiaries as at the date indicated and the results of their
operations and cash flow for the periods indicated in conformity with
GAAP (except as otherwise stated therein) and that the examination by
the Auditors has been made in accordance with generally accepted
auditing standards and (B) a written statement signed by the Auditors
stating that in the course of the regular audit of the business of
Communications and the Borrower, which audit was conducted by the
Auditors in accordance with generally accepted auditing standards,
the Auditors have not obtained any knowledge of the existence of any
Default or Event of Default under any provision of Sections 7.01 and
7.02 of this Agreement, or, if such Auditors shall have obtained from
such examination any such knowledge, they shall disclose in such
written statement the existence of the Default or Event of Default
and the nature thereof, it being understood that such Auditors shall
not be required hereunder to perform any special audit procedures and
shall have no liability, directly or indirectly, to anyone for
failure to obtain knowledge of any such Default or Event of Default
and (ii) a compliance certificate substantially in the form of
Exhibit O along with a schedule in form reasonably satisfactory to
the Administrative Agent of the calculations used in determining, as
of the end of such fiscal year, whether the Borrower was in
compliance with the covenants set forth in Section 7 of this
Agreement for such year. To the extent that Communications' or the
Borrower's, as the case may be, annual report on Form 10-K contains
any of the foregoing items, the Banks will accept such Form 10-K in
lieu of such items required to be furnished by Communications or the
Borrower, as the case may be;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of Communications or the Borrower, as
the case may be, (except the last fiscal quarter of any fiscal year),
(i) Financial Statements as at the end of such period and for the
fiscal year to date, together with a comparison to the Financial
Statements for the same periods in the prior year, all in reasonable
detail and duly certified (subject to the addition of footnotes and
audit and normal year-end adjustments) by the chief executive
officer, chief financial officer or vice president - corporate
controller of Communications or the Borrower, as the case may be, as
having been prepared substantially in accordance with GAAP and (ii) a
compliance certificate substantially in the form of Exhibit O along
with a schedule in form reasonably satisfactory to the Administrative
Agent of the calculations used in determining, as of the end of such
fiscal quarter, whether the Borrower was in compliance with the
covenants set forth in Section 7 of this Agreement for such quarter.
To the extent that Communications' or the Borrower's, as the case may
be, quarterly report on Form 10-Q contains any of the foregoing
items, the Banks will accept such Form 10-Q in lieu of such items
required to be furnished by Communications or the Borrower, as the
case may be;
(c) promptly and in any event within five Business Days after
becoming aware of the occurrence of a Default or Event of Default, a
certificate of the chief executive officer or chief financial officer
of the Borrower specifying the nature thereof and the Borrower's
proposed response thereto, each in reasonable detail; and
(d) promptly upon the earlier of the mailing or filing
thereof, copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual
reports, quarterly reports, registration statements and any other
filings or other communications made by the either of the Borrower or
Communications to holders of its publicly traded securities, to the
holders of its Senior Subordinated Notes or the Securities Exchange
Commission from time to time pursuant to the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended.
6.02 Corporate Franchises. Communications will, and will
cause each of its Restricted Subsidiaries to, do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence,
material rights and authority to do business, provided that any transaction
permitted by Section 7 will not constitute a breach of this Section 6.02 and
provided further that Communications shall not be required to preserve, with
respect to itself, any material right or authority to do business and with
respect to any of its Restricted Subsidiaries, any such existence, material
right or authority to do business if Communications shall reasonably determine
that such preservation is no longer desirable in the ordinary course of
business, and the loss thereof shall not be reasonably likely to have a
Material Adverse Effect.
6.03 Compliance with Statutes, etc. Communications and the
Borrower will, and will cause each of their respective Restricted Subsidiaries
to, comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable Environmental Laws) other than those the
non-compliance with which (individually or in the aggregate) would not have
a Material Adverse Effect. Neither Communications nor any of its Restricted
Subsidiaries will generate, use, treat, store, release or dispose of, or
permit the generation, use, treatment, storage, release or disposal of
Hazardous Materials on any of its Real Property, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property,
except for quantities used or stored at such Real Properties in material
compliance with all applicable Environmental Laws and required in connection
with the normal operation, use and maintenance of such Real Property or the
operation of the business of the Borrower and its Restricted Subsidiaries. If
required to do so under any applicable Environmental Law, the Borrower agrees
to undertake, and agrees to cause each of its Restricted Subsidiaries to
undertake, any cleanup, removal, remedial or other action necessary to remove
and clean up any Hazardous Materials from any Real Property in accordance with
the requirements of all such applicable Environmental Laws and in accordance
with orders and directives of all governmental authorities; provided that
neither Communications nor any of its Restricted Subsidiaries shall be
required to take any such action where same is being contested by appropriate
legal proceedings in good faith by Communications or such Restricted
Subsidiary.
6.04 ERISA. As soon as possible and, in any event, within
fifteen (15) days after Communications, the Borrower or any of the Borrower's
Subsidiaries or any ERISA Affiliate knows or has reason to know of the
occurrence of any of the following events relating to a Plan, the Borrower
will deliver to each of the Banks a certificate of the chief financial officer
of the Borrower setting forth details as to such occurrence and the action, if
any, that Communications, the Borrower, such Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required
to be given to or filed with or by Communications, the Borrower, such
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred
(other than with respect to a Plan which is a Multiemployer Plan) which could
reasonably be expected to result in material liability of Communications, the
Borrower, any of the Borrower's Subsidiaries or any ERISA Affiliate; that,
with respect to a Plan, an accumulated funding deficiency has been incurred or
an application will be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code or Section 302 of ERISA with respect to a Plan; that a
contribution required to be made to a Plan or Foreign Pension Plan by
Communications, the Borrower, any of the Borrower's Subsidiaries or any ERISA
Affiliate has not been timely made; that a Plan has been or is reasonably
expected to be terminated; that a Plan that is a Multiemployer Plan has been
or is reasonably expected to be reorganized, partitioned or declared insolvent
under Title IV of ERISA; that a Plan, which is not a Multiemployer Plan, has
an Unfunded Current Liability giving rise to a lien under ERISA or the Code;
that proceedings may be or have been instituted to terminate a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution of Communications, the Borrower, any of the Borrower's
Subsidiaries or any ERISA Affiliate to a Plan; or that Communications, the
Borrower, any Subsidiary or any ERISA Affiliate will or is reasonably expected
to incur any material liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or
Section 409 or 502(i) or 502(l) of ERISA; or that Communications, the Borrower
or any Subsidiary may incur any material liability pursuant to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA) as a result of the adoption or amendment of
any such plan. Upon the request of the Administrative Agent, Communications
will deliver to each of the Banks a complete copy of the annual report (Form
5500) of each Plan required to be filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Banks pursuant to the
first sentence hereof, copies of any material notices received by
Communications, the Borrower, any Subsidiary of Communications or the Borrower
or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall
be delivered to the Banks no later than 15 Business Days after the date such
notice has been received by Communications, the Borrower or such Subsidiary or
the ERISA Affiliate, as applicable.
6.05 Good Repair. The Borrower will, and will cause each of
its Restricted Subsidiaries to, ensure that its material properties and
equipment used or useful in its business in whomsoever's possession they may
be, are kept in good repair, working order and condition, normal wear and tear
excepted, provided that violations of the foregoing provisions of this Section
6.05 shall not constitute a breach of this covenant unless such violations,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
6.06 Additional Security; Further Assurances; etc. (a) If at
any time Communications, the Borrower or any of their respective Restricted
Subsidiaries grant a security interest in any of their assets or properties to
support extensions of credit pursuant to the Existing Credit Agreement (as
same is in effect from time to time), then Communications and the Borrower
will, or will cause the respective Restricted Subsidiary to, provide for the
granting of a security interest in such assets or properties to secure the
Obligations pursuant to this Agreement, on substantially the same basis as is
provided in the Collateral Documents as in effect on the Closing Date (after
giving effect to the amendments required pursuant to Section 4). All such
security interests shall be granted pursuant to documentation (the "Additional
Security Documents") in a form which secures the Obligations under this
Agreement on a second-priority basis in accordance with the provisions of
Section 11 hereof.
(b) Communications and the Borrower shall, and shall cause
each of their respective Restricted Subsidiaries to, defend the Collateral
against all claims and demands of all Persons (other than the Secured
Creditors) at any time claiming the same or any interest therein.
Communications and the Borrower shall, and shall cause their respective
Restricted Subsidiaries to, comply with the requirements of all state and
federal laws in order to grant to the Secured Creditors valid and perfected
first priority security interests in the Collateral, subject only to Liens
permitted by this Agreement and the priorities contained in Section 11 hereof
and in the Security Documents. The Collateral Agent is hereby authorized by
Communications and the Borrower to file any UCC financing statements covering
the Collateral whether or not the signature of Communications or the Borrower
appears thereon. Communications and the Borrower shall do whatever the
Collateral Agent may reasonably request, from time to time, to effect the
purposes of this Agreement and the other Credit Documents, including without
limitation, filing notices of liens, UCC financing statements and amendments,
renewals and continuations thereof; cooperating with the Collateral Agent's
representatives; keeping stock records; obtaining waivers from landlords and
mortgagees and from warehousemen and their landlords and mortgagees (provided
that Communications or the Borrower, as the case may be, shall not be required
to pay any consideration (other than de minimis amounts) or incur any material
obligation or relinquish any material right in connection with any such
waiver); and, paying claims which might, if unpaid, become a Lien on the
Collateral other than a Permitted Lien. Furthermore, the Borrower shall cause
to be delivered to the Collateral Agent such opinions of counsel, title
insurance and other related documents as may be reasonably requested by the
Collateral Agent to assure itself that this Section 6.08 has been complied
with.
(c) Each of Communications and the Borrower agrees that each
action required by this Section 6.06 shall be completed as soon as possible,
but in no event later than 60 days after such action is requested to be taken
by the Collateral Agent.
6.07 Insurance. Schedule IX hereto sets forth a true and
complete listing of all insurance maintained by the Borrower and each of its
Restricted Subsidiaries as of the Closing Date. The Borrower agrees to
maintain, and to cause each of its Restricted Subsidiaries to maintain, public
liability insurance, third party property damage insurance and replacement
value (or such higher coverage as the Borrower may obtain) insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, covering such risks and with such deductibles or self-insured
retentions as are in accordance with normal industry practice for similarly
situated businesses.
6.08 Taxes. Communications and the Borrower will, and will
cause each of their respective Subsidiaries to, pay and discharge all material
income and other material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, or payable by it pursuant to the Tax Sharing Agreements,
prior to the date on which penalties or interest attach thereto; provided,
that neither Communications nor any of its Subsidiaries shall be required to
pay any such tax, assessment, charge or levy which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of such Person) with respect thereto in
accordance with GAAP. In no event shall the Borrower and its Subsidiaries
make payments with respect to Federal income taxes computed on a consolidated,
combined or unitary basis which exceed the relevant amounts required to be
paid by them pursuant to the Tax Sharing Agreement as furnished to the
Administrative Agent prior to the Closing Date.
6.09 Corporate Separateness. Communications shall take, and
shall cause each of its Restricted Subsidiaries and Unrestricted Subsidiaries
to take, all actions as are necessary to keep the operations of
Communications, the Borrower and the Borrower's Restricted Subsidiaries
separate and apart from those of any Unrestricted Subsidiaries, including,
without limitation, ensuring that all customary formalities regarding their
respective corporate existence, including holding regular board of directors'
and shareholders' meetings and maintenance of corporate offices and records,
are followed. None of Communications, the Borrower nor any of the Borrower's
Restricted Subsidiaries shall make any payment to a creditor of any
Unrestricted Subsidiary in respect of any liability of any Unrestricted
Subsidiary. All financial statements provided to creditors shall clearly
evidence the corporate separateness of Communications, the Borrower and the
Borrower's Restricted Subsidiaries from any Unrestricted Subsidiaries, and
Communications, the Borrower and the Borrower's Restricted Subsidiaries shall
maintain their own respective payroll (if any) and separate books of account
and bank accounts from Unrestricted Subsidiaries. Each Unrestricted
Subsidiary shall pay its respective liabilities, including all administrative
expenses, from its own separate assets, and assets of Communications, the
Borrower and the Borrower's Restricted Subsidiaries shall at all times be
separately identified and segregated from the assets of Unrestricted
Subsidiaries. Finally, none of Communications, the Borrower nor any of the
Borrower's Restricted Subsidiaries nor any Unrestricted Subsidiaries shall
take any action, or conduct its affairs in a manner which is likely to result
in the corporate existence of any Unrestricted Subsidiary being ignored, or in
the assets and liabilities of any Unrestricted Subsidiary being substantively
consolidated with those of Communications, the Borrower or any of the
Borrower's Restricted Subsidiaries in a bankruptcy, reorganization or other
insolvency proceeding.
6.10 New Wholly-Owned Restricted Subsidiaries; Additional
Subsidiary Guarantors. To the extent (x) the Borrower creates or acquires any
Wholly-Owned Restricted Subsidiary after the Effective Date in accordance with
the other provisions of this Agreement or (y) any Restricted Subsidiary of
Communications or the Borrower directly or indirectly guarantees any
extensions of credit pursuant to the Existing Credit Agreement, then in either
such case, each such Restricted Subsidiary shall be required to become a party
to the Subsidiaries Guaranty by executing a counterpart thereof or enter into
an amendment thereto satisfactory to the Administrative Agent and, if
requested by the Administrative Agent or the Required Banks, shall be required
to enter into the Collateral Documents entered into by the entities which were
Subsidiary Guarantors on the Closing Date, in each case by entering into
counterparts thereof or amendments thereto, in form and substance reasonably
satisfactory to the extent requested by the Administrative Agent and the
Collateral Agent. In connection with the foregoing to the extent requested by
the Administrative Agent or the Collateral Agent, the Company shall be
required to cause to be delivered such relevant documentation (including
opinions of counsel) of the type described in Section 4 as the respective
Restricted Subsidiary would have had delivered if it were a Credit Party on
the Closing Date.
SECTION 7. Negative Covenants. Communications and the
Borrower hereby covenant and agree that, as of the Closing Date, and
thereafter, for so long as this Agreement is in effect and until the Total
Commitments have terminated, no notes are outstanding and the Loans, together
with interest, Fees, Expenses and all other Obligations (other than any
indemnities described in Section 12.01 hereof which are not then due and
payable) incurred hereunder are paid in full:
7.01 Limitation on Indebtedness. (a) Communications and the
Borrower shall not, and shall not permit any of their Restricted Subsidiaries
to, Incur any Indebtedness.
(b) Notwithstanding Section 7.01(a), the Borrower and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness of the Borrower Incurred pursuant to the
Existing Credit Agreement (including related Guarantees and security
agreements; provided that such security agreements shall only be
permitted if all Obligations pursuant to this Agreement are secured
thereby on substantially the same basis provided in the Collateral
Documents as in effect on the Closing Date after giving effect to the
amendments required pursuant to Section 4) in an aggregate principal
amount outstanding at any time not to exceed the greater of (x) the
sum of (i) 90% of the consolidated book value of the accounts
receivable of the Borrower and its Restricted Subsidiaries and (ii)
60% of the consolidated book value of the inventory of the Borrower
and its Restricted Subsidiaries, in each case as determined at the
time of the respective Incurrence in accordance with GAAP and (y)
$75,000,000, in each case less the sum of (x) any amount of
Indebtedness outstanding pursuant to this Section 7.01(b)(i)
permanently repaid as described in Section 7.04 hereof and (y) the
amount of any Indebtedness (other than pursuant to this Agreement)
outstanding on the Closing Date pursuant to Section 4.03(b)(xiv) of
the Senior Subordinated Notes Indenture, to the extent the
Indebtedness described in this clause (y) remains outstanding on the
date of any determination pursuant to this clause (i);
(ii) Indebtedness of the Borrower (and any Guarantee or Liens
with respect thereto; provided that such Liens shall only be
permitted if all Obligations pursuant to this Agreement are secured
thereby on substantially the same basis provided in the Collateral
Documents as in effect on the Closing Date after giving effect to the
amendments required pursuant to Section 4) originally Incurred
pursuant to the term loan provisions of the Existing Credit Agreement
in an aggregate principal amount outstanding at any time not to
exceed (A) $44,800,000 less (B) the aggregate sum of all principal
payments actually made from time to time after the Closing Date under
the Existing Credit Agreement and any amount of Indebtedness
outstanding pursuant to this Section 7.01(b)(ii) permanently repaid
as described in Section 7.04 hereof;
(iii) Indebtedness owed to and held by the Borrower or a
Wholly-Owned Restricted Subsidiary of the Borrower; provided,
however, that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly-Owned Restricted Subsidiary of
the Borrower ceasing to be a Wholly-Owned Restricted Subsidiary of
the Borrower or any subsequent transfer of such Indebtedness (other
than to the Borrower or another Wholly-Owned Restricted Subsidiary of
the Borrower) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness;
(iv) the Senior Subordinated Notes may remain outstanding in an
aggregate principal amount not to exceed $185,000,000;
(v) Indebtedness outstanding on the Closing Date after giving
effect to the Transaction (other than Indebtedness outstanding
pursuant to the Existing Credit Agreement or otherwise described in
clause (i), (ii), (iii) or (iv) above);
(vi) Guarantees by the Borrower or a Subsidiary Guarantor of
Indebtedness of a Subsidiary Guarantor otherwise permitted to be
Incurred by the Subsidiary Guarantor (other than Indebtedness
permitted by clause (x) below) or Guarantees by a Subsidiary
Guarantor of Senior Indebtedness of the Borrower permitted to be
Incurred by the Borrower under this Indenture;
(vii) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to clause (iv) or (v) above (excluding Indebtedness
outstanding on the Closing Date pursuant to Section 4.03(b)(xiv) of
the Senior Subordinated Notes Indenture) or clause (ix) and (x)
below; provided, however, that Refinancing Indebtedness the proceeds
of which are used to Refinance the Senior Subordinated Notes or any
other Indebtedness that is subordinated in right of payment to
Obligations pursuant to this Agreement shall only be permitted under
this clause (vii) if such Refinancing Indebtedness, by its terms or
by the terms of any agreement or instrument pursuant to which such
Refinancing Indebtedness is Incurred or is outstanding, is expressly
made subordinate in right of payment to the Obligations pursuant to
this Agreement at least to the extent that the Indebtedness to be
Refinanced is subordinated to such Obligations; provided further,
however, that Refinancing Indebtedness the proceeds of which are used
to Refinance Indebtedness Incurred pursuant to clause (x) below shall
only be permitted under this clause (vii) if such Refinancing
Indebtedness is Incurred by the Borrower or the Restricted Subsidiary
that originally Incurred the Indebtedness pursuant to clause (x)
below;
(viii) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business or (B)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters
of credit, surety bonds or performance bonds securing any obligations
of the Borrower or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the
acquisition or disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness or other obligations
Incurred by any Person acquiring all or any portion of such business,
assets or Restricted Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Borrower or any Restricted Subsidiary in
connection with such disposition;
(ix) Indebtedness, in an aggregate principal amount
outstanding at any time not to exceed $2.0 million, Incurred by the
Borrower in connection with the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock
of the Borrower, any of its Restricted Subsidiaries or
Communications, options on any such shares or related stock
appreciation rights or similar securities (including phantom equity
rights) held by employees, former employees, directors or former
directors of Communications, the Borrower or its Restricted
Subsidiaries (or their estates or beneficiaries under their estates),
upon death, disability, retirement, termination of employment or
pursuant to any agreement under which such shares of stock or related
rights were issued; provided, however, that (A) such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant
to which such Indebtedness is Incurred, is expressly made subordinate
in right of payment to all Obligations under this Agreement and (B)
such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is Incurred, provides
that no payments of principal of such Indebtedness, including by way
of sinking fund, mandatory redemption or otherwise (including
defeasance), may be made by the Borrower at any time while any of the
Loans are outstanding;
(x) Indebtedness of any Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Borrower (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 Restricted Subsidiary or was acquired by the
Borrower), so long as the aggregate principal amount of all
Indebtedness Incurred in any fiscal year pursuant to clauses (x),
(xi), (xii) and (xiii) of this Section 7.01 does not exceed
$25,000,000;
(xi) Capital Lease Obligations, so long as the aggregate
principal amount of all Indebtedness Incurred in any fiscal year
pursuant to clauses (x), (xi), (xii) and (xiii) of this Section 7.01
does not exceed $25,000,000;
(xii) Indebtedness constituting purchase money obligations for
property acquired in the ordinary course of business or other similar
financing transactions, so long as the aggregate principal amount of
all Indebtedness Incurred in any fiscal year pursuant to clauses (x),
(xi), (xii) and (xiii) of this Section 7.01 does not exceed
$25,000,000;
(xiii) Indebtedness Incurred to finance Capital Expenditures or
the acquisition of Additional Assets in any fiscal year in an
aggregate principal amount not to exceed 6% of the Borrower's
consolidated net sales for the immediately preceding fiscal year and
Refinancing Indebtedness in respect thereof, so long as the aggregate
principal amount of all Indebtedness Incurred in any fiscal year
pursuant to clauses (x), (xi), (xii) and (xiii) of this Section 7.01
does not exceed $25,000,000; and
(xiv) Indebtedness Incurred pursuant to this Agreement.
(c) The Borrower shall not Incur any Indebtedness pursuant to
Section 7.01(b) if such Indebtedness is subordinate in right of payment to any
Senior Indebtedness unless such Indebtedness is expressly subordinated (at
least to the same extent) in right of payment to all Obligations pursuant to
this Agreement. In addition, the Borrower shall not Incur any Secured
Indebtedness pursuant to Sections 7.01 (b)(i) and (ii) unless
contemporaneously therewith effective provision is made to secure the
Obligations pursuant to this Agreement equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien;
provided that, to the extent Indebtedness pursuant to the Existing Credit
Agreement or any obligations pursuant to Interest Rate Agreements (as defined
in the Collateral Documents) are secured by Liens, the Obligations pursuant to
this Agreement shall be secured on the basis provided in Section 11 hereof and
in accordance with the priorities (as to Collateral) established pursuant to
the amendments to the Collateral Documents entered into in accordance with the
requirements of Section 4.
(d) On and after the Closing Date, the Borrower and its
Restricted Subsidiaries shall not Incur any Indebtedness under Section
4.03(b)(xiv) of the Senior Subordinated Notes Indenture (other than (x)
Indebtedness Incurred pursuant to this Agreement and (y) at any time after the
repayment of Loans hereunder, such other Indebtedness in an aggregate
principal amount not to exceed at any time outstanding the aggregate principal
amount of all such repayments made since the Closing Date).
7.02 Limitation on Restricted Payments. (a) Communications
and the Borrower shall not, and shall not permit any of their Restricted
Subsidiaries to, directly or indirectly, to make any Restricted Payment.
(b) The provisions of Section 7.02(a) shall not prohibit:
(i) any purchase or redemption of Subordinated Obligations made
by exchange for, or out of the proceeds of the substantially
concurrent sale of, indebtedness of the Borrower which is permitted
to be Incurred pursuant to Section 7.01(b)(vii);
(ii) the repurchase (or dividends to Communications for the
repurchase) of shares of, or options to purchase shares of, Capital
Stock of the Borrower or any of its Restricted Subsidiaries or of
Communications from employees, former employees, directors or former
directors of Communications, the Borrower or any of its Restricted
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 persons purchase or sell, or are granted the option to purchase
or sell, shares of such stock; provided, however, that the aggregate
amount of all such repurchases or dividends after the Closing Date
shall not exceed $2.0 million;
(iii) any payments pursuant to any tax-sharing agreement between
the Borrower and any other Person with which the Borrower is required
or permitted to file a consolidated tax return or with which the
Borrower is or could be part of a consolidated group for tax purposes;
(iv) payments to Communications necessary for Communications to
pay corporate overhead expenses, not to exceed $250,000 in any fiscal
year;
(v) payments to Communications sufficient to permit
Communications to pay for the registration of its securities with the
SEC (including all reasonable professional fees and expenses); and
(vi) Investments in Unrestricted Subsidiaries made in exchange
for Capital Stock (other than Disqualified Stock) of Communications.
7.03 Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Borrower shall not, and shall not permit any of
its Restricted Subsidiaries to, create or otherwise cause or permit to exist
or become effective any consensual encumbrance or restriction on the ability
of any Restricted Subsidiary of the Borrower (a) to pay dividends or make any
other distributions on its Capital Stock owned by, or pay any Indebtedness
owed to, the Borrower, (b) to make any loans or advances to the Borrower or
(c) transfer any of its property or assets to the Borrower, except:
(i) any encumbrance or restriction pursuant to the Existing
Credit Agreement or any other agreement in effect at or entered into
on the date of this Agreement and any extensions, refinancings,
renewals or replacements of any such agreement; provided, however,
that the encumbrances and restrictions in any such extension,
refinancing, renewal or replacement are no less favorable in any
material respect to the Banks than those encumbrances or restrictions
being extended, refinanced, renewed or replaced;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary of the Borrower pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to
the date on which such Restricted Subsidiary was acquired by the
Borrower (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 Restricted
Subsidiary of, or was acquired by, the Borrower) 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 (ii) above or contained in any
amendment to an agreement referred to in clause (ii) above; provided,
however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable in any material respect to the Banks
than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in the agreements referred to in clause (ii)
above;
(iv) any encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or the
property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary of the Borrower to the extent such restrictions
restrict the transfer of the property subject to such security
agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary of
the Borrower 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;
(vii) encumbrances and restrictions contained in any
Indebtedness or any agreement relating to any Indebtedness of the
Borrower or a Restricted Subsidiary of the Borrower permitted
pursuant to Section 7.01; provided, however, that either (A) such
encumbrances and restrictions are no more restrictive than the
encumbrances and restrictions imposed by the Existing Credit
Agreement or (B) each Restricted Subsidiary subject to any such
encumbrances or restrictions after the Closing Date shall Guarantee
the Loans on a senior basis; pursuant to the Subsidiaries Guaranty;
and
(viii) any encumbrance or restriction existing under or by reason
of applicable law.
Nothing contained in this Section 7.03 shall prevent the
Borrower or any Restricted Subsidiary of the Borrower from restricting the
sale or other disposition of property or assets of the Borrower or any
Restricted Subsidiary of the Borrower that secure Indebtedness of the Borrower
or any of its Restricted Subsidiaries.
7.04 Limitation on Sales of Assets and Subsidiary Stock. (a)
In addition to any mandatory repayments required pursuant to Section 3.01, in
the event and to the extent that the Net Available Cash received by the
Borrower or any of its Restricted Subsidiaries from one or more Asset
Dispositions occurring on or after the Issue Date in any period of 12
consecutive months ended after the Closing Date exceeds 10% of Adjusted
Consolidated Assets as of the beginning of such 12-month period, then the
Borrower shall (i) within 12 months after the date such Net Available Cash so
received exceeds such 10% of Adjusted Consolidated Assets and to the extent
the Borrower elects (or is required by the terms of any Indebtedness) (A)
apply an amount equal to or less than such excess Net Available Cash to
permanently repay (and in the case of any repayment of revolving loans or
similar obligations, to permanently reduce the correlating commitments) Senior
Indebtedness of the Borrower or (B) invest an amount, equal to or less than
the difference between such excess Net Available Cash and the amount so
applied pursuant to clause (A) (or enter into a definitive agreement
committing to so invest within 12 months after the date of such agreement), in
Additional Assets and (ii) apply an amount equal to the difference between
such excess Net Available Cash and the amount applied pursuant to clause (i)
as provided in the following paragraphs of this Section 7.06. The amount of
such excess Net Available Cash required to be applied pursuant to clause (ii)
of the preceding sentence shall constitute "Excess Proceeds."
(b) If, as of the first day of any calendar month, the
aggregate amount of Excess Proceeds totals at least $5 million, the Borrower
must, not later than the fifteenth Business Day of such month, apply an amount
equal to such Excess Proceeds to prepay principal of outstanding Loans (the
"Excess Proceeds Repayment"). Each repayment pursuant to the preceding
sentence shall be accompanied by the payment of all accrued but unpaid
interest on the principal amount of Loans so repaid.
7.05 Limitation on Affiliate Transactions. (a) The Borrower
shall not, and shall not permit any of its Restricted Subsidiaries to, enter
into, renew or extend any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate
of the Borrower (an "Affiliate Transaction") unless the terms thereof (1) are
no less favorable to the Borrower or such Restricted Subsidiary (or, in the
case of an Affiliate Transaction between the Borrower and a Restricted
Subsidiary, are no less favorable to the Borrower or are, in the good faith
determination of the Board of Directors, in the best interests of the
Borrower) than those which could be obtained at the time of such transaction
in arm's-length dealings with a Person who is not such an Affiliate and (2) if
such Affiliate Transaction involves an amount in excess of $2.5 million, the
terms thereof are set forth in writing and either (A) have been approved by a
majority of the disinterested members of the Board of Directors or (B) for
which the Borrower or such Restricted Subsidiary delivers to the
Administrative Agent a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Borrower or such
Restricted Subsidiary from a financial point of view.
(b) The provisions of Section 7.05(a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 7.02, (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 Borrower pursuant to plans approved by the Board of
Directors, (iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Borrower or its
Restricted Subsidiaries; (v) the payment of reasonable fees to directors of
the Borrower and its Restricted Subsidiaries who are not employees of the
Borrower or its Restricted Subsidiaries; (vi) any payments or other
transactions pursuant to any tax-sharing agreement between the Borrower and
any other Person with which the Borrower is required or permitted to file a
consolidated tax return or with which the Borrower is or could be part of a
consolidated group for tax purposes; (vii) any Affiliate Transaction between
the Borrower and a Wholly-Owned Restricted Subsidiary or between Wholly-Owned
Restricted Subsidiaries; (viii) the Transaction; (ix) any employment or other
agreement providing for compensation between the Borrower or any of its
Restricted Subsidiaries and James T. Sullivan or Stephen M. Dyott that is
approved, in good faith, by the Board of Directors; (x) the payment of fees to
Morgan Stanley & Co. Incorporated or its Affiliates for financial, advisory,
consulting or investment banking services that the Board of Directors of the
Borrower deems to be advisable or appropriate for the Borrower or any
Restricted Subsidiary to obtain (and including the payment to Morgan Stanley &
Co. Incorporated or its Affiliates of any underwriting discounts or
commissions or placement agency fees in connection with the issuance and sale
of any securities by the Borrower or any Restricted Subsidiary of the
Borrower), so long as the amount of such fees is no greater than the amount of
fees which would be payable for such services in arm's-length dealings with a
Person who is not an Affiliate; or (xi) sales of Capital Stock of
Communications or the Borrower to Morgan Stanley & Co. Incorporated or its
Affiliates.
7.06 Change of Control. On the 15th day following the
occurrence of any Change of Control, the Borrower shall repay in full 100% of
the outstanding principal amount of all Loans, together with all accrued and
unpaid interest thereon to the date of such repayment. Notwithstanding
anything to the contrary contained in the immediately preceding sentence, the
Borrower shall not be required to repay the outstanding Loans of any Bank
which agrees in writing, prior to the 15th day following the occurrence of the
respective Change of Control, that such Bank waives its right to receive such
repayment. It is understood and agreed that no Bank shall be obligated to
grant any such waiver under any circumstances, and the granting thereof shall
be in the sole discretion of the respective Bank.
7.07 Limitation on the Issuance of Preferred Stock of
Restricted Subsidiaries. The Borrower shall not sell or otherwise dispose of
any shares of Preferred Stock of any Restricted Subsidiary of the Borrower,
and shall not permit any Restricted Subsidiary of the Borrower, directly or
indirectly, to issue, sell or otherwise dispose of any shares of its Preferred
Stock, except, in each case, (i) to the Borrower or a Wholly-Owned Restricted
Subsidiary of the Borrower or (ii) if, immediately after giving effect to such
issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary of the Borrower (and none of
Communications, the Borrower nor any of their respective Subsidiaries shall
retain any equity interest therein).
7.08 When Communications or Borrower May Merge or Transfer
Assets. After the Closing Date, neither Communications nor the Borrower shall
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person.
7.09 Ownership of Restricted Subsidiaries. Communications
will not at any time directly own equity interests in any Subsidiary other
than the Borrower.
7.09 Further Instruments and Acts. Upon request of the
Administrative Agent, Communications and the Borrower will execute and deliver
such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this
Agreement and the other Credit Documents.
SECTION 8. Events of Default. An "Event of Default" occurs
if:
8.01 Events of Default Defined.
(1) the Borrower defaults in any payment of interest on any
Loan, or any other amount (other than principal of Loans owing
pursuant to this Agreement or any other Credit Document, when the
same becomes due and payable, and such default continues for a period
of 30 days;
(2) the Borrower defaults in the payment of the principal of
any Loan or Note when the same becomes due and payable at its Stated
Maturity, as a result of any mandatory repayment under Section 3.01,
7.04 or 7.06, upon declaration or otherwise;
(3) the Borrower fails to comply with Section 7.08;
(4) the Borrower fails to comply with Section 7.01, 7.02,
7.03, 7.05, 7.06 and 7.07 and such failure continues for 30 days
after the notice specified below;
(5) Communications or the Borrower fails to comply with any
of its agreements in this Agreement or any other Credit Document
(other than those referred to in (1), (2), (3) or (4) above) and such
failure continues for 45 days after the notice specified below;
(6) Indebtedness of Communications, the Borrower or any
Significant Subsidiary is not paid within any applicable grace period
after final maturity thereof or becomes, or is declared by the
holders thereof to be, immediately and unconditionally due and
payable because of a default, the total amount of such Indebtedness
unpaid or becoming or declared to be due and payable exceeds
$10,000,000 or its foreign currency equivalent and such failure
continues (or such payment shall not have been waived or extended or
such Indebtedness shall continue to be due and payable) for 30 days
after the notice specified below;
(7) Communications, the Borrower or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Communications, the Borrower
or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of Communications, the Borrower
or any Significant Subsidiary or for any substantial part of
its property; or
(C) orders the winding up or liquidation of
Communications, the Borrower 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;
(9) any judgment or decree for the payment of money in excess of
$10,000,000 (provided that the amount of such money judgment or
decree shall be calculated net of any insurance coverage that the
Borrower has determined in good faith is available in whole or in
part with respect to such money judgment or decree) is entered
against Communications, the Borrower or any Significant Subsidiary
and is not discharged and there is a period of 60 days following the
entry of such judgment or decree during which such judgment or decree
is not discharged, waived or the execution thereof stayed and, in each
case, such default continues for 10 days after the notice specified
below;
(10) any Collateral Document shall cease to be in full force and
effect, or shall cease to give the Collateral Agent on behalf of the
Secured Creditors the Liens, rights, powers and privileges purported
to be created thereby in favor of the Collateral Agent, or any Credit
Party shall default in any material respect in the due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Collateral Document and
such failure shall continue for 30 days after the notice specified
below; or
(11) any Guaranty or provision thereof shall cease to be in full
force or effect as to the relevant Guarantor, or any Guarantor or
Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under the relevant Guaranty,
or any Guarantor shall default in the due performance or observance
of any material term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
A Default under clause (4), (5), (6), (9) or (10) of this
Section is not an Event of Default until the Administrative Agent or Banks
holding at least 25% in principal amount of the outstanding Loans notify the
Borrower of the Default and the Borrower 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 Borrower shall deliver to the Administrative Agent, within 5
Business Days after the occurrence thereof, written notice in the form of an
Officers' Certificate of any event which with the giving of notice and the
lapse of time would become an Event of Default under clause (4), (5), (6), (9)
or (10) of this Section, its status and what action the Borrower is taking or
proposes to take with respect thereto.
8.02 Acceleration. If an Event of Default (other than an
Event of Default specified in Section 8.01(7) or (8) with respect to the
Borrower) occurs and is continuing, the Administrative Agent shall, upon the
written request of the holders of at least a majority of the outstanding
principal amount of Loans, by written notice to the Borrower, declare the
principal amount of and accrued interest on all the Loans as of the date of
such declaration 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 8.01(7) or (8) with respect to the Borrower
occurs, the principal of and interest on all the Loans shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Administrative Agent or any Bank. The holders of a majority in
principal amount of the outstanding Loans by notice to the Administrative
Agent 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.
8.03 Other Remedies. If an Event of Default occurs and is
continuing, the Administrative Agent and the Banks may, subject to the
provisions of Section 11, pursue any available remedy to collect the payment
of principal of or interest on the Loans or to enforce the performance of any
provision of the Notes, this Agreement or any other Credit Document.
The Administrative Agent 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 Administrative Agent or any Bank 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 9. Definitions.
9.01 General Definitions. As used herein, the following terms
shall have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounts" of any Person shall mean all of such Person's rights
to payment for goods sold or leased or services performed by such Person,
whether presently existing or hereafter arising, including, without
limitation, rights evidenced by accounts, instruments, notes, drafts,
documents, chattel paper, and all other forms of obligations owing to such
Person arising out of the sale of goods or the rendition of services by such
Person, whether or not earned by performance, and any and all credit
insurance, letters of credit, guaranties and other security therefor, as well
as all merchandise returned to or reclaimed by such Person, and such Person's
books and records (except minute books) relating to any of the foregoing.
"Additional Security Documents" shall have the meaning provided
in Section 6.06(a).
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary of the Borrower; provided, however, that any such
Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
"Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for
negotiable certificates of deposit with a three-month maturity in the
secondary market as published in the most recent Federal Reserve System
publication entitled "Select Interest Rates," published weekly on Form H.15 as
of the date hereof, or if such publication or a substitute containing the
foregoing rate information shall not be published by the Federal Reserve
System for any week, the weekly average offering rate determined by the
Administrative Agent on the basis of quotations for such certificates received
by it from three certificate of deposit dealers in New York of recognized
standing or, if such quotations are unavailable, then on the basis of other
sources reasonably selected by the Administrative Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate
of deposit of a member bank of the Federal Reserve System in excess of
$100,000 (including, without limitation, any marginal, emergency,
supplemental, special or other reserves), plus (2) the then daily net annual
assessment rate as estimated by the Administrative Agent for determining the
current annual assessment payable by the Administrative Agent to the Federal
Deposit Insurance Corporation for insuring three-month certificates of deposit.
"Adjusted Consolidated Assets" means at any time the total
amount of assets of the Borrower and its consolidated Restricted Subsidiaries
(less applicable depreciation, amortization and other valuation reserves),
after deducting therefrom all current liabilities of the Borrower and its
consolidated Restricted Subsidiaries (excluding intercompany items), all as
set forth on the consolidated balance sheet of the Borrower and its
consolidated Restricted Subsidiaries as of the end of the most recent fiscal
quarter ended at least 45 days prior to the date of determination.
"Administrative Agent" shall mean Bankers Trust Company in its
capacity as Administrative Agent for the Banks hereunder, and shall include any
successor thereto as Administrative Agent, appointed as such pursuant to
Section 10.09.
"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 Section 7, "Affiliate", shall also mean any
beneficial owner of shares representing 10% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of Communications or the
Borrower or of rights or warrants to purchase such 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.
"Affiliate Transaction" shall have the meaning provided in
Section 7.05.
"Agreement" shall mean this Term Loan Agreement as same may be
supplemented, modified or amended from time to time in accordance with the
provisions hereof.
"Applicable Lending Office" shall mean, with respect to each
Bank, such Bank's Eurodollar Lending Office in the case of a Eurodollar Rate
Loan, and such Bank's Domestic Lending Office in the case of a Base Rate Loan.
"Applicable Margin" shall mean a percentage per annum which
shall initially equal (x) in the case of Eurodollar Loans, 4.0% and (y) in the
case of Base Rate Loans, 3.0%, provided that the Applicable Margins for each
type of loan shall increase on each three-month anniversary of the Closing
Date in accordance with the table set forth below:
Applicable Margin Applicable Margin for
Month Anniversary for Eurodollar Loans Base Rate Loans
----------------- -------------------- ---------------------
0 4.0% 3.0%
3 4.25% 3.25%
6 4.5% 3.5%
9 5.0% 4.0%
12 5.5% 4.5%
15 6.0% 5.0%
18 6.5% 5.5%
21 7.0% 6.0%
24 7.5% 6.5%
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Borrower 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 (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares) or
(ii) any assets of the Borrower or any Restricted Subsidiary outside the
ordinary course of business of the Borrower or such Restricted Subsidiary
(other than (y) a disposition by a Restricted Subsidiary to the Borrower or by
the Borrower or a Restricted Subsidiary to a Wholly-Owned Restricted
Subsidiary and (z) for purposes of Section 7.04 only, a Restricted Payment
permitted by Section 7.02); provided, however, that for purposes of Section
7.04 only, the term "Asset Disposition" shall not include any disposition of
assets if such disposition is governed by Section 7.08.
"Assignment and Assumption Agreement" shall mean an assignment
and assumption agreement entered into by an assigning Bank and an assignee Bank
in accordance with Section 12.04, substantially in the form of Exhibit P.
"Auditors" shall mean a nationally-recognized firm of
independent public accountants selected by Communications or the Borrower and
reasonably satisfactory to the Administrative Agent. For purposes of this
Agreement, Communications' current firm of independent public accountants,
Ernst & Young, shall be deemed to be satisfactory to the Administrative Agent.
"Authorized Officer" of any Credit Party shall mean any of the
President, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, any Vice-President, the Secretary or any Assistant Secretary of
such Credit Party or any other officer of such Credit Party which is
designated in writing to the Administrative Agent by any of the foregoing
officers of such Credit Party as being authorized to give such notices under
this Agreement.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the guotient obtained by dividing (i) the sum of
the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bankruptcy Law" shall mean Title 11, United States Code, or any
similar Federal or state law for the relief of debtors.
"Banks" is defined to mean the lenders who are from time to time
parties to this Agreement.
"Base Rate" shall mean the higher of (x) 1/2 of 1% in excess of
the Federal Reserve reported certificate of deposit rate and (y) the rate that
BTCo announces from time to time as its prime lending rate, as in effect from
time to time.
"Base Rate" at any time shall mean the highest of (i) 1/2 of 1%
in excess of the Adjusted Certificate of Deposit Rate, (ii) 1/2 of 1% in
excess of the overnight Federal Funds Rate and (iii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan converted into such
pursuant to Section 1.08, until such time (if any) as converted back into a
Eurodollar Loan in accordance with the requirements of Section 1.08(d).
"Blocked Account Agreements" shall mean all blocked account
agreements executed and delivered pursuant to the Existing Credit Agreement,
until such time as same are replaced by blocked account agreements in the form
of Exhibit M-2 hereto, and any blocked account agreements at any time entered
into in the form of Exhibit M-2 hereto.
"Board of Directors" means the Board of Directors of the
Borrower or any committee thereof duly authorized to act on behalf of such
Board.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"BTCC" shall mean BT Commercial Corporation, in its individual
capacity.
"BTCo" shall mean Bankers Trust Company in its individual
capacity.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) above and which is also a day
for trading by and between banks in Dollars in the New York interbank
Eurodollar market.
"Canadian Debenture" shall mean the Existing Canadian Debenture,
as same may be modified, amended or supplemented from time to time in
accordance with the terms thereof and hereof, including pursuant to the
Existing Canadian Debenture Amendment.
"Canadian Pledge Agreement" shall mean the Existing Canadian
Pledge Agreement, as same may be modified, amended or supplemented from time
to time in accordance with the terms thereof and hereof, including pursuant to
the Existing Canadian Pledge Agreement Amendment.
"Capital Expenditures" means expenditures (whether paid in cash
or accrued as liabilities and including Capital Lease Obligations) of the
Borrower and its Restricted Subsidiaries relating to the acquisition of
equipment used or useful in the business of the Borrower or any Restricted
Subsidiary or in a Related Business.
"Capital 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 of any other amount due
under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person 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.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other
than the Permitted Holders and their respective Affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of (A)
more than forty percent (40%) of the total voting power of the then
outstanding Voting Stock of the Borrower or Communications and (B) more than
the total voting power of the then outstanding Voting Stock of the Borrower or
Communications, as the case may be, beneficially owned by the Permitted
Holders and their respective Affiliates, treating the Permitted Holders and
their respective Affiliates as a "group"; or (ii) during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted the Board of Directors of (A) the Borrower (together with any new
directors whose election by the Borrower's Board of Directors or whose
nomination for election by the Borrower's Board of Directors or whose
nomination for election by the Borrower's shareholders was approved by a vote
of at least two thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) or (B) Communications (together with any
new directors whose election by Communications' Board of Directors or whose
nomination for election by Communications' shareholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved), in either case, cease for any reason to
constitute a majority of the directors of the Borrower or Communications, as
the case may be, then in office; or (iii) (A) the Borrower or Communications
consolidates with or merges into any other Person or conveys, transfers or
leases all or substantially all its assets to any Person or (B) any Person
mergers into the Borrower or Communications, in either event pursuant to a
transaction in which any Voting Stock of the Borrower or Communications, as the
case may be, outstanding immediately prior to the effectiveness thereof is
reclassified or changed into or exchanged for cash, securities or other
property; provided, however, that any consolidation, conveyance, transfer or
lease (x) between the Borrower and any of its Restricted Subsidiaries, between
Communications and the Borrower or between Restricted Subsidiaries of the
Borrower (including the reincorporation of the Borrower or Communications in
another jurisdiction) or (y) for the purpose of creating a public holding
company for the Borrower or Communications in another jurisdiction or (z) for
the purpose of creating a public holding company for the Borrower or
Communications in which all holders of the capital stock of the Borrower or
Communications, as the case may be, would be entitled to receive (other than
cash in lieu of fractional shares) solely capital stock of the holding company
in amounts proportionate to their holdings of such capital stock of the
Borrower or Communications immediately prior to such transaction, shall be
excluded from the operation of this clause (iii) or (iv) Communications shall
at any time cease to own 100% of the capital stock of the Borrower.
"Closing Date" shall mean the date of the extension of Loans
hereunder, which shall occur on or after the Effective Date and on or prior to
July 31, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"Collateral" shall mean all of the Collateral as defined in
each of the Collateral Documents.
"Collateral Access Agreements" shall mean any landlord waivers,
mortgagee waivers, bailee letters or any similar acknowledgement agreements of
any warehousemen or processor in possession of Inventory, in each case
substantially in the form of Exhibit N hereto (or prior to obtaining any such
agreement, in the form previously attached as Exhibit N to the Existing Credit
Agreement), in each case with such changes thereto as are reasonably
acceptable to the Administrative Agent.
"Collateral Agent" shall mean BTCC acting as collateral agent
pursuant to the Collateral Documents.
"Collateral Assignments of Rights" shall mean each collateral
assignment of rights executed and delivered in substantially the form of
Exhibit L hereto (or, if executed and delivered prior to the Closing Date, in
the form of Exhibit L to the Existing Credit Agreement).
"Collateral Documents" shall mean all contracts, instruments and
other documents now or hereafter executed and delivered in connection with this
Agreement, pursuant to which liens and security interests were or are granted
to the Collateral Agent in the Collateral for the benefit of the Secured
Creditors (including the Banks), including, without limitation, the Pledge
Agreement, the Security Agreement, each Mortgage, the Canadian Debenture, the
Canadian Pledge Agreement and, after the execution and delivery thereof, each
Additional Security Document.
"Commitment" shall mean, for each Bank, the amount set forth
opposite such Bank's name in Schedule I, as the same may be (x) reduced from
time to time pursuant to Section 3.01 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.11 or
12.04(b).
"Communications" means Sullivan Communications, Inc., a Delaware
corporation, and its successors.
"Concentration Account Agreements" shall mean each concentration
account agreement executed and delivered pursuant to the Existing Credit
Agreement, until such time as same are replaced by concentration account
agreements in the form of Exhibit M-3 hereto, and any concentration account
agreement at any time entered into in the form of Exhibit M-3 hereto.
"Covered Taxes" shall have the meaning provided such term in
Section 3.03(a).
"Credit Documents" shall mean, collectively, this Agreement, the
Notes, the Subsidiaries Guaranty and each of the Collateral Documents, as the
same may be modified, amended, extended, restated or supplemented from time to
time.
"Credit Parties" shall mean, collectively, Communications, the
Borrower and the Subsidiary Guarantors.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Disposition" means the sale, assignment, transfer, lease,
conveyance or other disposition by Communications, the Borrower or their
respective Restricted Subsidiaries of any Collateral, including, without
limitation an involuntary disposition as a result of a casualty or
condemnation.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms or upon the happening of any event (i)
matures or is mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Senior Subordinated Notes (as in effect on the Closing
Date); 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 any "asset sale" or "change of control", occurring prior to the
first anniversary of the Stated Maturity of the Senior Subordinated Notes (as
in effect on the Closing Date) shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital
Stock are no more favorable to the holders of such Capital Stock than the
provisions contained in Section 4.06 and Section 4.08 of the Senior
Subordinated Notes Indenture (as in effect on the Closing Date) and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such Capital Stock pursuant to such provision prior to such
Person's repayment of all Loans as are required to be repaid pursuant to
Section 7.04 and Section 7.06.
"Documents" shall mean all Credit Documents and all Existing
Credit Agreement Documents.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Domestic Lending Office" shall mean, with respect to any Bank,
the office of such Bank specified as its "Domestic Lending Office" opposite
its name on Schedule I, as such Schedule may be amended from time to time.
"Effective Date" shall have the meaning provided in Section
12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution, any fund that invests in bank loans and any other
"accredited investor" (as defined in Regulation D of the Securities Act).
"Environmental Law" shall mean any applicable Federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
guide, policy and rule of common law now or hereafter in effect and in each
case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300F et seq.; the Oil
Pollution Act of 1990, 33 U.S.C Section 2701 et seq. and any applicable
state, provincial and local or foreign counterparts, or equivalents or similar
statutes.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by the Borrower or any of its Restricted Subsidiaries solely
in the ordinary course of such Person's business or as required in connection
with a financing transaction and not in response to any third party action or
request of any kind) or proceedings relating in any way to any Environmental
Law or any permit issued, or any approval given, under any such Environmental
Law (hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation, specific
performance or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
"Equipment" means all of the Borrower's present and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, motor
vehicles, tools, parts, dies, jigs, goods, and any and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements thereto, wherever located (but shall exclude any such attachment,
accessories, accessions, replacements, substitutions, additions and
improvements which accrue to lessors with respect to any equipment leased by
the Borrower or subject to a prior lien as permitted hereunder).
"Equipment Acquisition Loans" shall mean all Equipment
Acquisition Loans under, and as defined in, the Existing Credit Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Communications, the Borrower or any
Restricted Subsidiary of Communications or the Borrower would be deemed to be
a "single employer" within the meaning of Section 414(b) or (c) of the Code,
and for the purpose of any specific provision of this Agreement which
expressly refers to Section 302 of ERISA or Section 412, 4971 or 4977 of the
Code, within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Eurodollar Lending Office" shall mean, with respect to any
Bank, the office of such Bank specified as its "Eurodollar Lending Office"
opposite its name on Schedule I, as such Schedule may be amended from time to
time (or, if no such office is specified, its Domestic Lending Office), or
such other office or Affiliate of such Bank as such Bank may from time to time
specify to the Borrower and the Administrative Agent.
"Eurodollar Loan" shall mean each Loan outstanding at any time
hereunder, except during such time (and then only to the extent) as the
respective such Loan is required to be maintained as a Base Rate Loan in
accordance with the provisions of Section 1.08.
"Eurodollar Rate" shall mean (a) the offered quotation to
first-class banks in the New York interbank Eurodollar market by BTCo for
Dollar deposits of amounts in immediately available funds comparable to the
outstanding principal amount of the Eurodollar Loan of BTCo with maturities
comparable to the Interest Period applicable to such Eurodollar Loan
commencing two Business Days thereafter as of 10:00 A.M. (New York time) on
the date which is two Business Days prior to the commencement of such Interest
Period, divided (and rounded off to the nearest 1/16 of 1%) by (b) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law) applicable
to any member bank of the Federal Reserve System in respect of Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category
of liabilities under Regulation D).
"Event of Default" has the meaning provided in Section 8.
"Excess Proceeds" shall have the meaning provided in Section
7.04.
"Excess Proceeds Repayment" shall have the meaning provided in
Section 7.04.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Canadian Debenture" shall mean the Canadian Debenture
under, and as defined in, the Existing Credit Agreement, as same is in effect
immediately prior to the occurrence of the Closing Date and immediately before
giving effect to the Existing Canadian Debenture Amendment.
"Existing Canadian Debenture Amendment" shall have the meaning
provided in Section 4.11.
"Existing Canadian Pledge Agreement" shall mean the Canadian
Pledge Agreement under, and as defined in, the Existing Credit Agreement, as
same is in effect immediately prior to the occurrence of the Closing Date and
immediately before giving effect to the Existing Canadian Pledge Agreement
Amendment.
"Existing Canadian Pledge Agreement Amendment" shall have the
meaning provided in Section 4.11.
"Existing Credit Agreement" is defined to mean the Credit
Agreement, dated as of August 15, 1995, among Communications, the Borrower,
the lenders party thereto and the Existing Credit Agreement Agent, together
with the related documents thereto (including any Guarantees and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented, replaced or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing or otherwise restructuring (including, but not limited to, the
inclusion of additional borrowers or guarantors thereunder that are Restricted
Subsidiaries of Communications or the Borrower and whose obligations are
guaranteed by Communications or the Borrower thereunder) all or a portion of
the Indebtedness under such agreement or any successor agreement.
"Existing Credit Agreement Agent" shall mean BTCC, as Agent
pursuant to the Existing Credit Agreement, and any successor thereto.
"Existing Credit Agreement Collateral Access Agreements" shall
mean all Collateral Access Agreements entered into pursuant to, and as
required by, the Existing Credit Agreement.
"Existing Credit Agreement Credit Parties" shall mean each of
the Credit Parties under, and as defined in, the Existing Credit Agreement.
"Existing Credit Agreement Documents" shall mean all Credit
Documents under, and as defined in, the Existing Credit Agreement.
"Existing Credit Agreement Obligations" shall mean all
Obligations under, and as defined, in the Existing Credit Agreement (in any
event including all principal of, and interest on, all loans pursuant to the
Existing Credit Agreement, all amounts owing in respect of unpaid drawings
under letters of credit issued thereunder, and all interest, fees and other
amounts owing pursuant to the Existing Credit Agreement).
"Existing Credit Agreement Required Lenders" shall mean the
Required Lenders under, and as defined in, the Existing Credit Agreement.
"Existing Credit Agreement Termination Date" shall mean that
date upon which all commitments pursuant to the Existing Credit Agreement have
terminated, no letter of credit or promissory note remains outstanding
thereunder and all loans and letter of credit obligations, together with
interest, fees, expenses and other obligations pursuant to the Existing Credit
Agreement (other than any indemnities described therein which are not then due
and payable) are paid in full.
"Existing Indebtedness" shall mean all Indebtedness of the
Borrower and its Restricted Subsidiaries outstanding prior to, and to remain
outstanding on and after, the Closing Date, and set forth on Schedule X,
without giving effect to extensions or renewals thereto, except as expressly
provided therein.
"Existing Mortgage Policies" shall mean each mortgage insurance
policy issued with respect to an Existing Mortgage under the Existing Credit
Agreement.
"Existing Mortgaged Property" shall mean all Real Property of
the Borrower and its Restricted Subsidiaries listed as such on Schedule VII
(which shall include all Real Property subject to any Existing Mortgage).
"Existing Mortgages" shall mean all Mortgages under, and as
defined in, the Existing Credit Agreement, granted by the Existing Credit
Agreement Credit Parties pursuant to the Existing Credit Agreement and which
have not been released by the lenders thereunder prior to the Closing Date.
"Existing Pledge Agreement" shall mean the Pledge Agreement
under, and as defined in, the Existing Credit Agreement, as same is in effect
immediately prior to the occurrence of the Closing Date and immediately before
giving effect to the Existing Pledge Agreement Amendment.
"Existing Pledge Agreement Amendment" shall have the meaning
provided in Section 4.08.
"Existing Security Agreement" shall mean the Security Agreement
under, and as defined in, the Existing Credit Agreement, as same is in effect
immediately prior to the occurrence of the Closing Date and immediately before
giving effect to the Existing Security Agreement Amendment.
"Existing Security Agreement Amendment" shall have the meaning
provided in Section 4.09.
"Expenses" shall mean all present and future expenses incurred
by or on behalf of the Administrative Agent in connection with this Agreement,
any other Credit Document or otherwise in its capacity as Administrative Agent
under this Agreement, whether incurred heretofore or hereafter.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such
day on such transactions received by the Administrative Agent from three
Federal Funds brokers of recognized standing selected by the Administrative
Agent.
"Fees" shall mean all fees payable pursuant to, or referenced
in, Section 2.01.
"Final Maturity Date" shall mean March 31, 2001.
"Financial Statements" shall mean the consolidated and, if
requested by the Administrative Agent, consolidating balance sheet and
statement of operations and statement of cash flows and statements of changes
in shareholders' equity of each of (x) Communications and (y) the Borrower,
for the period specified prepared in accordance with GAAP and consistent with
prior practices; provided however, that so long as Communications owns all the
capital stock of the Borrower, owns no other significant assets and owns no
capital stock of any other Subsidiary, separate financial statements for the
Borrower shall not be required to be furnished pursuant to Sections 6.01(a)
and (b).
"First Priority Secured Obligations" shall mean all Existing
Credit Agreement Obligations and all Secured Interest Rate Protection
Obligations, in each case secured pursuant to the Collateral Documents.
"Foreign Bank" shall mean any Bank organized under the laws of a
jurisdiction outside of the United States.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program or arrangement
established or maintained outside the United States of America by
Communications, the Borrower or any one or more of their Restricted
Subsidiaries primarily for the benefit of employees of Communications, the
Borrower or such Restricted Subsidiaries residing outside the United States of
America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or
payments to be made upon any termination of employment, and which plan is not
subject to ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles in
the United States as in effect from time to time subject to Section 9.02.
"Governing Documents" shall mean, as to any Person, the
certificate or articles of incorporation and by-laws or other organizational
or governing documents of such Person.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
financial obligation of any other Person and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other financial obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
financial obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any Indebtedness or financial obligation.
"Guaranty" shall mean the Parent Guaranty and the Subsidiaries
Guaranty.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contained dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any Environmental Law; and (c)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority.
"Highest Lawful Rate" shall mean, at any given time during which
any Obligations shall be outstanding hereunder, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received on the Obligations owing under this
Agreement, under the laws of the State of New York (or the law of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement and the other Credit Documents), or under
applicable federal laws which may presently or hereafter be in effect and
which allow a higher maximum nonusurious interest rate than under New York (or
such other jurisdiction's) law, in any case after taking into account, to the
extent permitted by applicable law, any and all relevant payments or charges
under this Agreement and any other Credit Documents executed in connection
herewith, and any available exemptions, exceptions and exclusions.
"Holder" means the Person in whose name a Security is
registered on the Registrar's books.
"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 Restricted Subsidiary
of the Borrower (whether by merger, consolidation, acquisition or otherwise)
shall be deemed to be Incurred by such Restricted Subsidiary at the time it
becomes a Restricted Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning.
"Indebtedness" of any Person means, without duplication:
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable (other
than Interest Rate Protection Agreements);
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto, all conditional sale obligations
of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in
the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course
of business of such Person to the extent such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by
such Person of a demand for reimbursement following payment on the
letter of credit);
(v) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified
Stock, and in respect of a Restricted Subsidiary, all obligations of
such Restricted Subsidiary with respect to the redemption, repayment
or other repurchase of any Preferred Stock (but excluding, in each
case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i)
through (v) 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; and
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the
lesser of the fair market value of such property or assets (as
determined by the Board of Directors) or the amount of the obligation
so secured.
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,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation; provided,
however, (i) that the amount outstanding at any time of any Indebtedness
Incurred with original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii) that
Indebtedness shall not include (A) any liability for Federal, state, local or
other taxes, (B) any obligations under Interest Rate Protection Agreements or
Raw Material Hedge Agreements or (C) any liability arising from the honoring
by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary
course of business.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section
1.07.
"Interest Rate Protection Agreement" means any interest rate or
currency swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect the Borrower or any Restricted
Subsidiary against fluctuations in interest rates or currency values.
"Inventory" of any Person shall mean all of the inventory owned
by such Person, including without limitation: (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials used or
consumed in such Person's business; (ii) all goods, wares and merchandise,
finished or unfinished, held for sale or lease or leased or furnished or to be
furnished under contracts of service; and (iii) all goods returned or
repossessed by such Person.
"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) 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 of the account or use of others), or
any purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment," and Section
7.02 (i) "Investment" shall include the portion (proportionate to the
Borrower's equity interest in such Subsidiary) of the fair market value of the
net assets of any Restricted Subsidiary of the Borrower at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Borrower shall be deemed to continue to have a permanent
"Investment" in such Subsidiary at the time of such redesignation equal to the
amount (if positive) equal to (x) the Borrower's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Borrower'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 (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Senior Subordinated
Notes were originally issued.
"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).
"Loan" shall have the meaning provided in Section 1.01.
"Lockbox Agreements" shall mean all lockbox agreements executed
and delivered pursuant to the Existing Credit Agreement, until such time as
same are replaced by lockbox agreements in the form of Exhibit M-1 hereto, and
any lockbox agreements at any time entered into in the form of Exhibit M-1
hereto.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, prospects, operations, results of operations, assets,
liabilities or financial condition of the Borrower or of Communications and
its Restricted Subsidiaries taken as a whole, (ii) any Credit Party's ability
to perform its material obligations under the Credit Documents to which it is
a party, or (iii) the material rights and remedies of the Administrative
Agent, the Collateral Agent or the Banks under any Credit Document.
"Material Contract" shall mean any contract or other arrangement
(other than the Credit Documents), whether written or oral, to which the
Borrower or its Restricted Subsidiaries is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto may be
reasonably expected to have a Material Adverse Effect.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Mortgage Amendments" shall have the meaning provided in Section
4.10.
"Mortgages" shall mean all Existing Mortgages, as modified by
the Mortgage Amendments or as same may be further modified, amended or
supplemented from time to time in the future in accordance with the terms
thereof and hereof, as well as any additional mortgages granted by any of the
Credit Parties after the Closing Date.
"MSCP Entities" means, collectively, Morgan Stanley Capital
Partners III, L.P., a Delaware limited partnership, Morgan Stanley Capital
Investors, L.P., a Delaware limited partnership, and MSCP III 892 Investors,
L.P., a Delaware limited partnership.
"MSLEF" means The Morgan Stanley Leveraged Equity Fund II,
L.P., a Delaware limited partnership.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received by way of
deferred payment of principal (but not interest) pursuant to a note or
installment receivable or otherwise including upon release to the Borrower or
a Restricted Subsidiary from any reserve established by the Borrower or such
Restricted Subsidiary against any liabilities associated with such Asset
Disposition, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form) in each case net of 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 accrued
as a liability under GAAP, as a consequence of such Asset Disposition (without
regard to the consolidated results of operations of the Borrower and its
Restricted Subsidiaries, taken as whole), and in each case net of 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, and,
until released to the Borrower or a Restricted Subsidiary, net of appropriate
amounts to be provided by the Borrower or any Restricted Subsidiary of the
Borrower as a reserve against any liabilities associated with such Asset
Disposition, including pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Disposition, all as
determined in accordance with GAAP, and net of all distributions and other
payments required to be made to minority interest holders in Restricted
Subsidiaries or joint ventures as a result of 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" shall have the meaning provided in Section 1.04(a).
"Notice of Borrowing" shall have the meaning provided in Section
1.02(a).
"Notice Office" shall mean the office of the Administrative
Agent located at 14 Wall Street, New York, New York 10005, Attention: Bruce
Addison, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto.
"Obligations" shall mean, without duplication, the unpaid
principal of and interest on (including interest accruing on or after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Communications, the Borrower or
any Restricted Subsidiary of the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the
Notes, the Fees, the Expenses and all other obligations and liabilities of
Communications, the Borrower or any Restricted Subsidiary of the Borrower to
the Administrative Agent, the Collateral Agent or the Banks, whether direct or
indirect, absolute or contingent, due or to become due, whether now existing
or hereafter incurred, which may arise under, out of, or in connection with,
this Agreement, the Notes, any other Credit Document or any other document
made, delivered or given in connection herewith or therewith.
"Offering Memorandum" shall mean the Offering Memorandum, dated
August 10, 1995, issued in connection with the private placement of the Senior
Subordinated Notes.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Borrower.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Administrative Agent. The counsel may be an employee
of or counsel to the Borrower or the Administrative Agent.
"Other Taxes" shall have the meaning given such term in Section
3.03(b).
"Parent Guarantor" shall have the meaning provided in the first
paragraph of this Agreement.
"Parent Guaranty" shall mean the Guaranty provided by
Communications pursuant to Section 13.
"Payment Office" shall mean the office of the Administrative
Agent located at 14 Wall Street, New York, New York 10005, ABA Number:
021001033, Account Name: BTCo Investor Cash A/C, Account Number: 000355784,
Reference: Sullivan Graphics, Inc., Attention: Bharathi Baliga, or such other
office as the Administrative Agent may hereafter designate in writing as such
to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA and any Person succeeding to the
functions thereof.
"Permitted Encumbrances" shall mean, with respect to any
Mortgage, the Permitted Encumbrances related thereto as described in the
respective Mortgage Policy relating thereto.
"Permitted Holders" means, collectively, MSLEF and the MSCP
Entities.
"Permitted Investment" means (i) an Investment in the Borrower
or in a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however, that the
primary business of such Restricted Subsidiary or such Person is a Related
Business; (ii) an Investment by the Borrower 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 Borrower or a Restricted Subsidiary; provided, however,
that such Person's primary business is a Related Business; (iii) a Temporary
Cash Investment; (iv) receivables owing to the Borrower 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 Borrower or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) 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;
(vi) loans or advances to employees made in the ordinary course of business in
accordance with past practices of the Borrower or of its Restricted
Subsidiaries; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Borrower or
any Restricted Subsidiary or in satisfaction of judgments, (viii) Interest
Rate Protection Agreements and Raw Material Hedge Agreements and (ix)
Investments at any time not exceeding $2 million (valued at the fair market
value at the time any such Investment was made).
"Permitted Materials" shall have the meaning given to such term
in Section 5.18.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which (i) is maintained or contributed to by
(or to which there is an obligation to contribute of), or (ii) at any time
during the five year period preceding (A) in the case of any Loan, the date of
the making of such Loan or (B) in the case of any event or condition described
in Section 6.04, the date thereof, was maintained or contributed to by (or to
which there is or was an obligation to contribute to), Communications, the
Borrower, a Restricted Subsidiary of Communications or the Borrower or an
ERISA Affiliate.
"Pledge Agreement" shall mean the Existing Pledge Agreement, as
same may be modified, amended or supplemented from time to time in accordance
with the terms thereof and hereof, including pursuant to the Existing Pledge
Agreement Amendment.
"PPSA" shall mean the Personal Property Security Act (Ontario).
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution
of assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other
loans at rates of interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean all proceeds of any Collateral.
"Quarterly Payment Date" shall mean the last Business Day of
each January, April, July and October occurring after the Closing Date.
"Raw Material Hedge Agreement" means an agreement designed to
hedge against fluctuations in the cost of raw materials entered into by the
Borrower or its Subsidiaries in the ordinary course of business in connection
with their business operations.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including leaseholds.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
Indebtedness in exchange, substitution or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Borrower or any Restricted Subsidiary of the Borrower
existing on the Closing Date or Incurred in compliance with this Agreement,
including Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that (i) such Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii)
such Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has
an aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees, accrued interest and
expenses, including any premium and defeasance costs) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness
shall not include Indebtedness of a Restricted Subsidiary of the Borrower that
Refinances Indebtedness of the Borrower.
"Register" shall have the meaning provided in Section 12.15.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
thereto.
"Related Business" means as of any date the businesses of the
Borrower and its Subsidiaries as conducted on the Closing Date and any business
related, ancillary or complementary thereto.
"Remedial Actions" means any claim, proceeding or action to
foreclose upon, take possession or control of, sell, lease or otherwise
dispose of, or in any other manner realize, take steps to realize or seek to
realize upon, the whole or any part of any Collateral, whether pursuant to the
UCC, by foreclosure, by setoff, by self-help repossession, by notification to
account debtors, by deed in lieu of foreclosure, by exercise of power of sale,
by judicial action or otherwise, or the exercise of any other remedies with
respect to any Collateral available under any of the Collateral Documents, or
under applicable law.
"Replaced Bank" shall have the meaning provided in Section 1.11.
"Replacement Bank" shall have the meaning provided in Section
1.11.
"Reportable Event" shall mean any of the events described in
Section 4043 of ERISA with respect to a Plan as to which the 30-day notice
requirement has not been waived by the PBGC.
"Required Banks" shall mean, collectively, Banks the sum of
whose outstanding Loans (or, if prior to the Closing Date, Commitments)
represent an amount greater than 50% of the sum of all outstanding Loans (or,
if prior to the Closing Date, the Commitments); provided that until the first
date on or after the Closing Date upon which BTCo and its Affiliates own less
than a majority of the outstanding principal amount of Loans, the Required
Banks shall be required to include (if there are any Banks other than BTCo and
its Affiliates) at least one Bank which is not BTCo or an Affiliate thereof.
"Required Secured Creditors" shall mean, with respect to any
Collateral Document, the Required Lenders as defined therein.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) or options, warrants or other rights to acquire its Capital Stock
(other than Disqualified Stock) and dividends or distributions payable solely
to the Borrower or a Restricted Subsidiary, and other than pro rata dividends
or other distributions made by a Subsidiary of the Borrower that is not a
Wholly-Owned Subsidiary to minority stockholders (or owners of an equivalent
interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Borrower held by any Person
or of any Capital Stock of a Subsidiary of the Borrower held by any Affiliate
of the Borrower (other than a Restricted Subsidiary), including the exercise
of any option to exchange any Capital Stock (other than into Capital Stock of
the Borrower that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of
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) or (iv) the
making of any Investment, other than a Permitted Investment, in any Person.
"Restricted Subsidiary" means any Subsidiary of the Borrower
that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SEC" means the Securities and Exchange Commission.
"Section 3.03(e) Certificate" shall have the meaning provided in
Section 3.03(e).
"Second Priority Secured Obligations" shall mean all Obligations
under, or with respect to, this Agreement.
"Second Tier Taxes" shall have the meaning provided in Section
3.03(a).
"Secured Creditors" shall have the meaning provided in the
various Collateral Documents (after giving effect to the amendments thereto
required pursuant to Section 4), and in any event shall include (x) the
lenders from time to time party to the Existing Credit Agreement, (y) various
lenders entering into Interest Rate Agreements as more fully provided in the
various Collateral Documents and (z) the Banks pursuant to this Agreement.
"Secured Indebtedness" means any Indebtedness of the Borrower or
any of its Restricted Subsidiaries secured by a Lien.
"Secured Interest Rate Protection Obligations" shall mean all
obligations relating to Interest Rate Protection Agreements secured pursuant
to the Collateral Documents in accordance with the terms thereof.
"Secured Obligations" shall mean all obligations secured in
accordance with the provisions of the various Collateral Documents, in any
event including all Existing Credit Agreement Obligations, all Obligations
pursuant to this Agreement and all Secured Interest Rate Protection
Obligations.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" shall mean the Existing Security
Agreement, as same may be modified, amended or supplemented from time to time
in accordance with the terms thereof and hereof, including pursuant to the
Existing Security Agreement Amendment.
"Senior Indebtedness" of any Person means all obligations of
such Person which would constitute Senior Indebtedness under, and as defined
in, the Senior Subordinated Notes Indenture as in effect on the Closing Date,
or which constitutes Senior Indebtedness under, and as defined in, the
documentation governing any Indebtedness which Refinances (or successively
Refinances) such Indebtedness and is incurred pursuant to the provisions of
Section 7.01(b)(vii).
"Senior Subordinated Note Documents" shall mean and include each
of the documents and other agreements entered into (including, without
limitation, the Senior Subordinated Notes and the Senior Subordinated Notes
Indenture) relating to the issuance by the Borrower of the Senior Subordinated
Notes, as in effect on the Closing Date and as the same may be entered into,
modified, supplemented or amended from time to time to the extent permitted
pursuant to the terms hereof and thereof.
"Senior Subordinated Notes Indenture" shall mean the Indenture,
dated as of August 15, 1995, entered into by and between the Borrower and
NationsBank of Georgia, National Association, as trustee thereunder, as in
effect on the Closing Date and as the same may be modified, amended or
supplemented from time to time to the extent permitted in accordance with the
terms hereof and thereof.
"Senior Subordinated Notes" shall mean the Borrower's 12-3/4%
Senior Subordinated Notes due 2005, as in effect on the Closing Date and as the
same may be modified, supplemented or amended from time to time to the extent
permitted pursuant to the terms hereof and thereof.
"Shareholders' Agreement" shall have the meaning assigned that
term in the Existing Credit Agreement, as same is in effect on the Closing
Date.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Borrower within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any Indebtedness, the
date specified in such security or other relevant documentation as the fixed
date on which the final payment of principal of such Indebtedness 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 unless such
contingency has occurred).
"Subordinated Obligation" means the Senior Subordinated Notes,
any Indebtedness which Refinances same, and any other Indebtedness of the
Borrower (whether outstanding on the Issue Date or thereafter incurred) which
is subordinate or junior in right of payment to the Loans pursuant to a
written agreement to that effect.
"Subsidiaries Guaranty" shall have the meaning provided in
Section 4.07.
"Subsidiary" shall mean as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Credit Agreement shall refer to a Subsidiary or Subsidiaries of Communications
or the Borrower, as appropriate.
"Subsidiary Guarantor" shall mean, at any time, any Restricted
Subsidiary of the Borrower which has theretofore executed and delivered the
Subsidiaries Guaranty or a counterpart thereof.
"Syndication Date" shall mean the earlier of (x) the date which
is 30 days after the Closing Date and (y) the date occurring three Business
Days after the date upon which the Administrative Agent determined in its sole
discretion (and notifies the Borrower) that the primary syndication (and the
resulting addition of institutions as Banks pursuant to Section 12.04) has
been completed, notice of which shall be promptly given to the Borrower.
"Tax Sharing Agreements" shall have the meaning assigned that
term in the Existing Credit Agreement, as same is in effect on the Closing
Date.
"Taxes" shall have the meaning provided in Section 3.03.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) 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 which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which 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) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications described
in clause (ii) above, (iv) investments in commercial paper, maturing not more
than 90 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Borrower) organized and in existence under the laws
of the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, and (v) investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or "A" by Moody's.
"Total Commitments" shall mean, at any time, the sum of the
Commitments of each of the Banks at such time.
"Transaction" shall mean the entering into of this Agreement
and the incurrence of Loans hereunder, the utilization of the proceeds hereof
as contemplated by Section 5.05 and the taking of the other actions specified
in Section 4 of this Agreement.
"Unfunded Current Liability" of any Plan shall mean the amount,
if any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year, exceeds the fair
market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 35, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"Uniform Commercial Code" means the New York Uniform Commercial
Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Borrower that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) of the Borrower to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock or Indebtedness of, or holds any Lien on any
property of, the Borrower or any Restricted Subsidiary of the Borrower that is
not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000
or less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted as a Permitted Investment pursuant to clause
(ix) of the definition thereof. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Borrower could
Incur $1.00 of additional Indebtedness under Section 4.03(a) of the Senior
Subordinated Notes Indenture as same is in effect on the Closing Date (and
without giving effect to any modifications, supplements or amendments thereto,
or terminations or waivers thereof) and (y) no Default or Event of Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced by the Borrower to the Administrative Agent by
promptly filing with the Administrative Agent a copy of the board resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"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 Restricted Subsidiary" shall mean, as to any
Person, (i) any corporation 100% of whose capital stock (other than director's
qualifying shares) is at the time owned by such Person and/or one or more
Wholly-Owned Restricted Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Restricted Subsidiaries of such Person has a 100% equity
interest at such time. Unless the context otherwise requires, each reference
to a Wholly-Owned Restricted Subsidiary shall be to a Wholly-Owned Restricted
Subsidiary of the Borrower.
9.02 Accounting Terms and Determinations. Unless otherwise
defined or specified herein all accounting terms used in this Agreement shall
be construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to the
Administrative Agent on or before the Closing Date. All accounting
determinations for purposes of determining compliance with the covenants
contained in Section 7, and all defined terms as used in said Section 7, shall
be made consistent with practices in effect as of the Closing Date and, if
applicable, in accordance with GAAP as in effect on the Closing Date (or, if
the Administrative Agent shall have given its prior written approval thereto,
such determinations may be made by the Borrower in accordance with GAAP as in
effect on the date for which the determinations of such compliance shall be
made), and applied on a basis consistent in all material respects with the
audited Financial Statements delivered to the Administrative Agent on or
before the Closing Date, except as otherwise previously disclosed to the
Administrative Agent. The Financial Statements required to be delivered
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. If GAAP shall change from the basis used
in preparing the audited Financial Statements delivered to the Administrative
Agent on or before the Closing Date, the certificates required to be delivered
pursuant to Section 6.01 demonstrating compliance with the covenants contained
herein shall include (except as otherwise provided above) at the election of
the Borrower or upon the request of the Required Banks, calculations setting
forth the adjustments necessary to demonstrate how the Borrower is in
compliance with the financial covenants based upon GAAP as in effect on the
Closing Date.
9.03 Other Defined Terms. Terms not otherwise defined herein
which are defined in the UCC as in effect in the State of New York shall have
the meanings given them in such UCC. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and references to Article, Section, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified.
SECTION 10. The Agent.
10.01 Appointment. (a) Each Bank hereby designates (x) BTCo
as Administrative Agent and (y) BTCC as Collateral Agent (for purposes of this
Section 10, the term "Agent" shall include BTCo as Administrative Agent
pursuant to this Agreement and BTCC as Collateral Agent under the Collateral
Documents) to act as herein specified. Each Bank hereby irrevocably
authorizes, and each holder of any Note shall be deemed irrevocably to
authorize, the Agent to take such action on its behalf under the provisions of
this Agreement and the Notes and any other instruments and agreements referred
to herein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. Subject to the provisions of Section 11, the Collateral Agent shall
hold all Collateral and the Administrative Agent shall hold all payments of
principal, interest, Fees, charges and Expenses received pursuant to this
Agreement or any other Credit Document for the benefit of the Banks to be
distributed as provided herein. The Agent may perform any of its duties
hereunder by or through its agents or employees.
(b) The provisions of this Section 10 are solely for the
benefit of the Agent and the Banks, and neither Communications nor any of its
Subsidiaries shall have any rights as a third party beneficiary of any of the
provisions hereof (other than Sections 10.09 and 10.10(c)). In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Banks and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for
Communications or any of its Subsidiaries.
10.02 Nature of Duties of Agent. The Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and the other Credit Documents. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or
their gross negligence or willful misconduct. The duties of the Agent shall
be mechanical and administrative in nature; the Agent shall not have by reason
of this Agreement or the other Credit Documents a fiduciary relationship in
respect of any Bank; and nothing in this Agreement or the other Credit
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement or the
other Credit Documents except as expressly set forth herein or therein.
10.03 Lack of Reliance on Agent. (a) Independently and
without reliance upon the Agent, each Bank, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial or other condition and affairs of the Borrower
and its Subsidiaries in connection with the taking or not taking of any action
in connection herewith and (ii) its own appraisal of the creditworthiness of
the Borrower and its Subsidiaries, and, except as expressly provided in this
Agreement, the Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Bank with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Bank for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Agreement or the Notes or the
financial or other condition of the Borrower or any of its Subsidiaries. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of
this Agreement or the Notes, or the financial condition of the Borrower or any
of its Subsidiaries, or the existence or possible existence of any Default or
Event of Default.
10.04 Certain Rights of the Agent. The Agent shall have the
right to request instructions from the Required Banks at any time. If the
Agent requests instructions from the Required Banks with respect to any act or
action (including the failure to act) in connection with this Agreement, the
Agent shall be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the Required Banks,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks.
10.05 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other documentary, teletransmission or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person. The Agent may consult with legal
counsel (including counsel for the Borrower with respect to matters concerning
the Borrower and its Subsidiaries), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
10.06 Indemnification of Agent. To the extent the Agent is not
reimbursed and indemnified by the Borrower or, in the case of the Collateral
Agent, the other Secured Creditors, each Bank will reimburse and indemnify the
Agent, in proportion to the Banks' respective "percentages" as used in
determining the Required Banks, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any
kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder,
in any way relating to or arising out of this Agreement or the other Credit
Documents; provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. The agreements contained in this Section
shall survive any termination of this Agreement and the other Credit Documents
and the payment in full of the Obligations.
10.07 The Agent in Its Individual Capacity. With respect to
its obligation to lend under this Agreement, the Loans made by it and the
Notes issued to it, the Agent shall have the same rights and powers hereunder
as any other Bank or holder of a Note or participation interests and may
exercise the same as though it was not performing the duties specified herein;
and the terms "Banks," "Required Banks," "holders of Notes," or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
in its individual capacity. The Agent may accept deposits from, lend money
to, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory or other business with Communications or any
Affiliate of Communications as if it were not performing the duties specified
herein, and may accept fees and other consideration from Communications for
services in connection with this Agreement and otherwise without having to
account for the same to the Banks. Without limiting the foregoing, the Banks
acknowledge that BTCC is the agent pursuant to the Existing Credit Agreement.
10.08 Holders of Notes. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
10.09 Successor Agent. (a) The Agent may, upon five (5)
Business Days' notice to the Banks and the Borrower, resign at any time
(effective upon the appointment of a successor Agent (including the Banks
acting as such pursuant to following clause (c)) pursuant to the provisions of
this Section 10.09) by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the right,
upon five (5) days' notice and approval by the Borrower (which approval shall
not be unreasonably withheld), to appoint a successor Agent. If no successor
Agent (i) shall have been so appointed by the Required Banks, and (ii) shall
have accepted such appointment, within fifteen (15) days after the retiring
Agent's giving of notice of resignation, then, upon five (5) days' notice, the
retiring Agent may, on behalf of the Banks, appoint a successor Agent.
(b) Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
(c) In the event that no successor Agent is appointed pursuant
to clause (a) above, the Agent's resignation shall become effective forty days
after notice of such resignation is given to the Borrower and the Banks, and
the Required Banks shall perform the duties of the Agent until a successor
Agent is appointed as provided herein.
10.10 Collateral Matters. (a) Each Bank authorizes and
directs the Collateral Agent to enter into the Collateral Documents for the
benefit of the Banks. Each Bank hereby agrees, and each holder of any Note by
the acceptance thereof will be deemed to agree, that, except as otherwise set
forth herein, any action taken by the Required Banks in accordance with the
provisions of this Agreement, or by the Required Secured Creditors under the
Collateral Documents, and the exercise by the Required Banks or Required
Secured Creditors, as the case may be, of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Banks. The Collateral Agent
is hereby authorized on behalf of all of the Banks, without the necessity of
any notice to or further consent from any Bank, to take any action with
respect to any Collateral or Collateral Documents which may be necessary to
perfect and maintain perfected the security interest in and liens upon the
Collateral granted pursuant to the Collateral Documents.
(b) The Banks hereby authorize the Collateral Agent, at its
option and in its discretion, upon the direction of the Agent to release any
Lien granted to or held by the Collateral Agent upon any Collateral (i) upon
termination of the Commitments and payment and satisfaction of all of the
Obligations at any time arising under or in respect of this Agreement or the
Credit Documents or the transactions contemplated hereby or thereby, (ii)
constituting property being sold or disposed of upon receipt of the proceeds
of such sale by the Collateral Agent if the Borrower certifies to the
Collateral Agent that the sale or disposition is made in compliance with this
Agreement and the Existing Credit Agreement (and the Agent may rely
conclusively on any such certificate, without further inquiry) or (iii) if
approved, authorized or ratified in writing by the Required Banks or Required
Secured Creditors, as the case may be, unless such release is required to be
approved by all of the Banks hereunder. Upon request by the Agent at any time,
the Banks will confirm in writing the Collateral Agent's authority to release
particular types or items of Collateral pursuant to this Section 10.10.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Agreement and the Existing Credit
Agreement, or consented to in writing by the Required Banks or Required Secured
Creditors, as the case may be, or all of the Banks, as applicable, and upon at
least five (5) Business Days' prior written request by the Borrower, the
Collateral Agent shall (and is hereby irrevocably authorized by the Banks to)
execute such documents as may be necessary to evidence the release of the
Liens granted to the Collateral Agent for the benefit of the Banks herein or
pursuant hereto upon the Collateral that was sold or transferred; provided
that (i) the Collateral Agent shall not be required to execute any such
document on terms which, in the Collateral Agent's opinion, would expose the
Collateral Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse,
representation or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations
of the Borrower or any of its Subsidiaries in respect of) all interests
retained by the Borrower or any of its Subsidiaries, including, without
limitation, the proceeds of the sale, all of which shall continue to
constitute part of the Collateral. In the event of any sale or transfer of
Collateral, or any foreclosure with respect to any of the Collateral, the
Collateral Agent shall be authorized to deduct all of the Expenses reasonably
incurred by the Collateral Agent from the proceeds of any such sale, transfer
or foreclosure.
(d) The Collateral Agent shall have no obligation whatsoever
to the Banks or to any other Person to assure that the Collateral exists or is
owned by the Borrower or any of its Subsidiaries or is cared for, protected or
insured or that the Liens granted to the Collateral Agent herein or pursuant
hereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise or to continue exercising at all or in any manner or under any duty
of care, disclosure or fidelity any of the rights, authorities and powers
granted or available to the Collateral Agent in this Section 10.10 or in any
of the Collateral Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, the Collateral
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Collateral Agent's own interest in the Collateral as one of the
Banks and that the Collateral Agent shall have no duty or liability whatsoever
to the Banks, except for its gross negligence or willful misconduct.
(e) It is acknowledged and agreed by all the Banks that (i) the
priorities with respect to the Collateral are as set forth in the Collateral
Documents and are expressly subject to the provisions of Section 11 hereof and
(ii) to the extent the provisions of the Collateral Documents are inconsistent
with any of the provisions of this Section 10, the provisions of the
respective Collateral Document shall prevail.
10.11 Actions with Respect to Defaults. In addition to the
Agent's right to take actions on its own accord as permitted under this
Agreement, the Agent may take such action with respect to an Event of Default
as shall be directed by the Required Banks or, in the case of any Collateral
Document, the Required Secured Creditors; provided that until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable and in the best interests of the
Banks or, in the case of Collateral Documents, the Secured Creditors (or the
lenders pursuant to the Existing Credit Agreement).
10.12 Delivery of Information. The Agent shall not be
required to deliver to any Bank originals or copies of any documents,
instruments, notices, communications or other information received by the
Agent from Communications, the Borrower, any Subsidiary, the Required Banks,
any Bank or any other Person under or in connection with this Agreement or any
other Credit Document except (i) as specifically provided in this Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Bank with respect to a specific document, instrument, notice
or other written communication received by and in the possession of such Agent
at the time of receipt of such request and then only in accordance with such
specific request.
SECTION 11. Special Provisions Providing Lien Priorities;
etc. To induce the lenders pursuant to the Existing Credit Agreement to enter
into the amendments thereto and to the related Collateral Documents as
required by Section 4 hereof, and thereby permit the extensions of credit
pursuant to this Agreement and the securing of the Obligations pursuant to
this Agreement pursuant to the Collateral Documents (on a second priority
basis as more fully provided below), the following agreements are made by the
Banks (and their successors and assigns) for the benefit of the other Secured
Creditors (including without limitation the lenders pursuant to the Existing
Credit Agreement) under, and as defined in, the various Collateral Documents.
11.01 Priorities With Respect to Collateral. The Banks
acknowledge and agree that all Secured Obligations shall be secured pursuant
to the Collateral Documents in accordance with the terms thereof; provided
that, notwithstanding anything to the contrary contained in this Agreement or
any other Credit Document, as between the First Priority Secured Obligations
and Second Priority Secured Obligations, the following priorities with respect
to the Collateral shall apply:
(i) the First Priority Secured Obligations shall be
entitled to a first priority security interest in all
Collateral, superior and prior to the rights of the holders of
the Second Priority Secured Obligations with respect thereto,
which rights of the holders of Second Priority Obligations to
any and all Collateral shall be subject to the prior interests
of the holders of the First Priority Secured Obligations under
the Collateral Documents; and
(ii) the holders of the Second Priority Secured
Obligations, for themselves and their successors and assigns,
hereby acknowledge and agree for the benefit of the First
Priority Secured Creditors that they shall not be entitled to
receive, in respect of the Second Priority Secured Obligations
held by them, any of the proceeds of any Collateral following
the occurrence of an Event of Default or received as a result
of the enforcement of rights pursuant to the Collateral
Documents until all First Priority Secured Obligations have been
indefeasibly paid in full in cash or cash equivalents. The
Banks (for themselves and their successors and assigns) hereby
agree that, unless the Credit Agreement Termination Date (as
defined in the Security Agreement as amended on the Closing
Date pursuant to Section 4) has occurred and no First Priority
Secured Obligations are outstanding, they shall have no rights
to institute foreclosure or other enforcement rights under the
Collateral Documents or any other Credit Document or otherwise,
but shall only be entitled to share in the proceeds of the
Collateral as realized and following the indefeasible payment
in full in cash or cash equivalents of all First Priority
Secured Obligations. The foregoing provisions shall not
affect, or impair, the right of the Banks to accelerate the
maturity of any Loans pursuant to Section 8 hereof or to
institute legal proceedings (not including enforcement actions
with respect to the Collateral) to collect amounts due pursuant
to this Agreement.
(iii) Until all First Priority Secured Obligations have
been indefeasibly paid in full in cash or cash equivalents,
each holder of the Second Priority Secured Obligations hereby
agrees (x) not to exercise, with respect to the Second Priority
Secured Obligations, any right of setoff or counterclaim with
respect to the Collateral or any Proceeds thereof, (y) that all
Proceeds of Collateral shall be paid to the Collateral Agent
for application to the First Priority Secured Obligations and
(z) that any Proceeds of Collateral received by any holder of
the Second Priority Secured Obligations in its capacity as such
shall be segregated and held in trust and paid over to the
Collateral Agent for the benefit of the holders of all Secured
Obligations (in accordance with the priorities set forth above)
in the same form as received, with any necessary endorsements.
(iv) The holders of the Second Priority Secured
Obligations acknowledge and agree that Collateral (or Liens
thereon pursuant to the Collateral Documents) may be released
from the security interests created pursuant to the Collateral
Documents in accordance with the requirements of the respective
Collateral Documents and, except as expressly required thereby,
no consent of the holders of the Second Priority Secured
Obligations shall be required in connection therewith.
The foregoing provisions shall be effective at all times during
the term of this Agreement, and notwithstanding (without limitation):
(i) the initiation of any bankruptcy, moratorium, reorganization or
other insolvency proceeding with respect to Communications, the
Borrower or any of their Subsidiaries; (ii) the priorities which
would otherwise result under the terms of the respective Collateral
Documents or under applicable law; (iii) the taking of possession of
any Collateral by any Bank; or (iv) any other matter whatsoever; and
shall continue in full force and effect until all Secured Obligations
have been repaid in full.
11.02 Priority on Distribution of Proceeds of Collateral. In
the event of:
(a) any distribution of any Collateral upon any
bankruptcy, arrangement, receivership, assignment for the
benefit of creditors or any other action or proceeding
involving the readjustment of the obligations and indebtedness
of Communications, the Borrower or any of their Subsidiaries,
or the application of any Collateral to the payment thereof;
(b) any distribution of the Collateral upon the
liquidation or dissolution of Communications, the Borrower or
any of their Subsidiaries, or the winding up of the assets or
business of Communications, the Borrower or any of their
Subsidiaries;
(c) any realization by any of the Secured Creditors or
the Collateral Agent with respect to the Liens pursuant to the
Credit Documents whether through a Remedial Action or
otherwise; or
(d) any Disposition of any Collateral, to the extent
that any part of the proceeds of such disposition are required
to be applied to any of the Secured Obligations or held by the
Collateral Agent in accordance with the provisions of any of
the Collateral Documents;
then, in any such event, as between the Secured Creditors all of the
Collateral and any Proceeds thereof so distributed, applied or
realized upon shall be distributed or paid to (or retained by) the
Collateral Agent for application first, to the Collateral Agent to
pay the Collateral Agent's fees, expenses and indemnities provided
for in this Agreement, the Existing Credit Agreement and in the
Collateral Documents, second, to the First Priority Secured
Obligations and third, after the indefeasible payment in full in cash
or cash equivalents of all First Priority Secured Obligations, the
remaining amount of such Proceeds shall be distributed or paid to (or
retained by) the Collateral Agent for application to the Second
Priority Secured Obligations then due and payable.
11.03 Certain Dispositions of Collateral. Notwithstanding
anything to the contrary contained above, to the extent Collateral is sold in
accordance with the requirements of Section 8.1 of the Existing Credit
Agreement and relevant provisions of this Agreement (and is not sold as a
result of any Remedial Action pursuant to a Security Document) at a time when
no Default or Event of Default exists pursuant to Section 8.01(7) and (8), the
proceeds thereof shall be applied in accordance with the requirements of this
Agreement and the Existing Credit Agreement.
11.04 Waiver of Set-Off. Notwithstanding anything to the
contrary contained elsewhere in this Agreement or any other Credit Document,
at all times prior to the Existing Credit Agreement Termination Date, and
unless the Existing Credit Agreement Required Lenders otherwise expressly
consent, the Banks shall have no right and hereby waive any right to set-off
(whether pursuant to Section 12.02, applicable law or otherwise) any amounts
owed to it by Communications, the Borrower or any Guarantor against or on
account of any of the Obligations.
11.05 Right to Contest. Each holder of Obligations and each
Bank agrees for itself, and its successors and assigns, not to contest or
support any other Person in contesting, in any proceeding, including without
limitation, any bankruptcy, insolvency or liquidation proceeding, the
priority, validity or enforceability of the Liens held by the Collateral Agent
or the Secured Creditors in the Collateral or the priority, validity or
enforceability of the Secured Obligations, or the provisions of this Section
11. Notwithstanding anything to the contrary contained in the immediately
preceding sentence, the Banks shall be entitled to assert the provisions of
the Collateral Documents (subject to the provisions of this Section 11) in
accordance with the terms thereof.
11.06 Payment Invalidated. In the event that any of the First
Priority Secured Obligations shall be paid in full and subsequently, for
whatever reason (including, but not limited to, an order or judgment for
disgorgement of a preference under Title 11 of the United Stated Code, or any
similar law, or the settlement of any claim in respect thereof), formerly paid
or satisfied First Priority Secured Obligations become unpaid or unsatisfied,
the terms and conditions of this Section 11 shall be fully applicable thereto
until all such First Priority Secured Obligations are again paid in full.
11.07 Right to Amend, etc. As between the Banks and the other
Secured Creditors, it is agreed that the Secured Creditors (excluding the
Banks in their capacities as such) may at any time and from time to time, in
their sole discretion, and without any obligation to give any notice or
receive any consent from any Bank in its capacity as such, change the manner,
place or terms of payment, or change or extend the time of payment of, or
renew, alter, refinance, increase or add to the First Priority Secured
Obligations (subject, in the case of an increase in outstanding Indebtedness
constituting Secured Obligations, to compliance to the relevant provisions of
Section 7.01 hereof), or obtain, release, or dispose of any Collateral
therefor, or amend or supplement in any manner the Existing Credit Agreement,
the Collateral Documents or any other agreements or instruments evidencing,
securing or relating to the First Priority Secured Obligations, and the
provisions of this Section 11 shall continue in full force and effect with
respect to all such First Priority Secured Obligations; provided, however,
that the actions of the Secured Creditors in effecting any amendments, waivers
or modifications of the Collateral Documents shall be required to be taken in
compliance with the relevant provisions regarding amendments contained in the
respective Collateral Document.
11.08 Creation of Future Obligations. All of the First
Priority Secured Obligations shall be deemed to have been funded by the
Secured Creditors in reliance upon the agreements contained in this Section
11, and each Bank expressly waives notice of acceptance of the agreements set
forth herein, notice of reliance thereon and any other agreements and notice
of the creation of any First Priority Secured Obligations after the date
hereof, and agrees that the Secured Creditors shall be entitled to rely upon
the agreements set forth herein at all times in creating First Priority
Secured Obligations. It is expressly agreed that, subject to the provisions
of Section 7.01, additional extensions of credit may be made pursuant to the
Existing Credit Agreement or Interest Rate Protection Agreements (including
but not limited to refinancings permitted pursuant to Section 7.01), and that
such additional obligations may be designated as First Priority Secured
Obligations (and shall be entitled to the priorities with respect to the
Collateral as are provided in this Section 11), and that, except to the extent
the Incurrence of any Indebtedness would violate Section 7.01, no further
consent of the Banks shall be required in connection therewith and that the
provisions of this Section 11 shall be fully applicable to the obligations so
created in the future. The Banks hereby authorize the Collateral Agent to
amend the Security Documents as necessary or desirable to effect the foregoing
agreements.
11.09 Waiver of Liability For Actions Taken With Respect To
Second Priority Secured Obligations and Collateral. (a) Neither the
Administrative Agent, the Existing Credit Agent, the Collateral Agent nor any
Secured Creditor shall have any liability to the holder of any Second Priority
Secured Obligations (in its capacity as such), and each Bank (in its capacity
as such), on behalf of itself and its successors and assigns, hereby waives to
the extent permitted by applicable law any claim, right, action or cause of
action which it may now or hereafter have against the Administrative Agent,
the Existing Credit Agreement Agent, the Collateral Agent or any other Secured
Creditor (including, without limitation, any and all claims, rights, actions
or causes of action that any Bank may otherwise have against the
Administrative Agent, the Collateral Agent or any other Secured Creditor under
Section 9-207, 9-504 and 9-507 of the UCC) arising out of, any and all actions
which the Administrative Agent, the Collateral Agent or any other Secured
Creditor, in good faith, takes or omits to take with respect to the Secured
Obligations, any obligor with respect to the Secured Obligations or any
Collateral, including, without limitation, actions with respect to: the
creation, perfection or continuation of Liens with respect to any Collateral;
any Remedial Action or Disposition of any Collateral; the release of any
Collateral; the custody, valuation, protection, preservation, use or
depreciation of any Collateral; the realizing upon or failure to realize upon
any Collateral; or the collection of the Obligations. To the extent that any
of the foregoing waivers is not permitted by applicable law, it is agreed that
the applicable standard by which any non-waivable rights, duties or claims are
to be measured shall be that neither the Administrative Agent, the Existing
Credit Agreement Agent, the Collateral Agent nor any other Secured Creditor
shall have any liability or responsibility to any holder of any Second
Priority Secured Obligations, for any actions or omissions other than actions
or omissions constituting gross negligence or wilful misconduct as finally
determined by a court of competent jurisdiction.
11.10 Financing Issues. If Communications, the Borrower or
any of their Restricted Subsidiaries shall be subject to a bankruptcy,
insolvency, liquidation or similar proceeding (including as a result of the
commencement of a case under the Bankruptcy Code) and the Administrative
Agent, the Existing Credit Agreement Agent, the Collateral Agent, the Secured
Creditors or any of them shall desire to permit the usage of cash collateral
or to provide financing to Communications, the Borrower or any of their
respective Restricted Subsidiaries under Section 363 or Section 364 of the
Bankruptcy Code, then: each of the holders of the Second Priority Secured
Obligations agrees that (i) notice received two Business Days' prior to the
entry of an order approving such usage of cash collateral and five Business
Days' prior to the entry of an order approving such financing shall be adequate
notice; and (ii) provided it receives a Lien in any property arising or
acquired after the commencement of such proceeding which may be substituted
for the Collateral subject to such usage under Section 363 of the Bankruptcy
Code or which secures such financing under Section 364 of the Bankruptcy Code
(which Lien shall be subordinated to any Lien in such property held by the
Administrative Agent, the Collateral Agent, or the Secured Creditors, as the
case may be, on terms substantially the same as the terms set forth in this
Section 11), it will raise no objection to such usage or financing on the
grounds that its junior Lien position with respect to any Collateral is not
adequately protected.
11.11 Effectiveness. The provisions in this Section 11 shall
be effective both before and after the commencement of a bankruptcy,
insolvency, liquidation or similar proceeding. All references in this
Agreement to Communications, the Borrower or any of their respective
Subsidiaries shall include such entity as debtor in possession or any receiver
or trustee for such entity.
11.12 Further Assurances. Each of the holders of the
Obligations agrees to take such further action and shall execute and deliver
to the Administrative Agent, the Existing Credit Agreement Agent, the
Collateral Agent and the Secured Creditors such additional documents and
instruments (in recordable form, if requested) as the Administrative Agent,
the Existing Credit Agreement Agent, the Collateral Agent or the Secured
Creditors may reasonably request to effectuate the terms of and agreements
contemplated by this Section 11.
11.13 Obligations as Designated Senior Indebtedness under
Senior Subordinated Notes Indenture. (a) The parties hereto expressly
acknowledge and agree that the Obligations constitute Indebtedness (as defined
in the Senior Subordinated Notes Indenture) of (and with full recourse, as a
general claim, to and against) the Borrower and the various Guarantors (by
virtue of the Guaranties), which (i) is senior and superior in right of
payment to the respective obligations of the Borrower and the Guarantors under
the Senior Subordinated Notes, the Guaranties thereof contained in the Senior
Subordianted Note Documents and the Senior Subordinated Note Documents, (ii)
is not subordinate in right of payment to any other Indebtedness (as defined
in the Senior Subordinated Notes Indenture) of the Borrower or any Guarantor
and (iii) is, therefore "Senior Indebtedness" (as defined in the Senior
Subordinated Notes Indenture) of the Borrower and such Guarantors,
respectively. The parties hereto further acknowledge and agree that, at any
time when all Indebtedness under the Existing Credit Agreement has been repaid
in full, the Obligations constitute Designated Senior Indebtedness (as defined
in the Senior Subordinated Notes Indenture) of the Borrower and the
Guarantors.
(b) The parties hereto further acknowledge and agree that,
without limiting the effect of the preceding sentence (including, without
limitation, the seniority and superiority of the Obligations in right of
payment), the priorities with respect to the Collateral and the Proceeds
thereof shall be governed by the provisions of this Section 11, and the
provisions of Section 11.13(a) shall in no event limit or modify the
agreements contained in Sections 11.01 through 11.12, or the provisions of the
Collateral Documents.
11.14 Benefits of this Section 11. It is acknowledged and
agreed that the provisions of this Section 11 are agreed to in order to induce
the Existing Credit Agreement Required Lenders to enter into the amendments to
the Existing Credit Agreement and Collateral Documents as contemplated by
Section 4, and that the provisions of this Section 11 may be directly enforced
by the various Secured Creditors and the Collateral Agent or Existing Credit
Agreement Agent on their behalf. In no event shall any of the provisions of
this Section 11 be supplemented, modified or waived except in a written
agreement executed by the Existing Credit Agreement Agent (with the prior
written consent of the Existing Credit Agreement Required Lenders).
SECTION 12. Miscellaneous.
12.01 Payment of Expenses; Indemnification; etc. The Borrower
agrees that it shall: (i) whether or not the transactions herein contemplated
are consummated, pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent (including, without limitation, the reasonable fees and
disbursements of White & Case and the Administrative Agent's local counsel and
consultants) in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto, of the Administrative Agent in connection with its
syndication efforts with respect to this Agreement and of the Administrative
Agent and, after the occurrence of an Event of Default, each of the Banks in
connection with the enforcement of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein
(including, without limitation, the fees and disbursements of counsel for the
Administrative Agent); (ii) pay and hold each of the Banks harmless from and
against any and all present and future stamp, excise and other similar
documentary taxes with respect to the foregoing matters and save each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Bank) to pay such taxes; and (iii) indemnify the Administrative Agent and
each Bank, and each of their respective officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
disbursements) incurred by, imposed on or assessed against any of them as a
result of, or arising out of, or in any way related to, or by reason of, (a)
any investigation, litigation or other proceeding (whether or not the
Administrative Agent or any Bank is a party thereto) related to the entering
into and/or performance of this Agreement or any other Credit Document or the
use of the proceeds of any Loans hereunder or the consummation of any
transactions contemplated herein or in any other Credit Document or the
exercise of any of their rights or remedies provided herein or in the other
Credit Documents, or (b) the actual or alleged presence of Hazardous Materials
in the air, surface water or groundwater or on the surface or subsurface of
any Real Property owned or at any time operated by the Borrower or any of its
Subsidiaries, the generation, storage, transportation, handling or disposal of
Hazardous Materials at any location, whether or not owned or operated by the
Borrower or any of its Subsidiaries, the non-compliance of any Real Property
with foreign, federal, state and local laws, regulations, and ordinances
(including applicable permits thereunder) applicable to any Real Property, or
any Environmental Claim asserted against the Borrower, any of its Subsidiaries
or any Real Property owned or at any time operated by the Borrower or any of
its Subsidiaries, including, in each case, without limitation, the reasonable
fees and disbursements of counsel and other consultants incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Administrative Agent or any Bank set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which is permissible under
applicable law.
12.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default,
each Bank is hereby authorized (to the extent not prohibited by applicable
law) at any time or from time to time, without presentment, demand, protest or
other notice of any kind to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any
time held or owing by such Bank (including, without limitation, by branches
and agencies of such Bank wherever located) to or for the credit or the
account of any Credit Party against and on account of the Obligations and
liabilities of such Credit Party to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 12.06(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or
not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
12.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to any Credit
Party, at the address specified opposite its signature below or in the other
relevant Credit Documents; if to any Bank, at its address specified on
Schedule II; and if to the Administrative Agent, at its Notice Office; or, as
to any Credit Party or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties
hereto and, as to each Bank, at such other address as shall be designated by
such Bank in a written notice to the Borrower and the Administrative Agent.
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective (x) three
Business Days after deposited in the mails, (y) one Business Day after
delivered to the telegraph company, cable company or a recognized overnight
courier, as the case may be, or (z) when sent by telex or telecopier, except
that notices and communications to the Administrative Agent shall not be
effective until received by the Administrative Agent.
12.04 Benefit of Agreement; Assignments; Participations. (a)
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, the Borrower may not assign or transfer any of its rights,
obligations or interest hereunder or under any other Credit Document without
the prior written consent of the Banks and, provided further, that, although
any Bank may transfer, assign or grant participations in its rights hereunder,
such Bank shall remain a "Bank" for all purposes hereunder (and may not
transfer or assign all or any portion of its obligations hereunder except as
provided in Sections 1.11 and 12.04(b)) and the transferee, assignee or
participant, as the case may be, shall not constitute a "Bank" hereunder and,
provided further, that no Bank shall transfer or grant any participation under
which the participant shall have rights to approve any amendment to or waiver
of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any Loan
or Note in which such participant is participating, or reduce the rate or
extend the time of payment of interest or Fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates)
or reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
repayment of Loans shall not constitute a change in the terms of such
participation, (ii) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement or (iii) release all
or substantially all of the Collateral under all of the Collateral Documents
(except as expressly provided in the Credit Documents) supporting the Loans
hereunder in which such participant is participating. In the case of any such
participation, the participant shall (x) not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights
against such Bank in respect of such participation to be those set forth in
the agreement executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder shall be determined
as if such Bank had not sold such participation and (y) if such participant is
not a bank, represent that either (i) no part of its acquisition of its
participation is made out of assets of any employee benefit plan, or (ii) after
consultation, in good faith, with the Borrower and provision by the Borrower of
such information as may be reasonably requested by the participant, the
acquisition and holding of such participation does not constitute a non-exempt
prohibited transaction under Section 406 of ERISA and Section 4975 of the
Code, or (iii) such participation is an "insurance company general account,"
as such term is defined in the Department of Labor Prohibited Transaction
Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and, as of the
date of the transfer there is no "employee benefit plan" with respect to which
the aggregate amount of such general account's reserves and liabilities for
the contracts held by or on behalf of such "employee benefit plan" and all
other "employee benefit plans" maintained by the same employer (and affiliates
thereof as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of
PTCE 95-60) exceeds 10% of the total reserves and liabilities of such general
account (as determined under PTCE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of the
participant. As used in this Section 12.04(a), the term "employee benefit
plan" shall have the meaning assigned to it in Title I of ERISA and shall also
include a "plan" as defined in Section 4975(e)(1) of the Code.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
outstanding Obligations hereunder to (i) its parent company and/or any
affiliate of such Bank which is at least 50% owned by such Bank or its parent
company or to one or more Banks or (ii) in the case of any Bank that is a fund
that invests in bank loans, any other fund that invests in bank loans and is
managed by the same investment advisor of such Bank or by an Affiliate of such
investment advisor or (y) assign all, or if less than all, a portion equal to
at least $1,000,000 in the aggregate for the assigning Bank or assigning
Banks, of such outstanding Obligations hereunder to one or more Eligible
Transferees, each of which assignees shall become a party to this Agreement as
a Bank by execution of an Assignment and Assumption Agreement; provided that
(i) at such time Schedule I shall be deemed modified to reflect the
outstanding Loans of such new Bank and of the existing Banks, (ii) new Notes
will be issued, at the Borrower's expense, to such new Bank and to the
assigning Bank upon the request of such new Bank or assigning Bank, such new
Notes to be in conformity with the requirements of Section 1.04 (with
appropriate modifications) to the extent needed to reflect the revised
outstanding Loans, (iii) the Administrative Agent shall receive at the time of
each such assignment, from the assigning or assignee Bank, the payment of a
non-refundable assignment fee of $3,500 and (iv) if such Eligible Transferee
is not a bank, represent that either (i) no part of its acquisition of its
Loans is made out of assets of any employee benefit plan, or (ii) after
consultation, in good faith, with the Borrower and provision by the Borrower
of such information as may be reasonably requested by such Eligible
Transferee, the acquisition and holding of such Loans does not constitute a
non-exempt prohibited transaction under Section 406 of ERISA and Section 4975
of the Code, or (iii) such assignment is an "insurance company general
account," as such term is defined in the Department of Labor Prohibited
Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and,
as of the date of the assignment, there is no "employee benefit plan" with
respect to which the aggregate amount of such general account's reserves and
liabilities for the contracts held by or on behalf of such "employee benefit
plan" and all other "employee benefit plans" maintained by the same employer
(and affiliates thereof as defined in Section V(a)(1) of PTCE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTCE 95-60) exceeds 10% of the total reserves and liabilities of
such general account (as determined under PTCE 95-60) (exclusive of separate
account liabilities) plus surplus as set forth in the National Association of
Insurance Commissioners Annual Statement filed with the state of domicile of
such Eligible Transferee; provided further, that such transfer or assignment
will not be effective until recorded by the Administrative Agent on the
Register pursuant to Section 12.15. As used in this Section 12.04(b), the
term "employee benefit plan" shall have the meaning assigned to it in Title I
of ERISA and shall also include a "plan" as defined in Section 4975(e)(1) of
the Code. To the extent of any assignment pursuant to this Section 12.04(b),
the assigning Bank shall be relieved of its obligations hereunder with respect
to its assigned Loans. At the time of each assignment pursuant to this
Section 12.04 (b) to a Person which is not already a Bank hereunder and which
is not a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for Federal income tax purposes, the respective assignee Bank
shall, to the extent legally entitled to do so, provide to the Borrower the
forms described in Section 3.03(e). To the extent that an assignment of all or
any portion of a Bank's outstanding Obligations pursuant to Section 1.11 or
this Section 12.04(b) would, at the time of such assignment, result in
increased costs (including, without limitation, amounts described in Section
3.03) from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased
costs (although the Borrower shall be obligated to pay any other increased
costs of the type described above resulting from changes after the date of the
respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and,
with the consent of the Administrative Agent, any Bank which is a fund may
pledge all or any portion of its Notes or Loans to its trustee in support of
its obligations to its trustee. No pledge pursuant to this clause (c) shall
release the transferor Bank from any of its obligations hereunder.
12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent, the Collateral Agent or any Bank in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any other Credit
Party and the Administrative Agent, the Collateral Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights, powers and
remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the
Administrative Agent, the Collateral Agent or any Bank would otherwise have.
No notice to or demand on any Credit Party in any case shall entitle any
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent,
the Collateral Agent or any Bank to any other or further action in any
circumstances without notice or demand.
12.06 Payments Pro Rata. (a) Except as otherwise provided in
this Agreement, the Administrative Agent agrees that promptly after its
receipt of each payment from or on behalf of the Borrower in respect of any
Obligations hereunder, it shall distribute such payment to the Banks (other
than any Bank that has consented in writing to waive its pro rata share of any
such payment) pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or
interest on, the Loans, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such
Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the
Obligations of the respective Credit Party to such Banks in such amount as
shall result in a proportional participation by all the Banks in such amount;
provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
12.07 Computations. All computations of interest and Fees
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest or Fees are payable.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (EXCEPT, IN
THE CASE OF OTHER CREDIT DOCUMENTS, AS SPECIFICALLY OTHERWISE PROVIDED
THEREIN) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER
HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL
JURISDICTION OVER THE BORROWER, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL
ACTION PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENTS
BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL
JURISDICTION OVER THE BORROWER. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER
SUCH MAILING. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH
SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY BANK OR
THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN
ANY OTHER JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Administrative Agent.
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower, the Administrative
Agent and each of the Banks shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered the same to the
Administrative Agent at its Notice Office or, in the case of the Banks, shall
have given to the Administrative Agent telephonic (confirmed in writing),
written or telex notice (actually received) at such office that the same has
been signed and mailed to it. The Administrative Agent shall give the
Borrower and each Bank prompt written notice of the occurrence of the
Effective Date.
12.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement
nor any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party
thereto and the Required Banks, provided that (A) the various Collateral
Documents may be amended in accordance with the relevant provisions thereof
governing amendments (which shall be consistent with the Collateral Documents
as amended pursuant to the amendments required pursuant to Section 4 hereof)
and (B) except as provided in proceeding clause (A), no such change, waiver,
discharge or termination shall, without the consent of each Bank (other than a
Defaulting Bank) with Obligations being directly modified, (i) extend the
final scheduled maturity of any Loan or Note, or reduce the rate or extend the
time of payment of interest or Fees thereon, or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) release all or
substantially all of the Collateral (except as expressly provided in the
Collateral Documents) under all the Collateral Documents, (iii) amend, modify
or waive any provision of this Section 12.12 (except for technical amendments
with respect to additional extensions of credit pursuant to this Agreement
which afford the protections set forth in the proviso below to such additional
extensions of credit), (iv) reduce the percentage specified in the definition
of Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Loans are included on the Effective Date) or (vi)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement; provided further, that no such change,
waiver, discharge or termination shall (x) increase the Commitment of any Bank
over the amount thereof then in effect without the consent of such Bank (it
being understood that waivers or modifications of conditions precedent,
covenants, Defaults or Events of Default shall not constitute an increase of
the Commitment of any Bank), (y) without the consent of the Administrative
Agent, amend, modify or waive any provision of Section 10 or any other
provision as same relates to the rights or obligations of the Administrative
Agent, (x) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (vi), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the
consent of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right, so long as all
non-consenting Banks whose individual consent is required are treated as
described below, to replace each such non-consenting Bank or Banks with one or
more Replacement Banks pursuant to Section 1.11 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination, provided further, that in any event the
Borrower shall not have the right to replace a Bank, or repay its Loans solely
as a result of the exercise of such Bank's rights (and the withholding of any
required consent by such Bank) pursuant to the second proviso to Section
12.12(a).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.08, 3.03, 10.06 and 12.01 shall survive the
execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Obligations.
12.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of such
Bank. Notwithstanding anything to the contrary contained herein, to the
extent that a transfer of Loans pursuant to this Section 12.14 would, at the
time of such transfer, result in increased costs under Section 1.08, 1.09 or
3.03 in excess of those being charged by the respective Bank prior to such
transfer, then the Borrower shall not be obligated to pay such excess
increased costs (although the Borrower, in accordance with and pursuant to the
other provisions of this Agreement, shall be obligated to pay the costs which
would apply in the absence of such designation and any subsequent increased
costs of the type described above resulting from changes after the date of the
respective transfer).
12.15 Register. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 12.15, to maintain a register (the "Register") on which it will
record the Loans made by each of the Banks and each repayment in respect of
the principal amount of the Loans of each Bank. Failure to make any such
recordation, or any error in such recordation shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Bank, the transfer
of the rights to the principal of, and interest on, any Loan shall not be
effective until such transfer is recorded on the Register maintained by the
Administrative Agent with respect to ownership of such Loans and prior to such
recordation all amounts owing to the transferor with respect to such Loans
shall remain owing to the transferor. The registration of assignment or
transfer of all or part of any Loans shall be recorded by the Administrative
Agent on the Register only upon the acceptance by the Administrative Agent of
a properly executed and delivered Assignment and Assumption Agreement pursuant
to Section 12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for acceptance and
registration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Bank shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Bank
and/or the new Bank. The Borrower agrees to indemnify the Administrative
Agent from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 12.15.
12.16 Confidentiality. (a) Subject to the provisions of
clause (b) of this Section 12.16, each Bank agrees that it will use its
reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, advisors or counsel or to another Bank
if the Bank or such Bank's holding or parent company in its sole discretion
determines that any such party should have access to such information,
provided such Persons shall be subject to the provisions of this Section 12.16
to the same extent as such Bank) any information with respect to
Communications, the Borrower or any of their respective Subsidiaries which is
now or in the future furnished pursuant to this Agreement or any other Credit
Document and which is designated by the Borrower to the Banks in writing as
confidential, provided that any Bank may disclose any such information (a) as
has become generally available to the public, (b) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such Bank or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as may be required or appropriate in
respect to any summons or subpoena or in connection with any litigation, (d)
in order to comply with any law, order, regulation or ruling applicable to
such Bank, (e) to the Administrative Agent or the Collateral Agent or any
other Bank or Secured Creditor and (f) to any prospective or actual transferee
or participant in connection with any contemplated transfer or participation
of any of the Notes or Loans or any interest therein by such Bank, provided,
that such prospective transferee shall be subject to the provisions of this
Section 12.16(a).
(b) The Borrower hereby acknowledges and agrees that each Bank
may share with any of its affiliates any information related to
Communications, the Borrower or any of their respective Restricted
Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of Communications, the Borrower and
their respective Restricted Subsidiaries, provided such Persons shall be
subject to the provisions of this Section 12.16 to the same extent as such
Bank).
12.17 Designated Senior Indebtedness. The Borrower hereby
irrevocably agrees that, at any time when all Indebtedness under the Existing
Credit Agreement has been repaid in full, the Indebtedness outstanding
hereunder shall constitute Designated Senior Indebtedness under, and as
defined in, the Senior Subordinated Notes Indenture at all times when the
principal amount of outstanding Loans are at least equal to $25 million.
12.18 Limitation on Additional Amounts, etc. Notwithstanding
anything to the contrary contained in Section 1.08 or 1.09 of this Agreement,
unless a Bank gives notice to the respective Borrower that it is obligated to
pay an amount under the respective Section within one year after the later of
(x) the date the Bank incurs the respective increased costs, loss, expense or
liability, reduction in amounts received or receivable or reduction in return
on capital or (y) the date such Bank has actual knowledge of its incurrence of
the respective increased costs, loss, expense or liability, reductions in
amounts received or receivable or reduction in return on capital, then such
Bank shall only be entitled to be compensated for such amount by such Borrower
pursuant to said Section 1.08 or 1.09, as the case may be, to the extent the
costs, loss, expense or liability, reduction in amounts received or receivable
or reduction in return on capital are incurred or suffered on or after the
date which occurs one year prior to such Bank giving notice to such Borrower
that it is obligated to pay the respective amounts pursuant to said Section
1.08 and 1.09, as the case may be. This Section 12.18 shall have no
applicability to any Section of this Agreement other than said Sections 1.08
and 1.09.
12.19 Maximum Rate. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Credit Document, the
Borrower, the Administrative Agent and the Banks hereby agree that all
agreements among them under this Agreement and the other Credit Documents,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the Administrative Agent or any Bank for
the use, forbearance, or detention of the money loaned to the Borrower and
evidenced hereby or thereby or for the performance or payment of any covenant
or obligation contained herein or therein, exceed the Highest Lawful Rate. If
due to any circumstance whatsoever, fulfillment of any provisions of this
Agreement or any of the other Credit Documents at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance any Bank should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrower.
All sums paid or agreed to be paid to the Administrative Agent or any Bank for
the use, forbearance, or detention of the Obligations and other Indebtedness
of the Borrower to the Administrative Agent or any Bank shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in full so that
the actual rate of interest on account of all such Indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such
Indebtedness. The terms and provisions of this Section 12.19 shall control
every other provision of this Agreement and all agreements among the Borrower,
the Administrative Agent and the Banks.
12.20 Post-Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that:
(a) The Borrower was not required to satisfy the
conditions precedent set forth in Section 4.13 (other than with respect to
Concentration Account Agreements, which shall be delivered on the Closing
Date) and 4.14 on the Closing Date. Not later than the 90th day after the
Closing Date, the Borrower shall have:
(i) delivered fully executed amendments to all existing Lockbox
Agreements as otherwise required by Section 4.13, it being understood
that if the Borrower is unable to obtain any such amendment to an
existing Lockbox Agreement, the Borrower shall, by such 90th day,
have entered into a new Lockbox Agreement with a financial
institution satisfactory to the Collateral Agent in the form of
Exhibit M-1 hereto; and
(ii) used its best efforts to replace all Existing Credit
Agreement Collateral Access Agreements with Collateral Access
Agreements in accordance with the provisions of Section 4.14, it
being understood and agreed that if the Borrower is unable to replace
any such Existing Credit Agreement Collateral Access Agreement with a
Collateral Access Agreement after using its best efforts to do so, no
Default or Event of Default shall arise under this Agreement as a
result of any such failure.
In connection with the foregoing, the Borrower shall (i) to the extent
requested by the Collateral Agent on the Closing Date, deliver to the
Collateral Agent local counsel opinions in form and substance satisfactory to
the Collateral Agent prior to the 90th day following the Closing Date and (ii)
deliver to the Administrative Agent within 5 days following the Closing Date
Annexes II through X, inclusive, to this Agreement, which Annexes shall be
reasonably satisfactory to the Administrative Agent and the Required Banks.
All provisions of this Credit Agreement and the other Credit
Documents (including, without limitation, all conditions precedent,
representations, warranties, covenants and other agreements herein and
therein) shall be deemed modified to the extent necessary to effect the
foregoing (and to permit the taking of the actions described above within the
time periods, required above, rather than as otherwise provided in the Credit
Documents); provided, that (x) to the extent any representation and warranty
would not be true because the foregoing actions were not taken on the Closing
Date, the respective representation and warranty shall be required to be true
and correct in all material respects at the time the respective action is
taken (or was required to be taken) in accordance with the foregoing
provisions of Section 12.20 and (y) all representations and warranties
relating to the Collateral Documents shall be required to be true immediately
after the actions required to be taken by Section 12.20 have been taken (or
were required to be taken). The acceptance of the benefits of the Loans shall
constitute a representation, warranty and covenant by the Borrower to each of
the Banks that the actions required pursuant to this Section 12.20 will be, or
have been, taken within the relevant time periods referred to in this Section
12.20 and that, at such time, all representations and warranties contained in
this Credit Agreement and the other Credit Documents shall then be true and
correct without any modification pursuant to this Section 12.20, the parties
hereto acknowledge and agree that the failure to take any of the actions
required above, within the relevant time periods required above, shall give
rise to an immediate Event of Default pursuant to this Agreement.
SECTION 13. Parent Guaranty.
13.01 The Parent Guaranty. In order to induce the Banks to
enter into this Agreement and to extend credit hereunder and in recognition of
the direct benefits to be received by the Parent Guarantor from the proceeds
of the Loans and the issuance of the Letters of Credit, the Parent Guarantor
hereby agrees with the Banks as follows: the Parent Guarantor hereby
unconditionally and irrevocably guarantees as primary obligor and not merely
as surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all indebtedness of the Borrower to the
Banks hereunder. If any or all of the indebtedness of the Borrower to the
Banks becomes due and payable hereunder, the Parent Guarantor unconditionally
promises to pay such indebtedness to the Banks, or order, on demand, together
with any and all reasonable expenses which may be incurred by (x) the
Administrative Agent in connection with the preparation, execution and
delivery of this Agreement and the other Credit Documents and the documents and
instruments referred to herein and therein and any amendment, waiver or consent
relating hereto or thereto, in connection with its syndication efforts with
respect to this Agreement, or (y) the Administrative Agent or the Banks in
collecting any of the indebtedness. The word "indebtedness" is used in this
Section 13 in its most comprehensive sense and means any and all advances,
debts, obligations and liabilities of the Borrower arising in connection with
this Agreement, in each case, heretofore, now, or hereafter made, incurred or
created, whether voluntarily or involuntarily, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether or not such
indebtedness is from time to time reduced, or extinguished and thereafter
increased or incurred, whether the Borrower may be liable individually or
jointly with others, whether or not recovery upon such indebtedness may be or
hereafter become barred by any statute of limitations, and whether or not such
indebtedness may be or hereafter become otherwise unenforceable.
13.02 Bankruptcy. Additionally, the Parent Guarantor
unconditionally and irrevocably guarantees the payment of any and all
indebtedness of the Borrower to the Banks whether or not due or payable by the
Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 8.01(7) or (8), and unconditionally and irrevocably
promises to pay such indebtedness to the Banks, or order, on demand, in lawful
money of the United States.
13.03 Nature of Liability. The liability of the Parent
Guarantor hereunder is exclusive and independent of any security for or other
guaranty of the indebtedness of the Borrower whether executed by the Parent
Guarantor, any other guarantor or by any other party, and the liability of the
Parent Guarantor hereunder shall not be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party,
or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the indebtedness of the
Borrower, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase, decrease or
change in personnel by the Borrower, or (e) any payment made to the
Administrative Agent or the Banks on the indebtedness which such Administrative
Agent or such Bank repays the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and the Parent Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
13.04 Independent Obligation. The obligations of the Parent
Guarantor hereunder are independent of the obligations of any other guarantor
or the Borrower, and a separate action or actions may be brought and
prosecuted against the Parent Guarantor whether or not action is brought
against any other guarantor or the Borrower and whether or not any other
guarantor or the Borrower be joined in any such action or actions. The Parent
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall, to the fullest
extent permitted by law, operate to toll the statute of limitations as to the
Parent Guarantor.
13.05 Authorization. The Parent Guarantor authorizes the
Administrative Agent and the Banks without notice or demand (except as shall be
required by applicable statute and cannot be waived), and without affecting or
impairing its liability hereunder, from time to time to:
(a) subject to the agreement of the Borrower, change the
manner, place or terms of payment of, and/or change or extend the
time of payment of, renew, increase, accelerate or alter, any of the
indebtedness (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Parent Guaranty
herein made shall apply to the indebtedness as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the indebtedness
and sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever
at any time pledged or mortgaged to secure, or howsoever securing,
the indebtedness or any liabilities (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers,
guarantors, the Borrower or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to its creditors
other than the Banks;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Banks regardless
of what liability or liabilities of the Parent Guarantor or the
Borrower remain unpaid; and/or
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise, with the agreement of the Borrower,
amend, modify or supplement this Agreement or any of such other
instruments or agreements.
13.06 Reliance. It is not necessary for the Administrative
Agent or the Banks to inquire into the capacity or powers of the Borrower or
its Subsidiaries or the officers, directors, partners or agent acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
13.07 Subordination. Any indebtedness of the Borrower now or
hereafter owing to the Parent Guarantor is hereby subordinated in right of
payment to the indebtedness of the Borrower owing to the Administrative Agent
and the Banks; provided that payment may be made by the Borrower on any such
indebtedness owing to the Parent Guarantor so long as the same is not
prohibited by this Agreement; and provided further, that if the Administrative
Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to the Parent Guarantor shall be collected,
enforced and received by the Parent Guarantor as trustee for the Banks and be
paid over to the Banks on account of the indebtedness of the Borrower to the
Banks, but without affecting or impairing in any manner the liability of the
Parent Guarantor under the other provisions of this Parent Guaranty. Prior to
the transfer by the Parent Guarantor of any note or negotiable instrument
evidencing any indebtedness of the Borrower to the Parent Guarantor, the
Parent Guarantor shall mark such note or negotiable instrument with a legend
that the same is subject to this subordination.
13.08 Waiver. (a) The Parent Guarantor waives any right
(except as shall be required by applicable statute and cannot be waived) to
require the Administrative Agent or the Banks to (i) proceed against the
Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party or (iii) pursue any other remedy in the Administrative Agent's or the
Banks' power whatsoever. The Parent Guarantor waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party other than payment in full of the indebtedness, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other guarantor or any other party, or the unenforceability of
the indebtedness or any part thereof from any cause, or the cessation from any
cause of the liability of the Borrower other than payment in full of the
indebtedness. The Administrative Agent and the Banks may, at their election,
foreclose on any security held by the Administrative Agent, the Collateral
Agent or the Banks by one or more judicial or nonjudicial sales, whether or
not every aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other right or
remedy the Administrative Agent and the Banks may have against the Borrower or
any other party, or any security, without affecting or impairing in any way
the liability of the Parent Guarantor hereunder except to the extent the
indebtedness has been paid. The Parent Guarantor waives, to the fullest
extent permitted by law, any defense arising out of any such election by the
Administrative Agent and the Banks, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of the Parent Guarantor against any Borrower or any other party or
any security.
(b) The Parent Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Parent Guaranty, and notices of the existence, creation or incurring
of new or additional indebtedness. The Parent Guarantor 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 indebtedness and the nature, scope and extent of
the risks which the Parent Guarantor assumes and incurs hereunder, and agrees
that the Administrative Agent and the Banks shall have no duty to advise the
Parent Guarantor of information known to them regarding such circumstances or
risks.
13.09 Limitation on Enforcement. The Banks agree that this
Parent Guaranty may be enforced only by the action of the Administrative Agent
or the Collateral Agent, in each case acting upon the instructions of the
Required Banks and that no Bank shall have any right individually to seek to
enforce or to enforce this Parent Guaranty, it being understood and agreed
that such rights and remedies may be exercised by the Administrative Agent for
the benefit of the Banks upon the terms of this Agreement. The Banks further
agree that this Parent Guaranty may not be enforced against any Affiliate,
director, officer, employee or stockholder of the Parent Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
SULLIVAN COMMUNICATIONS, INC.,
a Delaware corporation
By /s/ Joseph M. Milano
----------------------------------
Title: Chief Financial Officer
SULLIVAN GRAPHICS, INC.,
a New York corporation
By /s/ Joseph M. Milano
----------------------------------
Title: Chief Finanical Officer
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY, as
Administrative Agent
By /s/ Bruce W. Addison
----------------------------------
Title: Vice President
COLLATERAL AGENT:
BT COMMERCIAL CORPORATION,
As Collateral Agent
By /s/ Bruce W. Addison
----------------------------------
Title: Vice President
SCHEDULE I
----------
LIST OF BANKS
-------------
Bank Commitment
- ---- ----------
Bankers Trust $25,000,000
Company
----------
$25,000,000
SCHEDULE II
-----------
GOVERNMENTAL APPROVALS
----------------------
SCHEDULE III
------------
CHIEF EXECUTIVE OFFICES, RECORDS LOCATIONS AND INVENTORY
--------------------------------------------------------
AND EQUIPMENT LOCATIONS
-----------------------
SCHEDULE IV
-----------
FICTITIOUS BUSINESS NAMES
-------------------------
SCHEDULE V
----------
TAX MATTERS
-----------
SCHEDULE VI
-----------
SUBSIDIARIES
------------
SCHEDULE VII
------------
REAL PROPERTIES
---------------
SCHEDULE VIII
-------------
COLLECTIVE BARGAINING AGREEMENTS
--------------------------------
SCHEDULE IX
-----------
INSURANCE
---------
SCHEDULE X
----------
PERMITTED LIENS
---------------
SCHEDULE XI
-----------
EXISTING INDEBTEDNESS
---------------------
SCHEDULE XII
------------
INVESTMENTS
-----------
SCHEDULE XIII
-------------
TRANSACTIONS WITH AFFILIATES
----------------------------
SCHEDULE XIV
------------
Exhibit 10.16
ACG HOLDINGS, INC.
COMMON STOCK OPTION PLAN
Section 1. Purpose. The ACG Holdings, Inc. Common Stock Option
Plan (the "Common Plan") is intended to provide an incentive to certain
officers and key employees of ACG Holdings, Inc., a Delaware corporation (the
"Company"), and its Subsidiaries (as defined in Section 2) to remain in the
employ of the Company and its Subsidiaries and to increase their interest in
the success of the Company through the grant of nonqualified stock options
(the "Options") to purchase shares of Common Stock, par value $0.01, of the
Company (the "Common Stock"). Options granted under the Common Plan are not
intended to qualify as "incentive stock options" within the meaning of Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 2. Definitions. As used in the Common Plan, the
following terms shall be defined as follows:
"Adjusted Purchase Price" means, with respect to any Option
Shares, the Option Price in respect of such shares plus interest, compounded
annually, from the date on which such Option Price was paid to the date of
termination of the Participant's employment, at a rate equal to the T-Bill
Rate plus 50 basis points per annum.
"Affiliate" has the meaning assigned to such term in the
Stockholders' Agreement.
"Agreement" has the meaning assigned to such term in Section 6.
"Applicable Value" as of any date of determination means (i) if
the Company is a Public Company, Public Value and (ii) if the Company is not a
Public Company, Fair Market Value.
"beneficial owner" or "beneficially own" has the meaning
assigned to such term in Rule 13d-3 under the 1934 Act.
"Beneficiary" or "Beneficiaries" shall be defined as the person
or persons designated by the Participant pursuant to the provisions of the
applicable Agreement to receive payments pursuant to such Agreement upon the
Participant's death. If no Beneficiary is so designated by the Participant or
if no Beneficiary is living at the time a payment is due pursuant to such
Agreement, payments shall be made to the estate of the Participant. The
Agreement shall provide the Participant with the right to change the designated
Beneficiaries from time to time by written instrument executed by the
Participant and filed with the Committee in accordance with such rules as may
be specified by the Committee.
"Board of Directors" means the Board of Directors of the
Company.
"Call Right" means the right of the Company, exercisable in
accordance with Section 9, (i) to cause a Participant or any Permitted
Transferee of such Participant to surrender for cancellation unexercised Vested
Options granted to such Participant pursuant to the Common Plan and (ii) to
repurchase, and to cause a Participant or any Permitted Transferee of such
Participant to sell, Option Shares beneficially owned by the Participant or any
such Permitted Transferee, in each case on the terms and conditions specified
in Sections 9 and 10.
Termination for "Cause" means a termination of the Participant's
employment with the Company or one of its Subsidiaries (a) for "cause" as
defined in an employment agreement applicable to the Participant, or (b) in the
case of a Participant who does not have an employment agreement that defines
"cause", because of: (i) any act or omission that constitutes a material breach
by the Participant of any of his obligations under his employment agreement
with the Company or one of its Subsidiaries or the applicable Agreement; (ii)
the continued failure or refusal of the Participant to substantially perform
the duties reasonably required of him as an employee of the Company or one of
its Subsidiaries; (iii) any willful and material violation by the Participant
of any Federal or state law or regulation applicable to the business of the
Company or one of its Subsidiaries, or the Participant's conviction of a
felony, or any willful perpetration by the Participant of a common law fraud;
or (iv) any other willful misconduct by the Participant which is materially
injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any of its Subsidiaries or
Affiliates.
"Commission" means the Securities and Exchange Commission.
"Committee" has the meaning assigned to such term in Section 3.
"Date of Grant" means the date on which Options are granted to a
Participant hereunder, as set forth on the applicable Agreement.
"Effective Time" means January 16, 1998.
"Eligible Persons" means officers and other key employees of the
Company and its Subsidiaries.
"Encumbrances" means any lien, security interest, pledge, claim,
option, right of first refusal, marital right or other encumbrance with respect
to any Option or Option Share.
"Fair Market Value" means the value of a share of Common Stock
as determined in good faith by the Board of Directors or, under the
circumstances described in Section 9(b), as determined in a written report to
the Company by an independent appraisal or investment banking firm selected by
the Board of Directors. For purposes of the definition of "Fair Market
Value", the value to be determined by the Board of Directors or such appraisal
or investment banking firm shall be the price per share at which a share of
Common Stock would trade on a national securities exchange, NASDAQ or a
similar market, assuming full liquidity and the absence of any "takeover" or
"change in control" premium.
"Good Reason" means, with respect to any Participant, (a) "good
reason" as defined in an employment agreement applicable to such Participant,
or (b) in the case of a Participant who does not have an employment agreement
that defines "good reason", (i) an unscheduled decrease in the Participant's
base rate of compensation or a failure by the Company or any Subsidiary to pay
material compensation due and payable to the Participant in connection with
his employment; (ii) a material diminution of the responsibilities or title of
the Participant with the Company or any Subsidiary; or (iii) the Company's or
any Subsidiary's requiring the Participant to be based at any office or
location more than 50 miles from his principal employment location as of the
Effective Time.
"Legended Certificate" means a certificate evidencing the
number of shares of Common Stock issued upon the exercise of an Option and
imprinted with a legend to indicate that (a) such shares are subject to the
restrictions on transfer set forth in the applicable Agreement and in the
Stockholders' Agreement and (b) if the offer and sale of such shares have not
been registered under the 1933 Act, such shares may be sold only pursuant to a
registration statement under the 1933 Act or an exemption from registration
under the 1933 Act that the Company has determined is available for such sale.
"NASDAQ" means the National Automated Securities Dealers'
Automated Quotation System.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Option Price" means, with respect to any Option, the exercise
price per share of Common Stock, as determined at the time of grant by the
Committee in its sole discretion and as set forth in the applicable Agreement.
"Option Shares" means the shares of Common Stock acquired by a
Participant upon exercise of an Option.
"Participant" means any Eligible Person who has entered into an
Agreement.
"Permanent Disability" means a physical or mental disability or
infirmity of the Participant that prevents the normal performance of
substantially all his duties as an employee of the Company or any Subsidiary,
which disability or infirmity shall exist for any continuous period of 180 days
or for 180 days within any twelve month period.
"Permitted Transferee" (i) with respect to any Option Share,
has the meaning assigned to such term in the Stockholders' Agreement and (ii)
with respect to any Option, means any person or entity (other than the
Company) to whom an Option has been transferred in accordance with Section 7.
The Company shall be deemed to be a "Public Company" if, as of
any date of determination, the aggregate number of shares of Common Stock that
shall have been sold in Public Offerings shall equal not less than 25% of the
then outstanding shares of Common Stock (as determined on a fully diluted
basis).
"Public Offering" means an underwritten public offering of
equity securities of the Company pursuant to an effective registration
statement under the 1933 Act.
The "Public Value" of a share of Common Stock on a given date
shall be the average closing price of a share of Common Stock on such national
securities exchange as may be designated by the Board of Directors, or, in the
event that the Common Stock is not listed for trading on a national securities
exchange but is quoted on an automated quotation system, the average closing
bid price per share of Common Stock on such automated quotation system (the
"Average Closing Price"), in either case for the 30-day period ending on such
date. The Average Closing Price of a share of Common Stock shall be
determined by dividing (i) by (ii), where (i) shall equal the sum of the
closing prices for the Common Stock on each day that the Common Stock was
traded and a closing price was reported on such national securities exchange
or such automated quotation system, as the case may be, during the 30-day
period, and (ii) shall equal the number of days on which the Common Stock was
traded and a closing price was reported on such national securities exchange
or such automated quotation system, as the case may be, during the 30-day
period.
"Retirement" means resignation or voluntary termination of
employment after attainment of an age required for payment of an immediate
pension pursuant to the terms of any qualified retirement plan maintained by
the Company or any of its Subsidiaries in which the Participant participates;
provided, however, that no resignation or termination prior to a Participant's
sixty-fifth birthday shall be deemed a Retirement unless the Committee so
determines in its sole discretion.
"Stockholders' Agreement" means the Amended and Restated
Stockholders' Agreement, dated as of August 14, 1995 among the Company and
each of the other parties signatory thereto, and as it may hereafter be
amended.
"Subsidiary" means any corporation if 50% or more of the total
combined voting power of all classes of stock is owned, either directly or
indirectly, by the Company or another Subsidiary.
"T-Bill Rate" means, with respect to any period during which
interest shall accrue at such rate hereunder, the arithmetic average of all
the yields, as reported in The Wall Street Journal, at which one-year U.S.
Treasury bills were auctioned during such period.
"Vested Options" means, as of any date, Options which have
vested in accordance with Section 8(a)(i) or 8(a)(ii).
Section 3. Administration of the Common Plan.
(a) Members of the Committee. The Common Plan shall be
administered, and Options shall be granted hereunder, by the Board of
Directors or such committee thereof as the Board of Directors may designate.
As used herein, "Committee" shall mean any committee of the Board of Directors
designated pursuant to the previous sentence or, if no such committee is so
designated, shall mean the Board of Directors. Notwithstanding the foregoing,
following the first registration of any equity security of the Company
pursuant to Section 12 of the 1934 Act, the composition of the Committee shall
be adjusted to the extent required in order for the Company to rely on the
exemptive relief provided under Rule 16b-3, as it may be amended from time to
time, promulgated pursuant to Section 16 of the 1934 Act.
(b) Authority of the Committee. The Committee shall adopt such
rules as it may deem appropriate in order to carry out the purpose of the
Common Plan. All questions of interpretation, administration and application
of the Common Plan shall be determined in good faith by a majority of the
members of the Committee then in office, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The determination
of such majority shall be final and binding in all matters relating to the
Common Plan.
Section 4. Number of Shares Issued in Connection with Option
Grants. The maximum aggregate number of shares of Common Stock that may be
issued under the Common Plan is thirty six thousand nine hundred thirty nine
(36,939), subject to adjustment as provided in Section 11. If any Option
expires or has been surrendered without being exercised in full, the shares of
Common Stock as to which such Option has not been exercised may again be
available for issuance in connection with future grants of Options.
Section 5. Eligible Persons. Options may be granted only to
Eligible Persons. The Committee shall have the authority to select the
individual Participants from among such class of Eligible Persons to whom
Options may be granted and to determine the number of Options to be granted to
each Participant.
Section 6. Agreement. The terms and conditions of each Option
shall be embodied in a written agreement (the "Agreement") in a form approved
by the Committee which shall contain terms and conditions not inconsistent with
the Common Plan and which shall incorporate the Common Plan by reference.
Each Agreement shall: (a) state the Date of Grant, the number of Options
being granted pursuant to such Agreement, and the applicable Option Price or
Option Prices; (b) specify the applicable vesting schedule and the effective
term of the Option; (c) be signed by the recipient of the Option and a person
designated by the Committee; and (d) be delivered to the recipient of the
Option.
Section 7. Stockholders' Agreement; Restrictions on Transfer.
Each Participant shall, as a condition to the effective grant of any Option
hereunder, execute an agreement, in form and substance satisfactory to the
Company, pursuant to which he shall become a party to the Stockholders'
Agreement. None of the Option Shares may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of to any third party other than
the Company except as provided in the Stockholders' Agreement. None of the
Options may be sold, transferred, assigned, pledged, or otherwise encumbered
or disposed of, except by will or the laws of descent and distribution. Each
Permitted Transferee (other than the Company) of any Option or Option Share
shall, as a condition to the transfer thereof, execute an agreement, in form
and substance satisfactory to the Company, pursuant to which it shall become a
party to the Stockholder's Agreement and the Agreement applicable to the
transferor.
Section 8. Options.
(a) Terms of Options Generally. Options may be granted to any
Eligible Person. Each Option shall entitle the Participant to whom such
Option was granted to purchase, upon payment of the relevant Option Price, one
share of Common Stock. Payment of the Option Price shall be made in cash, or,
in the sole discretion of the Board of Directors and to the extent provided in
the applicable Agreement, in shares of Common Stock already owned by the
Participant, in other property acceptable to the Board of Directors or in any
combination of cash, shares of Common Stock or other property. Options
granted under the Common Plan shall comply with the following terms and
conditions:
(i) Vesting. Except as vesting may be accelerated pursuant
to the terms of the Common Plan or the applicable Agreement, each Option shall
vest in accordance with a schedule to be set forth in the applicable
Agreement.
(ii) Acceleration of Vesting. In the event of a termination
of a Participant's employment by reason of death or Permanent Disability, such
Participant's Options shall become 50% vested if such Options were less than
50% vested at the time of such termination. All Options shall immediately
vest upon (A) the closing of a sale of Common Stock pursuant to Section 3.08
of the Stockholders' Agreement (and Participants shall be considered to be
"Other Stockholders" for purposes of such Section 3.08) and (B) a sale by the
Company of all or substantially all of its assets to a third party that is not
an Affiliate of the Company.
(iii) Duration of Options. Each Option shall be effective for
such term as shall be determined by the Board of Directors and set forth in
the applicable Agreement; provided, however, that the term of any Option shall
not exceed 10 years from the Date of Grant.
(iv) Exercise Following Termination of Employment. Upon
termination of a Participant's employment with the Company or any of its
Subsidiaries (including upon the Participant's death, Permanent Disability or
Retirement, but not including a termination, on or prior to December 31, 2001,
of such Participant's employment by the Company or any of its Subsidiaries for
Cause or by the Participant other than for Good Reason), the Participant (or,
in the case of the Participant's death, his Beneficiary) may exercise any
Vested Option, subject to Section 8(b), at any time until the earlier of (A)
60 days following the date of such termination of employment (or, if a Vested
Option may not be exercised on the date of such termination of employment
because the conditions to exercise set forth in Section 8(b) are not
satisfied, 60 days following the date on which the Company notifies the
Participant that one such condition has been satisfied and that the Option may
be exercised), and (B) exercise by the Company of its Call Right under Section
9, but in no event after the expiration of the Option under the provisions of
clause 8(a)(iii) above. Upon the expiration of such period or exercise of
such Call Right, any such Vested Option not theretofore exercised shall be
canceled, and the shares of Common Stock that had been subject thereto shall
again be available for grants of further Options under the Common Plan.
(v) Certain Restrictions. Options granted hereunder shall be
exercisable during the Participant's lifetime only by the Participant.
(vi) Stockholder Rights. A Participant shall have no rights
as a stockholder with respect to any Option Shares until a certificate or
certificates evidencing such shares shall have been issued to such
Participant, and, except as provided in Section 11, no adjustment shall be
made for dividends or distributions or other rights in respect of any share
for which the record date is prior to the date upon which the Participant
shall become the holder of record thereof.
(vii) Dividends and Distributions. Any shares of Common Stock
or other securities of the Company received by a Participant as a result of a
stock distribution to holders of Option Shares or as a stock dividend on
Option Shares shall be subject to the same restrictions as such Option Shares,
and all references to Option Shares hereunder shall be deemed to include such
shares of Common Stock or other securities.
(viii) Additional Terms and Conditions. Each Option granted
hereunder, and any shares of Common Stock issued in connection with such
Option, shall be subject to such additional terms and conditions not
inconsistent with the Common Plan which are prescribed by the Board of
Directors and set forth in the applicable Agreement.
(b) Limitation on Exercise. An Option shall not be
exercisable unless the offer and sale of the shares of Common Stock subject
to the Option have been registered under the 1933 Act and qualified under
applicable state "blue sky" laws, or the Company has determined that an
exemption from registration under the 1933 Act and from qualification under
such state "blue sky" laws is available.
(c) Issuance of Certificate. As soon as practicable
following the exercise of any Options, a Legended Certificate evidencing
the number of shares of Common Stock issued in connection with such
exercise shall be issued in the name of the Participant.
(d) Unvested Options. Upon termination of a
Participant's employment for any reason, all Options which have not
theretofore vested (and which do not vest by reason of such termination of
employment) shall be forfeited and canceled without any payment therefor.
Section 9. Termination of Employment.
(a) Company Call Right.
(i) Exercise of Call Right. If the employment of a
Participant with the Company and its Subsidiaries terminates for any reason,
the Company shall have a Call Right, exercisable for a period of 270 days
following such termination of employment, with respect to all of the Vested
Options and Option Shares beneficially owned by the Participant and any
Permitted Transferees of the Participant. The Company may exercise its Call
Right by giving written notice thereof to the Participant or such Permitted
Transferee.
(ii) Purchase Price. With respect to any exercise of the
Company's Call Right as provided for in Section 9(a)(i), the Participant or
his Permitted Transferee, as applicable, shall surrender to the Company all
Vested Options and Option Shares, and the Company shall pay to the Participant
as consideration therefor the following:
(A) In the event that the employment of a Participant
is terminated by the Company or any of its Subsidiaries without Cause, by the
Participant for Good Reason, or by reason of death, Permanent Disability or
Retirement (or is terminated for any other reason following December 31,
2001), the Participant shall receive a payment equal to (i) in the case of
Vested Options, the excess, if any, of the aggregate Applicable Value of the
shares of Common Stock subject to such Vested Options over the aggregate
Option Price of such Options, and if such amount is zero or less, the Options
shall be surrendered for cancellation without any consideration being paid
therefor, and (ii) in the case of Option Shares, the aggregate Applicable Value
of such Option Shares. The Applicable Value shall, for purposes of this
Section 9, be determined as of the date of termination of the Participant's
employment.
(B) In the event that, on or prior to December 31,
2001, the Participant's employment is terminated by the Company or any of its
Subsidiaries for Cause, or by the Participant other than for Good Reason, (i)
the Participant's Vested Options shall be surrendered for cancellation without
any consideration being paid therefor and (ii) the Participant shall receive a
payment equal to the lower of (x) the aggregate Applicable Value of the
Participant's Option Shares and (y) the aggregate Adjusted Purchase Price for
such Option Shares.
(b) Appraisal. If, in connection with the exercise by the Company
of its Call Right under this Section 9, the Participant with respect to whose
Options or Option Shares are subject to the Call Right reasonably believes that
the Board of Directors' determination of Fair Market Value (if applicable) is
not reasonable, then the Participant may challenge the Board of Directors'
determination of such Fair Market Value by giving written notice to the Board
of Directors no later than ten business days after receipt of notice of the
purchase price which the Company intends to pay upon exercise of its Call
Right. In such event, the Company shall engage at its own expense an
appraisal or investment banking firm that is independent of the Company and
its Affiliates to determine the Fair Market Value of the Common Stock for
purposes of determining the purchase price to be paid by the Company;
provided, however, that if such a determination has been made by such an
appraisal or investment banking firm less than one year prior to the date as of
which the Fair Market Value of the Common Stock is to be determined, the
Company shall not be required to engage any such firm and may, in its
discretion, instead rely upon such earlier valuation. Any such appraisal or
investment banking firm engaged by the Company shall be selected by the Board
of Directors and shall be reasonably satisfactory to the Participant. The
purchase price determined by such independent appraisal or investment banking
firm shall be conclusive and binding on the parties. Anything in Section
10(a) to the contrary notwithstanding, if such an independent appraisal or
investment firm is appointed, no payment shall be made in respect of the
Company's repurchase of Vested Options or Option Shares pending the
determination of the purchase price by such firm, and payment of such purchase
price shall instead be made no later than the tenth business day following
receipt by the Company of the report of such firm establishing such purchase
price. If there has been an independent appraisal or determination of Fair
Market Value by an independent appraisal or investment banking firm within the
past year and the Fair Market Value so determined by the independent appraisal
or investment banking firm exceeds the earlier Fair Market Value so determined
by 10%, the costs of such firm shall be for the account of the Company; in all
other cases, the costs of such firm shall be shared equally by the Company and
the Participant, and the Company shall have the right to withhold such costs
from any payment it makes in respect of its repurchase of Vested Options or
Option Shares from the Participant.
Section 10. Additional Terms Relating to the Company's Call
Right.
(a) Closing. The closing of any exercise of the Company's Call
Right shall take place at the offices of the Company, or such other place as
may be mutually agreed, not less than 15 nor more than 30 days after the date
such Call Right is exercised. The date and time of closing shall be specified
by the Company at the time it exercises the Call Right. At such closing, the
Participant shall deliver consents to the surrender and cancellation of Vested
Options and certificates for the Option Shares to be repurchased by the
Company duly endorsed, or accompanied by written instruments of transfer in
form reasonably satisfactory to the Company duly executed by the Participant,
free and clear of any Encumbrances. The Company shall, subject to Section
10(b), pay the applicable purchase price for surrendered Vested Options or
Option Shares in cash.
(b) Financial Capability; Legal Limitations. Anything in the
Common Plan or any Agreement to the contrary notwithstanding, to the extent
that (i) the limitations or restrictions applicable to the Company or any of
its Subsidiaries under the laws of the State of Delaware, the restrictions or
limitations contained in the Company's Certificate of Incorporation or any
other applicable law, rule or regulation or under the terms of any indebtedness
for borrowed money of the Company or any of its Subsidiaries prohibit the
Company from making any payment required under the Common Plan or any
applicable Agreement with respect to an Option or Option Share or (ii) the
Board of Directors shall determine in good faith that the Company is not
financially capable of making any such payment, then the Company shall not be
obligated to make payment at such time, and shall have the right to defer such
payment until the Board of Directors reasonably determines that such
limitations and restrictions no longer restrict the Company from making such
deferred payment. Any amounts the payment of which is so deferred shall bear
interest, compounded annually and calculated at a rate equal to the T-Bill
Rate plus 50 basis points per annum from the closing date for the repurchase
of the Participant's Options and Option Shares and shall be paid (with
interest) promptly after, and to the extent that, the Board of Directors
determines that the limitations and restrictions referred to in the first
sentence of this Section 10(b) no longer restrict such payment.
Notwithstanding a deferral of payment in accordance with this Section 10(b)
for Vested Options or Option Shares in respect of which the Company shall have
exercised its Call Right, the closing of any exercise of such Call Right shall
take place as provided in Section 10(a), and the right of the Participant and
his Permitted Transferees in respect of the Vested Options and Option Shares
(other than the right to receive payment of amounts deferred and interest
thereon in accordance with this Section 10(b)) shall terminate as of such
closing.
Section 11. Effect of Certain Corporate Changes.
(a) Dilution and Other Adjustments. In the event of a stock
dividend or split, the Committee shall make any or all of the following
adjustments as are necessary or advisable (the form of which shall be
determined by the Committee in its sole discretion) to provide each
Participant with a benefit equivalent to that which he would have been
entitled to had such event not occurred: (i) adjust the number of Options
granted to each Participant and the number of Options that may be granted
generally pursuant to the Common Plan, (ii) adjust the Option Price of any
Options and (iii) make any other adjustments, or take such action, as the
Committee, in its discretion, deems appropriate. Such adjustments shall be
conclusive and binding for all purposes. In the event of a change in the
Common Stock which is limited to a change in the designation thereof to
"Capital Stock" or other similar designation, or to a change in the par value
thereof, or from par value to no par value, without increase or decrease in
the number of issued shares, the shares resulting from any such change shall
be deemed to be Common Stock within the meaning of the Common Plan.
(b) Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation, (ii) all or substantially all
the assets of the Company are acquired by another corporation, person or
entity, (iii) the Company is reorganized, dissolved or liquidated (each such
event in (i), (ii) or (iii) being hereinafter referred to as a "Reorganization
Event") or (iv) the Board of Directors shall propose that the Company enter
into a Reorganization Event, then the Committee shall make upon consummation of
such Reorganization Event any or all of the adjustments described in Section
11(a) as are necessary or advisable (the form of which shall be determined by
the Committee in its sole discretion) to provide the Participant with a benefit
equivalent to that which he would have been entitled to had such event not
occurred.
Section 12. Miscellaneous.
(a) No Rights to Grants or Continued Employment. No Participant
shall have any claim or right to receive grants of Options under the Common
Plan. Neither the Common Plan nor any action taken or omitted to be taken
hereunder shall be deemed to create or confer on any Participant any right to
be retained in the employ of the Company or any Subsidiary or other Affiliate
thereof, or to interfere with or to limit in any way the right of the Company
or any Subsidiary or other Affiliate thereof to determine the employment of
such Participant at any time.
(b) Right of Company to Assign Rights and Delegate Duties. The
Company shall have the right to assign any of its rights and delegate any of
its duties hereunder to any of its Affiliates.
(c) Tax Withholding. The Company and its Subsidiaries shall have
the right to require any individual entitled to receive shares of Common Stock
pursuant to an Option to remit to the Company, prior to the delivery of any
certificates evidencing such shares, any amount sufficient to satisfy any
Federal, state or local tax withholding requirements. Prior to the Company's
determination of such withholding liability, such individual may make an
irrevocable election to satisfy, in whole or in part, such obligation to remit
taxes by directing the Company to withhold shares of Common Stock that would
otherwise be received by such individual. Such election may be denied by the
Committee in its discretion, or may be made subject to certain conditions
specified by the Committee, including, without limitation, conditions intended
to avoid the imposition of liability against the individual under Section
16(b) of the 1934 Act. The Company and its Subsidiaries shall also have the
right to deduct from all cash payments made pursuant to the Common Plan or any
applicable Agreement with any Federal, state or local taxes required to be
withheld with respect to such payments.
(d) No Restriction on Right of Company to Effect Corporate
Changes. The Common Plan shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital structure or
business of the Company, or any merger or consolidation of the Company, or any
issue of stock or options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to
or affect the Common Stock or the rights thereof or which are convertible into
or exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of the assets or business
of the Company, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) 1934 Act. Notwithstanding anything contained in the Common
Plan or any Agreement to the contrary, if the consummation of any transaction
under the Common Plan would result in the possible imposition of liability on
a Participant pursuant to Section 16(b) of the 1934 Act, the Committee shall
have the right, in its sole discretion, but shall not be obligated, to defer
such transaction to the extent necessary to avoid such liability, but in no
event for a period in excess of 180 days.
Section 13. Amendment. The Board of Directors may at any time
and from time to time alter, amend, suspend or terminate the Common Plan in
whole or in part. No termination or amendment of the Common Plan may, without
the consent of the Participant to whom any Options shall previously have been
granted, adversely affect the rights of such Participant in such Options;
provided, however, that the Participant Committee (as hereinafter defined)
shall have the authority to approve (without any further consent and which
approval shall be binding on all Participants) any such alteration, amendment,
suspension, termination or waiver of any of the rights of the Participants
under the Common Plan or any Agreement or any outstanding Options so long as
such alteration, amendment, suspension, termination or waiver is uniformly
applicable to all Participants. As used herein, the "Participant Committee"
means Stephen M. Dyott and successor members of such committee appointed by
him.
Section 14. Effective Date. The Common Plan shall be
effective as of the Effective Time.
Section 15. Termination. Unless previously terminated
pursuant to Section 13 hereof, the Common Plan shall terminate on the tenth
anniversary of the Effective Time, and no further Options may be awarded
hereunder after such date.
Section 16. Headings. The headings of sections and subsections
herein are included solely for convenience of reference and shall not affect
the meaning of any of the provisions of the Common Plan.
Section 17. Governing Law. The Common Plan and all rights
hereunder shall be construed in accordance with and governed by laws of the
State of New York.
Exhibit 10.17
ACG HOLDINGS, INC.
PREFERRED STOCK OPTION PLAN
Section 1. Purpose. The ACG Holdings, Inc. Preferred Stock
Option Plan (the "Preferred Plan") is intended to provide an incentive to
certain officers and key employees of ACG Holdings, Inc., a Delaware
corporation (the "Company"), and its Subsidiaries (as defined in Section 2) to
remain in the employ of the Company and its Subsidiaries and to increase their
interest in the success of the Company through the grant of nonqualified stock
options (the "Options") to purchase shares of Series AA Preferred Stock, par
value $0.01, of the Company ("Series AA Preferred Stock"), Series BB Preferred
Stock, par value $0.01, of the Company ("Series BB Preferred Stock" and,
together with the Series AA Preferred Stock, the "Preferred Stock"), and, in
certain circumstances set forth below, Common Stock, par value $0.01, of the
Company ("Common Stock"). Options granted under the Preferred Plan are not
intended to qualify as "incentive stock options" within the meaning of Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 2. Definitions. As used in the Preferred Plan, the
following terms shall be defined as follows:
"Adjusted Purchase Price" means, with respect to any Option
Shares, the Option Price in respect of such shares plus interest, compounded
annually, from the date on which such Option Price was paid to the date of
termination of the Participant's employment, at a rate equal to the T-Bill
Rate plus 50 basis points per annum.
"Affiliate" has the meaning assigned to such term in the
Stockholders' Agreement.
"Agreement" has the meaning assigned to such term in Section 6.
"Applicable Value" as of any date of determination means (A) in
the case of Preferred Stock, Fair Market Value, and (B) in the case of Common
Stock, (i) if the Company is a Public Company, Public Value and (ii) if the
Company is not a Public Company, Fair Market Value.
"beneficial owner" or "beneficially own" has the meaning
assigned to such term in Rule 13d-3 under the 1934 Act.
"Beneficiary" or "Beneficiaries" shall be defined as the person
or persons designated by the Participant pursuant to the provisions of the
applicable Agreement to receive payments pursuant to such Agreement upon the
Participant's death. If no Beneficiary is so designated by the Participant or
if no Beneficiary is living at the time a payment is due pursuant to such
Agreement, payments shall be made to the estate of the Participant. The
Agreement shall provide the Participant with the right to change the designated
Beneficiaries from time to time by written instrument executed by the
Participant and filed with the Committee in accordance with such rules as may
be specified by the Committee.
"Board of Directors" means the Board of Directors of the
Company.
"Call Right" means the right of the Company, exercisable in
accordance with Section 9, (i) to cause a Participant or any Permitted
Transferee of such Participant to surrender for cancellation unexercised Vested
Options granted to such Participant pursuant to the Preferred Plan and (ii) to
repurchase, and to cause a Participant or any Permitted Transferee of such
Participant to sell, Option Shares beneficially owned by the Participant or any
such Permitted Transferee, in each case on the terms and conditions specified
in Sections 9 and 10.
Termination for "Cause" means a termination of the Participant's
employment with the Company or one of its Subsidiaries (a) for "cause" as
defined in an employment agreement applicable to the Participant, or (b) in the
case of a Participant who does not have an employment agreement that defines
"cause", because of: (i) any act or omission that constitutes a material breach
by the Participant of any of his obligations under his employment agreement
with the Company or one of its Subsidiaries or the applicable Agreement; (ii)
the continued failure or refusal of the Participant to substantially perform
the duties reasonably required of him as an employee of the Company or one of
its Subsidiaries; (iii) any willful and material violation by the Participant
of any Federal or state law or regulation applicable to the business of the
Company or one of its Subsidiaries, or the Participant's conviction of a
felony, or any willful perpetration by the Participant of a common law fraud;
or (iv) any other willful misconduct by the Participant which is materially
injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any of its Subsidiaries or
Affiliates; provided, however, that no such termination that is susceptible to
cure and that does not constitute a repetition of such Cause shall be
considered a termination for Cause, unless the Company first gives the
Participant written notice of its intention to terminate and of the grounds
for such termination, and the Participant has not, within 20 business days
following receipt of such notice, cured such Cause, or in the event such Cause
is not susceptible to cure within such 20 business day period, the Participant
has not taken all reasonable steps within such 20 business day period to cure
such Cause as promptly as practicable thereafter.
"Commission" means the Securities and Exchange Commission.
"Committee" has the meaning assigned to such term in Section 3.
"Date of Grant" means the date on which Options are granted to a
Participant hereunder, as set forth on the applicable Agreement.
"Effective Time" means January 16, 1998.
"Eligible Persons" means officers and other key employees of the
Company and its Subsidiaries.
"Encumbrances" means any lien, security interest, pledge, claim,
option, right of first refusal, marital right or other encumbrance with respect
to any Option or Option Share.
"Fair Market Value" means the value of a share of Preferred
Stock or Common Stock (as the case may be) as determined in good faith by the
Board of Directors or, under the circumstances described in Section 9(b), as
determined in a written report to the Company by an independent appraisal or
investment banking firm selected by the Board of Directors. For purposes of
the definition of "Fair Market Value", the value to be determined by the Board
of Directors or such appraisal or investment banking firm shall be (a) in the
case of Preferred Stock, the price per share at which a share of Preferred
Stock would change hands in an arm's length transaction between a willing
buyer and a willing seller, both in possession of reasonable knowledge of all
relevants facts (including without limitation the terms of the Preferred Stock
and the financial condition of the Company), with neither party being under
any compulsion to act or not act and assuming (i) all outstanding options to
acquire shares of Preferred Stock are exercised if and only if such exercise is
economically beneficial to the holders of such options, (ii) an appropriate
discount to reflect the lack of liquidity (including the absence of a public
market) and all relevant transfer restrictions and (iii) the absence of any
"takeover" or "change-of-control" premium and (b) in the case of Common Stock,
the price per share at which a share of Common Stock would trade on a national
securities exchange, NASDAQ or a similar market, assuming full liquidity and
the absence of any "takeover" or "change in control" premium.
"Good Reason" means, with respect to any Participant, (a) "good
reason" as defined in an employment agreement applicable to such Participant,
or (b) in the case of a Participant who does not have an employment agreement
that defines "good reason", (i) an unscheduled decrease in the Participant's
base rate of compensation or a failure by the Company or any Subsidiary to pay
material compensation due and payable to the Participant in connection with
his employment; (ii) a material diminution of the responsibilities or title of
the Participant with the Company or any Subsidiary; or (iii) the Company's or
any Subsidiary's requiring the Participant to be based at any office or
location more than 50 miles from his principal employment location as of the
Effective Time; provided, however, no such event or material breach that
constitutes a potential grounds for Good Reason that is susceptible to cure
and that does not constitute a repetition of such event or material breach
shall be considered Good Reason, unless the Participant first gives written
notice to the Company of his intention to terminate and the grounds for such
termination, and the Company has not, within 20 days following the receipt of
such notice, cured such event or material breach, or in the event such event
or material breach is not susceptible to cure within such 20 business day
period, the Company has not taken all reasonable steps within such 20 business
day period to cure such event or material breach as promptly as practicable
thereafter.
"Legended Certificate" means a certificate evidencing the
number of Option Shares issued upon the exercise of an Option and imprinted
with a legend to indicate that (a) such shares are subject to the restrictions
on transfer set forth in the applicable Agreement and in the Stockholders'
Agreement and (b) if the offer and sale of such shares have not been
registered under the 1933 Act, such shares may be sold only pursuant to a
registration statement under the 1933 Act or an exemption from registration
under the 1933 Act that the Company has determined is available for such sale.
"Liquidity Event" means the first to occur of (i) a Public
Offering, (ii) a sale by the Company of all or substantially all of its assets
to a third party that is not an Affiliate of the Company, and (iii) the
completion of a sale contemplated by Section 3.08 of the Stockholders'
Agreement.
"NASDAQ" means the National Automated Securities Dealers'
Automated Quotation System.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Option Price" means, with respect to any Option, the exercise
price per share of Preferred Stock or Common Stock (as the case may be), as
determined at the time of grant by the Committee in its sole discretion and as
set forth in the applicable Agreement.
"Option Shares" means the shares of Preferred Stock or Common
Stock (as the case may be) acquired by a Participant upon exercise of an
Option, and the shares of Preferred Stock, Common Stock or other securities
of the Company received by a Participant in the circumstances set forth in
Section 8(a)(vii).
"Participant" means any Eligible Person who has entered into an
Agreement.
"Permanent Disability" means a physical or mental disability or
infirmity of the Participant that prevents the normal performance of
substantially all his duties as an employee of the Company or any Subsidiary,
which disability or infirmity shall exist for any continuous period of 180 days
or for 180 days within any twelve month period.
"Permitted Transferee" (i) with respect to any Option Share,
has the meaning assigned to such term in the Stockholders' Agreement and (ii)
with respect to any Option, means any person or entity (other than the
Company) to whom an Option has been transferred in accordance with Section 7.
The Company shall be deemed to be a "Public Company" if, as of
any date of determination, the aggregate number of shares of Common Stock that
shall have been sold in Public Offerings shall equal not less than 25% of the
then outstanding shares of Common Stock (as determined on a fully diluted
basis).
"Public Offering" means an underwritten public offering of
equity securities of the Company pursuant to an effective registration
statement under the 1933 Act.
The "Public Value" of a share of Common Stock on a given date
shall be the average closing price of a share of Common Stock on such national
securities exchange as may be designated by the Board of Directors, or, in the
event that the Common Stock is not listed for trading on a national securities
exchange but is quoted on an automated quotation system, the average closing
bid price per share of Common Stock on such automated quotation system (the
"Average Closing Price"), in either case for the 30-day period ending on such
date. The Average Closing Price of a share of Common Stock shall be
determined by dividing (i) by (ii), where (i) shall equal the sum of the
closing prices for the Common Stock on each day that the Common Stock was
traded and a closing price was reported on such national securities exchange
or such automated quotation system, as the case may be, during the 30-day
period, and (ii) shall equal the number of days on which the Common Stock was
traded and a closing price was reported on such national securities exchange
or such automated quotation system, as the case may be, during the 30-day
period.
"Retirement" means resignation or voluntary termination of
employment after attainment of an age required for payment of an immediate
pension pursuant to the terms of any qualified retirement plan maintained by
the Company or any of its Subsidiaries in which the Participant participates;
provided, however, that no resignation or termination prior to a Participant's
sixty-fifth birthday shall be deemed a Retirement unless the Committee so
determines in its sole discretion.
"Stockholders' Agreement" means the Amended and Restated
Stockholders' Agreement, dated as of August 14, 1995, among the Company and
each of the other parties signatory thereto, and as it may hereafter be
amended.
"Subsidiary" means any corporation if 50% or more of the total
combined voting power of all classes of stock is owned, either directly or
indirectly, by the Company or another Subsidiary.
"T-Bill Rate" means, with respect to any period during which
interest shall accrue at such rate hereunder, the arithmetic average of all
the yields, as reported in The Wall Street Journal, at which one-year U.S.
Treasury bills were auctioned during such period.
"Vested Options" means, as of any date, Options which have
vested in accordance with Section 8(a)(i) or 8(a)(ii).
Section 3. Administration of the Preferred Plan.
(a) Members of the Committee. The Preferred Plan shall be
administered, and Options shall be granted hereunder, by the Board of
Directors or such committee thereof as the Board of Directors may designate.
As used herein, "Committee" shall mean any committee of the Board of Directors
designated pursuant to the previous sentence or, if no such committee is so
designated, shall mean the Board of Directors. Notwithstanding the foregoing,
following the first registration of any equity security of the Company
pursuant to Section 12 of the 1934 Act, the composition of the Committee shall
be adjusted to the extent required in order for the Company to rely on the
exemptive relief provided under Rule 16b-3, as it may be amended from time to
time, promulgated pursuant to Section 16 of the 1934 Act.
(b) Authority of the Committee. The Committee shall adopt such
rules as it may deem appropriate in order to carry out the purpose of the
Preferred Plan. All questions of interpretation, administration and
application of the Preferred Plan shall be determined in good faith by a
majority of the members of the Committee then in office, except that the
Committee may authorize any one or more of its members, or any officer of the
Company, to execute and deliver documents on behalf of the Committee. The
determination of such majority shall be final and binding in all matters
relating to the Preferred Plan.
Section 4. Number of Shares Issued in Connection with Option
Grants. The maximum aggregate number of shares of Preferred Stock that may
be issued under the Preferred Plan is (subject to adjustment as provided in
Section 11):
Series AA Preferred Shares: 404
Series BB Preferred Shares: 179
If and to the extent that any Option expires or has been
surrendered or has been cancelled for any reason whatsoever without being
exercised in full, the shares of Preferred Stock as to which such Option has
not been exercised may again be available for issuance in connection with
future grants of Options.
Section 5. Eligible Persons. Options may be granted only to
Eligible Persons. The Committee shall have the authority to select the
individual Participants from among such class of Eligible Persons to whom
Options may be granted and to determine the number of Options to be granted to
each Participant.
Section 6. Agreement. The terms and conditions of each Option
shall be embodied in a written agreement (the "Agreement") in a form approved
by the Committee which shall contain terms and conditions not inconsistent with
the Preferred Plan and which shall incorporate the Preferred Plan by
reference. Each Agreement shall: (a) state the Date of Grant, the number of
Options being granted pursuant to such Agreement, and the applicable Option
Price or Option Prices; (b) specify the applicable vesting schedule and the
effective term of the Option; (c) be signed by the recipient of the Option and
a person designated by the Committee; and (d) be delivered to the recipient of
the Option.
Section 7. Stockholders' Agreement; Restrictions on Transfer.
Each Participant shall, as a condition to the effective grant of any Option
hereunder, execute an agreement, in form and substance satisfactory to the
Company, pursuant to which he shall become a party to the Stockholders'
Agreement. None of the Option Shares may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of to any third party other than
the Company except as provided in the Stockholders' Agreement. None of the
Options may be sold, transferred, assigned, pledged, or otherwise encumbered
or disposed of, except by will or the laws of descent and distribution. Each
Permitted Transferee (other than the Company) of any Option or Option Share
shall, as a condition to the transfer thereof, execute an agreement, in form
and substance satisfactory to the Company, pursuant to which it shall become a
party to the Stockholder's Agreement and the Agreement applicable to the
transferor.
Section 8. Options.
(a) Terms of Options Generally. Options may be granted to any
Eligible Person. Each Option shall entitle the Participant to whom such
Option was granted to purchase, upon payment of the relevant Option Price, one
share of Series AA Preferred Stock or Series BB Preferred Stock as specified
in the Agreement relating to such Options. Payment of the Option Price shall
be made in cash, or, in the sole discretion of the Board of Directors and to
the extent provided in the applicable Agreement, in shares of Preferred Stock
or other securities of the Company already owned by the Participant, in other
property acceptable to the Board of Directors or in any combination of cash,
shares of Preferred Stock or other securities of the Company or other
property. Options granted under the Preferred Plan shall comply with the
following terms and conditions:
(i) Vesting. Except as vesting may be accelerated pursuant
to the terms of the Preferred Plan or the applicable Agreement, each Option
shall vest in accordance with a schedule to be set forth in the applicable
Agreement.
(ii) Acceleration of Vesting. In the event of a termination
of a Participant's employment by reason of death or Permanent Disability, such
Participant's Options shall become 50% vested if such Options were less than
50% vested at the time of such termination. All Options shall immediately vest
upon (i) the closing of a sale of Common Stock pursuant to Section 3.08 of the
Stockholders' Agreement (and Participants shall be considered to be "Other
Stockholders" for purposes of such Section 3.08), (ii) a sale by the Company
of all or substantially all of its assets to a third party that is not an
Affiliate of the Company, and (iii) the occurrence of a Liquidation Event as
defined in the Company's Amended and Restated Certificate of Incorporation
("Charter"). In addition, in the event that any dividend shall be paid by the
Company pursuant to Sections 4.02(a)(i)(A) or 4.02(b)(i)(A) of the Charter,
all Series AA Options or Series BB Options, respectively, shall immediately
vest.
(iii) Duration of Options. Each Option shall be effective for
such term as shall be determined by the Board of Directors and set forth in
the applicable Agreement; provided, however, that the term of any Option shall
not exceed 10 years from the Date of Grant.
(iv) Exercise Following Termination of Employment. Upon
termination of a Participant's employment with the Company or any of its
Subsidiaries (including upon the Participant's death, Permanent Disability or
Retirement, but not including a termination, on or prior to December 31, 2001,
of such Participant's employment by the Company or any of its Subsidiaries for
Cause or by the Participant other than for Good Reason), the Participant (or,
in the case of the Participant's death, his Beneficiary) may exercise any
Vested Option, subject to Section 8(b), at any time until the earlier of (A)
one year following the date of such termination of employment (or, if a Vested
Option may not be exercised on the date of such termination of employment
because the conditions to exercise set forth in Section 8(b) are not
satisfied, one year following the date on which the Company notifies the
Participant that one such condition has been satisfied and that the Option may
be exercised), and (B) exercise by the Company of its Call Right under Section
9, but in no event after the expiration of the Option under the provisions of
clause 8(a)(iii) above. Upon the expiration of such period or exercise of
such Call Right, any such Vested Option not theretofore exercised shall be
canceled, and the shares of Preferred Stock that had been subject thereto
shall again be available for grants of further Options under the Preferred
Plan.
(v) Certain Restrictions. Options granted hereunder shall be
exercisable during the Participant's lifetime only by the Participant.
(vi) Stockholder Rights. A Participant shall have no rights
as a stockholder with respect to any Option Shares until a certificate or
certificates evidencing such shares shall have been issued to such
Participant, and, except as provided in Section 11, no adjustment shall be
made for dividends or distributions or other rights in respect of any share
for which the record date is prior to the date upon which the Participant
shall become the holder of record thereof.
(vii) Dividends, Distributions and Conversions. Any shares of
Preferred Stock, Common Stock or other securities of the Company received by a
Participant as a result of a stock distribution to holders of Options or
Option Shares, as a stock dividend on Option Shares or as a result of a
conversion of Options or Option Shares into other securities of the Company
shall be subject to the same restrictions as such Option Shares, and all
references to Option Shares hereunder shall be deemed to include such shares
of Preferred Stock, Common Stock or other securities.
(viii) Conversion of Options. Each Option Agreement shall
provide that in the event of a Majority Conversion (as defined in Section 11),
the Participant shall agree, if so requested by the Company, to immediately
convert any shares of Preferred Stock held by the Participant into shares of
Common Stock upon the same terms and conditions as apply to such Majority
Conversion.
(ix) Additional Terms and Conditions. Each Option granted
hereunder, and any Option Shares issued in connection with such Option, shall
be subject to such additional terms and conditions not inconsistent with the
Preferred Plan which are prescribed by the Board of Directors and set forth in
the applicable Agreement.
(b) Limitation on Exercise. An Option shall not be exercisable
unless the offer and sale of the corresponding Option Shares have been
registered under the 1933 Act and qualified under applicable state "blue sky"
laws, or the Company has determined that an exemption from registration under
the 1933 Act and from qualification under such state "blue sky" laws is
available. The Company shall use its reasonable best efforts to cause the
offer and sale of such Option Shares to qualify (i) for an applicable
exemption from registration under the 1933 Act and (ii) under applicable state
"blue sky" laws.
(c) Issuance of Certificate. As soon as practicable following the
exercise of any Options, a Legended Certificate evidencing the number of
Option Shares issued in connection with such exercise shall be issued in the
name of the Participant.
(d) Unvested Options. Upon termination of a Participant's
employment for any reason, all Options which have not theretofore vested (and
which do not vest by reason of such termination of employment) shall be
forfeited and canceled without any payment therefor.
Section 9. Termination of Employment.
(a) Company Call Right.
(i) Exercise of Call Right. If the employment of a
Participant with the Company and its Subsidiaries terminates for any reason
(other than a termination by the Participant for Good Reason or termination
by the Company without Cause) prior to a Liquidity Event, the Company shall
have a Call Right, exercisable for a period of fifteen months following such
termination of employment, with respect to all of the Vested Options and
Option Shares beneficially owned by the Participant and any Permitted
Transferees of the Participant. The Company may exercise its Call Right by
giving written notice thereof to the Participant or such Permitted Transferee.
(ii) Purchase Price. With respect to any exercise of the
Company's Call Right as provided for in Section 9(a)(i), the Participant or
his Permitted Transferee, as applicable, shall surrender to the Company all
Vested Options and Option Shares, and the Company shall pay to the Participant
as consideration therefor the following:
(A) In the event that the employment of a Participant
is terminated by the Company or any of its Subsidiaries without Cause, or by
reason of death, Permanent Disability or Retirement (or is terminated for any
other reason, except termination by the Participant for Good Reason or
termination by the Company without Cause, following December 31, 2001), the
Participant shall receive a payment equal to (i) in the case of Vested
Options, the excess, if any, of the aggregate Applicable Value of the Option
Shares subject to such Vested Options over the aggregate Option Price of such
Options, and if such amount is zero or less, the Options shall be surrendered
for cancellation without any consideration being paid therefor, and (ii) in the
case of Option Shares, the aggregate Applicable Value of such Option Shares.
The Applicable Value shall, for purposes of this Section 9, be determined as
of the date of termination of the Participant's employment.
(B) In the event that, on or prior to December 31,
2001, the Participant's employment is terminated by the Company or any of its
Subsidiaries for Cause, or by the Participant other than for Good Reason, (i)
the Participant's Vested Options shall be surrendered for cancellation without
any consideration being paid therefor and (ii) the Participant shall receive a
payment equal to the lower of (x) the aggregate Applicable Value of the
Participant's Option Shares and (y) the aggregate Adjusted Purchase Price for
such Option Shares.
(b) Appraisal. If, in connection with the exercise by the Company
of its Call Right under this Section 9, the Participant with respect to whose
Options or Option Shares are subject to the Call Right reasonably believes that
the Board of Directors' determination of Fair Market Value (if applicable) is
not reasonable, then the Participant may challenge the Board of Directors'
determination of such Fair Market Value by giving written notice to the Board
of Directors no later than ten business days after receipt of notice of the
purchase price which the Company intends to pay upon exercise of its Call
Right. In such event, the Company shall engage at its own expense an
appraisal or investment banking firm that is independent of the Company and
its Affiliates to determine the Fair Market Value of the Preferred Stock or
Common Stock (as the case may be) for purposes of determining the purchase
price to be paid by the Company; provided, however, that if such a
determination has been made by such an appraisal or investment banking firm
less than six months prior to the date as of which the Fair Market Value of the
Preferred Stock or Common Stock is to be determined, the Company shall not be
required to engage any such firm and may, in its discretion, instead rely upon
such earlier valuation. Any such appraisal or investment banking firm engaged
by the Company shall be selected by the Board of Directors and shall be
reasonably satisfactory to the Participant. The purchase price determined by
such independent appraisal or investment banking firm shall be conclusive and
binding on the parties. Anything in Section 10(a) to the contrary
notwithstanding, if such an independent appraisal or investment firm is
appointed, no payment shall be made in respect of the Company's repurchase of
Vested Options or Option Shares pending the determination of the purchase
price by such firm, and payment of such purchase price shall instead be made
no later than the tenth business day following receipt by the Company of the
report of such firm establishing such purchase price. If there has been an
independent appraisal or determination of Fair Market Value by an independent
appraisal or investment banking firm within the past year and the Fair Market
Value so determined by the independent appraisal or investment banking firm
exceeds the earlier Fair Market Value so determined by 10%, the costs of such
firm shall be for the account of the Company; in all other cases, the costs of
such firm shall be shared equally by the Company and the Participant, and the
Company shall have the right to withhold such costs from any payment it makes
in respect of its repurchase of Vested Options or Option Shares from the
Participant.
(c) Post-Call Events.
(i) If (x) the Company shall have exercised its Call Right
under this Section 9 following a termination of the Participant's employment
by the Company or one of its Subsidiaries without Cause, (y) the Company
becomes a Public Company during the 270-day period beginning as of the day
after the termination of the Participant's employment and (z) the
consideration that the holder of a share of Preferred Stock is entitled to
receive pursuant to Section 4.02(a)(ii)(B) or Section 4.02(b)(ii)(B) of the
Charter exceeds (the "Excess Price") the Applicable Value paid by the Company
pursuant to Section 9(a) in connection with the exercise of its Call Right,
then the Company shall pay to the Participant, as promptly as practicable
after the date of such Public Offering, an amount in cash (subject to Section
10(b)) equal to the Excess Price multiplied by the number of Option Shares or
shares of Preferred Stock underlying such Vested Options, as the case may be,
with respect to which the Company shall have exercised its Call Right.
(ii) If (w) the Company shall have exercised its Call Right
under this Section 9 following a termination of the Participant's employment
by the Company or one of its Subsidiaries without Cause, (x) during the
270-day period beginning as of the day after the termination of the
Participant's employment, the stockholders of the Company enter into (or
participate with respect to) a definitive agreement for the sale of all of the
outstanding shares of Common Stock in accordance with Section 3.08 of the
Stockholders' Agreement or the Company enters into a definitive merger
agreement pursuant to the which the stockholders of the Company will receive
cash (the "merger consideration") in lieu of their shares of Company stock, (y)
such sale or merger is thereafter consummated and (z) if the per share price
at which the Preferred Stock is sold in such sale, or the merger consideration
paid with respect to each share of Preferred Stock in such merger, exceeds (in
each case, the "Excess Sales Price") the Applicable Value paid by the Company
pursuant to Section 9(a) in connection with the exercise of its Call Right,
then the Company shall pay to the Participant, as promptly as practicable
after the closing date of such sale, an amount in cash (subject to Section
10(b)) equal to the Excess Sales Price multiplied by the number of Option
Shares or shares of Preferred Stock underlying such Vested Options, as the
case may be, with respect to which the Company shall have exercised its Call
Right.
(iii) If (w) the Company shall have exercised its Call Right
under this Section 9 following a termination of the Participant's employment
by the Company or one of its Subsidiaries without Cause, (x) the Company
enters into, during the 270-day period beginning as of the day after the
termination of the Participant's employment, a definitive agreement for the
sale of all or substantially all of its assets (other than a sale to an
Affiliate), (y) such sale is thereafter consummated and (z) if the per share
liquidation proceeds calculated (after giving effect to the provisions of this
paragraph) to be received by the holder of a share of the Series AA Preferred
Stock upon a subsequent pending liquidation of the Company exceeds (the "Excess
Series AA Proceeds") the Applicable Value paid by the Company pursuant to
Section 9(a) in connection with the exercise of its Call Right, then the
Company shall pay to the Participant, immediately prior to such liquidation,
an amount in cash (subject to Section 10(b)) equal to the Excess Series AA
Proceeds multiplied by the number of Series AA Preferred Stock Option Shares
or shares of Series AA Preferred Stock underlying such Vested Options, as the
case may be, with respect to which the Company shall have exercised its Call
Right.
(iv) If (w) the Company shall have exercised its Call Right
under this Section 9 following a termination of the Participant's employment
by the Company or one of its Subsidiaries without Cause, (x) the Company
enters into during the 270-day period beginning as of the day after the
termination of the Participant's employment, a definitive agreement for the
sale of all or substantially all of its assets (other than a sale to an
Affiliate), (y) such sale is thereafter consummated and (z) if the per share
liquidation proceeds calculated (after giving effect to the provisions of this
paragraph) to be received by the holder of a share of the Series BB Preferred
Stock upon a subsequent pending liquidation of the Company exceeds (the "Excess
Series BB Proceeds") the Applicable Value paid by the Company pursuant to
Section 9(a) in connection with the exercise of its Call Right, then the
Company shall pay to the Participant, immediately prior to such liquidation,
an amount in cash (subject to Section 10(b)) equal to the Excess Series BB
Proceeds multiplied by the number of Series BB Preferred Stock Option Shares
or shares of Series BB Preferred Stock underlying such Vested Options, as the
case may be, with respect to which the Company shall have exercised its Call
Right.
Section 10. Additional Terms Relating to the Company's Call
Right.
(a) Closing. The closing of any exercise of the Company's Call
Right shall take place at the offices of the Company, or such other place as
may be mutually agreed, not less than 15 nor more than 30 days after the date
such Call Right is exercised. The date and time of closing shall be specified
by the Company at the time it exercises the Call Right. At such closing, the
Participant shall deliver consents to the surrender and cancellation of Vested
Options and certificates for the Option Shares to be repurchased by the
Company duly endorsed, or accompanied by written instruments of transfer in
form reasonably satisfactory to the Company duly executed by the Participant,
free and clear of any Encumbrances. The Company shall, subject to Section
10(b), pay the applicable purchase price for surrendered Vested Options or
Option Shares in cash.
(b) Financial Capability; Legal Limitations. Anything in the
Preferred Plan or any Agreement to the contrary notwithstanding, to the extent
that (i) the limitations or restrictions applicable to the Company or any of
its Subsidiaries under the laws of the State of Delaware, the restrictions or
limitations contained in the Company's Certificate of Incorporation or any
other applicable law, rule or regulation or under the terms of any indebtedness
for borrowed money of the Company or any of its Subsidiaries prohibit the
Company from making any payment required under the Preferred Plan or any
applicable Agreement with respect to an Option or Option Share or (ii) the
Board of Directors shall determine in good faith that the Company is not
financially capable of making any such payment (provided, however, that the
Board of Directors shall not make any such determination in the event that a
dividend or other payment has been made with respect to Preferred Stock within
thirty days thereof), then the Company shall not be obligated to make payment
at such time, and shall have the right to defer such payment until the Board
of Directors reasonably determines that such limitations and restrictions no
longer restrict the Company from making such deferred payment. Any amounts
the payment of which is so deferred shall bear interest, compounded annually
and calculated at a rate equal to the T-Bill Rate plus 50 basis points per
annum from the closing date for the repurchase of the Participant's Options
and Option Shares and shall be paid (with interest) promptly after, and to the
extent that, the Board of Directors determines that the limitations and
restrictions referred to in the first sentence of this Section 10(b) no longer
restrict such payment. Notwithstanding a deferral of payment in accordance
with this Section 10(b) for Vested Options or Option Shares in respect of
which the Company shall have exercised its Call Right, the closing of any
exercise of such Call Right shall take place as provided in Section 10(a), and
the right of the Participant and his Permitted Transferees in respect of the
Vested Options and Option Shares (other than the right to receive payment of
amounts deferred and interest thereon in accordance with this Section 10(b))
shall terminate as of such closing.
Section 11. Effect of Certain Corporate Changes. (a) In the
event that at least 50 per cent of the shares of any series of Preferred Stock
outstanding on the date hereof are converted into shares of Common Stock, or
the Company has received notice that such shares are to be converted (each, a
"Majority Conversion"), each Option to purchase shares of that series of
Preferred Stock shall be automatically converted into an Option to purchase
shares of Common Stock upon the same terms and conditions as apply to such
Majority Conversion.
(b) In the event that at least 50 per cent of the shares of any
series of Preferred Stock outstanding on the date hereof are redeemed by the
Company for cash, or the Company has given notice of its intention to effect
such a redemption, the Committee may provide that each Option shall be
cancelled, in which case the Company shall pay each such Participant in cash
for each such Option an amount determined by multiplying (A) the excess, if
any, of the redemption price over the Option Price of such Option by (B) the
number of Option Shares to which such Option relates.
(c) In the event that any dividend or other distribution (whether
in the form of cash, securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, exchange, conversion, redemption or public
offering of securities of the Company, issuance or warrants or other rights to
purchase securities of the Company, or other similar corporate transaction or
event affects the Preferred Stock (or in the event that Options have been
converted into Options to purchase shares of Common Stock pursuant to Section
11(a), the Common Stock) then the Committee shall, in order to prevent economic
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Preferred Plan, in such manner as it may deem
equitable, adjust any or all of (i) the number of shares of Preferred Stock,
Common Stock or other securities of the Company (or number and kind of other
securities or property) with respect to which Options may be granted, (ii) the
number of shares of Preferred Stock, Common Stock or other securities of the
Company (or number and kind of other securities or property) subject to
outstanding Options, (iii) the Option Price with respect to any Option, and
(iv) in the case of Options that have been exercised but the Option Shares for
which have not been delivered by the Company, the number or kind of shares or
other consideration to be delivered.
Section 12. Miscellaneous.
(a) No Rights to Grants or Continued Employment. No Participant
shall have any claim or right to receive grants of Options under the Preferred
Plan. Neither the Preferred Plan nor any action taken or omitted to be taken
hereunder shall be deemed to create or confer on any Participant any right to
be retained in the employ of the Company or any Subsidiary or other Affiliate
thereof, or to interfere with or to limit in any way the right of the Company
or any Subsidiary or other Affiliate thereof to determine the employment of
such Participant at any time.
(b) Right of Company to Assign Rights and Delegate Duties. The
Company shall have the right to assign any of its rights and delegate any of
its duties hereunder to any of its Affiliates.
(c) Tax Withholding. The Company and its Subsidiaries shall have
the right to require any individual entitled to receive Option Shares to remit
to the Company, prior to the delivery of any certificates evidencing such
shares, any amount sufficient to satisfy any Federal, state or local tax
withholding requirements. Prior to the Company's determination of such
withholding liability, such individual may make an irrevocable election to
satisfy, in whole or in part, such obligation to remit taxes by directing the
Company to withhold Option Shares that would otherwise be received by such
individual. The Company and its Subsidiaries shall also have the right to
deduct from all cash payments made pursuant to the Preferred Plan or any
applicable Agreement with any Federal, state or local taxes required to be
withheld with respect to such payments.
(d) No Restriction on Right of Company to Effect Corporate
Changes. The Preferred Plan shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital structure or
business of the Company, or any merger or consolidation of the Company, or any
issue of stock or options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to
or affect the Preferred Stock or the Common Stock or the rights thereof or
which are convertible into or exchangeable for Preferred Stock or Common Stock
or the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of the assets or business of the Company, or any other
corporate act or proceeding, whether of a similar character or otherwise.
(e) 1934 Act. Notwithstanding anything contained in the Preferred
Plan or any Agreement to the contrary, if the consummation of any transaction
under the Preferred Plan would result in the possible imposition of liability
on a Participant pursuant to Section 16(b) of the 1934 Act, the Committee shall
have the right, in its sole discretion, but shall not be obligated, to defer
such transaction to the extent necessary to avoid such liability, but in no
event for a period in excess of 180 days.
Section 13. Amendment. The Board of Directors may at any time
and from time to time alter, amend, suspend or terminate the Preferred Plan in
whole or in part. No termination or amendment of the Preferred Plan may,
without the consent of the Participant to whom any Options shall previously
have been granted, adversely affect the rights of such Participant in such
Options; provided, however, that the Participant Committee (as hereinafter
defined) shall have the authority to approve (without any further consent and
which approval shall be binding on all Participants) any such alteration,
amendment, suspension, termination or waiver of any of the rights of the
Participants under the Preferred Plan or any Agreement or any outstanding
Options so long as such alteration, amendment, suspension, termination or
waiver is uniformly applicable to all Participants. As used herein, the
"Participant Committee" means Stephen M. Dyott and successor members of such
committee appointed by him.
Section 14. Effective Date. The Preferred Plan shall be
effective as of the Effective Time.
Section 15. Termination. Unless previously terminated
pursuant to Section 13 hereof, the Preferred Plan shall terminate on the tenth
anniversary of the Effective Time, and no further Options may be awarded
hereunder after such date.
Section 16. Headings. The headings of sections and subsections
herein are included solely for convenience of reference and shall not affect
the meaning of any of the provisions of the Preferred Plan.
Section 17. Governing Law. The Preferred Plan and all rights
hereunder shall be construed in accordance with and governed by laws of the
State of New York.
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Subsidiary of ACG Holdings, Inc.: State of Incorporation:
- -------------------------------- ----------------------
American Color Graphics, Inc. New York
Subsidiaries of American Color Graphics, Inc:
Sullivan Marketing, Inc. Delaware
American Images of North America, Inc. New York
Sullivan Media Corporation Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACG
HOLDINGS, INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTH
PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 856710
<NAME> ACG HOLDINGS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 67,902
<ALLOWANCES> 2,112
<INVENTORY> 10,795
<CURRENT-ASSETS> 80,163
<PP&E> 256,317
<DEPRECIATION> 96,684
<TOTAL-ASSETS> 329,958
<CURRENT-LIABILITIES> 68,553
<BONDS> 185,000
0
0
<COMMON> 1
<OTHER-SE> (106,085)
<TOTAL-LIABILITY-AND-EQUITY> 329,958
<SALES> 533,335
<TOTAL-REVENUES> 533,335
<CGS> 461,407
<TOTAL-COSTS> 461,407
<OTHER-EXPENSES> 269
<LOSS-PROVISION> 908
<INTEREST-EXPENSE> 38,956
<INCOME-PRETAX> (27,122)
<INCOME-TAX> 2,106
<INCOME-CONTINUING> (29,228)
<DISCONTINUED> 667
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,895)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
